Is this rally for real?

The "slopers" are from all over the US. They don't seem to be much of a political bunch so I'm not sure where all the pessimism about the stock market comes from. I think it was just too easy to short the market for too long and make a lot of money.

Hopefully I won't hang on too long but, for right now, I don't think it's over.

Sure has been fun though! :ROFLMAO: What made you guys realize the market had hit bottom? I was getting ready for a cruise last March and I like to read the message boards at cruisecritic. On the Royal Caribbean board was a thread that RCL stock had hit $5. The amount of $5 was insane and so was the fact that I was reading about a stock on a leisure forum. RCL has the most loyal customers - ever....borderline personality, I'll kill the Carnival cruise captain and you watch my back, loyal. No way is that company failing.

It took me two weeks to set up a brokerage account and I bought my first stocks on 3/20 (Then we left on the cruise and I was glued to CNN above the pool the whole time - lol).
 
tinlizzy said:
What made you guys realize the market had hit bottom?
Click to expand...
I didn't realize it had hit bottom. I had already rebalanced (buying equities) on Jan 15, after catching two falling knives in 2008. Even though my portfolio was again screaming "rebalance" on March 9, I was literally out of ammo to rebalance with.

Audrey
 
tinlizzy said:
Hopefully I won't hang on too long but, for right now, I don't think it's over.
Click to expand...

I can't complain. OK, I could but won't. I'm down roughly 5% from 12/31/07, not including new money. Not the high, but the nearest year end peak. I scaled way back when the DOW rebounded to 9,600. I thought I would get a jump on the next down turn. Heh heh.....still waiting on the next down turn. Oh well......still can't complain. Enjoyed a good comeback and now at a pretty conservative allocation, 25/75.

So you guys could see a bull market for quite sometime seeing I'm in conservative mode.:blink:
 
tinlizzy said:
Sure has been fun though! :ROFLMAO: What made you guys realize the market had hit bottom?
.
Click to expand...

I think the question is a good one. The reality is virtually nobody on the board called the bottom, or if they did it was their 2nd, 3rd or 4th calling of the bottom. :) There were a couple of folks who predicted the crash based on some very sound analysis. However, what distinguishes this group based on surveys and posting compared to many (most?) retail investosr is the relatively few who completely abandoned stocks during the crash and fled to cash or bond funds.

As I was reading my Schwab investment magazine which featured what investors learned during the crash, I reflected back on this forum.The main take away from the article was that investor who survived the best weren't kids 60s for the Schwab article and that keeping a rein on your emotions was the critical.

Thinking back on the mood of the forum in Oct 08 through March 09. It seems that while most all of us were scared, and many case somewhat shell shocked, there wasn't panic. Rather I saw a fair amount of grim determination to stay the course.

Broadly speaking there are two type of investors on the board. The passive indexers and the active stock or mutual fund pickers. (Although a fair number of the passive investors are reformed active investors.) Among the indexers I recall a lot of people saying I picked my asset allocation and I am sticking to it. A fair number of talked about FIREcalc and pointed out the Trinity study went all the way back to the Great Depression and while this was crises looked really bad it was Great Depression level.


I was getting ready for a cruise last March and I like to read the message boards at cruisecritic. On the Royal Caribbean board was a thread that RCL stock had hit $5. The amount of $5 was insane and so was the fact that I was reading about a stock on a leisure forum. RCL has the most loyal customers - ever....borderline personality, I'll kill the Carnival cruise captain and you watch my back, loyal. No way is that company failing.
Click to expand...

The second type of investor board is the stock picker like myself. I spent a lot of time looking a company balance sheets and income statements during those months, comparing the absurdly low market capitalization with actual company assets. Somewhat like your Royal Caribbean line example. A couple of examples come to mind. Back in Nov 08, Apple was trading in the $80/share. Even though I don't follow Apple closely I looked at the balanced sheet and looked at the 25 billion in cash they held and concluded that Mr. Market was valuing Apple and their great iPhone, iPod, iTunes business and good computer business at ~$50/share. Now I have no clue what Apple stock is worth, but I was confident that was worth a heck of lot more than $50 because the company was generating almost $10/share in cash flow a year. So I invested accordingly.

I also looked at tiny obscure Ohio Waste disposal/Golf course operator. I first bought the stock at $8 because it had $12 worth of assets (Book Value). During the crash the stock dropped to just over $1.50 a share after subtracting out the $1 share in cash, I calculated that I was buying the Golf course, landfill at around $.10-.20 on the dollar. Both stocks have almost tripled since their lows.

I think the key learnings for me is that it isn't really critical to pick the bottom. What is important is to have a clear understanding of what you own and sense of investment history. For me one of the breakthrough moments in investing was realizing that stocks weren't quotes on computer screen who's value seems change almost in a random fashion. Instead they are actual pieces of company,. A company has an intrinsic value based on its current and future profit potential and while Mr. Market will constantly tell you the price of company and the price will fluctuate constantly and rapidly the actually value changes at much slower rate.
 
clifp said:
...Rather I saw a fair amount of grim determination to stay the course.

Broadly speaking there are two type of investors on the board. The passive indexers and the active stock or mutual fund pickers. (Although a fair number of the passive investors are reformed active investors.) Among the indexers I recall a lot of people saying I picked my asset allocation and I am sticking to it.

The second type of investor board is the stock picker like myself. I spent a lot of time looking a company balance sheets and income statements during those months, comparing the absurdly low market capitalization with actual company assets.

...What is important is to have a clear understanding of what you own and sense of investment history.
Click to expand...
Excellent post, Clifp. :flowers:
I will be the first to admit that I do not understand the majority of what goes into individual stock picking. Compared to the general forum membership, I'll assess myself at novice level in that domain. And that's OK. :D
So I stick with mutual funds, a mix of indexed and actively managed, all low cost. I was looking very hard at the bear market performance of some of the mutual funds I own. Real time data is a glorious thing for an analytical person like me.
I definitely fall into the "sticking with my asset allocation" crowd, although I did do a minor adjustment from 50/50 to 40/60 due to seeing in real time that my theoretical risk level was exceeded in 4Q08.
What I took away from the experience of watching the market go bonkers is a firmer grasp of what I do know, what I don't know, and a better sense of what I need to learn. :cool:
 
audreyh1 said:
I was literally out of ammo to rebalance with.
Click to expand...
Luckily I had more cash on hand then I normally do but I still had to pare down the number of stocks I wanted to purchase. My insides were screaming mortgage the house and cash out all the I bonds, instead I limited myself to only risking cash on hand *sigh*.

clifp said:
However, what distinguishes this group based on surveys and posting compared to many (most?) retail investosr is the relatively few who completely abandoned stocks during the crash and fled to cash or bond funds.
Click to expand...
You're right about the most. I left my 401K fully invested at 90% stock index funds and rode it out :sick: but the majority of people in my daily life went to cash or equivilent in their retirement accounts.

I have learned a lot the last year and I love this forum btw. I had completely forgot it existed :blush:.
 
tinlizzy said:
What made you guys realize the market had hit bottom?
Click to expand...

Here's what I said then (3/7/09) . . .

Why I'm not selling stocks now

Many of us have been planning on below average stock returns because of high valuations. Well, those below average returns have already been realized and are now in the rear-view mirror. It's time to start raising your expectations for future returns. :)
Click to expand...
 
Awesome post Clif!
As previously said, very few if anyone 'called the bottom'. It just may seem that way because in this case, staying the course worked very well.
And if you were in the stage of continuing to DCA into stocks/stock funds it most likely worked out really really well for you.
Doing your best to analyze without fear or panic or greed will, in most cases serve you much better than jumping in and out of the market based on fear or panic or greed.
 
Ummm - just noticing that:

The DOW is above 11,000 and the S&P500 is within kissing distance of 1200.

When this thread started on 5-8-2009, the DOW had had a big swing day, ending with a pretty decent rally to close around 8575, and the S&P closed around 930.

Audrey
 
audreyh1 said:
The DOW is above 11,000 and the S&P500 is within kissing distance of 1200.
Click to expand...
Oh, great, W2R will be along in a moment to administer the coup de grace for yet another bull rally.

It's OK-- I took a little more off the table today. Hard to watch the limit orders blow right through what you thought was an outrageously high number...
 
The bumping of the thread was my sell signal, and W2R just confirmed it.

I know the retail sentiment is suppose to be contrary indicator. When retail investors all want to buy you should sell and vice versa. But I think this forum is different. I noticed that when this thread was started there were a lots post/threads about how we should, hold how the market will go up. Now I see a lot of posts about the P/E ratios showing the market to be overvalued etc.

If I could only get those 6% PenFed CDs, my AA would switch from 80/20 to 40/60 overnight.
 
clifp said:
The bumping of the thread was my sell signal, and W2R just confirmed it.
Click to expand...

But it was just a LITTLE (Wheee!)! :2funny: :whistle: After all, the Dow only broke 11,000 - -- not a record, like it was when it broke 14,000 back in 2007.
 
W2R said:
But it was just a LITTLE (Wheee!)!
Click to expand...


Oh, if it is only a little "wheeee", then we'll only have a 20% correction... or as it is known around here, a buying opportunity...;):ROFLMAO:
 
Usually sentiment reflects nothing more than a prolonged or dramatic market advance, which logically portends that the advance is nearer it's end than its beginning.

If I should mention PE10, many people will post about its manifold deficiencies.

The truth however is that the productive capacity of the country changes slowly, for better or worse, and thus corporate profits when smoothed such as by PE10 also change slowly.

Over and over it has been shown that unusually good 10 to 20 year results come from an investment made when PEs were low, and sold when they were high. Contrariwise, buying high PE and selling anything other than an equally high of higher PE results in either lackluster or disastrous results over these very meaningful timeframes.

So right now PE10 is almost 22; this is not as high as it has been, but other than the recent bubble it is very high indeed. The top in 1929 was around this level, as was the top in 1966.

People can make whatever clever arguments they wish about exceptionalism, economic and market improvements, sunspots or whatever. I suspect that the real argument is that this gloomy assessment is bad news for early retirees, especially those who are not generously pensioned.

It is sometimes said that low interest rates justify high PEs. True I guess. This is almost a necessary conclusion from capital theory.

But if you make investment decisions based on this, I hope you have a means of making sure than interest rates stay low forever, or at least for the next 20 or 30 years.

My investment program has been a steady earner for many years, and after getting walloped in 07,08, and early 09 I am now a slender margin above October 2007. A byproduct of an overall successful campaign over many years is that I have never had a year with net realized capital losses, or closed a year with any other than tiny losses on my books. I have of course had down years, most spectacularly 2008. Currently I carry no losses on my books.

I went into the recent debacle with a lot of junk that I thought was promising. That is all gone, and I realize that it was inappropriate for someone my age, with my modest resources and with my absolute reliance on my portfolio for living. I wish I had seen this clearly in Oct 2007, but better late than never I suppose. Although I have about a 50:50 allocation and I expect to give ground on the equity side over the next months, I probably will not sell in taxable accounts. I am hoping to do Roth conversions in size this year, and I don't want realized CGs to make these conversions more expensive. All of my equities are well financed dividend payers, only one timber MLP reduced payouts, and many stocks and MLPs continued to increase them, so although I have my doubts about it I will likely stand pat.

A lot of things can happen, but IMO one of the least likely is that a new real bull market started in March 09. Perhaps Zimbabwean inflation might make stocks fly, but the history of inflation at the levels that we have experienced before in the US is that they lower PE ratios enough to more than counteract any good effect of the inflation on corporate profits.

Deflation also kills PEs, and profits. So we are in a sweet spot, where of all the things that can happen, only one is good and it is very unlikely. The one positively good outcome is that inflation stays low but positive, and that PEs continue to surge higher.

We are in a tough spot. Returns on quality fixed instruments are very low, taxes are likely to go higher, and equities at best offer rewards only by taking large risks.

Eventually we will once more have a following wind, and that will be the time for much more adventurous allocations.

Ha
 
haha said:
The one positively good outcome is that inflation stays low but positive, and that PEs continue to surge higher.
Click to expand...

Or that corporate earnings this year, expected to put the S&P 500 multiple at ~15x, aren't "peak" earnings as implicitly assumed by PE10. There are reasons to think 2010 earnings are not at peak, but time will tell.
 
Well I just read this whole thread;)

This market never really made me uncomfortable until January...

Of course I didn't pay much attention to it last year either... Id just check in at the end of the day and count my money:D

I took my position in Nov 08 at around DOW 8150 and bought a little more in March 09...

I've sold a lot of these rallys the last few months and regretted it... I was in all Vanguard mutual funds until Dec 09.

I opened a brokerage account, 12 free trades and index sector ETF's...

At least I can buy or sell mid day instead of putting in an order at the end of the day...

Problem is I now find myself spending way too much time watching the market real time:(

I've found it hard to commit any kind of real money at these levels...

Interesting reading this thread, most of the worries all along were and are legitimate but the market just kept going up...

Im at 20% stocks, Weleslley and Wellington and a couple of ETF's, Sold Citi stock yesterday...

I sold a good chunk of Vanguards energy ETF 2 days ago and booked a nice gain:cool:

Now it seems Oil is selling off and Im wondering when to buy back... Long term I believe energy is a winner...

I still have a position in Utilities that's been a loser so far but the dividends are nice...

Now going into what looks like another good earnings season...

Plenty out there to worry about. Futures are down today... Resistance at 11000 and S&P 1200

Maybe buy and hold for a week:ROFLMAO:

Damn brokerage account has turned me into a wannabee day trader :mad:
 
Ha, are you doing anything different with your portfolio?
 
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