Bubbles all over the place

[BreathFree]

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Originally Posted by haha I have only one horse in this race, and I am on him. Ha

I like this. LoL! I'm stealing this for personal use.

[BreathFree]

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Originally Posted by HillCountry Have to agree here. I am less than 30% in stock. Fortunately for me, I don't need have a higher percentage to be in the market. Also, I have other investment. Yes, including but not limited to RE.

This is about my situation when counting rentals. I haven't sold any stock, but I haven't purchased any in the past year either. Cash is piling up as I am still accumulating. I am probably going to by some CDs from NFCU. Can't seem to pull the trigger on risky assets at the moment.

[Totoro]

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Originally Posted by krotoole If 90% is still duking it out to figure out what Boeing is worth, the indexers are probably still fine.

As long as there a handful of traders, price discovery will happen no? Even if 99% of stocks are effectively passively held, wouldn't the other 1% do the whole price discovery thing?

Or put differently: as long there is money to be made by mispricing, fulltimers will be attracted. Short term swings might be bigger though as a buy or sell moves the market more, like in smaller market cap stocks.

Call it a wussy form of the efficient market hypothesis

Not that I believe in efficient markets to begin with ...

[Koolau]

I have been selling my stocks to fund my withdrawals while keeping my port at about 30% stock. I have some non-bond stuff (such as SPDA's, GIF, PMs, collectables, etc.) which are either less subject to bubbling OR at least have some tendency toward non-correlation with stocks or bonds. Of course, we will see, won't we.

It is my opinion that our bubbles have been caused over recent time by all of the liquidity pumped into the economy - either through low interest rates or downright printing of money. The idea, of course, was to get things "rolling" again, but no one wants to roll, so they invest their own liquidity in bubbles - what else can they do unless they put it under the mattress. When bubbles begin to burst, that liquidity could be a real problem. As usual, I have told you WAY more than I know about this subject, so YMMV.

[eytonxav]

Ha, I think you need a supporting "whee" from W2R to back up your sell call.

[VFK57]

Many anti-Fed and some moderate economists point out on bubbles almost in every asset class. However what if the Fed despite prolonged talking of interest rates increase actually are going to continue the bubbles inflation with "easy money" policy for much longer(QE, negative rates, helicopter money etc)? Surely it will keep bubbles from bursting, create much higher inflation, help dealing with huge Debt.

[GrayHare]

When a bubble's risk gets too high the standard approach is to hedge. For example, if you deem Treasuries too pricey you can short them via something like TBT. It's another way to diversify. One assets class that IMO is less bubbly is real estate.

[Dawg52]

Here's the $64k question. If this is bubble territory for stocks(and I believe it is), what is the re-entry point for indexer's?

[W2R]

Quote:

Originally Posted by DFW_M5 Ha, I think you need a supporting "whee" from W2R to back up your sell call.

I'm pretty happy with the market lately, I must admit..


Edited to add: I just checked, and my portfolio (including bank accounts) is now nearly 95% of its highest value ever, on 4/24/2015 shortly before I sold a chunk of it and bought my dream home in cash. If it rises to equal that pre-dream-home amount or more, then did I get my dream home for free? Just kidding but it's an intriguing idea. I LOVE THIS BUBBLE!!! It's so much fun.

[Dawg52]

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Originally Posted by W2R I'm pretty happy with the market lately, I must admit.. Edited to add: I just checked, and my portfolio (including bank accounts) is now nearly 95% of its highest value ever, on 4/24/2015 shortly before I sold a chunk of it and bought my dream home in cash. If it rises to equal that pre-dream-home amount or more, then did I get my dream home for free? Just kidding but it's an intriguing idea. I LOVE THIS BUBBLE!!! It's so much fun.

Ha just got his confirmation.

[UpAnchor]

Quote:

Originally Posted by W2R I just checked, and my portfolio (including bank accounts) is now nearly 95% of its highest value ever, on 4/24/2015 shortly before I sold a chunk of it and bought my dream home in cash. If it rises to equal that pre-dream-home amount or more, then did I get my dream home for free? Just kidding but it's an intriguing idea.

At last, someone thinks like me! But then I've always been a practitioner of rubber math.

[W2R]

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Originally Posted by UpAnchor At last, someone thinks like me! But then I've always been a practitioner of rubber math.

Luckily there are a lot of engineers and various math geeks here, so I feel comfortable cracking math jokes once in a while. But there are one or two people here who honestly don't understand them and get all upset so I should probably just stop it and only speak of math in deadly serious contexts.

[UpAnchor]

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Originally Posted by W2R Luckily there are a lot of engineers and various math geeks here, so I feel comfortable cracking math jokes once in a while. But there are one or two people here who honestly don't understand them and get all upset so I should probably just stop it and only speak of math in deadly serious contexts.

I don't know. I sort of feel that math - like humor - is too important to be taken seriously.

[daylatedollarshort]

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Originally Posted by Totoro Another imploding bubble is over in tech & VC land. Fortunately only rich insiders and founder hopefuls suffer from those. Many unicorns are losing their horns right now, and turn out to be limp horses instead.

In some ways I hope the tech bubble does pop before too long. It is making housing prices and rents in our area kind of crazy and leading to more and more homeless at the lower end of the economic spectrum. Today I was stopped at a light and there was a homeless person with a shopping cart to my left and a young engineer type in a new looking Porsche on my right.

[HF63]

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Originally Posted by Dawg52 Here's the $64k question. If this is bubble territory for stocks(and I believe it is), what is the re-entry point for indexer's?

I can see the SP at ~ 800 if the Fed had not screw up with the rates.

If negative rates are coming, the bubble will get more bubbly.

I wonder how many consumers are willing to pay the banks for their deposit.

[jim584672]

I think they want bubbles. This thing could really start moving up fast. Once people realize the game is rigged to the upside it becomes a self reinforcing hyper bubble.

[Proteus126]

Low rates support high P/E multiples on stocks. 2% S&P 500 dividends plus the probability of short to intermediate term asset growth make it the only game in town. Low rates look like they will continue for quite some time.

The S&P 500 has weathered several (4 ?) moderate downturns in the past 24 months, motivated by a variety of fears (valuation, oil, Europe) and has a solid floor built in. Exuberance is low but fear has abated a bit. Sounds like a setup for lower volatility and steady upward price creep in the short term.

Given the globally entrenched low rate environment, I feel that the S&P is correctly priced for this low-rate regime or just a tad high but nowhere near the bubble-popping stage based just on index price. In fact I think it is poised to move 10% higher in the next 6 months.

One of these years, rates will be higher. At that time, multiples will have contracted significantly and we will all feel poorer in our stock accounts. Play it like we always play it, by picking the asset allocation you like based on risk tolerance and needs and rebalancing every 3 to 6 months, pocketing the stock gains along the way. Keep in mind a moderately ugly scenario (30%-40% correction lasting 1-2 years, say) and make sure that your plans and asset allocation are tuned such that you can live with it. The higher it goes from here forward the larger the eventual correction.

I honestly could see the S&P 500 at 1500 or 2500 in the next 12 months. I feel that 1500 is less likely. I just have no clue and won't bother trying to time it, other than using dips to shovel a little cash into the Roth if I manage to catch it.

[eytonxav]

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Originally Posted by UpAnchor I don't know. I sort of feel that math - like humor - is too important to be taken seriously.

Especially statistics

[Hamlet]

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Originally Posted by brewer12345 The 2000 bubble was weird because although average equity index valuations were extremely high, there was great divergence between sectors. Anything .com or tech was at insane levels, everything "real economy" was bargain basement. Do we have something like that now? Well, utilities and the like with steady dividends are probably at crazy levels. You cannot give cyclicals away, OTOH. So I would say that the divergence is not quite as spectacular as it was in 2000, but it definitely is there.

Yeah, I bought my first Berkshire class B share during that bubble, and it was priced at an extremely attractive valuation. Likewise with a bunch of "old economy" stuff like Allstate, REITs, Target, etc. It was a crazy market, but there were plenty of cheap stocks available.

These days, nothing I follow appears to be cheap.

[Lsbcal]

I have not seen a solid quantitative argument for a bubble in the SP500, the general equity markets. Maybe in narrow segments which I do invest in.

Still at 60/40. My last rebalance was to vfsux, short term investment grade.