Does it look like a bubble to you?

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CULater
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Does it look like a bubble to you?

Post by CULater » Wed Dec 06, 2017 8:09 pm

This is a chart of the value of all stocks in all companies in all countries, globally. It is, technically, the market cap of Planet Earth, and everyone who sees it does a double take. In just the last few months, total market cap has rocketed past $80 trillion and is heading steadily toward $100 trillion worldwide:
Image

It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?

http://www.businessinsider.com/global-m ... on-2017-12
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

Thesaints
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Re: Does it look like a bubble to you?

Post by Thesaints » Wed Dec 06, 2017 8:13 pm

Bubble, or inflation ?

You can't tell by that chart alone.

letsgobobby
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Re: Does it look like a bubble to you?

Post by letsgobobby » Wed Dec 06, 2017 8:18 pm

At least compare it to global gdp.

bigred77
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Re: Does it look like a bubble to you?

Post by bigred77 » Wed Dec 06, 2017 8:20 pm

Stocks are ownership of businesses that explicitly set out to make money. Not all profits are returned to shareholders via dividends and/or buybacks. Hence stock values rise even holding valuations constant. It’s supposed to go up. It’s common to go up and down in fits and spurts. That chart is in no way out of sync with normal expectations of market behavior.

CyberGuy
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Re: Does it look like a bubble to you?

Post by CyberGuy » Wed Dec 06, 2017 8:24 pm

So we went from 30 to 60 in four years and then from 60 to 90 in ten?

I will re balance my portfolio but then otherwise will stay the course.

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Re: Does it look like a bubble to you?

Post by AlohaJoe » Wed Dec 06, 2017 8:26 pm

Image

Being massively behind the 2004-2008 trendline is called being in a bubble?

Looks to me like it is just the rest of the world is finally recovering from the Global Financial Crisis.

I guess people can always find something to be scared of.

Swelfie
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Re: Does it look like a bubble to you?

Post by Swelfie » Wed Dec 06, 2017 8:27 pm

Going from the graph you have about 30T in 2004 to 80T end of 2017. That looks like notional CAGR of about 7.3% That's a bit on the low side for historical market returns, but it's not all that bad. Seems downright historically mundane actually.

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BogleMelon
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Re: Does it look like a bubble to you?

Post by BogleMelon » Wed Dec 06, 2017 8:32 pm

CULater wrote:
Wed Dec 06, 2017 8:09 pm
Anyone want to join me?
No thanks. I am staying the course.
Excuse my English, it is my second language! | | "One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

boglesmind
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Re: Does it look like a bubble to you?

Post by boglesmind » Wed Dec 06, 2017 8:38 pm

CULater wrote:
Wed Dec 06, 2017 8:09 pm
This is a chart of the value of all stocks in all companies in all countries, globally. It is, technically, the market cap of Planet Earth, and everyone who sees it does a double take. In just the last few months, total market cap has rocketed past $80 trillion and is heading steadily toward $100 trillion worldwide:
...
It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?

http://www.businessinsider.com/global-m ... on-2017-12
The BI link now contains the following
*Correction: The original version of this story contained only the chart showing market cap at nearly $100 trillion. After our story was published, Bloomberg changed the data it used to compose the chart, removing Venezuela because of its hyperinflation. We added the second chart, and more context, on December 6, 2017, to reflect that. The blue line represents the value of all stocks globally, which are nearly $100 trillion. But that value includes the Venezuelan stock market which has experienced a period of hyperinflation. If you take that extreme case out, you get the red line.*
and the corrected graph is as follows. https://imgur.com/a/c2uJ7 Image

Boglesmind

wilked
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Re: Does it look like a bubble to you?

Post by wilked » Wed Dec 06, 2017 8:41 pm

Someone better tell CULater before he fully converts to physical gold

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Pajamas
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Re: Does it look like a bubble to you?

Post by Pajamas » Wed Dec 06, 2017 8:42 pm

That chart may reveal more about the value of the dollar than it does about the value of the global stock market. What does a similar chart denominated in euros or renminbi, oil or gold instead of dollars look like? Or bitcoin, for that matter? What does a chart of total value of world currencies look like during the same time period?
Last edited by Pajamas on Wed Dec 06, 2017 8:50 pm, edited 1 time in total.

Thesaints
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Re: Does it look like a bubble to you?

Post by Thesaints » Wed Dec 06, 2017 8:46 pm

boglesmind wrote:
Wed Dec 06, 2017 8:38 pm
The BI link now contains the following
*Correction: The original version of this story contained only the chart showing market cap at nearly $100 trillion. After our story was published, Bloomberg changed the data it used to compose the chart, removing Venezuela because of its hyperinflation. We added the second chart, and more context, on December 6, 2017, to reflect that. The blue line represents the value of all stocks globally, which are nearly $100 trillion. But that value includes the Venezuelan stock market which has experienced a period of hyperinflation. If you take that extreme case out, you get the red line.*
and the corrected graph is as follows. https://imgur.com/a/c2uJ7 Image

Boglesmind
It looks very strange, unless the vertical scale is in Venezuelan dollars.

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knpstr
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Re: Does it look like a bubble to you?

Post by knpstr » Wed Dec 06, 2017 8:46 pm

All that money from "QE 120" has to go somewhere.
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bigred77
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Re: Does it look like a bubble to you?

Post by bigred77 » Wed Dec 06, 2017 8:49 pm

You might also take into consideration the effect of global IPOs over that time frame. Every IPO and new stock offering just bumps the line higher. How many private companies went public?

ResearchMed
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Re: Does it look like a bubble to you?

Post by ResearchMed » Wed Dec 06, 2017 8:50 pm

AlohaJoe wrote:
Wed Dec 06, 2017 8:26 pm
Image

Being massively behind the 2004-2008 trendline is called being in a bubble?

Looks to me like it is just the rest of the world is finally recovering from the Global Financial Crisis.

I guess people can always find something to be scared of.
Or does this show how out of control those first few years were (approx 2004-2008)?

How would this look if you drew the "red line" * starting with earlier years.
One could easily argue that the buildup to the great recession was abnormal. And ditto to the tech crash a few years earlier.

Meanwhile, the post above which showed the graph with and without Venezuela... that was pretty striking.

[* Isn't it about time for someone to post the progress of The Blue LIne? :D ]

RM
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Thesaints
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Re: Does it look like a bubble to you?

Post by Thesaints » Wed Dec 06, 2017 8:52 pm

ResearchMed wrote:
Wed Dec 06, 2017 8:50 pm
Meanwhile, the post above which showed the graph with and without Venezuela... that was pretty striking.
No doubt it is wrong. For two reasons:
1) Vertical scale is in US dollars which are insensitive to Venezuelan inflation
2) Venezuelan share of world market is <1%

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Pajamas
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Re: Does it look like a bubble to you?

Post by Pajamas » Wed Dec 06, 2017 8:53 pm

I see from subsequent posts that 1/3 of the value of the world market capitalization in the original graph was attributable to Venezuelan hyperinflation and the way the data were composed. That proves that it is not presenting information in a meaningful or useful way but just to be able to write about it.

bgf
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Re: Does it look like a bubble to you?

Post by bgf » Wed Dec 06, 2017 9:22 pm

Nah, looks more like a squiggly line to me.

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CyclingDuo
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Re: Does it look like a bubble to you?

Post by CyclingDuo » Wed Dec 06, 2017 9:23 pm

CULater wrote:
Wed Dec 06, 2017 8:09 pm
This is a chart of the value of all stocks in all companies in all countries, globally. It is, technically, the market cap of Planet Earth, and everyone who sees it does a double take. In just the last few months, total market cap has rocketed past $80 trillion and is heading steadily toward $100 trillion worldwide:
Image

It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?

http://www.businessinsider.com/global-m ... on-2017-12
Nope. We don't want to join you.

Image

We had a bear market in 2011, and from mid 2015-2016. It's nice to think this has been a bull market since 2009. However, officially, in terms of technical analysis, we had a 20% drop in 2011. Then, the bull market did not begin until 2013 when there was a breakout from previous highs. Then we had a 20% "bear market" correction (and even more than that in the median individual stock) from mid-2015 to mid-2016. The Nasdaq broke out in July of 2016 after going nowhere since 2000.

https://www.joefahmy.com/2017/03/07/yah ... et-turns-8

https://www.joefahmy.com/2017/04/29/mar ... rmedbroker

5-10% pull backs of the overall market are normal within a bull market. Seasonal pause at the moment. :mrgreen:

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nisiprius
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Re: Does it look like a bubble to you?

Post by nisiprius » Wed Dec 06, 2017 9:32 pm

Thesaints wrote:
Wed Dec 06, 2017 8:46 pm
boglesmind wrote:
Wed Dec 06, 2017 8:38 pm
The BI link now contains the following
*Correction: The original version of this story contained only the chart showing market cap at nearly $100 trillion. After our story was published, Bloomberg changed the data it used to compose the chart, removing Venezuela because of its hyperinflation...
It looks very strange, unless the vertical scale is in Venezuelan dollars.
(The Venezuelan unit of currency is called the "bolivar fuerte").

I had exactly the same thought. How could the inclusion or exclusion of Venezuela make that much difference? If the Venezuelan stock market has soared so much, valued in $USD, that it could do that to a global chart, then I wish I had money invested in the Venezuelan stock market.

I suppose what is happening is that there isn't a lot of investment in the Venezuelan stock market outside of Venezuela, and that the stock market, being a form of real assets, has been soaring when measured in the rapidly devaluing bolivar... and that they are valuing it at the artificial, basically false official exchange rate instead of... the black market rate.

This is a very interesting illustration, not of currency risk itself, but of how easy it is to form very incorrect impressions about international stocks due to the difficulty of understanding the reality behind international financial transactions, and the possible unreliability of financial statistics about international investments. Is Venezuela the only country where there is a dictated, official exchange rate that it is seriously different from reality?
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Re: Does it look like a bubble to you?

Post by iamlucky13 » Thu Dec 07, 2017 1:12 am

Thesaints wrote:
Wed Dec 06, 2017 8:52 pm
ResearchMed wrote:
Wed Dec 06, 2017 8:50 pm
Meanwhile, the post above which showed the graph with and without Venezuela... that was pretty striking.
No doubt it is wrong. For two reasons:
1) Vertical scale is in US dollars which are insensitive to Venezuelan inflation
2) Venezuelan share of world market is <1%
I was thinking that initially, too, but if they're not updating their exchange rates, or doing so too seldomly, then I suppose the 4000% inflation trend in Venezuela actually could blow that <1% way out of proportion like that.

For what it's worth, when looking at Vanguard Developed Markets Index and Total World Index over the same time frame, Morningstar's graphs looks fairly similar to the red line for both of them.

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Re: Does it look like a bubble to you?

Post by Thesaints » Thu Dec 07, 2017 1:14 am

No, it can not. It is simple algebra and they didn’t see a Zimbabwe effect as well, did they ?

The difference in the chart with and without Venezuela is 15/20%. The difference between official and actual exchange rate is around 400%. Yet, the capitalization of Venezuela is well below 1%, even if we multiply it by 4 it is still very far from 15%
No way that adding or subtracting Venezuela can be seen on that chart.
Last edited by Thesaints on Thu Dec 07, 2017 4:19 am, edited 2 times in total.

Valuethinker
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Re: Does it look like a bubble to you?

Post by Valuethinker » Thu Dec 07, 2017 4:04 am

Thesaints wrote:
Thu Dec 07, 2017 1:14 am
No, it can not. It is simple algebra and they didn’t see a Zimbabwe effect as well, did they ?
Zimbabwe ended its hyperinflation several years ago - they pegged to the dollar.

Thesaints
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Re: Does it look like a bubble to you?

Post by Thesaints » Thu Dec 07, 2017 4:08 am

The chart begins in 2004.

david1082b
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Re: Does it look like a bubble to you?

Post by david1082b » Thu Dec 07, 2017 6:43 am

This is a linear chart, not a log chart. Linear means that going from 10 to 12 takes up the same space as doubling from 2 to 4. Why should a chart represent a 20% increase the same as a doubling? The vertical movement of the line as it moves to the right will look more and more extreme the higher the vertical axis number becomes even if the rate of change has not changed. Check out a chart of Apple from 1981 to now in linear, it looks extreme. Check it in a log chart and it is more normal-looking. Same for the Dow from the beginning of its existence. Log is the only sensible way to look at charts.

Linear price chart for Apple from IPO to now:

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

CULater
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Re: Does it look like a bubble to you?

Post by CULater » Thu Dec 07, 2017 9:17 am

Consider that the last time CAPE hit this level (32) in 1998, you would have missed the big runup in stocks over the next 2 years but would have ended up with a net zero compound return on stocks until 2003 (5 years). Same scenario could be playing out again. For those who don't need to play the game anymore (low need to assume risk), good time to take some off the table? For me, yep. I've got better uses for my money right now than gambling too much of it on what is going to happen with stocks over the next few years. Too much risk for too little probable reward, IMO. Young investors, long term investors, and those with a high risk tolerance or need to take risk -- different story perhaps.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: Does it look like a bubble to you?

Post by midareff » Thu Dec 07, 2017 9:44 am

Whether a bubble, a trend, a whatever... makes no diff.. I'm here for the duration and not interested in timing.

dbr
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Re: Does it look like a bubble to you?

Post by dbr » Thu Dec 07, 2017 9:48 am

A chart looking at 13 years does not show enough time to mean much of anything at all.

If someone wants this to be a bubble, that person should certainly bail out of the market, though.

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Re: Does it look like a bubble to you?

Post by lostdog » Thu Dec 07, 2017 9:50 am

Nah, I'll stay the course. Your name is perfect for this instance. If you exit, I'll CULater...
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Re: Does it look like a bubble to you?

Post by randomizer » Thu Dec 07, 2017 10:06 am

I think a strong correction is coming and maybe a full on crash within the next year, most likely. But I know nothing, so I'm holding to my AA and will rebalance on the way up or the way down.

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Re: Does it look like a bubble to you?

Post by dbr » Thu Dec 07, 2017 10:12 am

randomizer wrote:
Thu Dec 07, 2017 10:06 am
I think a strong correction is coming and maybe a full on crash within the next year, most likely. But I know nothing, so I'm holding to my AA and will rebalance on the way up or the way down.
Yes, and a correction is not about there being a bubble. I don't know what your criterion for calling something a crash is, but either way you are right that if one is in the stock market these things come with the territory.

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Re: Does it look like a bubble to you?

Post by nisiprius » Thu Dec 07, 2017 10:23 am

Let's think about what this implies for all historical data about global stocks. In order to combine data in different currencies, it's necessary to convert currencies. For major currencies in normal times, when the nation is participating in a big way in international trade and currencies exchange rates are determined by market forces, this is probably straightforward. But it is not all that rare to have situations like Venezuela, where the government decrees and artificial, fictitious exchange rate in which (usually) the value of its currency is decreed to be much more than it really is.

It's not completely fictitious, because the official exchange rate is what the government uses in its own cross-border transactions. In the case of Venezuela the situation is beyond my ability to understand or track, but there are perhaps four exchange rates, and a quick Google search, probably outdated already, says that "The Venezuelan bolivar currently trades around 710 per U.S. dollar under the Dicom exchange rate and at 10 under the Dipro rate, Venezuela's other official rate. On the black market, however, a dollar can fetch around 3,000 bolivars." I imagine that if you sell the Venezuela government goods priced at $1, they probably pay you 10 bolivars and not 3,000.

So when people compile international financial data, what do they use as the exchange rate? My guess is that the easily obtained data are the official exchange rates, and there probably is no easy or authoritative reference for the black market rate if there is a black market.

What's interesting to me is that in this particular case, it really makes a difference. I'd have guessed, incorrectly, that it couldn't matter much. While I imagine the essential features of past datasets for international stock prices are OK, it does make you wonder how many Venezuela-like situations might be included in that past data. But perhaps Dimson and Marsh, who compiled "Triumph of the Optimists" and the Credit Suisse Global Return yearbooks, allow for this.
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Re: Does it look like a bubble to you?

Post by JoMoney » Thu Dec 07, 2017 10:34 am

nisiprius wrote:
Wed Dec 06, 2017 9:32 pm
... Is Venezuela the only country where there is a dictated, official exchange rate that it is seriously different from reality?
Here's a list of countries that have a 'dictated' / fixed exchange rate... not sure if any of the others are having issues that meet the "seriously different from reality" criteria:
https://www.investmentfrontier.com/2013 ... nge-rates/

Also not on the list, but worthy of some thought, is China https://www.marketwatch.com/story/china ... 2015-08-10
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Re: Does it look like a bubble to you?

Post by BolderBoy » Thu Dec 07, 2017 12:06 pm

CULater wrote:
Wed Dec 06, 2017 8:09 pm
It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?
Has market timing worked for you in the past? It has never worked for me so I won't be joining you. Enjoy the trip.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Re: Does it look like a bubble to you?

Post by wrongfunds » Thu Dec 07, 2017 12:13 pm

iamlucky13 wrote:
Thu Dec 07, 2017 1:12 am
Thesaints wrote:
Wed Dec 06, 2017 8:52 pm
ResearchMed wrote:
Wed Dec 06, 2017 8:50 pm
Meanwhile, the post above which showed the graph with and without Venezuela... that was pretty striking.
No doubt it is wrong. For two reasons:
1) Vertical scale is in US dollars which are insensitive to Venezuelan inflation
2) Venezuelan share of world market is <1%
I was thinking that initially, too, but if they're not updating their exchange rates, or doing so too seldomly, then I suppose the 4000% inflation trend in Venezuela actually could blow that <1% way out of proportion like that.

For what it's worth, when looking at Vanguard Developed Markets Index and Total World Index over the same time frame, Morningstar's graphs looks fairly similar to the red line for both of them.
Exactly! It is if when somebody provides a graph or bunch of data, people just forget to use their own brains to see if it passes the smell test. Both the initial chart and the modified chart are based upon totally bogus data. Why is difficult to fathom that?

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Re: Does it look like a bubble to you?

Post by adamthesmythe » Thu Dec 07, 2017 12:54 pm

boglesmind wrote:
Wed Dec 06, 2017 8:38 pm
CULater wrote:
Wed Dec 06, 2017 8:09 pm
This is a chart of the value of all stocks in all companies in all countries, globally. It is, technically, the market cap of Planet Earth, and everyone who sees it does a double take. In just the last few months, total market cap has rocketed past $80 trillion and is heading steadily toward $100 trillion worldwide:
...
It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?

http://www.businessinsider.com/global-m ... on-2017-12
The BI link now contains the following
*Correction: The original version of this story contained only the chart showing market cap at nearly $100 trillion. After our story was published, Bloomberg changed the data it used to compose the chart, removing Venezuela because of its hyperinflation. We added the second chart, and more context, on December 6, 2017, to reflect that. The blue line represents the value of all stocks globally, which are nearly $100 trillion. But that value includes the Venezuelan stock market which has experienced a period of hyperinflation. If you take that extreme case out, you get the red line.*
and the corrected graph is as follows. https://imgur.com/a/c2uJ7 Image

Boglesmind
If removing a country that is a very small part of the global economy- makes a big difference in the result- then I don't know what the vertical axis means.

Further: beware of plots with suppressed zeros. They make little changes look like enormous changes.

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Re: Does it look like a bubble to you?

Post by CULater » Thu Dec 07, 2017 1:23 pm

BolderBoy wrote:
Thu Dec 07, 2017 12:06 pm
CULater wrote:
Wed Dec 06, 2017 8:09 pm
It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?
Has market timing worked for you in the past? It has never worked for me so I won't be joining you. Enjoy the trip.
Who said I'm timing? I'm just adjusting my AA to reflect my low need and desire to take risk and the fact that Mr. Market has been way too generous to blind pig investors for a long while now. If I had a 30-year investing horizon or needed to stick with my current AA I'd act differently. As Edward Thorpe advised, "Sell down to the sleeping point." Your sleeping point may be higher than mine is right now. I will enjoy the trip regardless of what happens. I hope it isn't a round trip like it was from 1998 - 2003.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: Does it look like a bubble to you?

Post by cfs » Thu Dec 07, 2017 1:34 pm

Bail out?

No Way, Jose!

This time it's different.


Wishing all Bogleheads a Merry Christmas, and thanks for reading.
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Bastiat
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Re: Does it look like a bubble to you?

Post by Bastiat » Thu Dec 07, 2017 1:58 pm

No - it doesn't. It doesn't look like anything to me. Linear scale; short time frame; dubious methodology; agenda; etc. There's not enough information there for an objective person to draw any conclusion.
Thesaints wrote:
Wed Dec 06, 2017 8:52 pm
ResearchMed wrote:
Wed Dec 06, 2017 8:50 pm
Meanwhile, the post above which showed the graph with and without Venezuela... that was pretty striking.
No doubt it is wrong. For two reasons:
1) Vertical scale is in US dollars which are insensitive to Venezuelan inflation
2) Venezuelan share of world market is <1%
Which graph is wrong? The first one, or the "corrected" one generated by the same people? Or both? Where did you find their methodology?
CULater wrote:
Thu Dec 07, 2017 1:23 pm
BolderBoy wrote:
Thu Dec 07, 2017 12:06 pm
CULater wrote:
Wed Dec 06, 2017 8:09 pm
It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?
Has market timing worked for you in the past? It has never worked for me so I won't be joining you. Enjoy the trip.
Who said I'm timing? I'm just adjusting my AA to reflect my low need and desire to take risk and the fact that Mr. Market has been way too generous to blind pig investors for a long while now. If I had a 30-year investing horizon or needed to stick with my current AA I'd act differently. As Edward Thorpe advised, "Sell down to the sleeping point." Your sleeping point may be higher than mine is right now. I will enjoy the trip regardless of what happens. I hope it isn't a round trip like it was from 1998 - 2003.
You said you were timing. You are "edging toward the exit" because "it looks like a bubble". People don't market time on a whim. They market time because they are afraid of losing money and think they know better than the market what the future holds. That's what you're doing. If your "sleeping point" changes with the market, which obviously yours is, that's just a euphemism to rationalize market timing. "This looks like a bubble so I'm getting out" is emotional market timing.

heyyou
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Re: Does it look like a bubble to you?

Post by heyyou » Thu Dec 07, 2017 2:23 pm

The next recession is always coming, expected to last for years, probably followed by some recovery, before the second next recession occurs, etc., etc. That is just how it goes. Save, allocate, and spend accordingly.

CULater
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Re: Does it look like a bubble to you?

Post by CULater » Thu Dec 07, 2017 5:48 pm

Bastiat wrote:
Thu Dec 07, 2017 1:58 pm
No - it doesn't. It doesn't look like anything to me. Linear scale; short time frame; dubious methodology; agenda; etc. There's not enough information there for an objective person to draw any conclusion.
Thesaints wrote:
Wed Dec 06, 2017 8:52 pm
ResearchMed wrote:
Wed Dec 06, 2017 8:50 pm
Meanwhile, the post above which showed the graph with and without Venezuela... that was pretty striking.
No doubt it is wrong. For two reasons:
1) Vertical scale is in US dollars which are insensitive to Venezuelan inflation
2) Venezuelan share of world market is <1%
Which graph is wrong? The first one, or the "corrected" one generated by the same people? Or both? Where did you find their methodology?
CULater wrote:
Thu Dec 07, 2017 1:23 pm
BolderBoy wrote:
Thu Dec 07, 2017 12:06 pm
CULater wrote:
Wed Dec 06, 2017 8:09 pm
It does to Goldman and to me too, so I'm edging toward the exit. Anyone want to join me?
Has market timing worked for you in the past? It has never worked for me so I won't be joining you. Enjoy the trip.
Who said I'm timing? I'm just adjusting my AA to reflect my low need and desire to take risk and the fact that Mr. Market has been way too generous to blind pig investors for a long while now. If I had a 30-year investing horizon or needed to stick with my current AA I'd act differently. As Edward Thorpe advised, "Sell down to the sleeping point." Your sleeping point may be higher than mine is right now. I will enjoy the trip regardless of what happens. I hope it isn't a round trip like it was from 1998 - 2003.
You said you were timing. You are "edging toward the exit" because "it looks like a bubble". People don't market time on a whim. They market time because they are afraid of losing money and think they know better than the market what the future holds. That's what you're doing. If your "sleeping point" changes with the market, which obviously yours is, that's just a euphemism to rationalize market timing. "This looks like a bubble so I'm getting out" is emotional market timing.
Yep. But which emotion was right - the one I had before or the one I have now??? Do we ever get to change our minds? Happy sailing y'all.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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HomerJ
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Re: Does it look like a bubble to you?

Post by HomerJ » Thu Dec 07, 2017 6:00 pm

CULater wrote:
Thu Dec 07, 2017 9:17 am
For those who don't need to play the game anymore (low need to assume risk), good time to take some off the table?
Those people should be taking money off the table REGARDLESS of valuations. Wouldn't matter if CAPE is 10 or 32. The risk never goes to zero. If you're close to retirement, and have "enough", you should have a conservative allocation to preserve your wealth.

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nisiprius
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Re: Does it look like a bubble to you?

Post by nisiprius » Thu Dec 07, 2017 6:16 pm

david1082b wrote:
Thu Dec 07, 2017 6:43 am
This is a linear chart, not a log chart.
And it has a suppressed zero. Both of these tell us that the people who produced it are either financially innumerate, or dishonest.

Actually now that I think about it, a simple Morningstar growth chart for Vanguard Total World Stock Market Index Fund is a reasonable proxy for global total market cap. It only goes back to about 2009, but it is on a log axis... and it includes only developed and emerging markets, so it doesn't include Venezuela.

Source

I'm going to take the liberty of drawing a dotted line by hand, as well as a red arrow.

Image

That doesn't look visually compelling as a bubble.

I don't know how to force Morningstar to plot two charts on the same Y axis, and QQQ doesn't quite go back far enough, but this is a reasonably comparable view of how the runup to 2000 looked in the NASDAQ. It rose a lot more over a lot shorter time.

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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