Is the Stockmarket in a bubble?

chucknorris

There is an obvious answer to this, the reason the stock market is doing well is because my portfolio is very short of shares. The stock market will crash the moment that I try to rectify this by investing in shares.

gadgetmind

I can assure you that holding 80%+ equities for the last decade hasn't exactly been the easiest of rides!

I'm just glad I had the confidence to keep pumping the cash in even during the darkest days.

mark55man

There was a good article at www.thereformedbroker.com which said the questions isn't should I get into the market at these elevated level, but what the heck were you doing for the last 4 years

here you go - http://www.thereformedbroker.com/2013/03/06/wrong-question/

Carpi09

mark88man wrote: »

There was a good article at www.thereformedbroker.com which said the questions isn't should I get into the market at these elevated level, but what the heck were you doing for the last 4 years

here you go - http://www.thereformedbroker.com/2013/03/06/wrong-question/

That's interesting to know about the annualised return despite the losses over the 5 years. Maybe this isn't put across as much as it should be.

gadgetmind

mark88man wrote: »

but what the heck were you doing for the last 4 years

Well, quite.

I've moved a metric shedload of cash/etc into equities over the last few years and am jolly glad I did. Some was new income, some came from selling bonds/etc, and some was simply moving cash from term accounts into ISAs, SIPPs and unwrapped as it became free.

Come April, I'll rebalance, and this will automatically mean that some equities will be sold and the money moved into bonds, cash, (maybe) property, and (gasp) even some gold. Such is the way of rebalancing.

cepheus

mark88man wrote: »

There was a good article at www.thereformedbroker.com which said the questions isn't should I get into the market at these elevated level, but what the heck were you doing for the last 4 years

here you go - http://www.thereformedbroker.com/2013/03/06/wrong-question/

Those figures may have a degree of country and indexing bias. Why do we look to the Dow, because it's the main index, why is it the main index because it's the most successful. So is that a sound basis for estimating investment performance? Italian stocks once had a 74 year period before returning a real profit!

research published yesterday shows that for many people, the long-term has to be very long-term indeed to guarantee that an investor doesn’t lose money. Analysing data going back to 1900 shows that there was a period as long as 17 years when investing in American shares showed zero real returns – even with dividends re-invested.

There were three periods of negative real returns: 1905-20, 1906-21 and 1966-8.

In the UK, the longest period was 23 years, during the first two decades of the 20th Century, encompassing the 'financial panic' of 1907 and the First World War, 1914 to 1918 and ending in 1921.

However, the findings do not take into account investment charges. Those who invest via an actively managed fund, where typical total charges are 2 per cent a year - will find it even harder to make a profit.

http://www.thisismoney.co.uk/money/investing/article-2097825/Credit-Suisse-stock-market-returns-1900-The-24-year-spell-UK-shares-failed.html

mark55man

gadgetmind wrote: »

Well, quite.

I've moved a metric shedload of cash/etc into equities over the last few years and am jolly glad I did. Some was new income, some came from selling bonds/etc, and some was simply moving cash from term accounts into ISAs, SIPPs and unwrapped as it became free.

Come April, I'll rebalance, and this will automatically mean that some equities will be sold and the money moved into bonds, cash, (maybe) property, and (gasp) even some gold. Such is the way of rebalancing.

Summarised in a quote as I can't find the article "rebalancing is nature's way of telling you to sell high and buy low"

talking of buying low - my sensors such as they are (still in LLOY) tell me gold maybe has a bit further to go down - as its natural enemy is a strong dollar (although in the UK buying something USD linked has other advantages)

EDIT: This might be good for a few minutes entertainmnet - its a bit lightweight but the charts within cover a lot of differing ways to view the situation - my assessment this is written by a bear who is trying to balance with some bullish views

http://www.marketwatch.com/story/stock-bulls-vs-bears-11-charts-shape-the-battle-2013-03-07

mark55man

Came across this referenced on motley fool

http://www.businessinsider.com/dow-jones-idiot-maker-rally-2013-3?op=1

All the famous commentators caught making badly wrong predictions from 2009 - 2012. It seems they take it turns one puts themselves up froont and centre every month - then one day one of them will be right (this year but not soon IMHO) - and they will get the plaudits and be flavour of the month

sabretoothtigger

Stocks are not near to a bubble. For comparison in 1996, they started calling it a bubble I remember and within 3 years some companies had tripled or more.



One of the things with a bubble is disparity to reality, so its not the earnings but the projected estimate that is unreal.
But some feedback keeps that from adjusting back to actual earnings

Right now, earnings on stocks are generally supportive of the price. So not projection but actual profit already made justifies it.

Some might be developing far too much positive estimation but not in the main.
Apple even at its peak didnt go past 20 PE. Valued below 10 years profits now ? I just sold a 100 PE stock, they invented a new lightbulb and it might be fair value still

Commodities are the biggest blind spot because supply or demand can vary so much and alter margins massively. Apple has fear from increased competition, their margin is like 70% and R&D is billions ditto Intel

Not really a bubble yet. The main variance overall would be cost of money, interest rates. I see this as weakness and soft money is most likely, the alternative is default and political embarrassment to the point of conceding power.
They will choose weak currency over their ego loss, most people would do the same. If your on a date and paycheque bounces, are you going to max out the credit card or go wash the dishes. Dishes is what we should do, more credit is most likely.
Hence weak currency, shares adjusting to higher nominal revenues, etc justifiable PE

vs gold, stocks have fallen since August 2009. Warren Buffet has been losing money over a decade in those terms but nominally he is fine, the main risk is higher cost money

Henning_W._Prentis wrote:

The historical cycle seems to be: From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more.

http://questioningwithboldness.wordpress.com/2011/07/25/wisdom-of-the-day-henning-webb-prentis-jr/

mark88man wrote: »

All the famous commentators caught making badly wrong predictions from 2009 - 2012.

August 2009: Doug Kass says markets are overshooting to the upside

"I believe that the markets are now overshooting to the upside and that the U.S. stock market has likely peaked for the year...

I remember Kass saying this, because he was right but not in Dollars. Any price is value/currency.

Marc Faber got about -6% not 20, he did a whole study on Mexican stocks which rose over 100% but ultimately gained no value over 10 years

Marc_Faber wrote:

He concluded his June 2008 newsletter with the following mock quote:

"The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part

mark55man

sabretoothtigger wrote: »

The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I've been doing my part

Absolutely love it - I'm sorry I can only press the thanks button once