Economist article on bubbles and exuberance

[steve321]

see post below, quoting the post I am answering

[steve321]

Show me someone who has beaten the market based on CAPE. Or based on information from the economist.

Yeah, they don't exist.

how about guys like Asness or Arnott? These are value guys. Of course, like it says in the article (see link below), you gotta have brass balls (or diamond carbide balls, which are harder), but it can be done
https://www.turnaroundstockinvesting.co ... portfolio/

Concerning the Economist, it is quite a reputable publication over here.

[unclescrooge]

Show me someone who has beaten the market based on CAPE. Or based on information from the economist.

Yeah, they don't exist.

how about guys like Asness or Arnott? These are value guys. Of course, like it says in the article (see link below), you gotta have brass balls (or diamond carbide balls, which are harder), but it can be done
https://www.turnaroundstockinvesting.co ... portfolio/

Concerning the Economist, it is quite a reputable publication over here.

Are you claiming asness or arnott use CAPE?
No, because they use multifactor strategies.
Anyone who used CAPE would have been out of stocks for the past several years.

Are you saying the economist has a verifiable track record when it comes to investing?
No, because it doesn't exist.

Saying things that sound smart is very different from actually making money in the stock market.

My advice is to ignore the economist and forget about CAPE.

[steve321]

Are you claiming asness or arnott use CAPE?
No, because they use multifactor strategies.
Anyone who used CAPE would have been out of stocks for the past several years.

asness recommends diversification, implying that you'd invest in markets with lower CAPE across the world to mitigate risks in the US market, see his paper

International Diversification Works (Eventually)

Arnott has repeatedly said we should invest in EM (better, EM value) and his firm gives long term forecasts of different world regions based on valuations. (Same with GMO btw).

I do agree with you though that sounding smart and making money are very different things. I have wasted lots of time (but fortunately not lost money) reading stuff by people who sounded very intelligent (like the firm Gavekal in Europe) and who were often totally wrong.

[unclescrooge]

Are you claiming asness or arnott use CAPE?
No, because they use multifactor strategies.
Anyone who used CAPE would have been out of stocks for the past several years.

asness recommends diversification, implying that you'd invest in markets with lower CAPE across the world to mitigate risks in the US market, see his paper

International Diversification Works (Eventually)

Arnott has repeatedly said we should invest in EM (better, EM value) and his firm gives long term forecasts of different world regions based on valuations. (Same with GMO btw).

I do agree with you though that sounding smart and making money are very different things. I have wasted lots of time (but fortunately not lost money) reading stuff by people who sounded very intelligent (like the firm Gavekal in Europe) and who were often totally wrong.

I'm personally heavily overweight international markets, especially EM and explicitly China, based on on simple valuation metrics like PE, all of these are relatively and historically cheap. No need use fancy metrics like CAPE, which has been shown to have no useful value except loosely predicting long term returns.

The China fund excludes state owned enterprises, and is up 35%. This is despite everyone dumping blame on China, lack of transparency, authoritatian government, lack of protections for foreign investors, and rampant book cooking. If you listened to the smart people, you would've tried to exclude China in your EM funds, not over weight it.

Be grateful you never listened to John Hussman. He is smart, and his posts read like a PhD dissertation. But his basic assumptions are probably flawed, and he's actively lost money for his investors.

I've found listening to smart people and their theories has cost me a lot of money. Luckily it was when I was younger and had less money.

Develop your own strategy, and ignore the noise. And read the economist for entertainment, but rarely is anything actionable in terms of investing advice.

[Robot Monster]

see post below, quoting the post I am answering

see post above, quoting the post I'm not answering

[rockstar]

sounds like buy high and sell low.

Better than buying low and selling lower. I'd like to know that there is at least a chance that I'll make money. Buying an index that is limping along or falling doesn't really excite me. I won't touch international right now even though the valuations look far better than the US market.

Too bad - you could have made a real killing if you'd picked up QQQ or even just VUG a decade ago when they were doing dismally. If instead you had chosen the more 'exciting' things like emerging markets, which were doing very well at the time, you would have had a rough time

I was heavily invested in preferred stock a decade ago as well as MO. I did okay. But yeah, I should have been in QQQ much longer. I have only been in it for around the past five years.

hi rockstar just wondering how you are reacting to the last 2 days prices movements in QQQ; for my part even though I am a momentum guy by temperament, I am feeling quite happy that I have a lot of investments in other assets since I fear the US market may be in a bubble that might be bursting soonish. So since you

have been diving head first into QQQ

what are you doing now? Are you buying the dip? Are you thinking of bailing out? If so, are looking at things like moving averages or will you act based on your individual judgement?

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

[steve321]

Better than buying low and selling lower. I'd like to know that there is at least a chance that I'll make money. Buying an index that is limping along or falling doesn't really excite me. I won't touch international right now even though the valuations look far better than the US market.

Too bad - you could have made a real killing if you'd picked up QQQ or even just VUG a decade ago when they were doing dismally. If instead you had chosen the more 'exciting' things like emerging markets, which were doing very well at the time, you would have had a rough time

I was heavily invested in preferred stock a decade ago as well as MO. I did okay. But yeah, I should have been in QQQ much longer. I have only been in it for around the past five years.

hi rockstar just wondering how you are reacting to the last 2 days prices movements in QQQ; for my part even though I am a momentum guy by temperament, I am feeling quite happy that I have a lot of investments in other assets since I fear the US market may be in a bubble that might be bursting soonish. So since you

have been diving head first into QQQ

what are you doing now? Are you buying the dip? Are you thinking of bailing out? If so, are looking at things like moving averages or will you act based on your individual judgement?

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

How did you determine those values? 300 and 20? (in particular why 20? I guess 300 is around 1 year if it corresponds to the trading days)

[mesaverde]

If you are regularly buying shares of a U.S. stock index fund and plan to keep those shares invested for many years (otherwise you'd be buying mostly bonds, right?) this "news/revelation" is meaningless. You probably won't use the stock shares you're currently buying for 10, 20, 30, or more years. Stocks are a long term investment.

[rockstar]

Too bad - you could have made a real killing if you'd picked up QQQ or even just VUG a decade ago when they were doing dismally. If instead you had chosen the more 'exciting' things like emerging markets, which were doing very well at the time, you would have had a rough time

I was heavily invested in preferred stock a decade ago as well as MO. I did okay. But yeah, I should have been in QQQ much longer. I have only been in it for around the past five years.

hi rockstar just wondering how you are reacting to the last 2 days prices movements in QQQ; for my part even though I am a momentum guy by temperament, I am feeling quite happy that I have a lot of investments in other assets since I fear the US market may be in a bubble that might be bursting soonish. So since you

have been diving head first into QQQ

what are you doing now? Are you buying the dip? Are you thinking of bailing out? If so, are looking at things like moving averages or will you act based on your individual judgement?

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

How did you determine those values? 300 and 20? (in particular why 20? I guess 300 is around 1 year if it corresponds to the trading days)

The big sustained drops occurred below those thresholds. You can check the charts for yourself. Check them out starting with the dotcom burst and work your way forward. What's more important is that you have a measure to buy back in.

[steve321]

I was heavily invested in preferred stock a decade ago as well as MO. I did okay. But yeah, I should have been in QQQ much longer. I have only been in it for around the past five years.

hi rockstar just wondering how you are reacting to the last 2 days prices movements in QQQ; for my part even though I am a momentum guy by temperament, I am feeling quite happy that I have a lot of investments in other assets since I fear the US market may be in a bubble that might be bursting soonish. So since you

have been diving head first into QQQ

what are you doing now? Are you buying the dip? Are you thinking of bailing out? If so, are looking at things like moving averages or will you act based on your individual judgement?

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

How did you determine those values? 300 and 20? (in particular why 20? I guess 300 is around 1 year if it corresponds to the trading days)

The big sustained drops occurred below those thresholds. You can check the charts for yourself. Check them out starting with the dotcom burst and work your way forward. What's more important is that you have a measure to buy back in.

it doesn't make any sense to me that just because in the last 20 years a trend rule worked, it will work again. Sounds like nothing more than a gamble to me.

[langlands]

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

I don't think it makes much sense to use any form of technical analysis on a derivative product like TQQQ. TQQQ is literally just 3x leveraged QQQ. What I'm saying is that it would be inconsistent to have a trading strategy that ever told you to buy TQQQ but sell QQQ or vice versa. Since QQQ is the simpler underlying product, you should decide all directional bets based on QQQ and use TQQQ simply if you wish to leverage up your bet.

[langlands]

Regarding the Economist, it should be known that most articles are written by journalist types with an undergrad degree from Oxford in English (or who knows maybe even economics). In any case, a PhD in economics would be rare and certainly I wouldn't say they are experts in anything. It's occasionally an interesting read to keep up with current events and views, but these writers are not economic experts by any means, despite the name of the publication.

[rockstar]

hi rockstar just wondering how you are reacting to the last 2 days prices movements in QQQ; for my part even though I am a momentum guy by temperament, I am feeling quite happy that I have a lot of investments in other assets since I fear the US market may be in a bubble that might be bursting soonish. So since you

what are you doing now? Are you buying the dip? Are you thinking of bailing out? If so, are looking at things like moving averages or will you act based on your individual judgement?

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

How did you determine those values? 300 and 20? (in particular why 20? I guess 300 is around 1 year if it corresponds to the trading days)

The big sustained drops occurred below those thresholds. You can check the charts for yourself. Check them out starting with the dotcom burst and work your way forward. What's more important is that you have a measure to buy back in.

it doesn't make any sense to me that just because in the last 20 years a trend rule worked, it will work again. Sounds like nothing more than a gamble to me.

You can say the same thing for anything that has worked in the past. People still think bonds will work even though the yield is near zero. That makes no sense to me, but I don't see everyone going all in on equities.

[steve321]

A 6% drop isn't bad enough for me to bail. I'm planning to buy some more next week.

I use VOO's moving average to drive my sell decisions. I look for it to break through its 300 day moving average. This rarely happens and mostly keeps me invested.

For an investment like TQQQ, I'll sell when it's below its 20 day moving average for a couple of days. I don't want to sell and have it rebound the next day. I look for a sustained drop below the average.

How did you determine those values? 300 and 20? (in particular why 20? I guess 300 is around 1 year if it corresponds to the trading days)

The big sustained drops occurred below those thresholds. You can check the charts for yourself. Check them out starting with the dotcom burst and work your way forward. What's more important is that you have a measure to buy back in.

it doesn't make any sense to me that just because in the last 20 years a trend rule worked, it will work again. Sounds like nothing more than a gamble to me.

You can say the same thing for anything that has worked in the past. People still think bonds will work even though the yield is near zero. That makes no sense to me, but I don't see everyone going all in on equities.

They are very different things. With bonds you know the interest rates when you buy them and it's a question of maths. With trend following it's empirical rules.

[Valuethinker]

Regarding the Economist, it should be known that most articles are written by journalist types with an undergrad degree from Oxford in English (or who knows maybe even economics). In any case, a PhD in economics would be rare and certainly I wouldn't say they are experts in anything. It's occasionally an interesting read to keep up with current events and views, but these writers are not economic experts by any means, despite the name of the publication.

[Political comment removed by Moderator Misenplace.]

They employ some pretty talented people - their economics coverage is, in fact, quite good. It used to be one of the recognised training grounds for SPADs (politically appointed ministerial advisers ie not part of Civil Service) and PPC (Prospective Parliamentary Candidates) - a bit like NM Rothschild (the investment bank, still privately owned).

You do have to watch sometimes that they just repackage a thinktank piece which has a particular axe to grind.

[Political comment removed by Moderator Misenplace.]