Stock Market "Experts" told us in 2012 that the market was over valued!

[Forced to Retire]

The "EXPERTS" have been saying that the stock market is way over valued and to expect only a 2-3% real annual return in the next few decades. If this is true this will be tough for the retired people who depend on stock market returns to fund their lifestyle.

Though I was thinking about all these doom and gloom media stories about an overvalued stock market and depressed expected annual returns. I thought I had read this before, years ago. Upon investigation I found these doom and gloom stories about the stock market being overbought and we should expect low returns going forward were found in articles dating back to 2010.

So I googled stories from early 2012 about the subject and found that the EXPERTS back then were warning everyone that the stock market was way overbought and to expect only 2-3% real returns in the upcoming years. They also said get out of bonds in 2012 because the Fed was going to increase interest rates.

That was four years ago and since the overbought stock market has returned 69.91% according to this chart:

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html



Market Valuations and Expected Returns as of May 2012 - NASDAQ.com

 

[LOL!]

I think a lot of folks come to these forums to avoid the noise and hype and doom and gloom and idiotic optimism of the financial media that is all worthless and a waste of time reading or watching.

And now, we have been invaded. Our little island of common sense and rationality and sanity has been penetrated.

 

[Forced to Retire]

Get out of the stock market now! Written in 2011:

5 Reasons the Stock Market is Over-valued - CBS News

 

[REWahoo]

FTR, here is a recent thread on the accuracy of the gloom and doom prognosticators:

http://www.early-retirement.org/for...its-vs-the-s-and-p-500-2010-2016-a-83005.html

 

[MichaelB]

So, financial media is continually publishing reports of imminent disaster or gloom and doom, and they all turn out to be nothing more than "Chicken Little"? Shocking. What shall we do? what

 

[Midpack]

"The experts?" Who is that? You can find convincing buy or sell recommendations under any circumstances, even easier in today's online connected world. Long term investors don't listen to the noise...

 

[eytonxav]

Heck, those experts were also saying back in 2008-9 that it would take a decade or more to recover from the great recession. No one nows anything until you look in the rear view mirror.

 

[jim584672]

QE works wonders!

 

[Lakewood90712]

The " Market" is always overvalued, always has been. The days of stodgy companies with loads of hidden value were gone decades ago. Still plenty of money can and will be made thru speculation by those who " Buy and wait" as I call it. I don't call it buy and hold, as things change over time . Growth and dividends are good, but fortunes are made over intermediate / long terms ( like decade long) . Companies like the old GM , some of the tech co's during 1990-2000 had amazing rises, and falls. These were the " forever" stocks. No such thing IMO.

 

[ripper1]

Reality is DOW 20,000 is just around the bend.

 

[sengsational]

It's "reasonable" to predict less than average earnings from the stock market when the CAPE ratio is higher than average. That has been true in recent history, except for 2008. I think average CAPE since 1881 (or whenever Shiller's data goes back to) is about 17 and right now it's about 27. Since 1990 the average CAPE has been 25, so if you're thinking "this time it's different" (different than that very old data), then you might conclude that average stock market returns are expected.

 

[gauss]

Two words - "Balanced Fund"

Set it and forget it.

No need for you or the experts to trade in anticipation of future events.

These funds re-balance themselves, often daily, so the fund is automatically buying low and selling high.

-gauss

 

[COcheesehead]

Two words - "Balanced Fund"

Set it and forget it.

No need for you or the experts to trade in anticipation of future events.

These funds re-balance themselves, often daily, so the fund is automatically buying low and selling high.

-gauss

As long as they are in a tax advantaged account otherwise the tax man will get his share at the end of the year from all that churn.

 

[gauss]

As long as they are in a tax advantaged account otherwise the tax man will get his share at the end of the year from all that churn.

Most of the daily balancing that I refer to can occur from the natural buy/sell orders that shareholders place on the fund (ie the fund manager can choose to buy/sell either stocks or bonds to meet the needs of the buy/sell orders).

If there is net selling going on (ie market is dropping and shareholders are selling) wouldn't the same tax effect be experienced in an after-tax account if one were to hold a single balanced fund vs a pure bond and a pure stock fund?

 

[golfnut]

Did anyone else ever notice that 'experts" in the financial arena have a much worse track record than weather experts iro forecasts ?

 

[COcheesehead]

Most of the daily balancing that I refer to can occur from the natural buy/sell orders that shareholders place on the fund (ie the fund manager can choose to buy/sell either stocks or bonds to meet the needs of the buy/sell orders).

If there is net selling going on (ie market is dropping and shareholders are selling) wouldn't the same tax effect be experienced in an after-tax account if one were to hold a single balanced fund vs a pure bond and a pure stock fund?

No, I am talking about the turnover rate within a fund. If a manager is constantly buying and selling within the fund, they are generating short/long term cap gains that have to be passed onto the current shareholder. Some funds are managed for more tax efficiency, less churn, and better for taxable accounts, an example being an index fund. The example you reference of almost daily rebalancing will create many, many taxable events and will probably have a less efficient tax profile than say an index fund or my preference, an ETF.

 

[gauss]

No, I am talking about the turnover rate within a fund. If a manager is constantly buying and selling within the fund, they are generating short/long term cap gains that have to be passed onto the current shareholder. Some funds are managed for more tax efficiency, less churn, and better for taxable accounts, an example being an index fund. The example you reference of almost daily rebalancing will create many, many taxable events and will probably have a less efficient tax profile than say an index fund or my preference, an ETF.

Okay,

I think we are comparing apples and oranges. Although I didn't state it explicitly I was referring to Balanced Index funds such as the many Vanguard Target Retirement 2XXX funds. These funds only hold pure index funds such as :

- Vanguard Total Stock Market Index Fund
- Vanguard Total Bond Market II Index Fund

as well as the corresponding International Index funds.

Investing in Actively managed funds would definitely open up the possibility for churn and is not what I was intending to recommend. Thanks for the catch.

p.s. Nobody outside of the fund typically knows the details of the balancing strategy. This proprietary info could be used by other market actors to the determent of the fund. If the fund does not keep much in cash then the daily net buy-sell from shareholders could give the manager a chance to keep nudging the fund back towards balance.

 

[Bestwifeever]

The webs have to fill all those pages with something, anything, just to get the clicks for the ads. Doom and gloom works--rinse and repeat as needed.

 

[wanaberetiree]

My favorite reply is if not stock market then what?

http://www.stockpickssystem.com/wp-content/uploads/2011/06/historical-rate-of-return-1900-2000.jpg

 

[COcheesehead]

Okay,

I think we are comparing apples and oranges. Although I didn't state it explicitly I was referring to Balanced Index funds such as the many Vanguard Target Retirement 2XXX funds. These funds only hold pure index funds such as :

- Vanguard Total Stock Market Index Fund
- Vanguard Total Bond Market II Index Fund

as well as the corresponding International Index funds.

Investing in Actively managed funds would definitely open up the possibility for churn and is not what I was intending to recommend. Thanks for the catch.

p.s. Nobody outside of the fund typically knows the details of the balancing strategy. This proprietary info could be used by other market actors to the determent of the fund. If the fund does not keep much in cash then the daily net buy-sell from shareholders could give the manager a chance to keep nudging the fund back towards balance.

 

[marko]

Someone here posted a few months ago that "from 20 feet away the upward market trend line is a pretty straight line over the past 50 years."

 

[NW-Bound]

Reality is DOW 20,000 is just around the bend.

Oh yeah?!? Time for some music then.

Here's "Up Around The Bend" by CCR. I am sure many posters here are old enough to recall this song.

Up Around The Bend

There's a place up ahead and I'm goin'
Just as fast as my feet can fly
Come away, come away if you're goin'
Leave the sinkin' ship behind

Come on the risin' wind,
We're goin' up around the bend...
​

 

[mickeyd]

"Nobody knows nothin". John Bogle

 

[target2019]

I guess we're gonna see something, sometime.
Shiller PE Ratio

 

[gcgang]

They're not wrong, they're early. ��