Where are we in the stock market cycle?

[bld999]

Anybody remember Elaine Gazarelli? She became notorious by calling the '87 swoon, but I can't remember the last time I heard the name.

Her firm has a Track Record page that makes them look like oracles.


Garzarelli.com

[audreyh1]

Quote:

Originally Posted by UnrealizedPotential I am not smart enough to pick my own stocks but I am smart enough to find fund managers with an eye on risk. IOW don't lose money.

I don't think anyone is smart (prescient) enough to pick fund managers who won't lose money. Even the great fund managers occasionally lose money. But if you have a diversified portfolio, you rebalance occasionally, and funds that have gone down often recover.

I don't worry about fund managers trying to minimize risk. Stocks are risky. I manage my own risk through diversification across a broad range of asset classes.

[audreyh1]

Quote:

Originally Posted by Chuckanut IIRC, there are number of people here who retired into a big down turn. They seem to have adjusted, rolled with the punches and have lived to fight another day.

Yeah - also poster child W2R, 2008 retiree.

[UnrealizedPotential]

Quote:

Originally Posted by mrfeh If you aren't willing to see your assets decline in value, then you shouldn't own stocks.

Don't lose money means do not take unnecessary risks. It does not mean do not take any risks. I went through the 2001/2002 down market and the 2008/2009 downturn. Neither time was I tempted to sale anything. I do not plan on doing so now. My viewpoint of don't lose money stems from the fact of me losing in the tech bubble of 2000. Not alot, but enough to make me realize there is risk and then there is risk one should not take. It also comes from me owning an emerging markets fund that I long ago sold and do not plan on owning again. You have to know what you own and why you own it. I do . Oftentimes you have to lose before you can learn to win. In 2000 the tech stock I owned went bankrupt. I did not have alot in it. In 2010 I traded my emerging markets fund into something I actually understand. Other than those two I have not traded or sold anything.

[HFWR]

Quote:

Originally Posted by HF63 The real question is when is Fed going to raise rates. I very much doubt that they have balls to raise rates...

I'm 92.4% certain that JY doesn't have any...

I'm "almost" certain the FED will raise rates. They need to get away from zero...

[Lsbcal]

For the OP I'm going to get serious for at least one post. I do have a market timing system and it is not signalling any kind of danger at this point. It has worked going back to the 1920's but only for major downturns that are preciptated by a combo of (1) slowly rolling off SP500 returns versus bonds, (2) yield curve at or near inversion, (3) weakly dependent on PE10 over very recent months. Most of the sell signals were in or followed by recessions. But note that recessions are generally recognized several months after they have started. And yes, I even have a buy back methodology. But to be honest, there hasn't been a sell signal since 2008 and I developed this starting in 2009. So yet to be tested in real time.

Then there are the very sharp decline markets that are tougher to identify. These include the Reagan era October 1987 decline and the Kennedy era 1962 sharp decline. Both those declines did not usher in recessions and were very worrisome but pretty quickly recovered from.

[Midpack]

Quote:

Originally Posted by UnrealizedPotential I do not get the sense that this is a market where the good times will roll on forever.

That's a given - absolutely no one is saying anything like that. The S&P 500 has gone up relentlessly for the long term (mostly trading within a range of PE ratios, but not always), but there will always be corrections (some more severe than others), and no one has devised a system to reliably predict when.

I think your original question has been answered, but you may not agree?

Quote:

Originally Posted by UnrealizedPotential Yet, not that I am asking for a correction or even worse, I can't help but wonder, where are we? I am not a market timer, but I do feel a sense of responsibility to myself if I can ,to understand if the markets are overvalued, fully valued , or if earnings are good, undervalued?

[UnrealizedPotential]

Quote:

Originally Posted by Midpack That's a given - absolutely no one is saying anything like that. The S&P 500 has gone up relentlessly for the long term (mostly trading within a range of PE ratios, but not always), but there will always be corrections (some more severe than others), and no one has devised a system to reliably predict when. I think your original question has been answered, but you may not agree?

I think you have given about the best answer one can give. As best as I can tell we are where we are which is about in line with earnings going forward and I think the market prices reflect that. Beyond that , I have no opinion because I simply do not know.

[audreyh1]

Quote:

Originally Posted by UnrealizedPotential Don't lose money means do not take unnecessary risks. It does not mean do not take any risks. I went through the 2001/2002 down market and the 2008/2009 downturn. Neither time was I tempted to sale anything. I do not plan on doing so now. My viewpoint of don't lose money stems from the fact of me losing in the tech bubble of 2000. Not alot, but enough to make me realize there is risk and then there is risk one should not take. It also comes from me owning an emerging markets fund that I long ago sold and do not plan on owning again. You have to know what you own and why you own it. I do . Oftentimes you have to lose before you can learn to win. In 2000 the tech stock I owned went bankrupt. I did not have alot in it. In 2010 I traded my emerging markets fund into something I actually understand. Other than those two I have not traded or sold anything.

You will occasionally lose money. There is no way around that. If you have a diversified portfolio, over longer periods of time you will very likely not lose money. You can avoid the more volatile assets, but even the less volatile assets occasionally lose money. If you hang in there, they usually recover.

It's probably good to avoid concentrations in specific market segments like high tech companies, or even very volatile asset classes like emerging market stocks. Putting all your eggs in just one or two categories betting that they will outperform in the short term often doesn't pan out, which is why many of us stay well diversified.

[target2019]

Is the Stock Market Cheap?

I think that Doug Short article presents a balanced view of where we are. Common measurements say the S&P 500 is over a regression line. You can dig deeper, but the additional data won't help most of us. Just re-balance on schedule, and let your Asset Allocation do the rest.

[audreyh1]

S&P500 crossed 2100! OMG!

[Totoro]

Quote:

Originally Posted by UnrealizedPotential With the Sp500 reaching all time highs again, I am amazed how it just keeps going up. It has not been a smooth ride. There have been been bumps in the road. Yet, not that I am asking for a correction or even worse, I can't help but wonder, where are we? I am not a market timer, but I do feel a sense of responsibility to myself if I can ,to understand if the markets are overvalued, fully valued , or if earnings are good, undervalued? Now I know there will be those who say it does not matter. To those who say that, you are correct, to a point. But to get more knowledge we have to ask why things are the way they are. So I am asking.

I tend to look at several things:

• Shiller P/E
• World GDP vs. total world market cap
• Bond yields vs. earnings yield
• Inflation
• Unemployment numbers
• Some annual reports
• Reports of major sectors in trouble. Hindsight 20/20 and all, but the 2008 implosion was not a new problem. It was relatively well known in 2007. Same thing with tech in 2001.

I'm wondering about one big indicator right now: the real yield on stocks.

Everytime it went negative in the past 100 years or so big trouble was ahead, with only a few months warning.

Real yield is E/P - inflation. If you take the 10 year E/P (3.7%), inflation is around 1%, so we are still far away from the cliff according to that measure.

Another one is long term corporate bond yields (VCLT vanguard for example), which are around 4.1% right now. That is higher than the E/P ratio, not a good sign. Stocks are supposed to have a premium vs. bonds as they are junior in rank.

In my view the US market is moderately overvalued, but not extremely so given inflation and bond rates. Not enough deviation to make a bet on it though. Edit: to put a number on it: 20% or so.

Europe still has some ways to go to recover (in valuation and in actual performance). Have no opinion on emerging (Especially China).

What will happen, nobody knows.

[audreyh1]

I do notice that some intermediate bond funds are yielding around the same as the S&P500, and that's pretty unusual. Usually they yield more - in recent decades, that is.

[Ticker]

I am not a market timer, but I do believe in taking profits. I weigh the
current price/profit against the likelihood of further appreciation vs. further
risk. You don't have to be a long term holder of everything in your portfolio.

this morning I sold a winning position in the snp 500. I'll buy it back again sometime later this year when it drops back to a level I am more comfortable with, and one that has better profit potential/risk for my tastes. Meanwhile, I'll sleep better.

[Options]

"There are two kinds of investors, be they large or small: Those who don't know where the market is headed and those who don't know that they don't know."

- William Bernstein

[utrecht]

Quote:

Originally Posted by Ticker I am not a market timer, but I do believe in taking profits. I weigh the current price/profit against the likelihood of further appreciation vs. further risk. You don't have to be a long term holder of everything in your portfolio. this morning I sold a winning position in the snp 500. I'll buy it back again sometime later this year when it drops back to a level I am more comfortable with, and one that has better profit potential/risk for my tastes. Meanwhile, I'll sleep better.

The second statement is pretty much the very definition of a market timer.

[NW-Bound]

Quote:

Originally Posted by HF63 ... The real question is when is Fed going to raise rates. I very much doubt that they have balls to raise rates...

Quote:

Originally Posted by HFWR I'm 92.4% certain that JY doesn't have any... ...

I recall the couple of scenes in "Crocodile Dundee" where Hogan wanted to be sure, and did a manual check.

[razztazz]

Quote:

The second statement is pretty much the very definition of a market timer.

Not necesarilly. "Market timer" connotes a person sitting there using either a calendar or a moving average or related metric who simply buys/sells based on that talisman/method.

Ticker just sounds like a prudent investor not slaved to either mechanical "timing" or buy and hold.

[imoldernu]

W2R's visual depiction of the market triggered some deep thought about the subject. So real...
So if I'm the guy in the middle seat, in the third car... (hands are not raised to show I'm not afraid)... what do I do now? There was the long ride up, enjoying the scenery, listening to the chain gears struggling to pull the cars to the top. The view is great.
Now I look down... it's long way down, and it's going to be a faster ride down, than the ride up. There are a lot of people on this ride along with me.
We can all see where this is going.

What to do? Gotta decide... Ride it down with everybody else? Get off before the ride down?

C'mon... seriously... Should I try to climb over my broker, who is sitting beside me? Even if I could, where would I go? Could I get off, quickly, and then carefully climb down the tracks or the frame? Then, even if I could, how would I catch up with the cars when they reach bottom, and start the next climb?

Most likely I'd reason that what goes down, must come back up... and stay in my seat... and like the rest of the riders... ride it down. When it reaches bottom again, it will go back up. Again, a slower ride up. Ooo.. and what if that trip down was the end of the ride?

Yup... overthinking again ...but the analogy was so clear. Maybe the picture was taken in 2008... and that was not the highest point on the ride. The car went down for a quick thrill... came back up and was now at the peak. What if this is the peak, now... and the ride ends at the bottom of the hill.

Unfortunately, I don't have time to buy another ticket.

[Lsbcal]

Of course, in real equity markets the picture includes many variations on that top with plenty of turbulence. And there is no end to the ride for the market. You age on that ride and eventually die in harness.

It's a game you have to play. Even sitting on the ground and watching the equity ride is part of that game.