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Anyone else preparing for a big selloff?
The Shiller CAPE has hit 38.18, more than double its mean (17.17) and median (16). That seems like a very scary high to me so I have for the most part moved to defensive holdings and the largest proportion of cash I have ever maintained
Shiller PE Ratio - Multpl |
I moved to all cash and some short term bond funds recently. Scary right now and next year. I can't afford a big loss but I can live with very small gains.
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Yes, the current SP500 P/E of Forward earnings is approx 22, which has been a ceiling for most rallies.
The Equity Risk Premium (ERP) has just gone negative versus the 10 year yield, which means that the stock market earnings' growth is less that the 10 year interest grate, and equity is supposed to be riskier than the 10 year treasury. This is due to the sudden rise in interest rates against very little adjustment in the future earnings or in the index price. Volatility (VIX) index, is low again, which is a sign of lack of expectation of a sell off The sentiment bullish index of AAII bulls + II Bulls + MarketVane Bulls + NAAIM percent invested is in the 90 percent range of historically scaled results. . .the highest 90%+ was in July, and currently we are in the 80%s, with the decline mostly in AAII, not in the other three professional sentiment rankings. . still very high or greed phase. So one valuation indicator and two sentiment indicators are all in the GREED / PERFECTION range, and momentum has yet to change. . So currently I am all in BIL as of Monday until the market corrects and gives a buying opportunity. YMMV |
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Were I still playing the market, I would definitely have taken my profit, and run to to the hills. All bubbles burst eventually. |
if you want to get historical SP500 earnings from SP for the last 30 years, click on the link below
https://www.spglobal.com/spdji/en/do...0-eps-est.xlsx Clicking should autodownload an excel workbook, with the SP500 earnings, and other great data, plus the current earnings forecast for the next 4+ quarters. . good luck to us |
Not a trader. Made my portfolio adjustments in July with my financial adviser. Remain diversified. It’s been a good year.
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If you want to read an analysis on what investments work well under different inflation assumptions, here is a great web page to research
Varying by Degrees: Fire & Ice 2.0 | Man Institute | Man Group |
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My crystal ball smashed a few years ago. Here is hoping winter green fees will go down if the market crashes?
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Market Timing Experts???
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but you mean capital gains as a tax on success? I will gladly make millions and pay the appropriate capital gains versus losing money and waiting to return to a gain or taking a loss |
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[QUOTE=manaboutown;2386402]The Shiller CAPE has hit 38.18, more than double its mean (17.17) and median (16). That seems like a very scary high to me so I have for the most part moved to defensive holdings and the largest proportion of cash I have ever maintained
Shiller PE Ratio - Multpl[I I did the same this week. |
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Money market same as cash? Not sure where you get that info but I have millions in a money market making more than 5% and have for years. It did go down a few months ago to 4.9% but came back up, which is still better than any cash savings account.
As for sky high market, I made a large 6-digit gain in earnings the day after the election a week ago with the rest of my money invested in index funds and a couple stocks. If you got out of the market in 2007/2008 and in 2020, you missed some of the best comebacks. The 2007/2008 collapse took longer to recover but in 2020, we all knew it was going to a ‘v’ shape recovery and I doubled my money by staying in. Today, I look at the world economy, and our current political and economic environment before looking at stock market tea leaves to get a feel about the market. I sold everything at its highest point in late 2021 and moved everything to money markets earning 5.x% because of our policies and incoming inflation. In 2023 I started getting back in slowly and by December 2023, I had the majority of my money in index funds and a few stocks. This has been a banner 12 months. As for charts/reports on the market, what did the tea leaves tell you about Apple, meta, nvidia, tesla 1.5 years ago? I got into these over 1.5 years ago when meta and tesla were < $100 a share, Apple in the $120’s, and I can’t remember what nvidia was before the split. I sold some of these a couple months ago with nice profits to get back into more stable index funds making 30+%. People’s feelings today are exactly what happened in 2016. Back then, A lot of people were scared and sold, others like me, bought more or stayed fully invested. When people get scared about market evaluations, that’s when you make money in the market. The only issues I see now are: we should not be lowering rates because we aren’t done with inflation, consumers have the largest credit debt in history and defaults usually follow, the wars, and investors making too much hype out of AI, the same way they did about .com in the early 2000’s and we know what happened then. I have no problem hitting the sell button and moving everything back into money market if any of these issues get worse. |
Sell Hubris, Buy Humiliation
Sell High, Buy Lower BIL is 3-6 month TBILLS, which are currently over 5% before Cap gains, which is what money market buys for their returns. . . What's a normal market? Less mega cap dominance of the weighted price indexes, less correlation of component movements. Less passive investment, which increases component correlation which increases volatility on two fronts, and less dependence upon money supply / liquidity growth and more on investment growth. from a recent Chinese dinner GFTU Good Fortune to You |
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YMMV stands for Your Mileage May Vary, which references the difference between theory and reality. . . because everyone situation is unique |
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Who Is Michael Burry? |
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Ever since the stock market started, corrections (or drops if you prefer) have always been followed by even higher increases. How do you think the market got to where it is today? Make sure your portfolio consists of a good allocation of all types of investments and then stay the course. That is the best investment advice you’ll ever get.
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I wish I were as smart as many here. I can never figure out when to sell everything, and more importantly, when to buy everything back. So I just stay in mostly equities even though I’m always nervous.
I’m also impressed by the high money market returns achieved. I’ve been getting around 5% for the past couple of years. But before that it was much lower. I have found some nice fixed instruments over the past few years, but the highest yielding ones have short duration or are callable. So those nice returns aren’t really locked in. |
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I don't claim to be a market timer. What happened is I sold some real estate in 2022 and 2023 and have needed to make decisions about how to invest the money. I remain mostly invested in real estate but now have more money in the stock market than ever before. At the age of 82 with 83 looming on the horizon I prefer to stay on the cautious side. Like most of the world I follow what Buffett does and he has been selling some stocks that look fine to me and holding the proceeds rather than reinvesting them in other equities. I will not delve into speculating why he is selling but AAPL had become an overwhelming portion of BRK's portfolio and the potential for higher corporate tax rates had reared its ugly head.
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Never tell people how to spend their money
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Yes I met with my investment guy yesterday. We both agreed there is a big chance of major volatility in the coming months. Based on possible major changes in federal operations, we decided to de-risk the portfolio, so I’m not so exposed. I took my gains, and now in other sectors.
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The indices are dominated by just a few stocks with enormous capitalization. So everybody is holding the same few stocks whether we know it or not. Another thing to be worried about. Or not.
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So, like you, I stick to two strategies: Buy and Hold, and Dollar Cost Averaging. I concur with your perspective, Rich42. |
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As long as the US dollar is the reserve currency there will be an upward bias to US equities. So, what goes up does not necessarily go down. But the upward trend is not a straight line. Many end up buying high and selling low. What has worked for me has been to decide on a distribution of equities and fixed income and other assets such as real estate. The idea is to have some orthogonality to the portfolio. For many years I was aggressive with equities, as I've gotten older, I reduced my exposure and at 70 I fixed it to 50% to keep up with inflation. I periodically rebalance to maintain the 50% equities. If the market gets really frothy or depressed, I may do an additional rebalance. I have about 5-10% in a brokerage account to have fun with and while I often pick losers or mediocre stocks, every now and then having one do >10 fold can put a smile on my face. Most importantly, I sleep well at night.
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When is enough enough?
Based on one’s lifestyle, is it not possible to reach a level of assets such that it is no longer necessary to concern yourself with stock market fluctuations? In other words, just invest in those vehicles that provide guaranteed returns. I’m not necessarily speaking of annuities. Mark Twain: “I’m more concerned about the return OF my money than the return ON my money”. There must be some amount that even inflation would not be a concern. If your annual expenses average “X” then what multiple of “X” would be enough? Or, at some point, does investing become more of a hobby than a necessity? Also, what would such a conservative portfolio look like? |
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some people can get along fine on social security. other people want to travel the world, or have two/three homes. its about lifestyle needs and wants. . pick a number for your annual lifestyle cost, and then work from there. |
Warren Buffet is afraid, he is like 75% in cash i read.
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lac
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