Cash alternatives

[feelthefreedom]

Actually, my question is not how much it will continue to go up before the drop, but how long will it be after the drop before it reaches its previous high? If there's a recession or depression early in my retirement, I plan on just reducing my draws and spending only from the cash/bond portion, and I should have enough to hold me over for decades of a comfortable but simple LBYM lifestyle!

Exactly, the thing about the extreme/record valuations we have now is two-fold. One, they are ineffective at predicting short term drops in the market, whether large or small. Two, they are good predictors of poor long term returns.

 

[Montecfo]

This site does good work demonstrating how unique and extreme valuations are relative to any other time going back 100 years.
https://www.advisorperspectives.com...gression-to-trend-186-above-trend-in-november

Extreme valuations?

"monthly average of daily close". So this is just based on pricing, with no indication of the value represented?

 

[Midpack]

The OP appears long gone, so I won’t bother to comment.

There’s no alternative to cash with the same principle preservation and guaranteed higher returns, so these threads always go nowhere and fade away. Some people have gone to alternatives with more risk and higher returns, but that’s not a cash equivalent. Over and over and over.

 

[Montecfo]

There’s no alternative to cash with similar principle preservation and guaranteed higher returns, so these threads always go nowhere and fade away. Some people have gone to alternatives with more risk and higher returns, but that’s not a cash equivalent. Over and over and over.

I agree. There is no asset quite like cash is there?

But the OP asked about alternatives, not equivalents. And some folks have suggested some that merit consideration, with short term bonds leading the way in my view. Ibonds can make some sense, but with limited ability to fund. And as attractive as they are now, this has not been the case until recently.

And you can't earn more without taking more risk, it's very simple.

 

[olyveoil]

Actually, selecting for dividend stocks is a suboptimal strategy, as has been debated here many times. Dr. Ken French explains in this brief video: https://famafrench.dimensional.com/videos/homemade-dividends.aspx

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[feelthefreedom]

Extreme valuations?

"monthly average of daily close". So this is just based on pricing, with no indication of the value represented?

Valuation:

https://www.advisorperspectives.com/dshort/updates/2021/11/08/is-the-market-still-overvalued

https://www.advisorperspectives.com...ap-to-gdp-october-buffett-valuation-indicator

 

[feelthefreedom]

Uncharted terrritory

More on topic...I'm not a econ guy, but I am a math guy. The uncharted territory phrase always gets my attention.
https://www.advisorperspectives.com...arket-valuation-inflation-and-treasury-yields


"In the months following the Great Financial Crisis, we have essentially been in "uncharted" territory. Never in history have we had 20+ P/E10 ratios with yields below 2.5%. The latest monthly average of daily closes on the 10-year yield is at 1.58%, which is above its all-time monthly average low. As of August 4, 2020, the daily 10-year note hit an all-time low of 0.52%.
What can we conclude? We have been in "uncharted" territory. Despite the end of QE, many analysts assume that Fed intervention through its Zero Interest Rate Policy (ZIRP), will keep yields in the basement for a prolonged period, thus continuing to promote a risk-on skew to investment strategies despite weak fundamentals.
On the other hand, we could see a negative market reaction to a growing sense that Fed intervention may have its downside, resulting in an aberrant bond market and increased inflation/deflation risk."