selftalk wrote: ↑
Tue Aug 08, 2017 3:38 pm
Today I purchased more VTI as the money became available. It seems that everyone in my group of friends keep on talking about how high the market is and how bad the world situation is but of course won`t buy any more shares. It`s a real wall of worry as they say. Call me crazy but I do try to ignore the friendly chatter and well meaning people and continue with my purchasing plan to preserve my long term purchasing power of the dollar as per Warren Buffett so indicates in his annual reports of Berkshire Hathaway and what John Bogle and Taylor Larimore suggests.
I don't think people need to obsess over valuations. Pretty much what you want to do is cut back if you see a bubble forming. We are not in a bubble. I would explain a bubble as excessive valuations coupled with excessive optimism. Pretty much, bull markets end when markets run out of buyers. It seems that valuations are "stretched" but interest rates are still very low, still a lot of cash on corporate balance sheets, profit margins are still high, and inflation seems subdued. The higher the market goes, the more articles I see warning of market doom. There is optimism out there about the economy and the markets but no where near euphoria. Individual investors and institutions have optimism but I don't see huge optimism in the financial press. People are not quitting their jobs to day trade. Market valuation is nowhere near where it was before the 2000-2002 bear market.
Markets seem expensive but we have been in a bull market since about March of 2009. Stocks always look expensive in bull markets. Garden variety bear markets of 20% to 30% down can happen at any time, particularly if there is an unexpected world event that happens which shakes investors. I don't see euphoria setting us up for a 50% or more crash, it doesn't feel like the 1999 stock market euphoria or the 2007 real estate euphoria. In certain real estate markets, where new construction is constricted, we might be seeing whiffs of euphoria but mortgages are harder to get now than in 2007 and other parts of the US have more normal markets.
If you are relatively young, just keep investing right on schedule. If you are near retirement, you might want to pay more attention to market valuations, but no reason here for anyone to panic. That is if you have an age appropriate asset allocation and you have a long term outlook.
A fool and his money are good for business.