[manaboutown]

At my age I am more concerned with holding on to what I have accumulated than risking a significant portion of it for high gains. One never knows when another Black Swan will appear. Remember the early 1970s bear market, dot.com bubble and what happened in 2008?

Black Swan in the Stock Market: What Is It, With Examples and History

1973–1974 stock market crash - Wikipedia

Dot-com bubble - Wikipedia

2008 financial crisis - Wikipedia

[CoachKandSportsguy]

Passive investing dominates, but are there risks?

since passive investing in index fund now account for more than active funds and more than 50% of the index, the market is getting distorted, and the advantages of a market diversified portfolio is being diluted. .

most will dismiss the article, but the disadvantages are the pieces which john bogle didn't want to touch as he had no data to prove/disprove any thesis. .

I don't have any passive index funds in my retirement account, all individual stocks.. .

good luck to us

[Boomer]

7

Originally Posted by manaboutown

At my age I am more concerned with holding on to what I have accumulated than risking a significant portion of it for high gains. One never knows when another Black Swan will appear. Remember the early 1970s bear market, dot.com bubble and what happened in 2008?

Black Swan in the Stock Market: What Is It, With Examples and History

1973–1974 stock market crash - Wikipedia

Dot-com bubble - Wikipedia

2008 financial crisis - Wikipedia

Yessiree!

Several years ago, I was talking with a financial advisory firm, and I specified that I wanted to interview the oldest advisor there. I wanted to talk with someone who had actually seen bad markets, the 1980s inflation, and bubbles that popped. (I did not hire the advisor, even though I liked him. I might go back there someday, but he is probably retired by now.)

The wild-eyed, shouting, money-media loves to call things crashes that are nothing more than blips, and they use untrue phrases like historically high inflation.

We boomers and beyond, who have been interested in the stock market and real estate for decades, including the last part of the last century, know that kind of reporting is the media’s hyperbole. Boomers who had double-digit mortgages in the 80s know what historically high inflation really looks like. (CDs were paying double-digits, too.)

I got caught in the dot.com bubble in the 90s because I thought it was the latest, greatest, unstoppable thing ever and could not possibly lose. I was guilty of hubris. Then came the big POP! I view those losses as the cost of an education. Fortunately, I had not bet the farm on dot.com, only the butter and egg money. But I have never forgotten how arrogant and stupid I was for that brief and shining moment of insane returns on dot.com funds.

I have never owned commercial property, but I clearly remember people talking about how those who did were set for life, even the small-scale commercial property owners. While there are, of course, a lot of commercial properties that are successful, the commercial landscape does not look like it once did. Office buildings in my home city have a lot of “Space Available” or “For Sale ” signs out front. Lots of empty mall space, too. There is also is a wide difference in the appearance and occupancy of small strip malls. Some that appear to be well-maintained and probably reasonable with their small business tenants seem to be doing OK. But the world of commercial property that we see while driving around is not what it once was. Internet shopping has pounded bricks-and-mortar. There are some buildings being converted to condos which requires a big investment but looks like a good idea. The rest just sit around looking neglected and desperate.

Index funds get more and more attention now, even though they have been around for a very long time. I do not pretend to be a sophisticated investor, but although I have an S&P, maybe two, I threw in some sector funds, like utilities, and other types, like Contrafund. That was because a lot of funds, in general, look to me like they end up so heavily weighted with the Magnificent Seven. Seems like so many funds are downright redundant now.

I was looking at a few funds recently and Nvidia was usually the top holding, followed by the the other tech biggies for the top ten holdings — and the top ten made up what I thought was an overly large percentage. It’s not that I think tech is a bubble, but isn’t there always something new ready to knock certain tech stocks off their pedestals?

Meanwhile, I guess I will just continue to manage the Boomerfund, keeping things simple, some individual stocks, a few funds, some cash, keeping an eye on longtime holdings, and buying and selling what I want to when I want to. It keeps me amused, I guess.

Boomer

[manaboutown]

Originally Posted by CoachKandSportsguy

Passive investing dominates, but are there risks?

since passive investing in index fund now account for more than active funds and more than 50% of the index, the market is getting distorted, and the advantages of a market diversified portfolio is being diluted. .

most will dismiss the article, but the disadvantages are the pieces which john bogle didn't want to touch as he had no data to prove/disprove any thesis. .

I don't have any passive index funds in my retirement account, all individual stocks.. .

good luck to us

Thanks, Coach! That is a really good article. Indexing has become such a huge percentage of the market that their buying/selling actions move it. Very interesting about the lead dogging, too.

This post caused me to review the investments I made in my Schwab account during 2022 and 2023 when I came into significant cash to invest via sales of RE investments. Prior to that I just held the Schwab account for its ATM card which I primarily used for foreign travel. It only held a low five figure amount.

Schwab lists holdings in individual stocks separately from ETFs. What I put into individual stocks on my own hook has more than doubled. What I put into ETFs has gone up 37%. Velly, velly intelesting... OK, I did buy Nvidia at a small fraction of its price now which tipped the scales. In any case, securities prices have jumped, even leapt in the last two or three years.

The Shiller PE ratio is now 38.97. Its median is 16.05 and its mean 17.26 so it is currently extremely high by historical standards. That is why I retain enough in T bills and money market funds to pass my sleep at night test.

[dewilson58]

CAPE Is High: Should You Care?

CAPE Is High: Should You Care? - CFA Institute Enterprising Investor

Beware CAPE Crusaders: Limitations of Shiller's Ratio in Modern Market Valuation - Aptus Capital Advisors

[manaboutown]

Although "value" is a subjective term that's going to be different from one investor to the next, the S&P 500's Shiller price-to-earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E Ratio (CAPE Ratio), leaves no doubt that the stock market entered 2025 at a historically expensive valuation.

In December, the Shiller P/E nearly hit a multiple of 39, which marks the highest level during the current bull market cycle, as well as the third-priciest multiple during a continuous bull market when back-tested to January 1871. The average Shiller P/E multiple since 1871 is a considerably more modest 17.24.


While the Shiller P/E isn't useful for predicting when downturns will occur in the S&P 500 or Wall Street's other major stock indexes, it does have a knack for eventually foreshadowing significant downside in the broader market. The previous five instances where the Shiller P/E topped 30, dating back to 1871, were all eventually followed by declines ranging from 20% to 89% in one or more of Wall Street's major stock indexes.

Even though Warren Buffett hasn't made any specific mention of the Shiller P/E, or any valuation index for that matter, his actions -- i.e., 10 consecutive quarters of net-selling activity and Berkshire's record cash pile -- make crystal clear that stock valuations aren't attractive.

Though the future remains bright for the U.S. economy and stock market, Buffett's short-term actions paint a potentially worrisome picture for investors in the coming quarters.

From: Warren Buffett'''s Cash Pile at Berkshire Hathaway Just Hit a Record $348 Billion -- and That'''s Terrible News for Wall Street | The Motley Fool

[dewilson58]

Shiller has been over 25 for ten years, averaging around 30 with no shiller valuation dip.......the only dip during the last 10 years was during COVID & tariff panic. Doubt shiller calculation predicts outbreaks or tariff emotions.

Keep saying overvaluation and a downturn is coming............eventually will come true.

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