conceding defeat

User Forum Topic
Submitted by kev374 on February 2, 2017 - 10:57am

So, since 2009 i've always been pessimistic about the markets - both the housing market and the stock market. Primarily this was due to what I considered immense fiscal irresponsibility of our government, reckless deficit spending, unfunded liabilities, malinvestment and rampant speculation in real estate etc.

However, looking at the staggering market runup of this bull market (holy crap batman 26% return in 2016 for the DJIA) I am finally thinking that I am wrong about all of this.

I think housing and stocks will continue to do well. I am finally entering the market, albeit at a much higher level. I've stayed out since 2009 due to fears of an imminent crash but even I have to admit that this run up in both housing and stocks is just stunning and a crash does not looks like it's in the cards as the rest of the world is in shambles and the US looks like it's the most rock solid.

Submitted by givdrvr on February 21, 2017 - 8:16pm.

Global trade is currently contracting with services leading the way, goods will follow, lead by the EU desires to punish UK over Brexit and Trump tariffs. The economy is not the stock market but at certain point the two reflect each other IMHO.

Submitted by tnuomarap on February 22, 2017 - 1:36am.

~0% fed benchmark interest rate for nearly 10 years = epic bubbles in stock, housing and autos.

Unprecedented in fed history.

Submitted by kev374 on February 22, 2017 - 12:08pm.

Some say epic bubble on the precipice of a monster crash.

Others say the US is the best economy right now relative to the rest - EU, Canada, AU all are faltering so stocks can only go higher.

So, hold out and wait for the correction or just get into the market and hope for the best?

Submitted by plm on February 22, 2017 - 12:22pm.

Why do people think there is a bubble?

According to historic data,
http://pages.stern.nyu.edu/~adamodar/New...

It seems like the geometric average is 7 for the last 10 years vs 10 percent in the past. So doesn't this mean the market is undervalued since its been growing less than historic levels?

Submitted by tnuomarap on February 22, 2017 - 9:15pm.

plm wrote:
Why do people think there is a bubble?

According to historic data,
http://pages.stern.nyu.edu/~adamodar/New...

It seems like the geometric average is 7 for the last 10 years vs 10 percent in the past. So doesn't this mean the market is undervalued since its been growing less than historic levels?

Yes, but consider that GDP growth has been subpar for nearly a decade, around 2%. And yet as mentioned the market (dow) has soared (relative to gdp) during the same time period.

Submitted by phaster on February 22, 2017 - 9:26pm.

plm wrote:
Why do people think there is a bubble?

According to historic data,
http://pages.stern.nyu.edu/~adamodar/New...

It seems like the geometric average is 7 for the last 10 years vs 10 percent in the past. So doesn't this mean the market is undervalued since its been growing less than historic levels?

FYI when playing the markets or “forecasting” too often people get fixated
on the past financial performance figures because they expect the same
going forward, this is known as the “Gambler’s Fallacy” or the “Fallacy of
the Maturity of Chances” and why the SEC mandates investor warnings
(note this idea also applies to real estate prices)

http://www.investopedia.com/terms/g/gamb...

Submitted by tnuomarap on February 22, 2017 - 9:54pm.

IMO as long as the fed keeps benchmark rates low - and I suspect they will, the housing and stock market bubble will continue to grow grow grow.

All it takes is one utterance of the word 'tax' or 'regulation' by Mr. T or Ryan and the market soars.

It's ridiculous.

It's 2006 all over again. Or maybe 2005.

Submitted by temeculaguy on February 23, 2017 - 12:04am.

Whatever you do, do not listen to this crowd about stocks. Rich can help you with wealth management but that is his paying job.

Case and point- I did something similar 8 years ago here

https://piggington.com/dow_to_4000#comme...

https://piggington.com/where_would_piggs...

I've posted a few times over the years updating how much money I lost by listening back then.

March 2009 to today here is what happened
HOG 10 to 58
GE 8 to 33
COST 45 to 175
F 2 to 12
MO 15 to 73
HOV .85 to 2.37

Funny thing is most of them made most of their gains within a year or two.

I didn't even bother to see if any of them split or what the dividend totals were as that will just compound the pain.

I did take lots of real estate advice from this site and I benefited immensely, doubled my money and for that I am eternally grateful. But I plan on living in my house for as long as I can climb stairs so it really isn't an investment, just long term rent control. It has given me financial freedom but I still regret taking stock advice from this same crowd.

Think of piggington as a cardiologist, incredibly helpful for heart problems. Just don't ask your cardiologist about a problem with a tooth, go find a dentist for that.

Submitted by plm on February 23, 2017 - 10:34am.

phaster wrote:
plm wrote:
Why do people think there is a bubble?

According to historic data,
http://pages.stern.nyu.edu/~adamodar/New...

It seems like the geometric average is 7 for the last 10 years vs 10 percent in the past. So doesn't this mean the market is undervalued since its been growing less than historic levels?

FYI when playing the markets or “forecasting” too often people get fixated
on the past financial performance figures because they expect the same
going forward, this is known as the “Gambler’s Fallacy” or the “Fallacy of
the Maturity of Chances” and why the SEC mandates investor warnings
(note this idea also applies to real estate prices)

http://www.investopedia.com/terms/g/gamblersfallacy.asp

I don't think the Gambler's Fallacy applies in this case. Historical average of 10 or current average of 7 percent return is what one should expect over the long term.

Submitted by plm on February 23, 2017 - 11:02am.

tnuomarap wrote:
plm wrote:
Why do people think there is a bubble?

According to historic data,
http://pages.stern.nyu.edu/~adamodar/New...

It seems like the geometric average is 7 for the last 10 years vs 10 percent in the past. So doesn't this mean the market is undervalued since its been growing less than historic levels?

Yes, but consider that GDP growth has been subpar for nearly a decade, around 2%. And yet as mentioned the market (dow) has soared (relative to gdp) during the same time period.

That's a valid point that the stock market should grow slower if gdp slows. I think historically the stock market grows at a rate higher than gdp though. Maybe PE ratio is the best way to determine if there is a stock bubble.

Submitted by Coronita on February 23, 2017 - 12:02pm.

I stopped trying to outsmart the market. I just go with the flow.

Submitted by plm on February 23, 2017 - 1:56pm.

Not trying to outsmart the market. I am way too much of a novice for that. Just got extremely fortunate in the market last year (dumb luck) and talks of bubbles scare me into whether I should diversify. Last year I decided to let it ride and that worked out beautifully. Hope the market keeps going up.

Submitted by Coronita on March 1, 2017 - 9:02am.

The Trump rally continues. All three indexes up over 1%

Are we market timing now? :)

Submitted by kev374 on March 1, 2017 - 9:55am.

market is over 21k DOW for the first time... it just seems a bit surreal because how much higher can it go?

This in the news today:

http://seekingalpha.com/article/4050865-...

Submitted by spdrun on March 1, 2017 - 2:17pm.

Higher it goes, the harder the crash. Wonder if lots of small-time Trumpet investors are buying now -- if they lose their retirement savings, the 2018/20 elections will be blue as the sky.

Submitted by Coronita on March 1, 2017 - 2:36pm.

Party like it's 1999

Submitted by an on March 1, 2017 - 4:23pm.

Make my net worth great again. LoL

Submitted by Coronita on March 1, 2017 - 6:32pm.

AN wrote:
Make my net worth great again. LoL

Hey, you stole that from me. It's patented.

Submitted by an on March 1, 2017 - 10:26pm.

flu wrote:
AN wrote:
Make my net worth great again. LoL

Hey, you stole that from me. It's patented.

You can fight Trump for that one ;-)

Submitted by FlyerInHi on March 2, 2017 - 1:43pm.

the market is pricing in tax cuts.

it'll be interesting to watch because tax cuts aren't coming until after health care and the great wall of America.

I'm predicting a recession based on depressed confidence induced by unmet expectations.

I will qualify however that the stock market is detached from the overall economy in that over 40% of the SP500 sales come from abroad. So as long as the global system works, large corporations and global citizens will do well.

Submitted by harvey on March 2, 2017 - 2:45pm.

It's gettin' up there...

http://www.multpl.com/shiller-pe/

Submitted by The-Shoveler on March 2, 2017 - 3:26pm.

Yep, kind of looks like the 2000 blow off a little,

But I think the main difference is the record amount of money sitting on the side lines.

Maybe the market is pricing in all that infrastructure spending.

Not saying it is going to happen but what if after 4 years the DOW is at 35K etc...?

Submitted by FlyerInHi on March 2, 2017 - 4:04pm.

Wouldn't $1 trillion infrastructure cause the deficit and debt to shoot up? That's more the stimulus of 2009. And are the projects shovel ready or will the money be spent on consultants?

Submitted by The-Shoveler on March 2, 2017 - 4:23pm.

IMO defects are meaningless

Well OK maybe they mean a little but there is no way they will ever be paid off in today's dollars.

At some point I think they will either inflate it away or give up print a few trillion dollar coins.

Submitted by harvey on March 2, 2017 - 5:19pm.

The Snapchat Economy will pay for infrastructure.

Submitted by spdrun on March 2, 2017 - 5:38pm.

You mean the pets.com economy?

Submitted by FlyerInHi on March 2, 2017 - 6:12pm.

The-Shoveler wrote:
IMO defects are meaningless

Well OK maybe they mean a little but there is no way they will ever be paid off in today's dollars.

At some point I think they will either inflate it away or give up print a few trillion dollar coins.

So why didn't we do it earlier? Were we stupid to have given up all that wealth and the wonderful infrastructure we could be enjoying now?

Submitted by The-Shoveler on March 2, 2017 - 6:31pm.

Yep,

Not saying it should not have been done before, just saying he might actually do it and get away with it sort of like Reagan.

What was it Reagan used to say, the nation debt is big enough to take care of itself LOL.

Anyway we really need to fix stuff, maybe add some metro trains, the High Speed rail is just a complete waste however IMO, they should put it up (High Speed rail) for another vote and see how popular it would be now!! LOL.

I bet it would be defeated soundly.

Submitted by spdrun on March 2, 2017 - 6:53pm.

HSR isn't a bad idea, it's just being badly mismanaged by the state of CA.

Here's how it should be done:
(1) Solicit bids from existing, experienced contractors (SNCF, cough, ahem) for fixed-price contracts.
(2) Convince the Feds to allow a waiver to allow use of world-market trains, not US regulatory-specific overweight junque. Should actually be EASIER under Trump.
(3) Start building north from San Diego and south from San Francisco.
(4) Use existing routes when possible that can be bought out, electrified, and elevated if needed.

Submitted by FlyerInHi on March 2, 2017 - 8:36pm.

Shoveler,
I think the high speed train is not a bad way to develop the interior of California, maybe all the way down to San Bernardino.

That's what china did with infrastructure. If you go to the second and third tier cities, you see awesome infrastructure. If I recall, China's GDP was $400 billion in 1989 and now stands at $14 trillion. Real wealth, not fake.

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