Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-08-2016, 04:11 PM   #61
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,828
Quote:
Originally Posted by OrcasIslandBound View Post
I meant to say I won't buy any ADDITIONAL stocks unless the cape ratio moves back towards it's long term avg.

The fact that it has only been below it's avg once since 1991 seems like some kind of a sign to me. Have stocks been living in an overvalued world all this time?

Sent from my Nexus 4 using Early Retirement Forum mobile app
In this thread
Using Shiller PE to Time the Market the idea of altering behavior based on shiller PE. At first I was not convinced I could act on this, but a few months ago, when it triggered one of the few sell signals of the past century, I did find a way to take action...one that I could live with. The action was to adjust from an age appropriate asset allocation (actually one for a slightly younger person) to one of an 80 year old. If I live to see the buy trigger, I'll shift back to an age appropriate allocation again. This way, I can say at least I did something in response to the historically high PE. And if it never drops and "this time it's different", then, well, I'll justify it as insurance. That's nowhere near as drastic as saying " I've won" and taking all my assets off the table.
__________________

__________________
sengsational is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-08-2016, 04:46 PM   #62
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Quote:
Originally Posted by OrcasIslandBound View Post
I meant to say I won't buy any ADDITIONAL stocks unless the cape ratio moves back towards it's long term avg.

The fact that it has only been below it's avg once since 1991 seems like some kind of a sign to me. Have stocks been living in an overvalued world all this time?
I'm not an accountant nor an auditor but there are significant changes in how the E is computed in CAPE so that historical values aren't directly equivalent to today. For example, goodwill is now tested for impairment every year instead of amortized over multiple years. I can imagine that other changes in auditing standards might make a huge difference as well.

There are also many other structural reasons to think a historical CAPE value is not directly comparable to today:

Swedroe: Key Market Value Metric Outdated | ETF.com

The author (Swedroe) thinks that the cumulative effect of all these changes might make the historical CAPE of 16 roughly equivalent to a CAPE of 20 today. I've seen other experts also talk about these same issues but don't recall seeing anyone else put a real number on the size of the effect (e.g. 20/16 = 25% inflation in CAPE).
__________________

__________________
photoguy is offline   Reply With Quote
Old 01-08-2016, 10:00 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,411
There probably is some merit to that line of thought. Goodwill amortization is no longer. Pension expenses and retiree health insurance benefits are recognized (vs not). Stock compensation expense is drastically different. Many others.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 01-08-2016, 10:11 PM   #64
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,401
I don't know, but hope that Swedroe is right. Else, the portfolio shrinkage will not bankrupt me, but surely will cramp my style or what is left of it.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 01-08-2016, 10:35 PM   #65
Recycles dryer sheets
OrcasIslandBound's Avatar
 
Join Date: Mar 2010
Location: Poway, CA
Posts: 441
If we revert back to the cape 10 average ratio, S&P 500 will be 1310. A sobering prospect.

Sent from my Nexus 4 using Early Retirement Forum mobile app
__________________
OrcasIslandBound is offline   Reply With Quote
Old 01-08-2016, 10:52 PM   #66
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 2,211
Quote:
Originally Posted by OrcasIslandBound View Post
If we revert back to the cape 10 average ratio, S&P 500 will be 1310. A sobering prospect.

Sent from my Nexus 4 using Early Retirement Forum mobile app
As long as earnings hold up I'm fine with that. Dividend yields will increase to >5%, some solid companies paying out 10%+. Not bad if inflation stays within fed target of 2%.

Guess that's why it won't happen ..
__________________
Totoro is online now   Reply With Quote
Old 01-09-2016, 08:31 AM   #67
Dryer sheet aficionado
 
Join Date: Mar 2013
Posts: 27
Dividend stocks. Good and steady payers. Got a big surprise with fund distributions kicking me into a bad tax situation, I.e. AMT.
Only by individual stocks now am building a portfolio with 4% or higher yields. Taking advantage of the market downturn to do so.

Tom C



Sent from my iPad using Early Retirement Forum
__________________
tcaron20 is offline   Reply With Quote
What would you buy if another 2008 happened?
Old 01-09-2016, 09:49 AM   #68
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 1,048
What would you buy if another 2008 happened?

Depends if it happens before July I'd buy more equities with earnings if it happens after I'd do some rebalancing and buy more equities. I suspect it rill work out just fine


Sent from my iPad using Early Retirement Forum.
__________________
rayinpenn is offline   Reply With Quote
Old 01-09-2016, 09:50 AM   #69
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 1,048
Quote:
Originally Posted by OrcasIslandBound View Post
If we revert back to the cape 10 average ratio, S&P 500 will be 1310. A sobering prospect.

Sent from my Nexus 4 using Early Retirement Forum mobile app

Why, are you selling? It is a buying opportunity.


Sent from my iPad using Early Retirement Forum.
__________________
rayinpenn is offline   Reply With Quote
Old 01-09-2016, 10:51 AM   #70
Recycles dryer sheets
 
Join Date: May 2015
Location: Toledo
Posts: 50
I agree with Rayinpenn : I am buying S&P 500 index fund. It is a No Brainer, because it is practically guaranteed to go back up eventually if you do not sell. Although if you buy a single stock, or a single concentrated active mutual fund-they could go to zero and never come back. Remember in 00'-02' some tech stocks and Van Waggoner tech funds were completely wiped out, and never came back! S&P 500 will always come back up eventually.
__________________
Jpg1717 is offline   Reply With Quote
Old 01-09-2016, 04:52 PM   #71
Recycles dryer sheets
OrcasIslandBound's Avatar
 
Join Date: Mar 2010
Location: Poway, CA
Posts: 441
Quote:
Originally Posted by rayinpenn View Post
Why, are you selling? It is a buying opportunity.


Sent from my iPad using Early Retirement Forum.
Who said anything about selling? I wouldn't dream of it.

Sent from my Nexus 4 using Early Retirement Forum mobile app
__________________
OrcasIslandBound is offline   Reply With Quote
Old 01-09-2016, 05:21 PM   #72
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 184
I've got a dream list up & GTC orders in, so if 2008 happens hopefully I'll get some. List includes more of what I already have at lower levels and new items. BPL, D, CVX, XOM, VNRB, SCO, DUK, EPD, AVA, & WTR.
__________________
HpRyder is offline   Reply With Quote
Old 01-09-2016, 07:05 PM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,411
Quote:
Originally Posted by OrcasIslandBound View Post
If we revert back to the cape 10 average ratio, S&P 500 will be 1310. A sobering prospect.....
S&P 1310 is more likely than me winning Powerball tonight, but still quite unlikely IMO.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 01-09-2016, 07:25 PM   #74
Full time employment: Posting here.
 
Join Date: Aug 2009
Posts: 522
Quote:
Originally Posted by pb4uski View Post
S&P 1310 is more likely than me winning Powerball tonight, but still quite unlikely IMO.

Well if you assume that eventually we will get a bear market, I.e., we have to, and if it was coming soon (we are due) then according to these guys' stats (not opinions ) :

http://blog.gavekalcapital.com/histo...l-bear-market/

"The average performance of a cyclical bear market is -37.5%. Even if we exclude the largest outlier, the 89% drop of the 1929 high, the average performance is still -35%. "

That would put us right at 1300ish. It's really not that unlikely.


Sent from my iPad using Early Retirement Forum
__________________
bmcgonig is online now   Reply With Quote
Old 01-09-2016, 08:02 PM   #75
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
My T/A (technical analysis) buddies over M* are discussing several models that predict S&P sell off to around 1570 in 2016. Different gurus giving numbers including ranges like 1525-1615. The posters seem to think this likely. They are a somewhat pessimistic bunch.

1570 would be about an 18% drop from Friday's level of 1922, and a 26% drop from the closing high of 2131 on 5/21/15.

1705 is enough to get the S&P500 into official bear market territory (20% down) from the closing high on 5/21/15.

26% down is not nearly as bad of a bear market as 2008, but still a full bear, and sobering.

If this happened, I would be rebalancing from my bond funds to stocks, as well as tax loss harvesting where I could and buying similar funds.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 01-09-2016, 08:38 PM   #76
Dryer sheet aficionado
 
Join Date: Dec 2012
Location: marys ille
Posts: 40
Yes for us do what we did in 2008. Rebalance and turn noise off so I can sleep. 20 months retired. Great forum thanks


Sent from my iPhone using Early Retirement Forum
__________________
trouthog is offline   Reply With Quote
Old 01-09-2016, 10:29 PM   #77
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,689
Quote:
Originally Posted by photoguy View Post

There are also many other structural reasons to think a historical CAPE value is not directly comparable to today:

Swedroe: Key Market Value Metric Outdated | ETF.com

The author (Swedroe) thinks that the cumulative effect of all these changes might make the historical CAPE of 16 roughly equivalent to a CAPE of 20 today. I've seen other experts also talk about these same issues but don't recall seeing anyone else put a real number on the size of the effect (e.g. 20/16 = 25% inflation in CAPE).
SWEDROE is a very strong advocate of always investing in the market, while he likes index funds he wants you to pay him 1% to manage your index funds while criticizing managed funds as not worthy. Now to his main argument - The Federal Reserve and the SEC and the excellent work they do have restricted large volatility resulting in a 25% increase in the value of the stock market because company earnings are now more sure. Now this is stated as we have the largest drop to start a year in the history of the stock market - ever. 8 of the largest single day percentage drops, including the largest ever have happened in the last 30 years.

His argument is also that real growth in the economy is much more assured and as such we should have an increased PE ratio for that, yet this recovery is the slowest growth in GDP in history, shouldn't slower real growth mean a lower PE not higher PE. In 2007 GDP was 15 Trillion 8 years later it is 16.4 Trillion a nine percent gain. In 1929 GDP was 1 trillion 8 years later it was 5 percent higher at 1.11 trillion. The truth is our economy is recovering no better than it did during the greatest depression of all time. Commodities are in an all time slide in price, none of what he is saying makes any sense but sounds good and believable. It is what a manager says to keep his client herd in the pen.

The worst start to a year in the stock market must mean something after a historic collapse in commodity prices, which were presaged by historic collapses in shipping rates which has led to lower shipping costs and leading to overcapacity in China now ready to sell goods at ever lower prices in the United States. On the top of all this is a population that is aging in the United States and less able every year to do as Johnathan Clements feels they should be able to do: cheer declining stock prices as they need 4 percent of their portfolio every year.

If there is another 2008, it will not be 2008 it will be an S&P 500 at 670 with the federal reserve holding 4 trillion in useless debt and the government bankrupt and the percentage of the population working coming into untenable percentage of the population. This will be an interesting year.
__________________
Running_Man is offline   Reply With Quote
Old 01-09-2016, 11:11 PM   #78
Recycles dryer sheets
OrcasIslandBound's Avatar
 
Join Date: Mar 2010
Location: Poway, CA
Posts: 441
Seems like even more doom and gloom then even I was thinking.

I think I'll review my books on Preppers, and figure out how to preserve gasoline.

Sent from my Nexus 4 using Early Retirement Forum mobile app
__________________
OrcasIslandBound is offline   Reply With Quote
Old 01-10-2016, 03:21 PM   #79
gone traveling
 
Join Date: Oct 2011
Posts: 156
GE APPLE


Sent from my iPad using Early Retirement Forum
__________________
Moneygrubber is offline   Reply With Quote
Old 01-11-2016, 05:56 PM   #80
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Quote:
Originally Posted by Running_Man View Post
SWEDROE is a very strong advocate of always investing in the market, while he likes index funds he wants you to pay him 1% to manage your index funds while criticizing managed funds as not worthy. Now to his main argument - The Federal Reserve and the SEC and the excellent work they do have restricted large volatility resulting in a 25% increase in the value of the stock market because company earnings are now more sure. Now this is stated as we have the largest drop to start a year in the history of the stock market - ever. 8 of the largest single day percentage drops, including the largest ever have happened in the last 30 years.

His argument is also that real growth in the economy is much more assured and as such we should have an increased PE ratio for that, yet this recovery is the slowest growth in GDP in history, shouldn't slower real growth mean a lower PE not higher PE. In 2007 GDP was 15 Trillion 8 years later it is 16.4 Trillion a nine percent gain. In 1929 GDP was 1 trillion 8 years later it was 5 percent higher at 1.11 trillion. The truth is our economy is recovering no better than it did during the greatest depression of all time. Commodities are in an all time slide in price, none of what he is saying makes any sense but sounds good and believable. It is what a manager says to keep his client herd in the pen.
And yet this whole thread is filled with posts about what people would buy if a drop like 2008 repeated. Almost everyone would pile into equities it seems. This attitude toward market bears is everywhere on this board and the standard advice here is just to rebalance, carry on, nothing to see, life is normal, the market will recover. How could this be so unless we were supremely confident in our financial systems?

As for Swedroe, he is fairly predictable and typically follows academic research -- if he advocates for something, generally there's good evidence for it and multiple independent studies that back it. I personally find this very helpful because I don't have the time or inclination to read everything myself AND I think he has a good head for identifying potential issues like publication bias, survivor bias, multiple-testing bias, modeling gotchas, etc. I know some people aren't fans of academic research in finance, but I think even though a ton of crap gets published (Sturgeon's law applies), the process as a whole is pretty robust.


Quote:
The worst start to a year in the stock market must mean something after a historic collapse in commodity prices, which were presaged by historic collapses in shipping rates which has led to lower shipping costs and leading to overcapacity in China now ready to sell goods at ever lower prices in the United States. On the top of all this is a population that is aging in the United States and less able every year to do as Johnathan Clements feels they should be able to do: cheer declining stock prices as they need 4 percent of their portfolio every year.
Perhaps this is true. But sometimes a bad run of luck is just that.

Quote:
If there is another 2008, it will not be 2008 it will be an S&P 500 at 670 with the federal reserve holding 4 trillion in useless debt and the government bankrupt and the percentage of the population working coming into untenable percentage of the population. This will be an interesting year.
FWIW Swedroe is actually forecasting low expected returns for US equities. A deep bear would be consistent with that.
__________________

__________________
photoguy is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Buy, buy, buy! Dr. Doom said so. NW-Bound FIRE and Money 16 10-23-2013 05:09 PM
If you had $5000 would you buy a CD or an I Bond? rec7 FIRE and Money 14 01-09-2010 12:41 AM
Recession over? Buy, buy, buy? NW-Bound FIRE and Money 42 05-27-2009 05:53 PM

 

 
All times are GMT -6. The time now is 05:08 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.