If eye-rolling is all we need, I can pick up the slack. I never seemed to lose my knack. It has gotten me into much trouble over the past decades, so perhaps some good can come of it to counteract all of that historynigel_ht wrote: ↑Thu Jul 15, 2021 4:19 pmWell if he has a teenager he can past that duty to them…most are Olympic class eye rollers…
U.S. stocks continue to soar!
- Doom&Gloom
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- Joined: Thu May 08, 2014 3:36 pm
Re: U.S. stocks continue to soar!
Re: U.S. stocks continue to soar!
It is all a mental thing and I dont agree with William Bernstein that "risk tolerance is ingrained and we can never build it up".anoop wrote: ↑Wed Jul 14, 2021 12:09 amYes I know. I was following Zvi Bodie's worry-free investing and one of his quotes really resonated with me -- "I hate losing much more than I enjoy winning". Unfortunately that approach doesn't work in a ZIRP/NIRP/negative real rate environment.UpsetRaptor wrote: ↑Tue Jul 13, 2021 11:58 pm Anoop, I think you're the most risk averse investor I've seen on these boards. Which is totally fine, especially since you're saving over half your income; if you know your risk tolerance, you know it. Just an observation.
It is all about how you see your portfolio.
I have now started looking at it very differently.
My portfolio and networth is about 0.9 million USD* worth now. I was afraid of losing money when my portfolio was 0.8m, I was afraid of losing money when it was 0.4m and I was also afraid of losing money when it 10k. Something doesnt sound right, isn't it? How can you always be afraid of losing money regardless of how much you have and how much money are you afraid of losing and what do you base it upon. Percentage of networth? No!
We are afraid because we dont know how much money we will lose and the uncertainty around it and we dont even know how to benchmark it. These allocation ratios are good from an SWR and portfolio longetivity perspective. But they are no good to determine what is your risk tolerance.
I have found that having a sufficient amount cash/fixed income buffer that you determine as your safe ballast that will be enough for you no matter what. Having this buffer and then mentally relying on it that anything in excess of that is your risk money and you can afford to lose it. This is something you need to mentally prepare yourself and you need to come up with that number and that number needs to be finite. It cannot keep increasing with your networth. That doesnt make sense. When you do risk tolerance based on allocation ratio, then it doesnt take into account that increasing networth should increase your risk tolerance.
So, the way I look at it. I am right now saving a lot of money from my income which is great and this is a good problem to have. If I dont do anything with the new flows coming, I am just going to be in lots and lots of cash and wont know where to deploy it. So now I am implementing a rising equity allocation glidepath and one of the very very key measures, I am monitoring is my fixed income absolute level.
I have a dual goal
1) To increase my equity allocation ratio, by trying to deploy my fixed income corpus as efficiently as possible. I am 30% equity allocation ratio and my plan is to follow a rising equity glide path to reach 60% in 3 years. If markets keep going up and I am just deploying only my new flows into equities entirely, my fixed income component doesnt go down much. This is a happy scenario, so markets going up makes me happy. My allocation ratio in equities is going up and my I not losing my fixed income corpus. What more can you ask for?
2) Secondary goal is to not end up with more fixed income than what I already have, in absolute terms. I would hate it to add any more fixed income than what I already have. So any new inflows has to go to equities, no matter how overvalued they seem like. Also if markets fall in any particular month, that is the time when I will be happy to deploy my fixed income corpus to buy equities for cheap while maintaining my allocation ratio glide path. This is the principle of value averaging strategy. This makes me happy too, because this was the part of the plan. To buy equities when there is a sale and to increase my allocation ratio. But I will keep a watch on my fixed income corpus and see if I am depleting it too much in absolute terms. If there is a really bad crash and markets just keep going lower and lower, then I will stop at the point where I cannot tolerate any more fixed income depletion.
For me that lower bound of fixed income corpus is 400k USD. I cannot go below this no matter what. Right now, I have almost 600k USD in fixed income/bonds funds.
*All dollar amounts I have quoted are converted numbers at current exchange rate for easy understanding. I track my networth in Indian rupees and about 80% of my networth is Indian Rupee assets.
Re: U.S. stocks continue to soar!
Actually earlier in life I never worried about losing money. I was invested all along in random funds and lost money in 2000-2003 (I didn't check too closely; those were the days of paper statements.) I also lost money when changing jobs because the custodian (BNY Mellon) liquidated my account and took almost 3 months to send me check. This was back in 2003 and the market had dropped at the time of selling and moved up rapidly in those 3 months. I did lose after-tax money and took capital losses for almost 10 years after (I stopped investing after tax money after 2001ish). But I got into this market timing stuff when I was about to buy a house in 2004. At that time the house appreciated $13K in a matter of weeks between the time I expressed interest and the time of signing the contract. I backed out of that house, and long story short that's when I started reading blogs, and because of that moved to cash in early 2008 (got out at the right time). Since then I have struggled to find fixed income investments that can keep up. Between 2001 & now, after tax money has always been fixed income. I made decent returns on CDs at least until 5 years after the GFC. I got some really good 5 year CDs in the midst of the GFC. After that it's been pretty bad.revhappy wrote: ↑Thu Jul 15, 2021 11:48 pmIt is all a mental thing and I dont agree with William Bernstein that "risk tolerance is ingrained and we can never build it up".anoop wrote: ↑Wed Jul 14, 2021 12:09 amYes I know. I was following Zvi Bodie's worry-free investing and one of his quotes really resonated with me -- "I hate losing much more than I enjoy winning". Unfortunately that approach doesn't work in a ZIRP/NIRP/negative real rate environment.UpsetRaptor wrote: ↑Tue Jul 13, 2021 11:58 pm Anoop, I think you're the most risk averse investor I've seen on these boards. Which is totally fine, especially since you're saving over half your income; if you know your risk tolerance, you know it. Just an observation.
It is all about how you see your portfolio.
I have now started looking at it very differently.
My portfolio and networth is about 0.9 million USD* worth now. I was afraid of losing money when my portfolio was 0.8m, I was afraid of losing money when it was 0.4m and I was also afraid of losing money when it 10k. Something doesnt sound right, isn't it? How can you always be afraid of losing money regardless of how much you have and how much money are you afraid of losing and what do you base it upon. Percentage of networth? No!
We are afraid because we dont know how much money we will lose and the uncertainty around it and we dont even know how to benchmark it. These allocation ratios are good from an SWR and portfolio longetivity perspective. But they are no good to determine what is your risk tolerance.
I have found that having a sufficient amount cash/fixed income buffer that you determine as your safe ballast that will be enough for you no matter what. Having this buffer and then mentally relying on it that anything in excess of that is your risk money and you can afford to lose it. This is something you need to mentally prepare yourself and you need to come up with that number and that number needs to be finite. It cannot keep increasing with your networth. That doesnt make sense. When you do risk tolerance based on allocation ratio, then it doesnt take into account that increasing networth should increase your risk tolerance.
So, the way I look at it. I am right now saving a lot of money from my income which is great and this is a good problem to have. If I dont do anything with the new flows coming, I am just going to be in lots and lots of cash and wont know where to deploy it. So now I am implementing a rising equity allocation glidepath and once of the very very key measures, I am monitoring is my fixed income absolute level.
I have a dual aim
1) To increase my equity allocation ratio, by trying to deploy my fixed income corpus as efficiently as possible. I am 30% equity allocation ratio and my plan is to follow a rising equity glide path to reach 60% in 3 years. If markets keep going up and I am just deploying only my new flows into equities entirely, my fixed income component doesnt go down much. This is a happy scenario, so markets going up makes me happy. My allocation ratio in equities is going up and my I not losing my fixed income corpus. What more can you ask for?
2) Secondary aim is to not end up with more fixed income than what I already have, in absolute terms. I would hate it to add any more fixed income than what I already have. So any new inflows has to go to equities, no matter how overvalued they seem like. Also if markets fall in any particular month, that is the time when I will be happy to deploy my fixed income corpus to buy equities for cheap while maintaining my allocation ratio glide path. This is the principle of value averaging strategy. This makes me happy too, because this was the part of the plan. To buy equities when there is a sale and to increase my allocation ratio. But I will keep a watch on my fixed income corpus and see if I am depleting it too much in absolute terms. If there is a really bad crash and markets just keep going lower and lower, then I will stop at the point where I cannot tolerate any more fixed income depletion.
For me that lower bound of fixed income corpus is 400k USD. I cannot go below this no matter what. Right now, I have almost 600k USD in fixed income/bonds funds.
*All dollar amounts I have quoted are converted numbers for easy understanding. I track my networth in Indian rupees and about 80% of my networth is Indian Rupee assets.
Not sure how I came across bogleheads, but I did and then I attended a few meetings of the local chapter. I remember one of the retired lady's there saying on multiple occasions "no one invested in stocks in the early days...what has changed that makes this necessary now?" (my paraphrase of what she said, don't remember the exact words). Almost like a conundrum that she couldn't figure out--why is everyone in the mainstream talking about the stock market all the time.
Zvi Bodie used to say you should first save enough in TIPS/I-Bonds/MM/Stable Value until, along with social security and any guaranteed pensions, you can be assured of a minimum standard of living. Only beyond that should one venture in stocks. That makes sense for me.
The financial world has changed a lot. I'm in touch with a number of older folks from my first job who are now well into retirement and they say they have never seen the kind of things going on right now in terms of financial uncertainty. Maybe it's been going on but there was no awareness because all that was available was official news.
I hope something like what Michael Burry said doesn't actually happen. He was right about the GFC, and he's been issuing warnings again. And more recently Zoltan Pozsar of GS who warned about the repo stuff in 2019 that led to the Fed's Not-QE program is now warning about the repo markets again.
Right now my biggest problem is shortages. Seems like a lot of people like the same stuff I like at the grocery store and the shelves are empty of most of the things I want to buy. It shows me how worthless money is when there is nothing to buy with it.
Re: U.S. stocks continue to soar!
Please stay on-topic, which is the US market (increasing).
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- Joined: Sun May 05, 2019 11:23 am
Re: U.S. stocks continue to soar!
Retail Sales beat both consensus, and consensus range! link
Yea for US market (increasing)!
Boo for predictions!
Consumer spending accounts for more than two-thirds of U.S. economic activity, so this joyful retail sales figure is apparently a very good thing, indeed.
Yea for US market (increasing)!
Boo for predictions!
Consumer spending accounts for more than two-thirds of U.S. economic activity, so this joyful retail sales figure is apparently a very good thing, indeed.
Re: U.S. stocks continue to soar!
Kind of a sad week for the market. I hope next week is better. It feels like we've opened in the green most of the week only to close in the red every day
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- Joined: Sun Jan 07, 2018 11:52 am
Re: U.S. stocks continue to soar!
we have not had any sort of major consolidation (5-10%) in a long time, it's only a matter of time when we have the big 10% consolidation which statistically happens at least once a year, I think we're bound to have the weakness now (Jul-Sep) since the latter part of the year is typically very strong... so my thinking is if we drop to SPX 4000 now, then we rebound to SPX 4600 by December.
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- Joined: Sun May 05, 2019 11:23 am
Re: U.S. stocks continue to soar!
Ewww, consumer sentiment went ugly on us! *holds nose* link
Edit: "U.S. consumer sentiment drops in early July on inflation fears" link
Edit: "U.S. consumer sentiment drops in early July on inflation fears" link
Last edited by Robot Monster on Fri Jul 16, 2021 7:13 pm, edited 1 time in total.
Re: U.S. stocks continue to soar!
Its difficult to express my disappointment in user lostdog this week. Perhaps next week we will see improved performance.
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- Joined: Sun Jan 07, 2018 11:52 am
Re: U.S. stocks continue to soar!
Another mega bubble stock MRNA added to the index, the S&P 500 getting shakier by the day...
MRNA has a PE ratio of 225, am I missing something or do fundamentals no longer matter in today's world? What is the future of this company once the pandemic ends? MRNA treatment for cancer? Well, that is big big speculation to have 225 years of current earnings to get your money back!! Or to get to normal growth PE of around 30, MRNA has to 8X their earnings in the years ahead...
https://www.cnn.com/2021/07/16/investin ... index.html
MRNA has a PE ratio of 225, am I missing something or do fundamentals no longer matter in today's world? What is the future of this company once the pandemic ends? MRNA treatment for cancer? Well, that is big big speculation to have 225 years of current earnings to get your money back!! Or to get to normal growth PE of around 30, MRNA has to 8X their earnings in the years ahead...
https://www.cnn.com/2021/07/16/investin ... index.html
Last edited by stocknoob4111 on Fri Jul 16, 2021 1:10 pm, edited 3 times in total.
Re: U.S. stocks continue to soar!
Do you think having guaranteed fixed pension is going to solve this empty-shelves and/or inflation problem ? How one deals with inflation upon retirement (active job is one of the best hedges against inflation), but in retirement, your inflation-hedge is your portfolio (and some by social security). Educate us how to solve this problem with fixed pensions, fixed annuities, CDs, MM, Stable-value and/or other things you indicated ?anoop wrote: ↑Fri Jul 16, 2021 12:45 amActually earlier in life I never worried about losing money. I was invested all along in random funds and lost money in 2000-2003 (I didn't check too closely; those were the days of paper statements.) I also lost money when changing jobs because the custodian (BNY Mellon) liquidated my account and took almost 3 months to send me check. This was back in 2003 and the market had dropped at the time of selling and moved up rapidly in those 3 months. I did lose after-tax money and took capital losses for almost 10 years after (I stopped investing after tax money after 2001ish). But I got into this market timing stuff when I was about to buy a house in 2004. At that time the house appreciated $13K in a matter of weeks between the time I expressed interest and the time of signing the contract. I backed out of that house, and long story short that's when I started reading blogs, and because of that moved to cash in early 2008 (got out at the right time). Since then I have struggled to find fixed income investments that can keep up. Between 2001 & now, after tax money has always been fixed income. I made decent returns on CDs at least until 5 years after the GFC. I got some really good 5 year CDs in the midst of the GFC. After that it's been pretty bad.revhappy wrote: ↑Thu Jul 15, 2021 11:48 pmIt is all a mental thing and I dont agree with William Bernstein that "risk tolerance is ingrained and we can never build it up".anoop wrote: ↑Wed Jul 14, 2021 12:09 amYes I know. I was following Zvi Bodie's worry-free investing and one of his quotes really resonated with me -- "I hate losing much more than I enjoy winning". Unfortunately that approach doesn't work in a ZIRP/NIRP/negative real rate environment.UpsetRaptor wrote: ↑Tue Jul 13, 2021 11:58 pm Anoop, I think you're the most risk averse investor I've seen on these boards. Which is totally fine, especially since you're saving over half your income; if you know your risk tolerance, you know it. Just an observation.
It is all about how you see your portfolio.
I have now started looking at it very differently.
My portfolio and networth is about 0.9 million USD* worth now. I was afraid of losing money when my portfolio was 0.8m, I was afraid of losing money when it was 0.4m and I was also afraid of losing money when it 10k. Something doesnt sound right, isn't it? How can you always be afraid of losing money regardless of how much you have and how much money are you afraid of losing and what do you base it upon. Percentage of networth? No!
We are afraid because we dont know how much money we will lose and the uncertainty around it and we dont even know how to benchmark it. These allocation ratios are good from an SWR and portfolio longetivity perspective. But they are no good to determine what is your risk tolerance.
I have found that having a sufficient amount cash/fixed income buffer that you determine as your safe ballast that will be enough for you no matter what. Having this buffer and then mentally relying on it that anything in excess of that is your risk money and you can afford to lose it. This is something you need to mentally prepare yourself and you need to come up with that number and that number needs to be finite. It cannot keep increasing with your networth. That doesnt make sense. When you do risk tolerance based on allocation ratio, then it doesnt take into account that increasing networth should increase your risk tolerance.
So, the way I look at it. I am right now saving a lot of money from my income which is great and this is a good problem to have. If I dont do anything with the new flows coming, I am just going to be in lots and lots of cash and wont know where to deploy it. So now I am implementing a rising equity allocation glidepath and once of the very very key measures, I am monitoring is my fixed income absolute level.
I have a dual aim
1) To increase my equity allocation ratio, by trying to deploy my fixed income corpus as efficiently as possible. I am 30% equity allocation ratio and my plan is to follow a rising equity glide path to reach 60% in 3 years. If markets keep going up and I am just deploying only my new flows into equities entirely, my fixed income component doesnt go down much. This is a happy scenario, so markets going up makes me happy. My allocation ratio in equities is going up and my I not losing my fixed income corpus. What more can you ask for?
2) Secondary aim is to not end up with more fixed income than what I already have, in absolute terms. I would hate it to add any more fixed income than what I already have. So any new inflows has to go to equities, no matter how overvalued they seem like. Also if markets fall in any particular month, that is the time when I will be happy to deploy my fixed income corpus to buy equities for cheap while maintaining my allocation ratio glide path. This is the principle of value averaging strategy. This makes me happy too, because this was the part of the plan. To buy equities when there is a sale and to increase my allocation ratio. But I will keep a watch on my fixed income corpus and see if I am depleting it too much in absolute terms. If there is a really bad crash and markets just keep going lower and lower, then I will stop at the point where I cannot tolerate any more fixed income depletion.
For me that lower bound of fixed income corpus is 400k USD. I cannot go below this no matter what. Right now, I have almost 600k USD in fixed income/bonds funds.
*All dollar amounts I have quoted are converted numbers for easy understanding. I track my networth in Indian rupees and about 80% of my networth is Indian Rupee assets.
Not sure how I came across bogleheads, but I did and then I attended a few meetings of the local chapter. I remember one of the retired lady's there saying on multiple occasions "no one invested in stocks in the early days...what has changed that makes this necessary now?" (my paraphrase of what she said, don't remember the exact words). Almost like a conundrum that she couldn't figure out--why is everyone in the mainstream talking about the stock market all the time.
Zvi Bodie used to say you should first save enough in TIPS/I-Bonds/MM/Stable Value until, along with social security and any guaranteed pensions, you can be assured of a minimum standard of living. Only beyond that should one venture in stocks. That makes sense for me.
The financial world has changed a lot. I'm in touch with a number of older folks from my first job who are now well into retirement and they say they have never seen the kind of things going on right now in terms of financial uncertainty. Maybe it's been going on but there was no awareness because all that was available was official news.
I hope something like what Michael Burry said doesn't actually happen. He was right about the GFC, and he's been issuing warnings again. And more recently Zoltan Pozsar of GS who warned about the repo stuff in 2019 that led to the Fed's Not-QE program is now warning about the repo markets again.
Right now my biggest problem is shortages. Seems like a lot of people like the same stuff I like at the grocery store and the shelves are empty of most of the things I want to buy. It shows me how worthless money is when there is nothing to buy with it.
Overall the equity markets in long-term provide upward growth ..
Re: U.S. stocks continue to soar!
The short answer to your question is the fixed income market is broken and has been broken since the dot com bust.sc9182 wrote: ↑Fri Jul 16, 2021 1:08 pmDo you think having guaranteed fixed pension is going to solve this empty-shelves and/or inflation problem ? How one deals with inflation upon retirement (active job is one of the best hedges against inflation), but in retirement, your inflation-hedge is your portfolio (and some by social security). Educate us how to solve this problem with fixed pensions, fixed annuities, CDs, MM, Stable-value and/or other things you indicated ?anoop wrote: ↑Fri Jul 16, 2021 12:45 amActually earlier in life I never worried about losing money. I was invested all along in random funds and lost money in 2000-2003 (I didn't check too closely; those were the days of paper statements.) I also lost money when changing jobs because the custodian (BNY Mellon) liquidated my account and took almost 3 months to send me check. This was back in 2003 and the market had dropped at the time of selling and moved up rapidly in those 3 months. I did lose after-tax money and took capital losses for almost 10 years after (I stopped investing after tax money after 2001ish). But I got into this market timing stuff when I was about to buy a house in 2004. At that time the house appreciated $13K in a matter of weeks between the time I expressed interest and the time of signing the contract. I backed out of that house, and long story short that's when I started reading blogs, and because of that moved to cash in early 2008 (got out at the right time). Since then I have struggled to find fixed income investments that can keep up. Between 2001 & now, after tax money has always been fixed income. I made decent returns on CDs at least until 5 years after the GFC. I got some really good 5 year CDs in the midst of the GFC. After that it's been pretty bad.revhappy wrote: ↑Thu Jul 15, 2021 11:48 pmIt is all a mental thing and I dont agree with William Bernstein that "risk tolerance is ingrained and we can never build it up".anoop wrote: ↑Wed Jul 14, 2021 12:09 amYes I know. I was following Zvi Bodie's worry-free investing and one of his quotes really resonated with me -- "I hate losing much more than I enjoy winning". Unfortunately that approach doesn't work in a ZIRP/NIRP/negative real rate environment.UpsetRaptor wrote: ↑Tue Jul 13, 2021 11:58 pm Anoop, I think you're the most risk averse investor I've seen on these boards. Which is totally fine, especially since you're saving over half your income; if you know your risk tolerance, you know it. Just an observation.
It is all about how you see your portfolio.
I have now started looking at it very differently.
My portfolio and networth is about 0.9 million USD* worth now. I was afraid of losing money when my portfolio was 0.8m, I was afraid of losing money when it was 0.4m and I was also afraid of losing money when it 10k. Something doesnt sound right, isn't it? How can you always be afraid of losing money regardless of how much you have and how much money are you afraid of losing and what do you base it upon. Percentage of networth? No!
We are afraid because we dont know how much money we will lose and the uncertainty around it and we dont even know how to benchmark it. These allocation ratios are good from an SWR and portfolio longetivity perspective. But they are no good to determine what is your risk tolerance.
I have found that having a sufficient amount cash/fixed income buffer that you determine as your safe ballast that will be enough for you no matter what. Having this buffer and then mentally relying on it that anything in excess of that is your risk money and you can afford to lose it. This is something you need to mentally prepare yourself and you need to come up with that number and that number needs to be finite. It cannot keep increasing with your networth. That doesnt make sense. When you do risk tolerance based on allocation ratio, then it doesnt take into account that increasing networth should increase your risk tolerance.
So, the way I look at it. I am right now saving a lot of money from my income which is great and this is a good problem to have. If I dont do anything with the new flows coming, I am just going to be in lots and lots of cash and wont know where to deploy it. So now I am implementing a rising equity allocation glidepath and once of the very very key measures, I am monitoring is my fixed income absolute level.
I have a dual aim
1) To increase my equity allocation ratio, by trying to deploy my fixed income corpus as efficiently as possible. I am 30% equity allocation ratio and my plan is to follow a rising equity glide path to reach 60% in 3 years. If markets keep going up and I am just deploying only my new flows into equities entirely, my fixed income component doesnt go down much. This is a happy scenario, so markets going up makes me happy. My allocation ratio in equities is going up and my I not losing my fixed income corpus. What more can you ask for?
2) Secondary aim is to not end up with more fixed income than what I already have, in absolute terms. I would hate it to add any more fixed income than what I already have. So any new inflows has to go to equities, no matter how overvalued they seem like. Also if markets fall in any particular month, that is the time when I will be happy to deploy my fixed income corpus to buy equities for cheap while maintaining my allocation ratio glide path. This is the principle of value averaging strategy. This makes me happy too, because this was the part of the plan. To buy equities when there is a sale and to increase my allocation ratio. But I will keep a watch on my fixed income corpus and see if I am depleting it too much in absolute terms. If there is a really bad crash and markets just keep going lower and lower, then I will stop at the point where I cannot tolerate any more fixed income depletion.
For me that lower bound of fixed income corpus is 400k USD. I cannot go below this no matter what. Right now, I have almost 600k USD in fixed income/bonds funds.
*All dollar amounts I have quoted are converted numbers for easy understanding. I track my networth in Indian rupees and about 80% of my networth is Indian Rupee assets.
Not sure how I came across bogleheads, but I did and then I attended a few meetings of the local chapter. I remember one of the retired lady's there saying on multiple occasions "no one invested in stocks in the early days...what has changed that makes this necessary now?" (my paraphrase of what she said, don't remember the exact words). Almost like a conundrum that she couldn't figure out--why is everyone in the mainstream talking about the stock market all the time.
Zvi Bodie used to say you should first save enough in TIPS/I-Bonds/MM/Stable Value until, along with social security and any guaranteed pensions, you can be assured of a minimum standard of living. Only beyond that should one venture in stocks. That makes sense for me.
The financial world has changed a lot. I'm in touch with a number of older folks from my first job who are now well into retirement and they say they have never seen the kind of things going on right now in terms of financial uncertainty. Maybe it's been going on but there was no awareness because all that was available was official news.
I hope something like what Michael Burry said doesn't actually happen. He was right about the GFC, and he's been issuing warnings again. And more recently Zoltan Pozsar of GS who warned about the repo stuff in 2019 that led to the Fed's Not-QE program is now warning about the repo markets again.
Right now my biggest problem is shortages. Seems like a lot of people like the same stuff I like at the grocery store and the shelves are empty of most of the things I want to buy. It shows me how worthless money is when there is nothing to buy with it.
Overall the equity markets in long-term provide upward growth ..
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Re: U.S. stocks continue to soar!
But that's what people want. Lots of people called for YCC when 10Y started rising above 1.7% not too long ago.
Fair or not, "broken" fixed income market is necessary to keep equities elevated.
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Re: U.S. stocks continue to soar!
Small Caps getting decimated again, oh well, what's new... hope the bleeding stops sometime
Re: U.S. stocks continue to soar!
Isn't it up YTD, though?stocknoob4111 wrote: ↑Fri Jul 16, 2021 2:28 pm Small Caps getting decimated again, oh well, what's new... hope the bleeding stops sometime
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Re: U.S. stocks continue to soar!
Meh. At least I can buy something that hasn't suffered as much multiple expansion.stocknoob4111 wrote: ↑Fri Jul 16, 2021 2:28 pm Small Caps getting decimated again, oh well, what's new... hope the bleeding stops sometime
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Re: U.S. stocks continue to soar!
yes, about the same as the S&P 500, however Small Caps have not done too well in the last 5 years and are trailing Large by quite a bit. The expectation was that this cyclical period favors Small Caps to recapture their past underperformance. That seemed to be happening but now that rally has lost steam... so yes, they have gone up but not by that much if you look at a 5 year span.
The big issue is that if we have a correction, Small will go down even more regardless of whether it has already gone down a lot. S&P 500 is at -1.25% off highs, S&P 600 is currently almost in correction territory now at -8.1%
Also, since Feb 2021 the S&P 600 has returned nothing...
On the positive side, the S&P 600 is now undervalued per Yardeni, trading at a PE BELOW it's historical value and MUCH under the S&P 500 which is extremely overvalued, but fundamentals don't seem to be mattering much at the moment, same story as International... historically cheap but nobody wants to touch it. Herd mentality I guess.
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Re: U.S. stocks continue to soar!
Small caps and small cap value seem to be doing fine, both this year, and since Fama and French's 1993 paper.pasadena wrote: ↑Fri Jul 16, 2021 2:31 pmIsn't it up YTD, though?stocknoob4111 wrote: ↑Fri Jul 16, 2021 2:28 pm Small Caps getting decimated again, oh well, what's new... hope the bleeding stops sometime
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
Re: U.S. stocks continue to soar!
MRNA forward PE is only around 10.stocknoob4111 wrote: ↑Fri Jul 16, 2021 1:08 pm Another mega bubble stock MRNA added to the index, the S&P 500 getting shakier by the day...
MRNA has a PE ratio of 225, am I missing something or do fundamentals no longer matter in today's world? What is the future of this company once the pandemic ends? MRNA treatment for cancer? Well, that is big big speculation to have 225 years of current earnings to get your money back!! Or to get to normal growth PE of around 30, MRNA has to 8X their earnings in the years ahead...
https://www.cnn.com/2021/07/16/investin ... index.html
"I look at a hundred deals a day. I pick one." -Gordon Gekko
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Re: U.S. stocks continue to soar!
down 7% this month, Portfolio Visualizer is showing data through end of June not this month...
Re: U.S. stocks continue to soar!
Moderna has been working on its MRNA technology for a decade or so. The COVID vaccine was the first commercial success that they’ve had. By all accounts, the MRNA technology was incredibly effective with few side effects.stocknoob4111 wrote: ↑Fri Jul 16, 2021 2:54 pmso, an estimate based on predicted earnings, what happens after the pandemic demand for their vaccines dry out?
Going forward, I expect that Moderna will will have a full load of COVID vaccine production for a while to come, including possible booster shots.
Additionally and probably more importantly, I expect that the Moderna team will find many other uses for its (now proven) MRNA technology. Who knows what future vaccines or treatments might come out of MRNA technology?
Right now Moderna looks like a one-trick pony. I don’t think it stays that way forever.
Last edited by Stinky on Fri Jul 16, 2021 3:23 pm, edited 1 time in total.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: U.S. stocks continue to soar!
Those who have a strategy that depends on how an asset class does over a two-week period will surely be very disappointed to hear that.stocknoob4111 wrote: ↑Fri Jul 16, 2021 3:17 pmdown 7% this month, Portfolio Visualizer is showing data through end of June not this month...
Full disclosure: I don't personally engage in any factor tilts, but people ragging on small caps and value stocks seems odd to me.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
Re: U.S. stocks continue to soar!
Not just equities, all assets. I think real-estate is even more important because that's what keeps banks alive.Marseille07 wrote: ↑Fri Jul 16, 2021 2:21 pmBut that's what people want. Lots of people called for YCC when 10Y started rising above 1.7% not too long ago.
Fair or not, "broken" fixed income market is necessary to keep equities elevated.
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Re: U.S. stocks continue to soar!
Glad to see a slight down week. I am hoping for a correction or at least a sideways market for a few years.
Re: U.S. stocks continue to soar!
I slacked today. Wife and I are up north and I chilled in the pontoon today.
Stocks-80% || Bonds-20% || VTI/VXUS/AOR
Re: U.S. stocks continue to soar!
Few years! I would be surprised if the dip buyers dont come out in full force, the sentiment is such right now, that even the bulls are tired of markets going up and want a dip to buy. So I doubt you will get any dip that will last more than 2-3 days.Triple digit golfer wrote: ↑Fri Jul 16, 2021 4:08 pm Glad to see a slight down week. I am hoping for a correction or at least a sideways market for a few years.
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Re: U.S. stocks continue to soar!
I'm not expecting a few year dip. I'm saying a sideways market for for few years would be fine, and is certainly possible and has happened many times before.revhappy wrote: ↑Fri Jul 16, 2021 8:41 pmFew years! I would be surprised if the dip buyers dont come out in full force, the sentiment is such right now, that even the bulls are tired of markets going up and want a dip to buy. So I doubt you will get any dip that will last more than 2-3 days.Triple digit golfer wrote: ↑Fri Jul 16, 2021 4:08 pm Glad to see a slight down week. I am hoping for a correction or at least a sideways market for a few years.
Re: U.S. stocks continue to soar!
Yes, this is the design. Fiat currency and the fractional reserve banking system was design exactly for this. If there is any recession, centrals bankers will come in and plug the hole.Marseille07 wrote: ↑Fri Jul 16, 2021 2:21 pmBut that's what people want. Lots of people called for YCC when 10Y started rising above 1.7% not too long ago.
Fair or not, "broken" fixed income market is necessary to keep equities elevated.
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Re: U.S. stocks continue to soar!
Frontline just covered the power of the Fed: https://www.pbs.org/wgbh/frontline/film ... f-the-fed/anoop wrote: ↑Fri Jul 16, 2021 3:33 pmNot just equities, all assets. I think real-estate is even more important because that's what keeps banks alive.Marseille07 wrote: ↑Fri Jul 16, 2021 2:21 pmBut that's what people want. Lots of people called for YCC when 10Y started rising above 1.7% not too long ago.
Fair or not, "broken" fixed income market is necessary to keep equities elevated.
Re: U.S. stocks continue to soar!
I think all of us agree with this now and there are no bears remaining. Almost every bear has been converted. Any of the remaining bears are just fake who want to sell their newsletters to newbies to scare them.Marseille07 wrote: ↑Fri Jul 16, 2021 8:53 pmFrontline just covered the power of the Fed: https://www.pbs.org/wgbh/frontline/film ... f-the-fed/anoop wrote: ↑Fri Jul 16, 2021 3:33 pmNot just equities, all assets. I think real-estate is even more important because that's what keeps banks alive.Marseille07 wrote: ↑Fri Jul 16, 2021 2:21 pmBut that's what people want. Lots of people called for YCC when 10Y started rising above 1.7% not too long ago.
Fair or not, "broken" fixed income market is necessary to keep equities elevated.
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Re: U.S. stocks continue to soar!
"Don't fight the Fed" is a saying, just saying.
Re: U.S. stocks continue to soar!
TINA + FOMO + YOLO + DNFTF = BUY(FANGMAN + BLK)
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Re: U.S. stocks continue to soar!
The Frontline episode was actually pretty good. You can see how everyone's numb from the Fed bailing out time and again. A moral hazard.anoop wrote: ↑Fri Jul 16, 2021 9:32 pmTINA + FOMO + YOLO + DNFTF = BUY(FANGMAN + BLK)
- Yesterdaysnews
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Re: U.S. stocks continue to soar!
Nobody has the stomach for nasty stock market crashes anymore especially since most people’s retirements are dependent on a 401k.
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Re: U.S. stocks continue to soar!
This is true, though I don't think anyone guaranteed the 401K investments to go up. Investing isn't supposed to be blindly throwing monies at equities, but that's what it has become.Yesterdaysnews wrote: ↑Fri Jul 16, 2021 11:35 pm Nobody has the stomach for nasty stock market crashes anymore especially since most people’s retirements are dependent on a 401k.
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Re: U.S. stocks continue to soar!
Another reason to be concerned about bog standard S&P 500 index funds. Seem to go up just because they are easy to access and now have a good past decade of returns so people continue to plow money into it in retirement plans while ignoring other asset classes, no matter the valuationsMarseille07 wrote: ↑Fri Jul 16, 2021 11:43 pmThis is true, though I don't think anyone guaranteed the 401K investments to go up. Investing isn't supposed to be blindly throwing monies at equities, but that's what it has become.Yesterdaysnews wrote: ↑Fri Jul 16, 2021 11:35 pm Nobody has the stomach for nasty stock market crashes anymore especially since most people’s retirements are dependent on a 401k.
That party can only go on for so long, eventually fundamentals will catch up
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: U.S. stocks continue to soar!
You guys worry too much about the next crash.Nathan Drake wrote: ↑Sat Jul 17, 2021 2:29 amAnother reason to be concerned about bog standard S&P 500 index funds. Seem to go up just because they are easy to access and now have a good past decade of returns so people continue to plow money into it in retirement plans while ignoring other asset classes, no matter the valuationsMarseille07 wrote: ↑Fri Jul 16, 2021 11:43 pmThis is true, though I don't think anyone guaranteed the 401K investments to go up. Investing isn't supposed to be blindly throwing monies at equities, but that's what it has become.Yesterdaysnews wrote: ↑Fri Jul 16, 2021 11:35 pm Nobody has the stomach for nasty stock market crashes anymore especially since most people’s retirements are dependent on a 401k.
That party can only go on for so long, eventually fundamentals will catch up
The long-term average nominal 10% annual return of the S&P 500 INCLUDES the crashes. Read that again.
Just pick an Asset Allocation that assumes the stock market will start a big crash tomorrow and take a few years or even a decade to recover.
Because it might. Tomorrow. This is always true, regardless of valuations.
And then once you're prepared for the next crash, you don't have to worry about the next crash. And you certainly don't need to waste time trying to predict the future with valuations.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: U.S. stocks continue to soar!
I worry less about a short term crash and more about a prolonged sideways or down market while inflation is heating upHomerJ wrote: ↑Sat Jul 17, 2021 11:40 amYou guys worry too much about the next crash.Nathan Drake wrote: ↑Sat Jul 17, 2021 2:29 amAnother reason to be concerned about bog standard S&P 500 index funds. Seem to go up just because they are easy to access and now have a good past decade of returns so people continue to plow money into it in retirement plans while ignoring other asset classes, no matter the valuationsMarseille07 wrote: ↑Fri Jul 16, 2021 11:43 pmThis is true, though I don't think anyone guaranteed the 401K investments to go up. Investing isn't supposed to be blindly throwing monies at equities, but that's what it has become.Yesterdaysnews wrote: ↑Fri Jul 16, 2021 11:35 pm Nobody has the stomach for nasty stock market crashes anymore especially since most people’s retirements are dependent on a 401k.
That party can only go on for so long, eventually fundamentals will catch up
The long-term average nominal 10% annual return of the S&P 500 INCLUDES the crashes. Read that again.
Just pick an Asset Allocation that assumes the stock market will start a big crash tomorrow and take a few years or even a decade to recover.
Because it might. Tomorrow. This is always true, regardless of valuations.
And then once you're prepared for the next crash, you don't have to worry about the next crash. And you certainly don't need to waste time trying to predict the future with valuations.
Valuations and relative asset prices are the best tool we have to inform future investment decisions, and 0% of my contributions are going towards US LC stocks when others look much more attractive with higher expected returns.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: U.S. stocks continue to soar!
Well it's nice to see some earnings surprises on good
revenues. But can that continue ? So assuming the
estimates are a quarter ahead of themselves just for
safety to not overcalculate the price of the 500 should
have strong support around 4000 not higher.
For a low value should be fine but further surprises
earnings wise and investors will have some joy with
posted numbers.
A crash would be a surprise but who knows.
revenues. But can that continue ? So assuming the
estimates are a quarter ahead of themselves just for
safety to not overcalculate the price of the 500 should
have strong support around 4000 not higher.
For a low value should be fine but further surprises
earnings wise and investors will have some joy with
posted numbers.
A crash would be a surprise but who knows.
age in bonds, buy-and-hold, 10 year business cycle
Re: U.S. stocks continue to soar!
They may be the "best" tool but they are still really bad tools at predicting the future. And long-term, so far, it doesn't matter.Nathan Drake wrote: ↑Sat Jul 17, 2021 11:44 amValuations and relative asset prices are the best tool we have to inform future investment decisions
I might need to pound in a nail and all I have is a screwdriver and some sandpaper.
Sure, someone can come along and say "the screwdriver is the BEST tool you have", and even write a bunch of PhD papers on it, but it still will be really poor at pounding in a nail.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: U.S. stocks continue to soar!
HomerJ wrote: ↑Sat Jul 17, 2021 12:18 pmThey may be the "best" tool but they are still really bad tools at predicting the future. And long-term, so far, it doesn't matter.Nathan Drake wrote: ↑Sat Jul 17, 2021 11:44 amValuations and relative asset prices are the best tool we have to inform future investment decisions
I might need to pound in a nail and all I have is a screwdriver and some sandpaper.
Sure, someone can come along and say "the screwdriver is the BEST tool you have", and even write a bunch of PhD papers on it, but it still will be really poor at pounding in a nail.
If an asset class has high relative valuations, it has been best to allocate more towards assets with the same (or similar) long-term returns but where the valuations are at much lower levels.
Now, can you be sure that the reversion will happen in a period of a few years? No, but over the long-term it's a pretty sure bet. There are numerous examples.
This is particularly important to note for a retiree. We are entering into a period that may be extremely dangerous from a SORR perspective should they only be investing in 60% US LC stocks and 40% bonds.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: U.S. stocks continue to soar!
Only if the assets are fungible…Nathan Drake wrote: ↑Sat Jul 17, 2021 12:28 pm
If an asset class has high relative valuations, it has been best to allocate more towards assets with the same (or similar) long-term returns but where the valuations are at much lower levels.
What if the valuation is lower for a reason rather than being undervalued? Are all stocks with the same CAPE ratio identical in risk? How about two different buckets of stocks with the same CAPE ratio?
Is a bucket of utility stocks with a CAPE 30 the same as a bucket of tech stocks with a CAPE 30? More interesting is a bucket of utility stocks with CAPE 30 have a higher relative valuation to normal than tech at CAPE 40?
Depends on whether ex-US large cap has a low correlation with US large cap. Is VT really that much safer than VTI if the correlation is .8?If an asset class has high relative valuations, it has been
This is particularly important to note for a retiree. We are entering into a period that may be extremely dangerous from a SORR perspective should they only be investing in 60% US LC stocks and 40% bonds.
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Re: U.S. stocks continue to soar!
The market will price in higher expected returns for areas that are riskier; such as Small Cap Value. If large growth is considered to be less risky, there is less expected return. Combine lower expected equity returns with non-existent bond returns and potentially high inflation - boom, 4% SWR completely blows up.nigel_ht wrote: ↑Sat Jul 17, 2021 3:37 pmOnly if the assets are fungible…Nathan Drake wrote: ↑Sat Jul 17, 2021 12:28 pm
If an asset class has high relative valuations, it has been best to allocate more towards assets with the same (or similar) long-term returns but where the valuations are at much lower levels.
What if the valuation is lower for a reason rather than being undervalued? Are all stocks with the same CAPE ratio identical in risk? How about two different buckets of stocks with the same CAPE ratio?
Is a bucket of utility stocks with a CAPE 30 the same as a bucket of tech stocks with a CAPE 30? More interesting is a bucket of utility stocks with CAPE 30 have a higher relative valuation to normal than tech at CAPE 40?
Depends on whether ex-US large cap has a low correlation with US large cap. Is VT really that much safer than VTI if the correlation is .8?If an asset class has high relative valuations, it has been
This is particularly important to note for a retiree. We are entering into a period that may be extremely dangerous from a SORR perspective should they only be investing in 60% US LC stocks and 40% bonds.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: U.S. stocks continue to soar!
Not me. I'm hoping for a continued upward trend.Triple digit golfer wrote: ↑Fri Jul 16, 2021 4:08 pm Glad to see a slight down week. I am hoping for a correction or at least a sideways market for a few years.
By the way, we're down from July 2 through July 16, so we haven't gained over the last two weeks.
Re: U.S. stocks continue to soar!
My portfolio peaked on the 14th. The last couple of days last week weren't good. I need some more soaring.UpperNwGuy wrote: ↑Sat Jul 17, 2021 3:48 pmNot me. I'm hoping for a continued upward trend.Triple digit golfer wrote: ↑Fri Jul 16, 2021 4:08 pm Glad to see a slight down week. I am hoping for a correction or at least a sideways market for a few years.
By the way, we're down from July 2 through July 16, so we haven't gained over the last two weeks.
Re: U.S. stocks continue to soar!
You didn't answer. Would the utility sector that jumped up to CAPE 30 have higher or lower valuation than Tech that drops to CAPE 40? We know that structurally the businesses are very different with different growth potentials.Nathan Drake wrote: ↑Sat Jul 17, 2021 3:46 pmThe market will price in higher expected returns for areas that are riskier; such as Small Cap Value. If large growth is considered to be less risky, there is less expected return. Combine lower expected equity returns with non-existent bond returns and potentially high inflation - boom, 4% SWR completely blows up.nigel_ht wrote: ↑Sat Jul 17, 2021 3:37 pmOnly if the assets are fungible…Nathan Drake wrote: ↑Sat Jul 17, 2021 12:28 pm
If an asset class has high relative valuations, it has been best to allocate more towards assets with the same (or similar) long-term returns but where the valuations are at much lower levels.
What if the valuation is lower for a reason rather than being undervalued? Are all stocks with the same CAPE ratio identical in risk? How about two different buckets of stocks with the same CAPE ratio?
Is a bucket of utility stocks with a CAPE 30 the same as a bucket of tech stocks with a CAPE 30? More interesting is a bucket of utility stocks with CAPE 30 have a higher relative valuation to normal than tech at CAPE 40?
Depends on whether ex-US large cap has a low correlation with US large cap. Is VT really that much safer than VTI if the correlation is .8?If an asset class has high relative valuations, it has been
This is particularly important to note for a retiree. We are entering into a period that may be extremely dangerous from a SORR perspective should they only be investing in 60% US LC stocks and 40% bonds.
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Re: U.S. stocks continue to soar!
My answer is that there likely is some rational basis for higher CAPEs of certain companies based on growth/interest rates, but it's not as dramatic as the market is currently pricing. Higher CAPEs are basically a growth story, and investors over history routinely overpay for growth.nigel_ht wrote: ↑Sat Jul 17, 2021 4:51 pmYou didn't answer. Would the utility sector that jumped up to CAPE 30 have higher or lower valuation than Tech that drops to CAPE 40? We know that structurally the businesses are very different with different growth potentials.Nathan Drake wrote: ↑Sat Jul 17, 2021 3:46 pmThe market will price in higher expected returns for areas that are riskier; such as Small Cap Value. If large growth is considered to be less risky, there is less expected return. Combine lower expected equity returns with non-existent bond returns and potentially high inflation - boom, 4% SWR completely blows up.nigel_ht wrote: ↑Sat Jul 17, 2021 3:37 pmOnly if the assets are fungible…Nathan Drake wrote: ↑Sat Jul 17, 2021 12:28 pm
If an asset class has high relative valuations, it has been best to allocate more towards assets with the same (or similar) long-term returns but where the valuations are at much lower levels.
What if the valuation is lower for a reason rather than being undervalued? Are all stocks with the same CAPE ratio identical in risk? How about two different buckets of stocks with the same CAPE ratio?
Is a bucket of utility stocks with a CAPE 30 the same as a bucket of tech stocks with a CAPE 30? More interesting is a bucket of utility stocks with CAPE 30 have a higher relative valuation to normal than tech at CAPE 40?
Depends on whether ex-US large cap has a low correlation with US large cap. Is VT really that much safer than VTI if the correlation is .8?If an asset class has high relative valuations, it has been
This is particularly important to note for a retiree. We are entering into a period that may be extremely dangerous from a SORR perspective should they only be investing in 60% US LC stocks and 40% bonds.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: U.S. stocks continue to soar!
Okay, so it's time to move out of US stocks? CAPE has been elevated since the 1990s and we've still gotten decent returns.Nathan Drake wrote: ↑Sat Jul 17, 2021 4:59 pmMy answer is that there likely is some rational basis for higher CAPEs of certain companies based on growth/interest rates, but it's not as dramatic as the market is currently pricing. Higher CAPEs are basically a growth story, and investors over history routinely overpay for growth.nigel_ht wrote: ↑Sat Jul 17, 2021 4:51 pmYou didn't answer. Would the utility sector that jumped up to CAPE 30 have higher or lower valuation than Tech that drops to CAPE 40? We know that structurally the businesses are very different with different growth potentials.Nathan Drake wrote: ↑Sat Jul 17, 2021 3:46 pmThe market will price in higher expected returns for areas that are riskier; such as Small Cap Value. If large growth is considered to be less risky, there is less expected return. Combine lower expected equity returns with non-existent bond returns and potentially high inflation - boom, 4% SWR completely blows up.nigel_ht wrote: ↑Sat Jul 17, 2021 3:37 pmOnly if the assets are fungible…Nathan Drake wrote: ↑Sat Jul 17, 2021 12:28 pm
If an asset class has high relative valuations, it has been best to allocate more towards assets with the same (or similar) long-term returns but where the valuations are at much lower levels.
What if the valuation is lower for a reason rather than being undervalued? Are all stocks with the same CAPE ratio identical in risk? How about two different buckets of stocks with the same CAPE ratio?
Is a bucket of utility stocks with a CAPE 30 the same as a bucket of tech stocks with a CAPE 30? More interesting is a bucket of utility stocks with CAPE 30 have a higher relative valuation to normal than tech at CAPE 40?
Depends on whether ex-US large cap has a low correlation with US large cap. Is VT really that much safer than VTI if the correlation is .8?If an asset class has high relative valuations, it has been
This is particularly important to note for a retiree. We are entering into a period that may be extremely dangerous from a SORR perspective should they only be investing in 60% US LC stocks and 40% bonds.
Market cap to GDP is a little more concerning but since market weight are dominated by multinationals that depend more and more on international sales cap/GDP may be a less useful indicator in the past.
I get what you're saying but I don't think the commonly suggested alternative to VTI really changes the equation much. The countries with lower CAPE generally show up as less than 1-2% of the portfolio. Even if they return 5 times the US market it won't materially change the outcome for someone holding global market weight which is dominated by large cap.
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Re: U.S. stocks continue to soar!
Not necessarily get out of US stocks. I am just investing in value stocks in the US, particularly SCV. I still have US LC but it is a smaller portion of my portfolio. And I'm also investing overseas more aggressively.nigel_ht wrote: ↑Sat Jul 17, 2021 5:17 pmOkay, so it's time to move out of US stocks? CAPE has been elevated since the 1990s and we've still gotten decent returns.Nathan Drake wrote: ↑Sat Jul 17, 2021 4:59 pmMy answer is that there likely is some rational basis for higher CAPEs of certain companies based on growth/interest rates, but it's not as dramatic as the market is currently pricing. Higher CAPEs are basically a growth story, and investors over history routinely overpay for growth.nigel_ht wrote: ↑Sat Jul 17, 2021 4:51 pmYou didn't answer. Would the utility sector that jumped up to CAPE 30 have higher or lower valuation than Tech that drops to CAPE 40? We know that structurally the businesses are very different with different growth potentials.Nathan Drake wrote: ↑Sat Jul 17, 2021 3:46 pmThe market will price in higher expected returns for areas that are riskier; such as Small Cap Value. If large growth is considered to be less risky, there is less expected return. Combine lower expected equity returns with non-existent bond returns and potentially high inflation - boom, 4% SWR completely blows up.nigel_ht wrote: ↑Sat Jul 17, 2021 3:37 pm
Only if the assets are fungible…
What if the valuation is lower for a reason rather than being undervalued? Are all stocks with the same CAPE ratio identical in risk? How about two different buckets of stocks with the same CAPE ratio?
Is a bucket of utility stocks with a CAPE 30 the same as a bucket of tech stocks with a CAPE 30? More interesting is a bucket of utility stocks with CAPE 30 have a higher relative valuation to normal than tech at CAPE 40?
Depends on whether ex-US large cap has a low correlation with US large cap. Is VT really that much safer than VTI if the correlation is .8?
Market cap to GDP is a little more concerning but since market weight are dominated by multinationals that depend more and more on international sales cap/GDP may be a less useful indicator in the past.
I get what you're saying but I don't think the commonly suggested alternative to VTI really changes the equation much. The countries with lower CAPE generally show up as less than 1-2% of the portfolio. Even if they return 5 times the US market it won't materially change the outcome for someone holding global market weight which is dominated by large cap.
My recommendation is to not be so heavily concentrated in 100% US TSM. I am not sure I follow your argument about 1-2% of the portfolio with lower CAPE.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES