Market Euphoria?

[7eight9]

David Rosenberg, who runs a market research firm in Toronto, argues emphatically that whatever the short-term movements of the market, major declines and an extended economic struggle will be coming. He compared the current rally to the rebound that began in November 1929 and lasted until April 1930. The market gained almost 50 percent in that period, he said, but no one remembers it. What we remember is the Great Depression.
https://www.nytimes.com/2020/06/05/busi ... e=Homepage

Investors speculators gamblers should hope that history doesn't repeat.

Ah, david rosenberg. Is that the david rosenberg quoted here on April 2, 2009, regarding a paper he published on April 1st, 2009?
https://www.businessinsider.com.au/henr ... ind-2009-4

That was a couple of weeks after the March 2009 S&P 500 lows. He says in this article:

S&P 500 will hit new lows...it would not surprise us to see the S&P 500 gravitate in a 475-650 range for an extended period of time

On the contrary he said this at the beginning of the best bull run in generations. Oops!

Forgive me if I have no interest whatsoever in his predictions of the market this time around.

A broken clock is right twice a day. This might be one of those times.

[tiburblium]

Thank you everyone for your responses, I appreciate all the wisdom. I have learned a lot from this community!

To address the questions in a single response:

- I do not have a written IPS but I will invest the time to draft one over the weekend
- I did rebalance in march to maintain my AA of 70/30 buying some equity. I also boosted my 401k contributions so they were concentrated in March/April, I was able to add 11k of contributions in this period.

I like to think of myself as a logical person not driven by emotion, I have read quite a few books on "sensible investing" and do believe in the boglehead principals. To me, It is definitely true that one never really knows how they will react to market volatility until they experience it first hand. Also, while I have been invested in the market since 2003, my total portfolio size is now 10x what it was during the 2008 recession. It was pretty easy to not care as much back then, but now the numbers are just so much bigger...I guess it's something you get used to overtime.

Thank you all

[Jim180]

The market has to have a pullback soon. Perhaps Nasdaq 10K will be the trigger. Forward P/E of the S&P right now is around 22 while the 5 year average is around 18 and 10 year average is around 16.

[mathwhiz]

The businesses being hurt badly are largely the very small mom and pops that are not publicly traded or are otherwise companies that have long been in financial distress....JC Penny, Hertz that have finally fallen into bankruptcy. The stock market as represented by the S&P 500 are the strongest largest companies in the Country best positioned to whether and *take advantage* of the pandemic by devouring market share...i.e Amazon. Also, the job losses have largely been concentrated in service sector jobs among the lowest paid and lowest skilled who never had the cash flow to buy homes, cars, or other big purchases anyway. These people are largely being taken care of by the government with generous unemployment benefits making more than they would while working. So lots of people are out of work, but they are still getting paid so as far as the market is concerned all is well unless we have a second wave in the Fall/Winter and we shut down again.

I think society is largely comfortable with plateau and deaths at ~1k a day with the overwhelming majority in sick and elderly populations (>65, nursing homes). Just judging by traffic in the past couple weeks, things look well on their way back to normal. Even the news cycles have moved on to riots, protests away from corona. Whether that is moral or right or not is irrelevant to the market, the market has no morals.

[JBTX]

Whether we have hit 90s style euphoria or not is debatable, but it sure feels like we are headed in that direction.

First I agree set a reasonable plan and stick with it. Walk yourself through hypotheticals, can you live with the results if the market goes down by half, or more? Can you live with it if it goes up 50% or more, or even doubles.

It is envitable that if either happens, there will be a lot of noise and "conventional wisdom" about being in or out. If the market is way up, you will feel some remorse for missing out while watching others get rich for seemingly no good reason. Anybody who says the market may go down will be called a "permabear". If the market tanks you will hear lots of seemingly good reasons why the market may never recover.

By definition a good balanced asset allocation will feel at least moderately painful on both sides.

I recall in late 90s a friend who had never invested before told me he bought some stocks like Oracle and they just kept going up. This is easy!!

While I have no idea where we end up, I can see a scenario where stocks continue to inflate, due to all the liquidity out there, much of it landing in the hands of the "investor class". If long term rates are zero, there is potentially no limit to how high a PE theoretically should be.

[rockstar]

The market has lost its mind, but there really aren't many options right now. Feels like late 90s for sure.

[rkhusky]

Called 3 people to get some work done on our house. Didn’t hear back from one, a second said he was booked for the next 3 months and wasn’t interested, and the third also said he was booking into August and gave me a price 2x the normal rate.

=> There is a lot of work out there if you want to work.

[WildCat48]

This is a total bubble, the economy will be in shambles next year and may take a decade to recover. Stay the course.

[Fallible]

...
I think society is largely comfortable with plateau and deaths at ~1k a day with the overwhelming majority in sick and elderly populations (>65, nursing homes). ...

Wow, is there a source for this? Or am I reading it wrong, that society (not me) is comfortable with this?

[rkhusky]

...
I think society is largely comfortable with plateau and deaths at ~1k a day with the overwhelming majority in sick and elderly populations (>65, nursing homes). ...

Wow, is there a source for this? Or am I reading it wrong, that society (not me) is comfortable with this?

We are used to 40k deaths from the annual flu every year (70k a couple years ago), along with 50k auto deaths, another 600k from cancer, and another 600k from heart disease, another 150k from upper respiratory, another 150k from strokes. ...

Besides, we are already averaging less than 1k/day from corona virus and it’s going down.

[rkhusky]

This is a total bubble, the economy will be in shambles next year and may take a decade to recover. Stay the course.

The economy is already mostly back. 2020-2021 will be great. Stay the course.

[minesweep]

...
I think society is largely comfortable with plateau and deaths at ~1k a day with the overwhelming majority in sick and elderly populations (>65, nursing homes). ...

Wow, is there a source for this? Or am I reading it wrong, that society (not me) is comfortable with this?

We are used to 40k deaths from the annual flu every year (70k a couple years ago), along with 50k auto deaths, another 600k from cancer, and another 600k from heart disease, another 150k from upper respiratory, another 150k from strokes. ...

Besides, we are already averaging less than 1k/day from corona virus and it’s going down.

And many individuals don't get the yearly flu shot in spite of those numbers. No one will stop driving their cars because of the risk of injury or death. I would imagine that there were fewer highway deaths during this stretch of the coronavirus epidemic. Especially given that most of the bars were closed.

There are a number of individuals who live an unhealthy lifestyle (such as their diet & smoking) that contribute to cancer, heart disease and respiratory problems. Having said that no one should feel comfortable with any of those numbers you state.

[jeffyscott]

...
I think society is largely comfortable with plateau and deaths at ~1k a day with the overwhelming majority in sick and elderly populations (>65, nursing homes). ...

Wow, is there a source for this? Or am I reading it wrong, that society (not me) is comfortable with this?

Isn't it clear from most people's behavior that we (not me, either) are going to just accept 500-1000 extra deaths per day, with seemingly no end in sight?

This is actually what I kinda expected, back when China had their extreme shutdown, I thought nothing close to that would be done here (or in the western world, in general) and we'd just have a huge number of extra deaths. I was surprised that there was as much of a shutdown as there has been.

[Random Musings]

Pretty strong run up. Don't see action like this too often with a ton of stocks participating. Expect some consolidation, then further gains. Typically, markets don't fizzle out when these conditions occur, but these are strange times and it's not like the markets are super cheap. For now, I am not rebalancing.

RM