Thoughts on current market climate

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Muchtolearn
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Thoughts on current market climate

Post by Muchtolearn »

Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
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Re: Thoughts on current market climate

Post by livesoft »

When you sell out, that's when Capitulation 2012 sets in.

Frankly, I take quite a bit of comfort in my asset allocation plan. When I my percent for US stocks, foreign stocks, bonds, and commerical real estate where they are supposed to be, I'm thinking, "Ain't it nice to have plan."

And if there is a RBD, then I'm buying. That's also in the plan.
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Sheepdog
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Re: Thoughts on current market climate

Post by Sheepdog »

It's just a minor phase....a predictable one at that. There has been a nice runup and we need to cool things off. I really believe that. JOMO
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moneywise3
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Re: Thoughts on current market climate

Post by moneywise3 »

Buying opportunity!
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Re: Thoughts on current market climate

Post by stratton »

Rebalancing bands check.

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Re: Thoughts on current market climate

Post by Grt2bOutdoors »

Re-fi opportunity! Pay off debt opportunity! Buy international!
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Re: Thoughts on current market climate

Post by xerty24 »

The international pain is starting to get people's attention. At some point there'll be a capitulation rally. I don't think we're there yet... but we are getting closer.
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Re: Thoughts on current market climate

Post by VictoriaF »

livesoft wrote:And if there is a RBD, then I'm buying.
Was today an RBD?

Victoria
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GregLee
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Re: Thoughts on current market climate

Post by GregLee »

I think you can relax. The market has had a difficult few weeks, but it's still up for the year, and way up from last Fall. Economic indicators are mostly positive, though not robust. No bear in sight.
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Muchtolearn
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Re: Thoughts on current market climate

Post by Muchtolearn »

Folks, I tried to preface my statement with the idea that I know ti will not affect boglehead philosophy (nor mine) regarding investing, TLG, RBDs and all the goodies. It was a question of whether we are entering a bad phase. That is, market timing intellectually, not practically. The easy answer is who knows but I wanted to see if there were opinions on this. I am fully relaxed Greg so no worries, just interested.
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CaliJim
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Re: Thoughts on current market climate

Post by CaliJim »

Are a string of not so good days equivalent to a RBD?

S&P 500 PE = 15.

However the S&P 500 50 day ma is still well above the 200 day ma.

Better continue to stay the course.
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livesoft
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Re: Thoughts on current market climate

Post by livesoft »

CaliJim wrote:Are a string of not so good days equivalent to a RBD?
No. An RBD(tm) has a very specific definition. Watch out though, one could lose more money investing on RBDs.
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dmcmahon
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Re: Thoughts on current market climate

Post by dmcmahon »

Muchtolearn wrote:I just have this feeling that an erosive bear market is underway now.
JMHO, we are still in a secular bear market that began 12 years ago with the bursting of the tech bubble. In the past, these cycles have lasted 15-20 years. Bond yields have been driven to levels not seen in my lifetime. The main driver of the ongoing crisis is something I'm not sure we've seen before, namely, a huge overhang of both debt and (worse) unfunded future liabilities throughout the developed world, at all levels of government. Re. the market climate, I am in agreement with John Hussman that prospective market returns from today's levels appear poor, at around 4% nominal for the next 10 years. Sadly, that's still double the return you can get on treasuries. The valuation level of the market on earnings appears reasonable, especially versus 12 years ago and versus 4 years ago. However, corporate profitability is at record high levels, about 50% above historic averages. Meanwhile, labor's share of economic growth has lagged. One might conclude that productivity gains over the last 10 years have been skewed towards capital, and if this mean-reverts due to market or political factors, earnings growth projections may prove to be overly-optimistic. In sum, a grim investment environment, one where just beating inflation is a reasonable benchmark. JMHO
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Re: Thoughts on current market climate

Post by gkaplan »

My Vanguard Roth, which consist of all equity funds, is down a little over eight percent this quarter. I haven't checked my TSP, which consists entirely of the G fund, but I imagine it's up somewhat. I'm probably down about eight percent, maybe a little less, for the quarter, so it's no big deal.
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Re: Thoughts on current market climate

Post by hazlitt777 »

Muchtolearn wrote:Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
I personally see a bear market coming soon to the stock and bond market. But whether you and I are bears, the "solution," the best response, is to be well diversified and that means continuing to hold both stocks and bonds. But that picture is incomplete without a good diversification into cash/money markets and gold. (I'm one of those permanent portfolio investors.)
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Re: Thoughts on current market climate

Post by GammaPoint »

I've only been investing seriously for a couple of years now, but already I feel like these ups and downs are super lame and boring. If I see a RBD then maybe I toss a little more money in the ring, but I barely even get joy out of that anymore. Investing has become a purely mechanical, passionless affair, and I like it that way.
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Muchtolearn
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Re: Thoughts on current market climate

Post by Muchtolearn »

hazlitt777 wrote:
Muchtolearn wrote:Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
I personally see a bear market coming soon to the stock and bond market. But whether you and I are bears, the "solution," the best response, is to be well diversified and that means continuing to hold both stocks and bonds. But that picture is incomplete without a good diversification into cash/money markets and gold. (I'm one of those permanent portfolio investors.)
Hazlitt, I have always been interested in the PP. How do you do it via what mechanism, the fund of ETF? The fund seemed weird as it substitutes Swiss francs for something. I looked at it awhile ago. I figured that bonds, stocks and gold all looked high and that it might be at a tough future spot.
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Re: Thoughts on current market climate

Post by hazlitt777 »

Muchtolearn wrote:
hazlitt777 wrote:
Muchtolearn wrote:Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
I personally see a bear market coming soon to the stock and bond market. But whether you and I are bears, the "solution," the best response, is to be well diversified and that means continuing to hold both stocks and bonds. But that picture is incomplete without a good diversification into cash/money markets and gold. (I'm one of those permanent portfolio investors.)
Hazlitt, I have always been interested in the PP. How do you do it via what mechanism, the fund of ETF? The fund seemed weird as it substitutes Swiss francs for something. I looked at it awhile ago. I figured that bonds, stocks and gold all looked high and that it might be at a tough future spot.
I don't use the fund, and am not aware of an ETF for the permanent portfolio.

I hold the gold in bullion form, nearly all one ounce American Eagles. Most of the rest I hold at Vanguard via bond funds and stock index funds. To get something similar to the 25% 30 year long term bond and 25% treasury money market allocation, you can just use the long term bond treasury index fund and the short term bond treasury index fund. (I'm a little shorter term on my bonds overall so I don't remember the exact percentages.) I did the math once and I think if you hold your bonds and cash as...37.5% long term treasury bond index and 12.5% short term treasury bond index, the average maturities of the two funds collectively will be equal to what they would be if you could actually purchase two funds specifically designed for the permanent portfolio. You should double check my math to make sure my 37.5/12.5 is correct. I'm to lazy right now to crunch those numbers but I hope you get the concept.

You should read Brown's book, Fail Safe Investing and also Craigr's book that is coming out soon. I look forward to reading it when it hits the market. Maybe he will have ideas of how to use Vanguard funds...also I'm sure he will evaluate the pros and cons of Cuggino's permanet portfolio you mentioned.
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Re: Thoughts on current market climate

Post by john94549 »

The first quarter bump-up (12% +/-) was unsustainable, I think we can all agree. The current level (up 4% from the beginning of the year, again +/-, depending on your asset mix) is more reasonable. Folks get all nervous and jerky when unsustainable spurts give back. Heck, we're not even in correction territory yet (close, but no cigar). I suspect smart money took a bit off the table (or, for that matter, put on a modest short) some weeks back. I know I did, and I'm hardly in the "smart money" group.
riskonoff
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Re: Thoughts on current market climate

Post by riskonoff »

Markets today always go further than you think. My guess is that this correction has a way to go but will be a buying opportunity. It has been way to of an orderly sell off thus far and I see very little signs of capitulation.

I rebalanced in March and brough my equity allocation from 52% down to 40%. I would have brought my equity allocation down more but bonds did not seem very attractive (i guess they were though). I invest must less (just 12%) in international equities. I am thankful i did not jump on the international bandwagon.
livesoft
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Re: Thoughts on current market climate

Post by livesoft »

VictoriaF wrote:
livesoft wrote:And if there is a RBD, then I'm buying.
Was today an RBD?

Victoria
Thursday May 17th was an RBD for VNQ.
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Aptenodytes
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Re: Thoughts on current market climate

Post by Aptenodytes »

Muchtolearn wrote:Folks, I tried to preface my statement with the idea that I know ti will not affect boglehead philosophy (nor mine) regarding investing, TLG, RBDs and all the goodies. It was a question of whether we are entering a bad phase. That is, market timing intellectually, not practically. The easy answer is who knows but I wanted to see if there were opinions on this. I am fully relaxed Greg so no worries, just interested.
Your compulsion to engage in intellectual market timing is not good for your well-being. It betrays an insecurity which you should not feed -- let it die instead. No good can come of this contradictory path you have set yourself on. Imagine you let your intellect engage in this task and it comes to the conclusion "I'm about to lose a lot of money," but you stick with your plan. If your intellect turns out to have guessed right, you lose. You lose, because now you have something new to feel bad about and you have made it harder to resist this temptation next time around (even though your intellect would have been "right" only through luck).

Now suppose your intellect guessed wrong. You still lose because now you have a new reason to doubt your mental capacities, which from an investing perspective and a mental health perspective you want to trust.

For me, I think it is OK to monitor the market and to think about what might be transpiring, even what might happen in the future. But to engage in predictions, and to connect those predictions to my financial security, that's something to resist like Ulysses tying himself to the mast.

Maybe that's your view already, but the way you posed the original post doesn't quite sound like it. My advice for someone who starts to "... have this feeling that an erosive bear market is underway now" is to take measures to quash those feelings, not stoke them. You have a good plan; it is based on solid logic; anxious feelings are going to get in the way, not help.
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Re: Thoughts on current market climate

Post by NAVigator »

Is it time to check my portfolio again? Perhaps, it's May. I use a seasonal approach to add some spice to investing...

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bigred77
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Re: Thoughts on current market climate

Post by bigred77 »

dmcmahon wrote:
Muchtolearn wrote:I just have this feeling that an erosive bear market is underway now.
JMHO, we are still in a secular bear market that began 12 years ago with the bursting of the tech bubble. In the past, these cycles have lasted 15-20 years. Bond yields have been driven to levels not seen in my lifetime. The main driver of the ongoing crisis is something I'm not sure we've seen before, namely, a huge overhang of both debt and (worse) unfunded future liabilities throughout the developed world, at all levels of government. Re. the market climate, I am in agreement with John Hussman that prospective market returns from today's levels appear poor, at around 4% nominal for the next 10 years. Sadly, that's still double the return you can get on treasuries. The valuation level of the market on earnings appears reasonable, especially versus 12 years ago and versus 4 years ago. However, corporate profitability is at record high levels, about 50% above historic averages. Meanwhile, labor's share of economic growth has lagged. One might conclude that productivity gains over the last 10 years have been skewed towards capital, and if this mean-reverts due to market or political factors, earnings growth projections may prove to be overly-optimistic. In sum, a grim investment environment, one where just beating inflation is a reasonable benchmark. JMHO
I know there are a few bogleheads in their 20s here (myself included) who like to glean wisdom from the more mature crowd. From our perspective, I REALLY hope your right. 10 years of nominal 4% returns would probably be just enough to keep everyone as dissapointed bogle believers. We could accumulate a larger asset base in preperation for hopefully (inevitably IMO) a nice bull market run. Then, when my age group is all in our 50s/60s, hopefully we've stayed the course and dialed down our equity exposure with age right before the NEXT "great recession"/ bear market hits and we all get our retirement homes for 50% off!!!



Dreaming up these scenarios is more fun then checking CNBC headlines. Unless Susie Orman has a new "Can I afford it?" video up...
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Re: Thoughts on current market climate

Post by Hector »

its interesting that us market (s&p and dow jones) is down only 7-9% from its 52 week high, but world markets are down a lot more. world markets are down around 20% or more. who knows what does this mean? does this mean us market is inflated or us is doing significantly better than rest of the world? does this mean rest of the world market would come back again or does it mean us market would join rest of the world and officially join bear market (lower than 15%)? I find it strange that us market is this much out of sync from rest of the world markets in today's world of globalization.
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Re: Thoughts on current market climate

Post by GammaPoint »

Hector wrote:its interesting that us market (s&p and dow jones) is down only 7-9% from its 52 week high, but world markets are down a lot more. world markets are down around 20% or more. who knows what does this mean? does this mean us market is inflated or us is doing significantly better than rest of the world? does this mean rest of the world market would come back again or does it mean us market would join rest of the world and officially join bear market (lower than 15%)? I find it strange that us market is this much out of sync from rest of the world markets in today's world of globalization.
Are the markets in Asia off by as much, or is it just the Eurozone?
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Re: Thoughts on current market climate

Post by stlutz »

I agree with dmcmahon in that I'm not terribly optimistic over the intermediate term. While I know we like to make fun of the Death of Equities article from Business Week back in 1979, the one thing that sticks with me from reading it is everything that that the article said we would need to fix to have an equities revival actually did happen. That is, the 80s and 90s happened because we did the right thing. I'm not so confident as to believe that will always happen and I don't see any evidence that we are addressing our current structural issues in any serious way.
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Re: Thoughts on current market climate

Post by BigD53 »

My opinion?

*The European mess will continue to affect our markets for months to come, and there is no easy or imminent solution to that financial fiasco over there.

*Our economy is not getting any better, contrary to what the Gov will have you believe. Bernanke has warned Congress (again) that we are headed for a "fiscal cliff."

Those younger folks with a long, long time frame (and cast iron stomachs) will "stay the course" (and keeping buying all the way down?) Most of us that are retired, should already have a well thought out portfolio, and are able to weather the storms. I personally, am in the preservation mode... taking Taylor's wise advice to "keep what you have" and don't take any unnecessary risks.
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Re: Thoughts on current market climate

Post by ge1 »

dmcmahon wrote:
Muchtolearn wrote:I just have this feeling that an erosive bear market is underway now.
JMHO, we are still in a secular bear market that began 12 years ago with the bursting of the tech bubble. In the past, these cycles have lasted 15-20 years. Bond yields have been driven to levels not seen in my lifetime. The main driver of the ongoing crisis is something I'm not sure we've seen before, namely, a huge overhang of both debt and (worse) unfunded future liabilities throughout the developed world, at all levels of government. Re. the market climate, I am in agreement with John Hussman that prospective market returns from today's levels appear poor, at around 4% nominal for the next 10 years. Sadly, that's still double the return you can get on treasuries. The valuation level of the market on earnings appears reasonable, especially versus 12 years ago and versus 4 years ago. However, corporate profitability is at record high levels, about 50% above historic averages. Meanwhile, labor's share of economic growth has lagged. One might conclude that productivity gains over the last 10 years have been skewed towards capital, and if this mean-reverts due to market or political factors, earnings growth projections may prove to be overly-optimistic. In sum, a grim investment environment, one where just beating inflation is a reasonable benchmark. JMHO
well stated, exactly what I think
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Re: Thoughts on current market climate

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dmcmahon wrote:The main driver of the ongoing crisis is something I'm not sure we've seen before, namely, a huge overhang of both debt and (worse) unfunded future liabilities throughout the developed world, at all levels of government. Re. the market climate, I am in agreement with John Hussman that prospective market returns from today's levels appear poor, at around 4% nominal for the next 10 years
We have treasuries yields at approximately their lowest levels ever. That's not consistent with our major problem being an overhand of debt and unfunded liabilities, at least not if markets are close to rational.

The main driver of the US crisis is that people don't have the money to buy things, resulting in businesses not hiring or producing as much as they might if there was more demand, leaving people with even less. People are trying to save, but remember that one person's spending is another person's income. If everyone tries to pay down debt, then everyone has less income with which to pay down debt and you have a viscous spiral. Government could be filling in the gap, given low interest rates and available workers, but instead is laying off massive numbers (over 600,000 for the past few years; if hiring had proceeded at rates normal for the last few decades we'd have about 1.3 million more workers and unemployment would be under 7% instead of over 8%). Worse, we're laying off teachers and withdrawing aid from education, decreasing our human capital and therefore our ability to grow. To the extent debt is a problem, the issue is not the absolute number, it's the debt/GDP ratio.

We've seen debt at these levels before. The UK in post-war years and Japan in recent years have been running debt/GDP at about twice current US levels. Our major unfunded liability is senior healthcare costs. Other than that, we don't have a serious problem. We can solve that at the government level by shifting costs to seniors, but that won't help the average senior - lower taxes here balanced by higher spending there (worse, according to the CBO, it would increase overall costs because Medicare has more buying power and lower administrative costs than private insurance).

It's harder to predict markets. Everyone knows things are bad, which leads to worry about equity returns, which leads to lower prices, which might lead to higher returns. Or not.

JMHO.
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BigD53
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Re: Thoughts on current market climate

Post by BigD53 »

Kinda hard to turn a blind eye to things.

Tune out the "noise"? I haven't quite mastered that yet. :? I guess I just like to keep up on current events, financial news, world events, etc.

Well, I know my limitations and my loss-tolerance is very clear. So that's why I remain on the side of caution and have always held a very conservative portfolio, especially in retirement. Those words "keep what you have" is bouncing around in my head.

German Finance Minister Wolfgang Schaeuble said turmoil in the financial markets caused by Europe’s debt crisis may last another two years, as Group of Eight leaders prepared to discuss Greece and its impact on the global economy.

Merkel and fellow European leaders face pressure from their G-8 counterparts to do more to quell the crisis after almost $4 trillion was wiped from global equity markets this month amid speculation that Greece will exit the euro. The U.S., which hosts the G-8 summit starting today, faces economic challenges from the “damaging” situation in Europe, Treasury Secretary Timothy F. Geithner said yesterday.


http://www.bloomberg.com/news/2012-05-1 ... rmoil.html
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Re: Thoughts on current market climate

Post by sschullo »

Muchtolearn wrote:
hazlitt777 wrote:
Muchtolearn wrote:Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
I personally see a bear market coming soon to the stock and bond market. But whether you and I are bears, the "solution," the best response, is to be well diversified and that means continuing to hold both stocks and bonds. But that picture is incomplete without a good diversification into cash/money markets and gold. (I'm one of those permanent portfolio investors.)
Hazlitt, I have always been interested in the PP. How do you do it via what mechanism, the fund of ETF? The fund seemed weird as it substitutes Swiss francs for something. I looked at it awhile ago. I figured that bonds, stocks and gold all looked high and that it might be at a tough future spot.
This portfolio goes well beyond the PP. This guy has zero confidence in growing economies, currencies or financial institutions: http://blogs.wsj.com/totalreturn/2011/1 ... e_facebook
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
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Re: Thoughts on current market climate

Post by goalie »

I am acting like a kid on Christmas Morning when prices drop. Co-workers laugh at the way I scoop up deals like a kid winning a game of marbles. Keep on dropping!!! :twisted:
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Re: Thoughts on current market climate

Post by gotherelate »

It's simply the self-fulfilling prophecy of those who sell in May.
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Re: Thoughts on current market climate

Post by HongKonger »

GammaPoint wrote:
Hector wrote:its interesting that us market (s&p and dow jones) is down only 7-9% from its 52 week high, but world markets are down a lot more. world markets are down around 20% or more. who knows what does this mean? does this mean us market is inflated or us is doing significantly better than rest of the world? does this mean rest of the world market would come back again or does it mean us market would join rest of the world and officially join bear market (lower than 15%)? I find it strange that us market is this much out of sync from rest of the world markets in today's world of globalization.
Are the markets in Asia off by as much, or is it just the Eurozone?
The Hang Seng is down 10% in the last month, the Kospi is down 9%, Shanghai A shares down close to 1.5%.
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Re: Thoughts on current market climate

Post by letsgobobby »

richard wrote:
dmcmahon wrote:The main driver of the ongoing crisis is something I'm not sure we've seen before, namely, a huge overhang of both debt and (worse) unfunded future liabilities throughout the developed world, at all levels of government. Re. the market climate, I am in agreement with John Hussman that prospective market returns from today's levels appear poor, at around 4% nominal for the next 10 years
We have treasuries yields at approximately their lowest levels ever. That's not consistent with our major problem being an overhand of debt and unfunded liabilities, at least not if markets are close to rational.

The main driver of the US crisis is that people don't have the money to buy things, resulting in businesses not hiring or producing as much as they might if there was more demand, leaving people with even less. People are trying to save, but remember that one person's spending is another person's income. If everyone tries to pay down debt, then everyone has less income with which to pay down debt and you have a viscous spiral. Government could be filling in the gap, given low interest rates and available workers, but instead is laying off massive numbers (over 600,000 for the past few years; if hiring had proceeded at rates normal for the last few decades we'd have about 1.3 million more workers and unemployment would be under 7% instead of over 8%). Worse, we're laying off teachers and withdrawing aid from education, decreasing our human capital and therefore our ability to grow. To the extent debt is a problem, the issue is not the absolute number, it's the debt/GDP ratio.

We've seen debt at these levels before. The UK in post-war years and Japan in recent years have been running debt/GDP at about twice current US levels. Our major unfunded liability is senior healthcare costs. Other than that, we don't have a serious problem. We can solve that at the government level by shifting costs to seniors, but that won't help the average senior - lower taxes here balanced by higher spending there (worse, according to the CBO, it would increase overall costs because Medicare has more buying power and lower administrative costs than private insurance).

It's harder to predict markets. Everyone knows things are bad, which leads to worry about equity returns, which leads to lower prices, which might lead to higher returns. Or not.

JMHO.
I agree with this post. I think the us economy is very well positioned for the long run, say 20-50 years. Once we solve health care, we've got a much less serious demographic and debt problem than any other major country. Brazil, Canada, Australia, Indonesia, etc may have some good things brewing but we have size and immigration and military hegemony and those things matter.
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Re: Thoughts on current market climate

Post by YDNAL »

Muchtolearn wrote:Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
Define "erosive bear market under way now."
http://www.multpl.com/

I'm not a market-timer, not a robot either, but would like appoint myself a value investor (others may think of a different appointment :)). Although I agree with richard in principle, and regardless of how we see (value) data, I do tend NOT to excessively rationalize S&P 500 PE 20.8, but tend to act at PE 45 (or near 5). Other than that, I try to float like a butterfly...! *

* ps. I was at Marlins Park in Miami for the MLB opening day in the new stadium and Ali was the ceremonial grand marshall... a sad thing.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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iceport
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Re: Thoughts on current market climate

Post by iceport »

Muchtolearn wrote:I just have this feeling that an erosive bear market is underway now.
Muchtolearn wrote:Any thoughts?
You means besides "Nobody knows nuthin'?" Besides that, my thoughts are along the lines of livesoft's. This comment is the most concise:
livesoft wrote:Frankly, I take quite a bit of comfort in my asset allocation plan.
Exactly.

I'm in a pre-determined transition to holding some "risk-free" assets (a la Swensen). Eventually, I'll have an overall static AA of 56/44. Anyway, right now my target AA is 63.2% equity, 36.8% fixed income. The problem is, I've never had that little in equities before. So with the market surges over the last few months, I've consciously considered delaying my transition, and boosting my equities holdings. In the end, I realized my plan was sound, and I shouldn't get greedy.

So yeah, right about now "I take quite a bit of comfort in my asset allocation plan" too.

Not only that, it's comforting to know I haven't been buying equities as they have become relatively more expensive than before -- and now. If their values keep tumbling, I'll be buying again.

Sometimes staying the course seems like pure genius, especially considering...

"...nobody knows nuthin'!"

--Pete
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: Thoughts on current market climate

Post by john94549 »

Up 12% followed by down 9% (or thereabouts) always brings out the hand-wringers. Especially if it happens within a five-month period. Folks, if you really, truly, suffer extreme angst over Mr. Market, might I offer a few suggestions.

Age-in-Bonds. Purists hate it, but its simplicity is noteworthy. If you are really conservative, plop a goodly chunk of that bond allocation in a long CD ladder. I do. I so love compound interest. Compound interest makes me feel, well, wonderful.

Don't be afraid to take some off the table. If Mr. Market goes nuts (as it did in the first quarter of this year), sell some of those shares and plop the proceeds into a money market fund. The interest rate might be pathetic, but when the value of the shares sold goes down 9% (while the cash remains clicking along), well, you get the drift. Sure, this is market-timing. If it makes you feel better, think of it as "sort-of-like-but-not-quite re-balancing". It's funny how re-balancing is OK but market-timing is not. So, call it the politically-correct "re-balancing".

Never second-guess taking a profit. OK, I must admit I've gnashed my teeth over taking profits "too soon." You sell a position, in part or in whole, at "X", then the position goes to "X+Y", and you constantly fret over the fact. Don't.

Cash is really, really, good. You can spend it. The last I checked, you can buy groceries or gasoline, pay utility bills, even send it to your grandchildren on birthdays. If cash is good, liquid cash is even better. No substitute for bucks in the ATM. To this day, I marvel at how I can get cash from a machine. It's magic, I tell you.

Remember that, once you are retired, it's all about making the stuff last until you check out. If you have enough "stuff" to do that, then you're just keeping score above-and-beyond that "stuff". That might be fun, but is it really the best use of your extra "stuff"?

Have a nice weekend.
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Re: Thoughts on current market climate

Post by GregLee »

Muchtolearn wrote:Limiting it to the US, I just have this feeling that an erosive bear market is underway now.
I think it makes perfect sense for you to be concerned about this, and if we are indeed in a bear market, this is definitely something an investor should know about. I don't see how having a nice AA plan means that you don't need to know about the bear. Personally, I don't believe in bears or bulls in anything but a retrospective descriptive sense, so I am not myself concerned with whether we are in a bear market. But I can certainly understand how a person who believes in bears would be concerned about whether he was in the grasp of one.
Greg, retired 8/10.
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Re: Thoughts on current market climate

Post by john94549 »

GregLee wrote:
Muchtolearn wrote:Limiting it to the US, I just have this feeling that an erosive bear market is underway now.
I think it makes perfect sense for you to be concerned about this, and if we are indeed in a bear market, this is definitely something an investor should know about. I don't see how having a nice AA plan means that you don't need to know about the bear. Personally, I don't believe in bears or bulls in anything but a retrospective descriptive sense, so I am not myself concerned with whether we are in a bear market. But I can certainly understand how a person who believes in bears would be concerned about whether he was in the grasp of one.
Some would suggest we are merely at a point in a secular bear market (which started back in the year 2000) punctuated by cyclical bull markets. The key is to recognize the punctuation marks, if you get my drift. While it is anti-thetical to the Boglehead philosophy to try to time the ups and downs of cyclical bull markets (within a secular bear market), it can be done. Luck is a big factor, but watching for out-sized ups and downs in a (relatively) short period of time during the secular bear can lead to swing profits. I'm sure I will be chastized for saying the foregoing, but it worked for me the past few years.
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Re: Thoughts on current market climate

Post by grayfox »

Muchtolearn wrote:Colleagues: I know we are not market timers in the sense of not investing that way. And I will not regardless of what I am saying here. But we aren't robots and do think about things, including world equity markets. Limiting it to the US, I just have this feeling that an erosive bear market is underway now. Bonds are doing what they do if this is true which is being in a continual uptrend. Is this just recency bias or is there any rationale to what I am thinking? Again, not that it will affect investing. It would of course affect or at least correlate with a sick economic situation. Any thoughts?
Well based on the S&P 500 using intra-day highs and lows, and bear/bull market definition 20% off peak/trough,

The last trough was 1074.77 on 10/04/2011
Then up 32.34% to 1422.38 on 4/2/2012
Since then, down -7.74% to 1312.24 on 5/18/2012

To be down -20% from 1422.38 would be 1137.90. So unless S&P 500 falls to 1137.90, it can't be said that we are in a bear market. It's not even officially a correction, which would be down -10%. Over the course of time, we'll see if it goes down to 1137 (bear) or up to new highs (bull continues).

Oh, but you have a "feeling" that we are in the beginning of a bear market. The numbers don't show a bear market, but you can "feel" it using, what, your spider sense or something? Good luck with that.

Now I haven't looked at the exact dates for International and European, but they are probably officially in bear market territory. VEU looks like its down -21% from a year ago and VGK is down -24% from a year ago.
Last edited by grayfox on Sun May 20, 2012 2:07 am, edited 1 time in total.
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Re: Thoughts on current market climate

Post by iceport »

GregLee wrote:
Muchtolearn wrote:Limiting it to the US, I just have this feeling that an erosive bear market is underway now.
I think it makes perfect sense for you to be concerned about this, and if we are indeed in a bear market, this is definitely something an investor should know about. I don't see how having a nice AA plan means that you don't need to know about the bear.
Besides triggering rebalancing or tax-loss harvesting and the like -- typical portfolio management stuff -- what would be actionable about knowing if we're in a bear market? Presumably, a well-devised AA has been constructed to withstand bears.

--Pete
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: Thoughts on current market climate

Post by GregLee »

petrico wrote: Besides triggering rebalancing or tax-loss harvesting and the like -- typical portfolio management stuff -- what would be actionable about knowing if we're in a bear market?
Stop buying stocks. If you knew they were going to go down in price, it would be irrational to buy. Bulls and bears are part of a momentum theory of the market, as contrasted with a mean reversion theory.
Last edited by GregLee on Sun May 20, 2012 10:10 am, edited 1 time in total.
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Re: Thoughts on current market climate

Post by sschullo »

I am sure it was already mentioned on these types of questions: if you worry about the future, you are taking on too much risk. There will always be uncertainty, that's a constant you can count on.
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
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iceport
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Re: Thoughts on current market climate

Post by iceport »

GregLee wrote:
petrico wrote: Besides triggering rebalancing or tax-loss harvesting and the like -- typical portfolio management stuff -- what would be actionable about knowing if we're in a bear market?
Stop buying stocks. If you knew they were going to go down in price, it would be irrational to buy. Bulls and bears are part of a momentum theory of the market, as contrasted with a mean reversion theory.
Heck if you knew stocks were going to go down in price, never mind buying them, it would be irrational even to hold them.

--Pete
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: Thoughts on current market climate

Post by paulsiu »

Let's put this into perspective here. Today, we have the Europe debt crisis, yesteryears we had the subprime crisis, the dotcom bubble, the Asian currency crisis. Every couple of years, there is another one with global implications. What are you going to do each time? Sell? What did majority of the herd do? Did that save them? Frankly, I would stick with the plan. Unless you have an alternate plan, you're just reacting to noise out of fear.

What else are you going to hold? Cash? Cash is negative after you factor in inflation and taxes. Austerity measure probably means even high taxes. So you want to trade your upward potential for an investment guaranteed to lose money in the long term?

To put this into a wider perspective, is this economic crisis worse than the great depression, the World Wars, Vietnam, or the Cuban Missiles Crisis? In these times, I take comfort that at least I have a plan for my investment and that the stock market is something to worry about in the future. I am more concern with employment, feeding my family, etc. I am no optimist, I am just sticking with the devil I know.

Paul
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