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Stock Market "Experts" told us in 2012 that the market was over valued!
08-31-2016, 06:13 AM
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#1
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gone traveling
Join Date: Aug 2016
Location: Alexandria VA
Posts: 48
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Stock Market "Experts" told us in 2012 that the market was over valued!
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...histretSP.html
Market Valuations and Expected Returns as of May 2012 - NASDAQ.com
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08-31-2016, 06:19 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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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.
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08-31-2016, 06:35 AM
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#3
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gone traveling
Join Date: Aug 2016
Location: Alexandria VA
Posts: 48
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08-31-2016, 06:44 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
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FTR, here is a recent thread on the accuracy of the gloom and doom prognosticators:
http://www.early-retirement.org/foru...6-a-83005.html
__________________
Numbers is hard
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08-31-2016, 06:52 AM
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#5
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,518
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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
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08-31-2016, 06:59 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,150
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"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...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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08-31-2016, 07:14 AM
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#7
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gone traveling
Join Date: Sep 2003
Location: DFW
Posts: 7,586
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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.
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08-31-2016, 07:18 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Posts: 3,046
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QE works wonders!
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08-31-2016, 07:36 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 2,223
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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.
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08-31-2016, 07:51 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Mar 2010
Location: Chicago
Posts: 1,154
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Reality is DOW 20,000 is just around the bend.
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08-31-2016, 08:23 AM
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#11
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Moderator
Join Date: Oct 2010
Posts: 10,622
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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.
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08-31-2016, 09:10 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Aug 2011
Posts: 3,587
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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
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08-31-2016, 09:14 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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Quote:
Originally Posted by 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
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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.
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08-31-2016, 09:33 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Aug 2011
Posts: 3,587
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Quote:
Originally Posted by COcheesehead
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.
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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?
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08-31-2016, 09:40 AM
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#15
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Full time employment: Posting here.
Join Date: Dec 2006
Location: chicago burbs
Posts: 806
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Did anyone else ever notice that 'experts" in the financial arena have a much worse track record than weather experts iro forecasts ?
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08-31-2016, 09:59 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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Quote:
Originally Posted by gauss
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?
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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.
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08-31-2016, 10:27 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Aug 2011
Posts: 3,587
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Quote:
Originally Posted by COcheesehead
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.
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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.
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08-31-2016, 10:35 AM
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#18
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,773
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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.
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
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08-31-2016, 10:42 AM
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#19
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Full time employment: Posting here.
Join Date: Apr 2010
Posts: 717
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__________________
“The problem with the world is that the intelligent people are full of doubt, while the stupid people are full of confidence.”
(—Charles Bukowski)
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08-31-2016, 11:01 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
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