Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Indicator - future stock returns -3.3% per year.
Old 06-24-2022, 11:16 AM   #1
Recycles dryer sheets
 
Join Date: Jun 2022
Posts: 65
Indicator - future stock returns -3.3% per year.

https://www.morningstar.com/news/mar...test-predictor

I donít make big moves on clickbait, but nonetheless interesting and has some degree of plausibility. Basically the percent of stocks in indivuals portfolios is fairly strongly inversely correlated with future returns. This is generally consistent with CAPE10 longer term projections, Buffett indicator and in the ballpark of Bogleís projections and similar to Jeremy Grantham.

Of course they could all be wrong, but itís probably worth being prepared for if this is right to any material degree.
JBTX 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 06-24-2022, 11:29 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 9,675
Not a fan of Cape 10. The correlation when it was developed worked for past sequences, but not really since then with the exception of 2009.
If one invested in the stock market according to Cape 10 since development, what would those returns look like?
__________________
TGIM
Dtail is offline   Reply With Quote
Old 06-24-2022, 12:47 PM   #3
Recycles dryer sheets
 
Join Date: Jun 2022
Posts: 65
Quote:
Originally Posted by Dtail View Post
Not a fan of Cape 10. The correlation when it was developed worked for past sequences, but not really since then with the exception of 2009.
If one invested in the stock market according to Cape 10 since development, what would those returns look like?
Cape 10 is not a very good mechanism to use for market timing - getting in or out. It is a pretty good indicator, directionally, or whether returns will be above or below averages 10 years out.
JBTX is offline   Reply With Quote
Old 06-24-2022, 07:21 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 9,675
Quote:
Originally Posted by JBTX View Post
Cape 10 is not a very good mechanism to use for market timing - getting in or out. It is a pretty good indicator, directionally, or whether returns will be above or below averages 10 years out.
Cape 10 was over 21 in 2012, so the next 10 years should have had below average returns. The results say otherwise.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 06-24-2022, 07:23 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RobbieB's Avatar
 
Join Date: Mar 2016
Location: Central CA
Posts: 8,225
Hehe, yeah, I bought a yacht with my "below average" returns.
__________________
Retired at 59 in 2014. Should have done it sooner but I worried too much.
RobbieB is offline   Reply With Quote
Old 06-24-2022, 07:51 PM   #6
Recycles dryer sheets
 
Join Date: Jun 2022
Posts: 65
Quote:
Originally Posted by Dtail View Post
Cape 10 was over 21 in 2012, so the next 10 years should have had below average returns. The results say otherwise.
Awesome. You found one data point. That changes everything.

https://www.evidenceinvestor.com/the...-not-abuse-it/


https://www.evidenceinvestor.com/wp-...er-CAPE-10.png


https://i0.wp.com/earlyretirementnow...45%2C705&ssl=1
JBTX is offline   Reply With Quote
Old 06-24-2022, 10:21 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 33,226
Quote:
Originally Posted by JBTX View Post
Cape 10 is not a very good mechanism to use for market timing - getting in or out. It is a pretty good indicator, directionally, or whether returns will be above or below averages 10 years out.
The late Bogle warned us to lower our expectation for future stock returns due to high P/E.

He would not and could not predict when P/E reversion would happen, only that it could anytime.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)

"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is offline   Reply With Quote
Old 06-24-2022, 10:42 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 10,255
Whatever the stock market does in the next few years will confirm SOME one's pet theory. Then they'll have their own click-bait site. YMMV
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 06-25-2022, 04:07 AM   #9
Full time employment: Posting here.
 
Join Date: Feb 2019
Location: St Pete
Posts: 606
I am an efficient market guy (especially over the long term) and into fundamental analysis if inclined to try to find the inefficiencies. I think a lot of people forget when talking about "the market" that what they are talking about is just a large collection (somehow curated, usually by an index) of financial instruments (whether ownership rights or debt holders) related to private companies.



Technical analysis never made sense to me (through my efficient market lens) as it is not causal at all (and doesn't usually claim to be) and is always trying to predict the future based of perceived patterns in the past (one step up from astrology imo). Particularly with technical analysis I think the market is VERY efficient as any prior patterns can be easily identified and automated (same as it is really hard to find arbitrage opportunities at the individual level*). It may not be completely impossible to notice a pattern that has not been exploited but certainly anything published will be used by someone thus impacting the future usefulness of exploiting that perceived pattern either at the market level or individual security level.


I do think that there are opportunities to exploit fundamental analysis of individual companies and possibly niche sectors that are mis-valued (more likely due to fads or social trends -sin stocks and perhaps some socially conscious investing distortions that overvalue based off of non-financials). However, there are a lot of really smart people and computers seeking and exploiting these and can do so much better than us. We, as individuals, are very unlikely to have the time and consistent luck in finding the nuggets in a competitive marketplace to be useful to exploit. -But it is fun to look if you like to nerd out and play doing analysis.



As long as I have an overall optimistic outlook on the future, I expect the market will trend upwards based off of technical and social advancements that will lift, on average, all those companies I invest in through mutual funds. If I'm wrong, that's what guns, ammo, food, and survival skills are for (but if it all hits the fan they won't help you for long either!).


* without some external forces at play such as government manipulation, or 0% teaser interest rates (expected to be offset by other income flows by the lender) allowing you to borrow for less than market prices.
__________________
FIREd 7/2021 at age 47
FLSUnFIRE is offline   Reply With Quote
Old 06-25-2022, 05:51 AM   #10
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: Chattanooga
Posts: 3,444
See sig line.
__________________
"My investing style is beauty-in-simplicity, set it and forget it with index funds, along with a little dabbling around the edges for fun and profit" credit to Markola.
frayne is offline   Reply With Quote
Old 06-25-2022, 06:38 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 10,255
Quote:
Originally Posted by frayne View Post
See sig line.
Right on!
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 06-25-2022, 07:20 AM   #12
Confused about dryer sheets
 
Join Date: Mar 2022
Posts: 7
I don’t understand any predictions of real returns when no one has any clue what inflation will be.
Quattro73 is offline   Reply With Quote
Old 06-25-2022, 09:37 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 8,485
The nice thing about predictions is that there is always one that confirms one's bias.

An interesting thing is that in general the prognosticators know that their prediction ability is poor. If it was good, they wouldn't be telling everyone -- they would be out making money. So either they have tried and failed to make money from their predictions or they are afraid to try.

A problem is that regardless of what happens, someone is always right. So then we must endure months or years of drivel from someone who was the lucky monkey this time around.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 06-25-2022, 11:37 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 9,675
See posts 8,10,11,12,13.
Whew you set me straight now on Cape 10. Your turn.......
__________________
TGIM
Dtail 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
Future Stock and Bond Returns!? nun FIRE and Money 12 10-10-2015 05:31 PM
Y Generation to Affect Future Stock Returns? tjscott0 FIRE and Money 19 08-01-2013 06:35 AM
Investors' actual returns versus total returns JohnEyles FIRE and Money 0 11-14-2006 01:20 AM
VIX indicator-- or not. Nords FIRE and Money 2 09-14-2005 06:28 PM

» Quick Links

 
All times are GMT -6. The time now is 02:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.