jjustice wrote:I've always (well, for about 25 years) found rebalancing to a tolerance band around a set allocation easy and rewarding. I do it mindlessly. But everytime the market gets unusually low or high the idea of overbalancing starts to appeal. So far, I've never done it. You would need a better metric than Bernstein's "when the market goes up 50%." 50% from where? Isn't there a poster here who shifts his allocation according to levels of PE10? Maybe reduce equities by 10% when PE10 reaches 25. Of course, you could use a sliding scale and make more frequent smaller adjustments.
is the thread.
Mr. Bogle on Shiller PE10 (in 2011) from Morningstar
"I like the Shiller P/E. I like the Shiller P/E for two reasons: One, it's focused on a longer period of time, not just on the moment, and that's very important thing to do because earnings can do all kinds of things in short periods."
"And the other thing I like about it is, he uses reported earnings from companies and not operating earnings. All the Wall Street pundits use operating earnings. Why? Because they are higher than reported earnings. The difference between operating earnings is what the company does in its normal course of business, and we take away from that, in order to get to reported earnings, all the mistakes they've made in investments, bad decisions, changing past decisions, things of that nature. And so it is actually reported earnings that give you the true, long-term picture of the company itself. So those two reasons, a long-term focus and the right earnings number and reliance on history, I go with Shiller. And by his numbers, I think he has about a 17 times P/E as the norm, and it’s around 21 times today. I wouldn’t regard this data, being data, as a major imbalance, but it would suggest the market is probably more or less properly valued, correctly valued, or maybe somewhat overvalued."
Note, today PE10 is over 25.
Raybo wrote:Where do I put the money? It isn't like bonds are such a safe investment. What are the prospects for their returns going forward? I've already sold TSM and bought my allotment of IBonds this year. What do you suggest I do with the money I take out of stocks?
Bonds are a far safer investment than stocks, assuming they are government or investment grade corporates. There are also CDs.
There is no free lunch.