Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Why I believe we are about to embark on a historic bull market run
Old 12-18-2019, 07:13 PM   #1
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,494
Why I believe we are about to embark on a historic bull market run

I have come to believe that the stock market is set to soar to unbelievable heights over the coming 2-5 years, ending with the S&P 500 somewhere around the 12,000 range. This has come to me after ruminating and watching multiple times a Mike Green one hour video which paradoxically was titled "The trouble with Passive Investing". After contemplating what he was stating was happening in the market and confirming the trends he spoke of are true I have the following conclusions:

1) Since 2002, passive investing has been outpacing active investing in terms of total market share of the stock market universe. This means on balance active investors have been selling to passive investors and active investors have been leaving the market.

2) Passive investors, for a large majority, means there is no analysis done on individual companies to determine the value needed, a formula is adopted by passive funds - do I have cash I buy stocks or do I need cash I sell stocks. Active funds held cash reserves to be utilized when prices reached what was felt by the investor to be a good price to purchase stocks. A very large indicator of how this is occurring is in the European government debt with negative interest rates. The largest holders are United States passive index funds, who are forced to buy more of the bonds as the government purchases the bonds to drive down their interest rate and increase the price and as the market capitalization of the negative debt is increasing at the fastest rate, this leads to a greater weighting in the global bond indexes leading to a feedback loop. The negative rates of course do lead to some selling as the bonds don't yield enough and drive more funds into passive stock investments.

3) Active investors leave the market as when they feel values are too high they hold more cash and then under perform passive investing by ever great amounts, exacerbated by the ZIRP conditions leading to zero returns on their cash while passive indexes soar. Since 2011 this is leading to a hockey stick curve in the percentage of the market that passive investing controls. Presently about 90 percent of all transactions and 38 percent of the holders of equity capitalization. There has been an explosive increase in passive holdings over the past 8 years

4) This means as passive funds continue to receive funds they must buy the index whatever the level of the index, and the reduced pool of active investors is lessening the pool from which to buy the stock. This effect is clear to see on the S&P 500 which has now had 4 days in the last 2 years where every stock in the S&P 500 traded in the same direction something that has never happened.

5) Older investors are far more likely to hold active funds and investors younger than 30 hold nearly 90 percent of their equity in passive funds. So the trend of passive investing is only going to increase, leading to wider price gains in order to break investors hold of their stocks. SO over the next 2 years passive will surpass the holdings of funds in the market to over 50%, further reducing the supply from active investors. And the passive indexes will most likely be performing far better than active managers and confirm in investors minds the need for passive investing.

6) Equity holdings as a percentage of a portfolio is also growing leading to more money being invested in the market and as passive investing will be driving up the indexes price moves will become more and more rapid.

7) Once the passive market achieves more than 50% of the market, the lack of active managers is going to increasingly reduce the liquidity to the market and move will become explosive, by the end 10-20 percent increase in a month will be seen. I expect something along the lines of a 30-35 percent gain followed by a 35-40 percent gain followed by a 90-100 percent gain will occur in stocks.

IF this occurs the truly difficult thing to do is to sell before the end of the bull market, because once the selling begins there is no value hunters to absorb the supply but that is a discussion for the future. The alternative view that the passive investing tipping point causes an immediate decline seems incredibly unlikely as the Federal Reserve seems clearly interested in maintaining stock market increases in fixing the problem with pension funding and hoping to proved some inflation to offset other debt problems.

If this occurs the best investment should be the S&P 500 as index funds invest more in the largest capital items and S&P 500 companies make up a larger market cap of most indexes. But all the indexes should see large positive moves.
__________________

Running_Man 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 12-18-2019, 07:21 PM   #2
Full time employment: Posting here.
mn54's Avatar
 
Join Date: Sep 2007
Location: mpls, mn
Posts: 547
so, based on this belief, are you going to change your AA? will you be 100% equities? what has been your belief up to now?
__________________

mn54 is offline   Reply With Quote
Old 12-18-2019, 07:25 PM   #3
Thinks s/he gets paid by the post
timo2's Avatar
 
Join Date: Jul 2011
Location: Bernalillo, NM
Posts: 2,285
Quote:
Originally Posted by Running_Man View Post
I have come to believe that the stock market is set to soar to unbelievable heights over the coming 2-5 years, ending with the S&P 500 somewhere around the 12,000 range.
All the fixed indexed annuity salesman will love your post!
__________________

"This is the year 2020 and nothing is OK" ...Lois Griffin
timo2 is offline   Reply With Quote
Old 12-18-2019, 08:10 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,494
Quote:
Originally Posted by mn54 View Post
so, based on this belief, are you going to change your AA? will you be 100% equities? what has been your belief up to now?
When investing I think investors and certainly I am wary of the probability of being wrong and what that would mean to me if i am wrong, kind of a personal stress test prior to the incorporation of any changes to a portfolio before one were to do it. I think a balanced portfolio has very positive advantages and would never be 100% equities. However investing a little over 1% of my portfolio in a certain one year S&P500 call, if my prediction of a historic market does occur will expand to over 2 times the value of my entire portfolio, while limiting my loss to a little over 1% of the total value of my portfolio.
Running_Man is offline   Reply With Quote
Old 12-18-2019, 08:24 PM   #5
Thinks s/he gets paid by the post
UnrealizedPotential's Avatar
 
Join Date: May 2014
Posts: 1,126
The financial markets are generally unpredictable. George Soros
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger

The first rule of compounding: Never interupt it unnecessarily. Charlie Munger
UnrealizedPotential is offline   Reply With Quote
Old 12-18-2019, 08:28 PM   #6
Full time employment: Posting here.
 
Join Date: May 2011
Posts: 817
I want to keep an eye on this thread to see where your prediction goes.
kimcdougc is offline   Reply With Quote
Old 12-18-2019, 08:39 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,494
Quote:
Originally Posted by UnrealizedPotential View Post
The financial markets are generally unpredictable. George Soros
If that was true no one would invest in markets, as a matter of fact most individuals that invest in passive markets believe that markets are entirely predictable and expect prices to go ever higher, any low will be soon reversed and a new high achieved, it is only a matter of time and has been proven on every decline over the history of the stock market (at least in the US).

And you honestly are quoting a man who once made 1 billion dollars in a single day and is the author of the financial theory of reflexivity which he used to amass his fortune?
Running_Man is offline   Reply With Quote
Old 12-18-2019, 08:41 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2011
Posts: 6,161
Quote:
Originally Posted by kimcdougc View Post
I want to keep an eye on this thread to see where your prediction goes.
But on Feb 22, 2018 Running Man posted:
"As of today I am back to 0% stocks. The action of the market and the confidence of the average participant leads me to fear there is shortly to be a move of epic proportions and speed to the downside. "

Thread here: http://www.early-retirement.org/foru...cks-90933.html

So, what has changed? We all know what happened to the 'epic' movement to the downside over the past 22 months.
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is offline   Reply With Quote
Old 12-18-2019, 08:45 PM   #9
Thinks s/he gets paid by the post
UnrealizedPotential's Avatar
 
Join Date: May 2014
Posts: 1,126
Quote:
Originally Posted by Running_Man View Post
If that was true no one would invest in markets, as a matter of fact most individuals that invest in passive markets believe that markets are entirely predictable and expect prices to go ever higher, any low will be soon reversed and a new high achieved, it is only a matter of time and has been proven on every decline over the history of the stock market (at least in the US).

And you honestly are quoting a man who once made 1 billion dollars in a single day and is the author of the financial theory of reflexivity which he used to amass his fortune?
Most individuals do not have Soros net worth, so I really don't care what they predict. But if you are looking for a back and forth war of words you will have to look elsewhere.
__________________
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things. Charlie Munger

The first rule of compounding: Never interupt it unnecessarily. Charlie Munger
UnrealizedPotential is offline   Reply With Quote
Old 12-18-2019, 08:54 PM   #10
Full time employment: Posting here.
corn18's Avatar
 
Join Date: Aug 2015
Posts: 775
Quote:
Originally Posted by marko View Post
But on Feb 22, 2018 Running Man posted:
"As of today I am back to 0% stocks. The action of the market and the confidence of the average participant leads me to fear there is shortly to be a move of epic proportions and speed to the downside. "

Thread here: http://www.early-retirement.org/foru...cks-90933.html

So, what has changed? We all know what happened to the 'epic' movement to the downside over the past 22 months.
Based on this, we should all do the opposite of what RM predicts.
__________________
Don't do something, just stand there!
corn18 is online now   Reply With Quote
Old 12-18-2019, 08:56 PM   #11
Recycles dryer sheets
 
Join Date: Sep 2018
Location: Washington, DC
Posts: 464
Quote:
Originally Posted by marko View Post
But on Feb 22, 2018 Running Man posted:
"As of today I am back to 0% stocks. The action of the market and the confidence of the average participant leads me to fear there is shortly to be a move of epic proportions and speed to the downside. "

Thread here: http://www.early-retirement.org/foru...cks-90933.html

So, what has changed? We all know what happened to the 'epic' movement to the downside over the past 22 months.
It's fairly obvious from the previous posts, and from the "tone"of this post, that the OP is assuming that the herd is stupid, will invest no matter what, and will drive the market. If that is NOT the fact, then he is schizophrenic.
__________________
Hoping 2023 - 2024
Tiger8693 is offline   Reply With Quote
Old 12-18-2019, 09:01 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 25,515
OMG I can’t believe you posted this!

Sorry, I’m just used to your dire warnings.

Oh wait, this is a dire warning!
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Old 12-18-2019, 09:08 PM   #13
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: 5,230
I like stocks, always have. What else is there bonds? CD's?

AA - 80-18-2
__________________
Retired at 59 in 2014. Should have done it sooner but I worried too much.
RobbieB is online now   Reply With Quote
Old 12-18-2019, 09:11 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,494
Quote:
Originally Posted by marko View Post
But on Feb 22, 2018 Running Man posted:
"As of today I am back to 0% stocks. The action of the market and the confidence of the average participant leads me to fear there is shortly to be a move of epic proportions and speed to the downside. "

Thread here: http://www.early-retirement.org/foru...cks-90933.html

So, what has changed? We all know what happened to the 'epic' movement to the downside over the past 22 months.
I bought back in on April 4th as I reported in that same thread:
http://www.early-retirement.org/foru...ml#post2034060
I then in October of 2019 bought 1% of my portfolio in S&P500 puts as detailed here:
http://www.early-retirement.org/foru...uts-94093.html

Which I sold on December 24,26 and 30th
http://www.early-retirement.org/foru...ml#post2162942
Running_Man is offline   Reply With Quote
Old 12-18-2019, 09:11 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 27,515
Many weird things have happened in history. I would not rule anything out. How probable is this described scenario? Beats me!

The OP was talking about buying a bit of call options, and not going on margin to load up on stocks. If it does not work out, he won't be broke. I guess that's OK.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 12-18-2019, 09:19 PM   #16
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 2,494
Quote:
Originally Posted by corn18 View Post
Based on this, we should all do the opposite of what RM predicts.
This is the reason I feel the markets will move one way, noone will even do the cursory investigation to see what the facts of what was actually done posit a logical response based on incorrect facts or headlines.

When I hold a strong view, I post it here, by the time I post here I have thought about the idea for quite a while and have in my mind an opinion of where and how the market should move and invest that way, if the market does not move in the way I expect I correct my action and end the investment to re-assess.

I do not hold that the market will move up exponentially haphazardly, the entire move in negative bonds in the summer was crazy, the move in the Nasdaq in 2000 was crazy and they had a lot in common with the move in US markets to passive investing, the reduced the amount of stock available to purchase which is outstanding causing a shortage which leads to higher prices. This to me is as logical an outcome as must occur. But this is what I think can and will occur and I look for the best investments to take advantage of this theory while risking as little of my capital as possible.
Running_Man is offline   Reply With Quote
Old 12-18-2019, 09:52 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Aug 2016
Location: Northern Virginia
Posts: 1,592
Net funds flowing into passive vehicles have no doubt supported the prices of stocks in the respective index. When this begins to slow, then I think you will see active management begin to perform better relative to indices.

But as far are your primary premise, I think it is false that fund flows into indices will drive those indices into the stratosphere. You have too much hedge fund money and high frequency trading to allow that the happen.

Your premise seems to suggest that once someone invests in an index, they will not sell the index and invest elsewhere, or look for better values in individual stocks, real estate, commodities, etc. And vice versa.
Montecfo is offline   Reply With Quote
Old 12-18-2019, 09:57 PM   #18
Thinks s/he gets paid by the post
jollystomper's Avatar
 
Join Date: Apr 2012
Posts: 2,679
Goodness, if this happens, I will have huge RMDs to deal with. Oh the horror...
__________________
FIREd date: June 26, 2018 - wwwwwwhat a rush!
jollystomper is offline   Reply With Quote
Old 12-18-2019, 10:08 PM   #19
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: No Country for Old Men
Posts: 46,719
Quote:
Originally Posted by Running_Man View Post
...noone will even do the cursory investigation...
I don't think so. Noone hasn't posted here for years.
__________________
Numbers is hard

You may not know it but I'm quite famous

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 12-18-2019, 10:35 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Aug 2016
Location: Northern Virginia
Posts: 1,592
Quote:
Originally Posted by REWahoo View Post
I don't think so. Noone hasn't posted here for years.
especially since he got a good look at Mrs. Brown's daughter...
__________________

Montecfo 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
The Bull Run will continue for years .. Cabot article cyber888 Stock Picking and Market Strategy 69 09-10-2018 04:05 PM
Real Estate/Equities Market Bull Run yakers Stock Picking and Market Strategy 2 09-25-2016 05:39 AM
Recognizing an historic crash vs. correction or bear market. Snidely Whiplash FIRE and Money 82 02-08-2014 07:49 PM
Foreign stock market charts or historic prices summer2007 FIRE and Money 2 07-25-2008 11:15 PM
The Gold Bull Market johnlw FIRE and Money 38 05-14-2006 05:03 PM

» Quick Links

 
All times are GMT -6. The time now is 12:46 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×