The stock market highs

[street]

Quote:
Originally Posted by kjpliny View Post
The markets are being propped up by central banks (QE, artificially low interest rates, and ever increasing debt). Stock buybacks, leverage and multiple expansion for the past 5 years are also a main driver. Risk taking and speculation is also in overdrive due to the "Fed backstop".



No idea how long it can continue. Maybe they'll start talking quadrillions in easy money instead of trillions, who knows. It's a huge Ponzi and will collapse on itself one day. Make no mistake, markets are up, but we are in no way a prosperous economy. Since 2008, we added $17T in debt. Most of America's wealth has already been transferred with things of value sold off or outsourced to other countries. Enjoy the fake prosperity while it lasts.

Hummmm. Maybe I should sell tomorrow and put the cash under the bed.

If that were the case where everyone panics and sells then, what?

 

[Badger]

During my accumulation years I was fine with letting my investments ride and continued buying with maximum 401k/403b investments. During the down years I was able to scoop up on the cheap. Later as I retired I felt my AA needed to change with my aging. My cash savings have increased to eventually reflect about 50% that would be more than enough to comfortably see me through to my expiration date even with inflation like 1980. Some of this was done by selling stocks that had not performed as expected, some by sales of MF that were getting to be too large a piece of the pie, and some was by taking dividends in cash instead of purchasing more stock. I view this as rebalancing. All of the stock/MF will stay to ride out any fluctuations since it will be inheritance.
If for some reason the market chases the bear then my powder is dry.


Cheers!

 

[Markola]

I wish there was a measure of arrogance that we could graph.

I was with a tech company in the late 90s and we were all arrogant jerks. There was no way tech would fall, and we were 100% sure. I hedged my bets on my company by "diversifying" into other tech companies. What a great move. (sarcasm)

Today, it feels like the arrogance factor has reached some peak. Let's see where this goes.

I gotta tell you, the humble crap pie I ate in the early aughts was quite a wake up call. I'm somewhat ashamed of how I acted in the late 90s. It gives me a certain perspective of what I'm seeing right now.

Robert Schiller at Yale does measure something like an arrogance index for U.S. stocks. It’s in a downswing at the moment.

 

[SunnyOne]

I wish there was a measure of arrogance that we could graph.

I was with a tech company in the late 90s and we were all arrogant jerks. There was no way tech would fall, and we were 100% sure. I hedged my bets on my company by "diversifying" into other tech companies. What a great move. (sarcasm)

Today, it feels like the arrogance factor has reached some peak. Let's see where this goes.

I gotta tell you, the humble crap pie I ate in the early aughts was quite a wake up call. I'm somewhat ashamed of how I acted in the late 90s. It gives me a certain perspective of what I'm seeing right now.

To conjure up all those self images, all I have to do is say one word: Lucent.

 

[Koolau]

To conjure up all those self images, all I have to do is say one word: Lucent.

Thank you so much for reminding us!

 

[GravitySucks]

To conjure up all those self images, all I have to do is say one word: Lucent.

I worked with a Lucent engineer who was always somewhat difficult. One day he responded to a question by handing me (the customer) a 600 page manual and yelled something about being rich and not needing this crap. That he was only working another 6 months to get retire medical.
Turned out he was paper rich in 100% Lucent stock. Last I heard he was at another Telco vendor.
Watching Lucent I learned the lesson of selling off company stock as soon as possible. No sense having your employment and your safety net cut from the same cloth.

 

[SunnyOne]

My situation was that at the time, I was a decade long employee of one of those tech fliers. We were about to be bought out by a competitor for $X per share. Employees stopped working and started standing around white boards all day running calculations of our new wealth status. Many of us had unexercised employee stock options. Running the numbers became our favorite game.
Work? what was that? lol. Our local area became the high flying "Silicon Valley" of the late 90s/early 2000s. Mail room guys became sudden millionaires.
We watched the market bid the stock price higher and higher and we did nothing but wait for the top prize. Then a few senior executives started resigning and presumably selling, but we did nothing. Wrapped in a blanket of glee and starry eyed greed lol.
Then the govt declined to approve the merger/takeover....and the price started falling and falling and falling....3 digits, 2 digits and then 1 digit. I did a little selling on the way down, but it was too late.
We were done in by greed. We were all within a few dollars of the top number before it started falling - but no, that was not enough for us.
I kept with the same employer because I was vested in the pension...but things were never the same after that. It was like a balloon with the air let out. They started cost cutting measures, people left....some of us came to the office at 10, left at 4, just hanging out in between, doing a little work here and there. By 2005, as was the trend of the time, they froze the pension.
Most of us left for greener pastures. Freezing a pension is a great way to accelerate the attrition rate if that is the goal.
Great life lessons to be learned from that experience. One of my partners in glee just passed away unexpectedly at age 59 last year. All that living for the future....
Lots of learning to be had from these experiences.

 

[JoeWras]

The previous two posts are exactly what I'm talking about. I was one of those jerks acting like they owned the world. About the only difference was I ended up with no pension at all. For a brief moment, I was an unvested millionaire, and oh boy, was I full of it.

I don't run in those circles anymore, nor live in S.V. anymore. But through social media and other means, I see that I-got-stock-options rich jerk arrogance coming at me.

Should be interesting.

 

[harley]

Interesting. I was w*rking for a major telecom, and watched tons of people bailing and going to the start ups. Bragging about their stock options (we didn't get any), their paper net worth, and the cool working conditions. They were bouncing from one company to another, often staying less than a year. It was tempting, but I'm Mr. Conservative, and the job security (such as it was) and the pension/retiree medical kept me where I was. Plus I liked what I was doing.

When the tech bubble burst, it was devastating. I didn't care about their paper net worth dropping, but they were losing their jobs, and often their homes. They had bought McMansions based on two big salaries, and losing one job, sometimes both, would mean they couldn't make the payments. I was already a LBYM type, but that lesson was learned viscerally during that time. These were people I liked, and it was painful to watch.

I hope this new bunch doesn't have to learn that same painful lesson, but they probably will.

 

[Tetto]

Interesting. I was w*rking for a major telecom, and watched tons of people bailing and going to the start ups. Bragging about their stock options (we didn't get any), their paper net worth, and the cool working conditions. They were bouncing from one company to another, often staying less than a year. It was tempting, but I'm Mr. Conservative, and the job security (such as it was) and the pension/retiree medical kept me where I was. Plus I liked what I was doing.

When the tech bubble burst, it was devastating. I didn't care about their paper net worth dropping, but they were losing their jobs, and often their homes. They had bought McMansions based on two big salaries, and losing one job, sometimes both, would mean they couldn't make the payments. I was already a LBYM type, but that lesson was learned viscerally during that time. These were people I liked, and it was painful to watch.

I hope this new bunch doesn't have to learn that same painful lesson, but they probably will.

Sobering; DW and I are both LBYM, big time. I too, know lots of these types of folks, it makes me physically ill sometimes to see how they pi$$ away their hard earned money. Being conservative and cautious by nature, we are well positioned to weather the storm.

 

[copyright1997reloaded]

My situation was that at the time, I was a decade long employee of one of those tech fliers. We were about to be bought out by a competitor for $X per share. Employees stopped working and started standing around white boards all day running calculations of our new wealth status. Many of us had unexercised employee stock options. Running the numbers became our favorite game.
Work? what was that? lol. Our local area became the high flying "Silicon Valley" of the late 90s/early 2000s. Mail room guys became sudden millionaires.
We watched the market bid the stock price higher and higher and we did nothing but wait for the top prize. Then a few senior executives started resigning and presumably selling, but we did nothing. Wrapped in a blanket of glee and starry eyed greed lol.
Then the govt declined to approve the merger/takeover....and the price started falling and falling and falling....3 digits, 2 digits and then 1 digit. I did a little selling on the way down, but it was too late.
We were done in by greed. We were all within a few dollars of the top number before it started falling - but no, that was not enough for us.
I kept with the same employer because I was vested in the pension...but things were never the same after that. It was like a balloon with the air let out. They started cost cutting measures, people left....some of us came to the office at 10, left at 4, just hanging out in between, doing a little work here and there. By 2005, as was the trend of the time, they froze the pension.
Most of us left for greener pastures. Freezing a pension is a great way to accelerate the attrition rate if that is the goal.
Great life lessons to be learned from that experience. One of my partners in glee just passed away unexpectedly at age 59 last year. All that living for the future....
Lots of learning to be had from these experiences.

I worked in high tech all of my mega-corp career, and saw this with some friends who worked in the valley. Working for a mega-corp, I too even got some stock options, but not the craziness of what start up employees were seeing. By 2002 some of those people had hundreds of thousands of dollars in capital losses, because they had "gains" on the vested options but couldn't sell them because of trading restrictions on the securities. By the time they could, their holdings were worth a few pennies on the dollar.

Someday that scenario (as yours) will be repeated.


As to why the crazy market, I have my own ideas. We now have a "system" where essentially everyone in charge has given up any semblance of controlling stimulus/money supply. Exhibit 1 is the M1 money supply. That liquidity has to go SOMEWHERE. If it is not being spent on vacations, food, capital expansion - it goes to other places: Housing, Stocks, Bitcoin, PM's. We are seeing just about all asset classes up up up.

Since September, we are seeing this expand from the "safe" plays (e.g. FAANG) to SPACs, small cap, and other more speculative plays...and I've been right there with them buying/selling/trading those plays. EV plays, Pot stocks, small biotech/drug companies, and so on (many via SPAC).

Will it end badly? YES.
When will it end and at what level? It is hard to predict the top, even though you know things are "frothy". In 1998 and early 1999 I thought things were getting out of hand...and yet selling out in Jan 1999 would have left a lot of money on the table.

In terms of "It's different this time" in a certain sense, it might be. Not that we have some new magical thing in terms of innovation (even though there are those who think we are on the cusp of even more technological innovation that changes everything). No, my thinking (right or wrong) is that "what is different" is the mantra that MORE debt, MORE money, MORE stimulus will solve any downturn we encounter. No need for people to work! Just give them money! "But we are going more and more into debt!" Answer: WHO CARES, IT WILL NEVER HAVE TO BE PAID BACK, JUST PRINT MORE.

Think of it this way: If the leaders (politicians) are faced with
a) Belt tightening
b) Print more money
Which do you think they will choose?

This will work until it doesn't.