Why I believe we are about to embark on a historic bull market run
- Thread starter Running_Man
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You are correct in that I was posting an opinion...I did write "IMO' in my post which means "In My Opinion".
I do not have to prove anyone wrong. I am not in that business. I am just posting some historical data. What you do with it....is up to you.
My retirement portfolio is currently an "asset preservation" portfolio...and that is where I want to be.
Especially when the PE ratio is currently 36 and still climbing. I am not waiting for the PE ratio to hit a similar historic record high of 116 on May 2009 and then see it crash to a PE ratio 15 on Oct 2010. I am not timing the market. What I am stating is that the current market risk exceeds my own personal risk tolerance. My fear (and lack of greed) justifies my asset preservation portfolio.
What is wrong with that?
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Hi Vchan, nothing wrong with an opinion. I have plenty of them too. 
Just saying that you started off saying you are data driven and it really morphed into an opinion. But OK, I don't want to be too pedantic so please don't take my comments too seriously.
There are all kinds of PE's. Using the most recent 12 months we have a PE=40.9. Estimated PE's are maybe 22. If we knew the future earnings for sure then that would be interesting. Even Shiller has moved to recognizing that PE10 should maybe be interpreted in the context of current interest rates.
What I and others have observed is that no one variable will predict the future.
Just saying that you started off saying you are data driven and it really morphed into an opinion. But OK, I don't want to be too pedantic so please don't take my comments too seriously. There are all kinds of PE's. Using the most recent 12 months we have a PE=40.9. Estimated PE's are maybe 22. If we knew the future earnings for sure then that would be interesting. Even Shiller has moved to recognizing that PE10 should maybe be interpreted in the context of current interest rates.
What I and others have observed is that no one variable will predict the future.
I only suggested there is a higher risk in the stock market because of the high PE ratio. Are you implying that a high PE ratio translate to a undervalued market and a lower risk? If you are, then I disagree.
I do agree with your statement that "no one variable will predict the future".
This is because if you can predict the future...then you should be richer than Elon Musk.
Running_Man
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This was my buy level, I was not on this forum again until September but when S&P500 crossed 3100 I got back in. Of course I also invested quite a bit in gold and silver from my option winnings in late 2019 early in the year and did quite well with them as well. I am doing alright. Overall 2020 was a good year again, as has been every year for quite a while now, not much of a task with the tailwinds of the Fed holding at zero...
I stopped posting because every time I post OldShooter posts... yes but Nobel Prize winners have stated this is not possible and the only thing to do, as I tell my students is a portfolio selected to blah blah blah. It is tiresome and of no use and the repetitive thunderclap of Nobel musings on portfolio construction is not understandable in the INDIVIDUAL STOCK THREAD. If Covid had not hit, I do believe we would have had an incredible bull run in 2020, even with the worst business downturn in history it was still and is extraordinary.
OLD Shooter is not necessarily wrong in my opinion, and most people are far better off investing as he pontificates, though they are usually not in the individual stock forums, but he irks me, he's irksome.
https://www.early-retirement.org/forums/f44/for-the-first-time-ever-i-sold-all-my-stocks-103777-19.html#post2435366
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Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well there is always the ignore choice. I thought people were kidding but it is really a function that works, I think. I used it with only one other poster and it worked nicely. At least I think it did as I have not seen any other posts from him.
There is an art to disagreeing with someone. Probably the best way to disagree is to shut up and let the other person have the floor.
There is an art to disagreeing with someone. Probably the best way to disagree is to shut up and let the other person have the floor.
S&P value
I'm exposing myself as a DMT, I suppose, but I share with VChan concerns about the market valuation, based on current/future PE. There are mitigating factors, to be sure, most importantly
a) interest rates (I've come to believe this to be a far more important factor in stock valuations than I believed to be the case 10 or 20 years ago)
b) COVID recovery (assuming Earnings are depressed by COVID-related factors, PEs could rapidly decline at the end of 2021 and particularly 2022, assuming recovery occurs and carries earnings upwards, to the moon)
c) COVID stimulus (TINA to stocks, given yields)
Whether now to act on those concerns (and if so how) is the question.
a)The same explosion of PE occurred from '97-'2000 during the tech rapture; I had less than 10% of my current portfolio but was concerned, but largely I responded by scraping gains in my large-cap growth from late 1998-2000 into a small/mid blend fund and increasing my contributions to this and an international fund. That worked out from 2001-2003, much better than I had dreamed. Most of my gains were from the small/midcap fund, along with a biotech and China fund that I started investing in 1999.
b) In summer 2015, I started to get concerned, not so much about PE but about mortgage debt and I was approaching age 50 with a 95-5% portfolio that had ballooned. I realized retirement somewhat early was a possibility, which I had never really envisioned. I decided to reduce the allocation from almost 90% stock down to a target of 65% to reduce risk, so I started methodically selling 3-5% every couple months. With the market rising, I was selling considerably more stock gains than I had expected to do, but I started sticking the majority of the sales into an intermediate Treasury fund. For almost 2 years, I looked like an idiot as the market zoomed......until the crash when the intermediate treasury fund became a source for rebuys to get back up to 60-65%.
In retrospect, these moves helped me reallocate/rebalance into stocks when my stock allocation had dropped >5% due to the rapid collapse of stock values.
c) Now. I spent 2016-19 shaving off gains to build cash preparing for withdrawals particularly since my younger DW was frustrated working (I had a nice online teaching gig for 5 years after retiring and moving to Reno, but in 2015-18 I was not sure how long this income stream would last). The period of withdrawals from 2017 until 4 years from now when I reach SS full withdrawal age was worrisome and I feared a big correction like what happened in March 2020 (SORR), so I slowly decreased stock allocation from 63-45%, as I did before the 2007 crash. In the March crash, the allocation dropped below 38% so I put a chunk of cash to work in March/April to get back up to 42%, intending to invest more in June--then the market zoomed doing my work for me.
I can withdraw from DW's IRAs next year and full SS is less than 4 years away for me, so I've let the run-up since April largely increase the stock allocation (I withdrew enough for this year's withdrawal however in July and September). I have 25% cash, which is too much, and bonds are not attractive.
I'm now comfortable with reaching a 53-55% stock allocation over the next 2-4 years, by allowing stock funds to continue to rise and increase the stock allocation and by slowly re-investing cash, particularly on dips of 5-7%. Further, I like international stocks, given both the relative value compared to US largecaps, so I'm going to gradually (1-2% every 2-3 months) increase international allocation. I already did the first steps of 20k twice over the last two months. And I may grit my teeth and allocate some cash (now almost 25%) to intermediate/TIPS bond funds, although I'm giving some time to this, as a shock absorber. I would like to see bond yields rise 1% or so but I may die before that happens. I do not have any TIPS, so I probably will start there.
Cash is not necessarily trash given bond yields (IMO).
I'm already up to 48.5% stock allocation given the post-March lift, so I hope to either use cash gradually if the market slumps or let the market lift it.
After I start drawing SS in a little under 4 years, I'm comfortable going back up to a 60%-65% stock allocation; the problem could be spending the dough, which is different problem from when I semi-retired to go to Reno in summer 2015 (the portfolio is up 45%--despite hefty withdrawals from my 403b the last 3 years--hence my telling DW to retire more than 2 years ago when she was frustrated at work, although the original plan was for her to work through 2021.) We clearly can afford to spend more than I originally planned back in 2013/14, now that the highest risk is almost past; I can always draw SS early if necessary.
This is all loosely based on reducing risk with a lower stock allocation before SS (and in my case the inability to access DW's IRAs), then raising the allocation as the guaranteed annuity of SS approaches. Several posts here alerted me to this strategy (forgot the retirement advisor who advocates this strategy).
Summary is that allocations can be dynamic rather than fixed, and one can increase stock allocations by concentrating investment in comparatively less valued sectors. And, yes, there is an admirable and elegant clarity to just sticking to a 65-35% allocation through thick and thin (or whatever) as I think many here do.
Everyone has a plan, until they are punched in the face (imagine if the March crash had persisted for 2-3 years with my withdrawing 10% from my account this year by selling stock funds); allocations are not written on stone tablets. Another factor to consider in allocation within stocks is currency, which has been a tail wind for US large caps for a long time, but this has rapidly changed over the last year, and currency cycles are typically 2-5 years. That doesn't mean the dollar won't recover soon (although I'm skeptical).
--confessions of a DMT
I'm exposing myself as a DMT, I suppose, but I share with VChan concerns about the market valuation, based on current/future PE. There are mitigating factors, to be sure, most importantly
a) interest rates (I've come to believe this to be a far more important factor in stock valuations than I believed to be the case 10 or 20 years ago)
b) COVID recovery (assuming Earnings are depressed by COVID-related factors, PEs could rapidly decline at the end of 2021 and particularly 2022, assuming recovery occurs and carries earnings upwards, to the moon)
c) COVID stimulus (TINA to stocks, given yields)
Whether now to act on those concerns (and if so how) is the question.
a)The same explosion of PE occurred from '97-'2000 during the tech rapture; I had less than 10% of my current portfolio but was concerned, but largely I responded by scraping gains in my large-cap growth from late 1998-2000 into a small/mid blend fund and increasing my contributions to this and an international fund. That worked out from 2001-2003, much better than I had dreamed. Most of my gains were from the small/midcap fund, along with a biotech and China fund that I started investing in 1999.
b) In summer 2015, I started to get concerned, not so much about PE but about mortgage debt and I was approaching age 50 with a 95-5% portfolio that had ballooned. I realized retirement somewhat early was a possibility, which I had never really envisioned. I decided to reduce the allocation from almost 90% stock down to a target of 65% to reduce risk, so I started methodically selling 3-5% every couple months. With the market rising, I was selling considerably more stock gains than I had expected to do, but I started sticking the majority of the sales into an intermediate Treasury fund. For almost 2 years, I looked like an idiot as the market zoomed......until the crash when the intermediate treasury fund became a source for rebuys to get back up to 60-65%.
In retrospect, these moves helped me reallocate/rebalance into stocks when my stock allocation had dropped >5% due to the rapid collapse of stock values.
c) Now. I spent 2016-19 shaving off gains to build cash preparing for withdrawals particularly since my younger DW was frustrated working (I had a nice online teaching gig for 5 years after retiring and moving to Reno, but in 2015-18 I was not sure how long this income stream would last). The period of withdrawals from 2017 until 4 years from now when I reach SS full withdrawal age was worrisome and I feared a big correction like what happened in March 2020 (SORR), so I slowly decreased stock allocation from 63-45%, as I did before the 2007 crash. In the March crash, the allocation dropped below 38% so I put a chunk of cash to work in March/April to get back up to 42%, intending to invest more in June--then the market zoomed doing my work for me.
I can withdraw from DW's IRAs next year and full SS is less than 4 years away for me, so I've let the run-up since April largely increase the stock allocation (I withdrew enough for this year's withdrawal however in July and September). I have 25% cash, which is too much, and bonds are not attractive.
I'm now comfortable with reaching a 53-55% stock allocation over the next 2-4 years, by allowing stock funds to continue to rise and increase the stock allocation and by slowly re-investing cash, particularly on dips of 5-7%. Further, I like international stocks, given both the relative value compared to US largecaps, so I'm going to gradually (1-2% every 2-3 months) increase international allocation. I already did the first steps of 20k twice over the last two months. And I may grit my teeth and allocate some cash (now almost 25%) to intermediate/TIPS bond funds, although I'm giving some time to this, as a shock absorber. I would like to see bond yields rise 1% or so but I may die before that happens. I do not have any TIPS, so I probably will start there.
Cash is not necessarily trash given bond yields (IMO).
I'm already up to 48.5% stock allocation given the post-March lift, so I hope to either use cash gradually if the market slumps or let the market lift it.
After I start drawing SS in a little under 4 years, I'm comfortable going back up to a 60%-65% stock allocation; the problem could be spending the dough, which is different problem from when I semi-retired to go to Reno in summer 2015 (the portfolio is up 45%--despite hefty withdrawals from my 403b the last 3 years--hence my telling DW to retire more than 2 years ago when she was frustrated at work, although the original plan was for her to work through 2021.) We clearly can afford to spend more than I originally planned back in 2013/14, now that the highest risk is almost past; I can always draw SS early if necessary.
This is all loosely based on reducing risk with a lower stock allocation before SS (and in my case the inability to access DW's IRAs), then raising the allocation as the guaranteed annuity of SS approaches. Several posts here alerted me to this strategy (forgot the retirement advisor who advocates this strategy).
Summary is that allocations can be dynamic rather than fixed, and one can increase stock allocations by concentrating investment in comparatively less valued sectors. And, yes, there is an admirable and elegant clarity to just sticking to a 65-35% allocation through thick and thin (or whatever) as I think many here do.
Everyone has a plan, until they are punched in the face (imagine if the March crash had persisted for 2-3 years with my withdrawing 10% from my account this year by selling stock funds); allocations are not written on stone tablets. Another factor to consider in allocation within stocks is currency, which has been a tail wind for US large caps for a long time, but this has rapidly changed over the last year, and currency cycles are typically 2-5 years. That doesn't mean the dollar won't recover soon (although I'm skeptical).
--confessions of a DMT
Last edited:
RetireeRobert
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We've been on a historic bull market run for now going into eleven years.
I believe the market historically is now in very over valued territory viewed from SP 500 earnings PE wise. And this market is historically long in the tooth.
The wild card causing economic distortions is the un-precedented Covid plague, and now the recovery from it that perhaps seems in sight with the vaccines.
Maybe another several months to a year of good times, but I think a sizable correction in stock market is overdue, and who knows what might trigger it. Some other unanticipated event, perhaps foreign affairs.
I believe the market historically is now in very over valued territory viewed from SP 500 earnings PE wise. And this market is historically long in the tooth.
The wild card causing economic distortions is the un-precedented Covid plague, and now the recovery from it that perhaps seems in sight with the vaccines.
Maybe another several months to a year of good times, but I think a sizable correction in stock market is overdue, and who knows what might trigger it. Some other unanticipated event, perhaps foreign affairs.
corn18
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With record personal savings that no one is spending until COVID goes away and cheap corporate money, I think this bull can run for a couple of more years.
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I think probably you are right and is now the consensus.
So yes, we could get multiple bad months (not sequentially) of -5% or so but that is common in a basically up market. Before the pandemic we had around 1 bad month on average per year.
VChan, I appreciate your posts, and Running_Man’s too. To read others’ views is helpful to me. If I wanted to hear opinions only corroborating my own thought, I could talk to myself in the mirror. A wide open forum is best, even if some of the voices are extreme or unconventional, and esp. if they have data or info to support their view.
There will be a bull market for at least 7-10 more years. Dow 50,000 is coming. Interest rates are low. More people are saving more money and looking for stock investments in the covid19 survival mode. If you're not spending money on travel, luxuries, and useless stuff, you put it in savings - but the banks are not giving you high interest .. so the only options are stocks. Earnings are low due to covid, but future P/E will go down as people get vaccinated and life returns to normal. I think there will be a big infrastructure investment to pump prime the economy.
RetiredAtThirty-eight
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I agree with the theory we are still in the early stages of a multi-decade bull market (with corrections along the way, of course) but my reasons are somewhat different than yours.
I think it will be driven by a confluence of different technologies coming together to automate and reduce costs while simultaneously making things quicker, cleaner, more efficient and more effective. It will impact farming, transportation, energy production and distribution, manufacturing, education, health care and drugs, entertainment, etc. Essentially, everything.
The efficiencies achieved will drive economies and markets in developed nations to levels most people can't even imagine. Those who don't invest in the new economy will be left behind. They will be the "have nots". The profits will all go to the investors in the new economy.
RetiredAtThirty-eight
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I don't like that saying because it implies that the thousands of hours I've spent researching companies to invest in and digging deep into their business plans were a waste of time. That I could have done just as well throwing darts at a stock list and I don't buy that.
I can see first hand how my research has paid off, both in the companies I chose to buy and also in those I chose to stay away from over the years.
RetireeRobert
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Here is a veteran who belies the "consensus" of bull market. He suggest major correction coming:
https://finance.yahoo.com/news/wall-street-veteran-says-market-173407061.html
RetiredAtThirty-eight
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That's not really the kind of information I consider to be actionable.
There's always a number of people predicting 15% corrections, the problem is knowing exactly when it will happen. Better to just ride them out rather than think you can time the top and subsequent bottom. That's just fantasy land.
Right. And at the rate stocks are moving lately, subsets of them will absolutely exceed 15% rise (or double or 10x that) before the predicted dip comes along. Time in the market.
I’m big into diversification, though. Hoping that will help over the remainder of my life.
target2019
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
In times like these I am reminded of what an experienced paper machine tender once taught me. He poked his head up from the Wall Street Journal and let me know that someone had just pulled the lever and let the expected savings of millions escape down the drain.
Maybe take showers until the bath tub fills again?
Maybe take showers until the bath tub fills again?
RetiredAtThirty-eight
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I agree. P/E's are the most over-rated metric of all. Companies are too diverse and varied to pick on metric of many and suggest you can analyze a companies value based on that lone metric. I've made the most money buying companies that either had no p/e ratio (because there were no earnings) or whose p/e was sky high because the company was in the early stages of growth and re-investing most of their profits to grow as quickly as possible.
I don't like that saying because it implies that the thousands of hours I've spent researching companies to invest in and digging deep into their business plans were a waste of time. That I could have done just as well throwing darts at a stock list and I don't buy that.
I can see first hand how my research has paid off, both in the companies I chose to buy and also in those I chose to stay away from over the years.
Agree. While it may not be for everyone here, there is nothing wrong with picking individual stocks and it is possible to beat the "market" if you have time and enjoy it...which I do.
Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have never invested directly in super high PE stocks and probably have missed many opportunities. I have invested in growth asset classes like large cap growth or midcap growth. Currently in mid/small value which I think has the momentum currently
But still I have done well over the years. For young investors I think investing some portion in growth stocks is not a bad idea. Perhaps best done in taxable accounts where you can hold for many years. Probably best done with a strong stomach when we have a very sharp and broad decline like in recessions or the "recession" of last year that was over with before it seemed to start.
But still I have done well over the years. For young investors I think investing some portion in growth stocks is not a bad idea. Perhaps best done in taxable accounts where you can hold for many years. Probably best done with a strong stomach when we have a very sharp and broad decline like in recessions or the "recession" of last year that was over with before it seemed to start.
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I also dislike the idea that fundamentals get ignored, and I don't buy into the idea that understanding fundamentals has zero value (case in point: Berkshire Hathaway). But as a retail investor trading shares held by index funds, when the flight to cash happens, that lowers all boats, irrespective of how well a company is positioned. The key at that point would be to double-down on the issues that were 'unfairly' devalued. Or more in tune with the current situation, short issues that are hyped above fundamentals. The problem is, like the casino solution to keep doubling your bet until you win, you run up against a limit, and you leave with no chips.
RetiredAtThirty-eight
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I don't look at investing like gambling. The key is to take a long-term approach, buy well-managed companies using innovation to offer more value than their competitors and don't try to time the market.
When taking a long-term approach, corrections and recessions don't matter - just ride them out. Stocks have always come back. Not every individual stock does well over time, the key is knowing how to pick the ones that will.
RetireeRobert
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Agree with having a wide open forum to exchange other people's opinions. Ok to disagree respectfully but not ok to imply "I am right and you are wrong". I like to listen to bears and bulls because ultimately they will be right eventually. I also agree playing the long game works best...but there is a catch. Nobody lives forever. For example the stock market in Japan crashed in 1989 from a peak of 38,916 and people should review the Nikki average since 1989 on the internet. My point: There is a risk in the US stock market and it is NOT risk free.
This is an important subject because people's retirement may depend on how well the stock market do in the next 20 years. I am bearish so I decided to diversify partially into real estate because bad things happen. I want to be more independent of the stock market during my retirement and more dependent of investments in different asset classes. Here are some asset classes to ponder: equities, bonds, precious metals, real estate, cash, investments in developing foreign counties, a small business, bitcoin, helping other family members reduce their debt, etc., etc. My next point: If your retirement is dependent on only one ot two asset classes then you can taking a risk of not being diversified into the other asset classes. Diversification works to reduce risk but not necessarily eliminates it because nothing is risk free.
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