Current Market rally

joyanni · Post by **joyanni** » Thu Dec 08, 2016 8:28 am

How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

FrugalInvestor · Post by **FrugalInvestor** » Thu Dec 08, 2016 8:31 am

I cannot know and neither can anyone else. I could guess, but it would only be a guess, and if I acted on it it would be a gamble. I don't gamble, especially with money that my future depends on.

Tamalak · Post by **Tamalak** » Thu Dec 08, 2016 8:32 am

In the long term, I believe it has unlimited staying power.

Jack FFR1846 · Post by **Jack FFR1846** » Thu Dec 08, 2016 8:36 am

What's the approximate date of your retirement? Ok......on that date, do you think the market will be lower or higher than today? That's the only question you need to answer. The rest is a "who cares?".

imabeliever · Post by **imabeliever** » Thu Dec 08, 2016 8:42 am

i have no idea and neither do you or anyone else

of course that's the expected answer here on BH right?

that said, i have taken this run up as an opportunity to slightly rebalance by a couple %, essentially claiming some profit and dumping it into other areas.

but i tend to agree with those who are suggesting, perhaps, there's a lot of hot air with little substance to this run up. have to ask yourself "what has changed in the economy to support this" and so far, i haven't seen a single substantiated reason. which there doesn't have to be of course, but as humans we sure like being able to answer "why".

livesoft · Post by **livesoft** » Thu Dec 08, 2016 8:46 am

As the previous posters all intimated. no one knows and no one should care.

If one has a plan, an asset allocation plan, then if one hits a rebalancing trigger point set in that plan, then one should rebalance.

Full disclosure: I hit a rebalancing trigger point and have rebalanced.

sometimesinvestor · Post by **sometimesinvestor** » Thu Dec 08, 2016 8:58 am

At current levels I don't particularly want to buy stocks or bonds.I do not think its obvious to get out of the market at this time and I don't actually think it was clear to do so in 2007 but sometimes (spring of 2000) it is and in that sense I disagree with Jack as the amount I have on the day of retirement is important. I think it was correct to sell bonds 5 months ago(on a non results basis) but at that time the stock market was not clearly the place to be.. My next purchase will be be a move from cash (paying little) to a floating rate fund though I may sell some stocks ina taxable account early next year.. Oh well, time will tell.

lazydavid · Post by **lazydavid** » Thu Dec 08, 2016 9:39 am

livesoft wrote:As the previous posters all intimated. no one knows and no one should care.

If one has a plan, an asset allocation plan, then if one hits a rebalancing trigger point set in that plan, then one should rebalance.

Full disclosure: I hit a rebalancing trigger point and have rebalanced.

I don't know how I haven't hit a rebalancing point with stocks skyrocketing and bonds tanking (to the degree that bonds "tank") in the past month. But I haven't. The greatest drift is on US stock, which at 49.34%, is just a third of a point higher than the target. International (target 21%) and bond (target 30%) allocations each account for about half of that.

livesoft · Post by **livesoft** » Thu Dec 08, 2016 9:41 am

lazydavid wrote:
livesoft wrote:As the previous posters all intimated. no one knows and no one should care.

If one has a plan, an asset allocation plan, then if one hits a rebalancing trigger point set in that plan, then one should rebalance.

Full disclosure: I hit a rebalancing trigger point and have rebalanced.
I don't know how I haven't hit a rebalancing point with stocks skyrocketing and bonds tanking (to the degree that bonds "tank") in the past month. But I haven't.

My rebalancing bands are probably tighter than yours. Also, I rebalanced out of bonds into equities about a month ago when equities dropped about 4% before the election. There is a chart showing this: viewtopic.php?p=3116772#p3116772

So now yesterday's rebalancing was going the other way.

Svensk Anga · Post by **Svensk Anga** » Thu Dec 08, 2016 9:46 am

imabeliever wrote: have to ask yourself "what has changed in the economy to support this" and so far, i haven't seen a single substantiated reason. which there doesn't have to be of course, but as humans we sure like being able to answer "why".

There was a story on Yahoo finance yesterday about what Cisco would do with extra cash if there were a tax holiday to bring foreign-held cash belonging to US corporations back to the US. The answer was more dividends, more mergers and acquisitions, and more stock buybacks, all of which would support higher stock prices. There has also been speculation that the next Congress and administration may undertake corporate tax reform, which would boost after-tax profits. Also, there is a wealth effect where when people see their stocks going up (or their house value going up) they feel that they can spend more money. This propagates throughout the economy. The rally is suggesting that all of this has become more likely since the election. It probably has some room to run if these things come to pass, but also has some risk of reversal if they do not, or if the reality is not to the extent that market participants are expecting.

There is also the risk of a trade war arising from protectionism crimping economic activity. The market is constantly repricing the risk of this possibility. It looked likely to the futures market election night. If the new administration tones down its stance, it could boost stocks. Or maybe the opposite happens.

To get ahead of the market, you have to have a better forecast of these possibilities than is currently baked in. Good luck with that.

Index Fan · Post by **Index Fan** » Thu Dec 08, 2016 9:50 am

Nobody knows nothin'.

krannerd · Post by **krannerd** » Thu Dec 08, 2016 9:50 am

sometimesinvestor wrote:At current levels I don't particularly want to buy stocks or bonds.

I've been worried about both stocks and bonds being overvalued for years now...everything is always too expensive and doomed to drop in value soon. Luckily, I continued to plow along with automatic investments according to my asset allocation plan and have reaped the rewards.

To the OP, I don't know where this is going but have everything allocated about as well as I can with a healthy EF. Wake me up when something happens.

nedsaid · Post by **nedsaid** » Thu Dec 08, 2016 9:51 am

I was surprised when Dow Futures were down over 800 points the night of the election but then the real market was up the day after when the results were actually known. My attitude is that pretty much anything the market decides to do is a surprise to me. I have my opinions but I have given up trying to figure this stuff out. Just enjoy the ride.

simplesimon · Post by **simplesimon** » Thu Dec 08, 2016 9:52 am

As an accumulator, this is a little annoying.

My parents are probably doing a little dance.

Prudence · Post by **Prudence** » Thu Dec 08, 2016 9:57 am

joyanni wrote:How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

There does seem to be eurphoria in equities so it would be a great time for market timers to take profits.

orca91 · Post by **orca91** » Thu Dec 08, 2016 10:23 am

joyanni wrote: Any thoughts ?

Nope.

Might go up, down, or sideways... stay the course.

orca91 · Post by **orca91** » Thu Dec 08, 2016 10:26 am

lazydavid wrote:I don't know how I haven't hit a rebalancing point with stocks skyrocketing and bonds tanking (to the degree that bonds "tank") in the past month. But I haven't. The greatest drift is on US stock, which at 49.34%, is just a third of a point higher than the target. International (target 21%) and bond (target 30%) allocations each account for about half of that.

I would bet most folks have not hit a rebalance point all year.

I'm a simple 60/40 type and it's barely nudged from there... I don't think it went 2% either way that I've seen.

Some call market timing, rebalancing.

I would also say, your terms skyrocketing and tanking may exaggerate the market moves of 2016 just a bit.

goingup · Post by **goingup** » Thu Dec 08, 2016 10:56 am

krannerd wrote:
sometimesinvestor wrote:At current levels I don't particularly want to buy stocks or bonds.
I've been worried about both stocks and bonds being overvalued for years now...everything is always too expensive and doomed to drop in value soon. Luckily, I continued to plow along with automatic investments according to my asset allocation plan and have reaped the rewards.

To the OP, I don't know where this is going but have everything allocated about as well as I can with a healthy EF. Wake me up when something happens.

I'm with krannerd on the power of automatic investing. Auto-exchanges monthly/quarterly in taxable accounts and bi-weekly in 401K has been key to wealth-building. Otherwise I would dither. As Jack B says, "Invest we must".

midareff · Post by **midareff** » Thu Dec 08, 2016 11:19 am

It's a market and it goes up and down... that's what markets do. Rebalance bands and rebalancing is how you keep your AA and risk at appropriate levels for you.

avalpert · Post by **avalpert** » Thu Dec 08, 2016 1:05 pm

nedsaid wrote:I was surprised when Dow Futures were down over 800 points the night of the election but then the real market was up the day after when the results were actually known. My attitude is that pretty much anything the market decides to do is a surprise to me. I have my opinions but I have given up trying to figure this stuff out. Just enjoy the ride.

My belief at the time was the the Futures weren't reacting to Trump winning per se but to the fear that there would not be an orderly outcome that night (there was a non-trivial chance of an actual electoral tie and the prospect of something like 2000's drawn out contest). By the time the markets opened in the morning fear of those outcomes was pretty much quashed.

nedsaid · Post by **nedsaid** » Thu Dec 08, 2016 1:12 pm

avalpert wrote:
nedsaid wrote:I was surprised when Dow Futures were down over 800 points the night of the election but then the real market was up the day after when the results were actually known. My attitude is that pretty much anything the market decides to do is a surprise to me. I have my opinions but I have given up trying to figure this stuff out. Just enjoy the ride.
My belief at the time was the the Futures weren't reacting to Trump winning per se but to the fear that there would not be an orderly outcome that night (there was a non-trivial chance of an actual electoral tie and the prospect of something like 2000's drawn out contest). By the time the markets opened in the morning fear of those outcomes was pretty much quashed.

That is a very plausible explanation. I had also heard that the market favored one candidate over the other and the favored candidate was losing. But by the time the market actually opened, the markets decided the news wasn't so bad after all. Hard to say what exactly happened. Markets are not always logical and rational. Sometimes it is just pure emotion.

tennisplyr · Post by **tennisplyr** » Thu Dec 08, 2016 1:16 pm

I can guarantee two things, the market will go up and the market will go down....just don't know when.

squirm · Post by **squirm** » Thu Dec 08, 2016 1:50 pm

Anyone's guess but I hear more market talk at work that's bearish. All bull markets come to an end.

surfstar · Post by **surfstar** » Thu Dec 08, 2016 2:00 pm

https://www.morningstar.com/news/Market ... d-red.html

In a nutshell: Investors shouldn't flee stocks simply because the Shiller PE is above average. They shouldn't flee stocks even when the Shiller PE is way above average. But history has said they should flee stocks when the Shiller PE is at extreme levels -- like now.

Only when the CAPE is "higher than 27.6", they conclude, has the stock market proven to be a really bad investment.

And, like I said, it just hit 27.9.

The ONLY reason I care about the current market highs, is that I have cash that WAS invested, taken out for a home purchase, and I want to re-invest the extra. During our home purchase, the stock market has jumped 5%+. Not too happy about buying back in right now!

munemaker · Post by **munemaker** » Thu Dec 08, 2016 2:10 pm

joyanni wrote:How much staying power do you think this rally has ? ... Any thoughts ?

It doesn't matter. Just follow your investment policy statement and ignore the noise. Don't try to time the market.

Saphomd · Post by **Saphomd** » Thu Dec 08, 2016 2:23 pm

All I know is: What goes up, will go down. (Who knows when). What goes down, will go up. (Who knows when).
If you are a long term investor, do nothing.

bligh · Post by **bligh** » Thu Dec 08, 2016 2:42 pm

In a nutshell: Investors shouldn't flee stocks simply because the Shiller PE is above average. They shouldn't flee stocks even when the Shiller PE is way above average. But history has said they should flee stocks when the Shiller PE is at extreme levels -- like now.

Only when the CAPE is "higher than 27.6", they conclude, has the stock market proven to be a really bad investment.

And, like I said, it just hit 27.9.

Just another alarmist article that is intentionally worded to cause it to be shared widely and elicit clicks and page views. The oldest indicator isn't necessarily the best, also the end of the article contradicts itself with the usual caveats.

It calls out 1996 when the CAPE hit 28. If you bought SPY in 1996 it was about $75. The ETF never returned to that price except for a brief period in 2009 the darkest depths of the 2008 crash. If you were buying SPY then you were getting a ridiculous bargain.. which means if you were buying in 1996 you were also getting a ridiculous bargain. Now throw in your dividend yield over that entire time period and the rebalancing opportunities.

I worry about the valuations as much as the next guy, but looking at these indicators to divine a market crash is a losing game.

How about a contrarian indicator? When you see articles like this, it means there is a lot of cash still on the sidelines. It means the flighty investors who go "SELL SELL SELL" aren't in the market yet. That means the bull market has legs. When you see your mom or Bob next door talking about stock picks and trading options, thats when you start getting worried about a bubble.

The way the market has been tearing it up these last few weeks, I expect that to start pretty soon though haha.

Just stay the course man. If the market crashes, and you are in the accumulation phase.. buy like its a black Friday sale. If you are retired, your stock bond ratio should let you sleep well at night and you can look at it as a great rebalancing opportunity.

If there really is the kind of event that our economies never recover from.. your portfolio will be the least of your worries anyway.

HomerJ · Post by **HomerJ** » Thu Dec 08, 2016 2:45 pm

livesoft wrote:As the previous posters all intimated. no one knows and no one should care.

If one has a plan, an asset allocation plan, then if one hits a rebalancing trigger point set in that plan, then one should rebalance.

Full disclosure: I hit a rebalancing trigger point and have rebalanced.

Same here. No one knows, but I did actually hit a rebalance trigger point, and I rebalanced as well.

leonard · Post by **leonard** » Thu Dec 08, 2016 2:48 pm

Until a "reason" code is incorporated in to the millions of stock trades that happen in a day - we won't know the reasons for the current moves in the stock market - let alone future moves.

HomerJ · Post by **HomerJ** » Thu Dec 08, 2016 2:54 pm

bligh wrote:
In a nutshell: Investors shouldn't flee stocks simply because the Shiller PE is above average. They shouldn't flee stocks even when the Shiller PE is way above average. But history has said they should flee stocks when the Shiller PE is at extreme levels -- like now.

Only when the CAPE is "higher than 27.6", they conclude, has the stock market proven to be a really bad investment.

And, like I said, it just hit 27.9.
Just another alarmist article that is intentionally worded to cause it to be shared widely and elicit clicks and page views. The oldest indicator isn't necessarily the best, also the end of the article contradicts itself with the usual caveats.

It calls out 1996 when the CAPE hit 28. If you bought SPY in 1996 it was about $75. The ETF never returned to that price except for a brief period in 2009 the darkest depths of the 2008 crash. If you were buying SPY then you were getting a ridiculous bargain.. which means if you were buying in 1996 you were also getting a ridiculous bargain. Now throw in your dividend yield over that entire time period and the rebalancing opportunities.

This. In 1996, CAPE was ridiculously overvalued. Even more than today, because back then, it was first time it had hit that level since the Great Depression. Today, we've bounced around above 20 and 25 CAPE for years, decades even. But in 1996, it was scary scary high.

And yet, 1996 was the cheapest time to buy stocks in the last 20 years. It was a good time to buy even at a CAPE of 28. Money invested in 1996 has returned 8% a year nominal.

Just ignore anyone who says they can predict the future, especially if they cite one variable. Nobody knows enough to predict anything about the stock market.

Just stay the course man. If the market crashes, and you are in the accumulation phase.. buy like its a black Friday sale. If you are retired, your stock bond ratio should let you sleep well at night and you can look at it as a great rebalancing opportunity.

Words of wisdom!

midareff · Post by **midareff** » Thu Dec 08, 2016 3:01 pm

joyanni wrote:How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

How much wood could a wood chuck if a wood chuck could chuck wood?

A wood chuck would chuck as much wood as a wood chuck could chuck if a wood chuck could chuck wood.

lostdog · Post by **lostdog** » Thu Dec 08, 2016 3:03 pm

Don't look at the news or the indexes. Rebalance according to your plan and get on with your day. Don't even peak.

Taylor Larimore · Post by **Taylor Larimore** » Thu Dec 08, 2016 3:17 pm

joyanni wrote:How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

joyanni:

Listen to our mentor, Jack Bogle:

Stay the Course. No matter what happens, stick to your program. I've said "Stay the course" a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you. -- From "Common Sense on Mutual Funds"

Best wishes.
Taylor

Nicolas · Post by **Nicolas** » Thu Dec 08, 2016 5:57 pm

HomerJ wrote:
bligh wrote:
In a nutshell: Investors shouldn't flee stocks simply because the Shiller PE is above average. They shouldn't flee stocks even when the Shiller PE is way above average. But history has said they should flee stocks when the Shiller PE is at extreme levels -- like now.

Only when the CAPE is "higher than 27.6", they conclude, has the stock market proven to be a really bad investment.

And, like I said, it just hit 27.9.
Just another alarmist article that is intentionally worded to cause it to be shared widely and elicit clicks and page views. The oldest indicator isn't necessarily the best, also the end of the article contradicts itself with the usual caveats.

It calls out 1996 when the CAPE hit 28. If you bought SPY in 1996 it was about $75. The ETF never returned to that price except for a brief period in 2009 the darkest depths of the 2008 crash. If you were buying SPY then you were getting a ridiculous bargain.. which means if you were buying in 1996 you were also getting a ridiculous bargain. Now throw in your dividend yield over that entire time period and the rebalancing opportunities.
This. In 1996, CAPE was ridiculously overvalued. Even more than today, because back then, it was first time it had hit that level since the Great Depression. Today, we've bounced around above 20 and 25 CAPE for years, decades even. But in 1996, it was scary scary high.

And yet, 1996 was the cheapest time to buy stocks in the last 20 years. It was a good time to buy even at a CAPE of 28. Money invested in 1996 has returned 8% a year nominal.

Just ignore anyone who says they can predict the future, especially if they cite one variable. Nobody knows enough to predict anything about the stock market.

Just stay the course man. If the market crashes, and you are in the accumulation phase.. buy like its a black Friday sale. If you are retired, your stock bond ratio should let you sleep well at night and you can look at it as a great rebalancing opportunity.
Words of wisdom!

I get it: CAPE is bunk.

Svensk Anga · Post by **Svensk Anga** » Thu Dec 08, 2016 5:57 pm

squirm wrote:Anyone's guess but I hear more market talk at work that's bearish.

But that's a contrarian indicator! There must be more room for the bull to run. It's when everyone is bragging about their super stock picks that you need to run for cover.

Grogs · Post by **Grogs** » Thu Dec 08, 2016 6:37 pm

nedsaid wrote:
avalpert wrote:
nedsaid wrote:I was surprised when Dow Futures were down over 800 points the night of the election but then the real market was up the day after when the results were actually known. My attitude is that pretty much anything the market decides to do is a surprise to me. I have my opinions but I have given up trying to figure this stuff out. Just enjoy the ride.
My belief at the time was the the Futures weren't reacting to Trump winning per se but to the fear that there would not be an orderly outcome that night (there was a non-trivial chance of an actual electoral tie and the prospect of something like 2000's drawn out contest). By the time the markets opened in the morning fear of those outcomes was pretty much quashed.
That is a very plausible explanation. I had also heard that the market favored one candidate over the other and the favored candidate was losing. But by the time the market actually opened, the markets decided the news wasn't so bad after all. Hard to say what exactly happened. Markets are not always logical and rational. Sometimes it is just pure emotion.

Yeah, the day after the election, I wrote something in my daily journal about how it would probably be a huge down day and pondered whether I should consider moving my monthly contribution in taxable forward to take advantage of it. I was pretty surprised when the markets took off. Just one more reminder that I can't predict the direction of the markets, and shouldn't even try.

As for rebalancing, my equity portion is up to 80.9% from a target of 80%, so not worth rebalancing yet. My IPS calls for me to reduce stocks to 78% in January, so if the markets are still up I'll rebalance then. If they drop, I may not need to do anything.

squirm · Post by **squirm** » Thu Dec 08, 2016 7:04 pm

Svensk Anga wrote:
squirm wrote:Anyone's guess but I hear more market talk at work that's bearish.
But that's a contrarian indicator! There must be more room for the bull to run. It's when everyone is bragging about their super stock picks that you need to run for cover.

It's starting to remind me of the year 2k bubble. We'll know for sure if cnbc has a big special for Dow 20k.

itstoomuch · Post by **itstoomuch** » Thu Dec 08, 2016 7:29 pm

joyanni wrote:How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

Few of my IPS rules:
-Warren Buffett: "Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1."
-Jean Rasczak: "This is for all you new people. I have only one rule. Everybody fights, no one quits. If you don't do your job, I'll kill you myself! Welcome to the Roughnecks!" [StarShip Troopers, movie adaptation of Robert Heinlein's book of same]
-unknown: "Don't greedy with the cookies."
-unknown: "Buy low. Sell High"

Your, Investment-Position/Policy-Statement, MV

TomCat96 · Post by **TomCat96** » Thu Dec 08, 2016 7:39 pm

joyanni wrote:How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

I'll respond since I figure you wanted an analysis on the situation even though the line is "stay the course"
I think the market will rally until 1/2.
After new years, and into february the market I believe has a high chance of dropping. No not a crash. Dropping by 5-10%

Why?

Look at Jan-Feb of 1981, 1992, 2001, 2009. Those are all the years the president elect came into power and parties changed.
So in a sense, the market faced similar pressures and similar uncertainty during those times.
Every single one of them shows a large correction sometime between Jan and Feb.

Now the caveats.

1. past performance is no guarantee of future performance
2. going in and out of the market creates bad habits.
3. staying the course is a philosophy so difficult to beat, you'll almost certainly end up losing money. It's easy to screw up and hard to profit.

Toons · Post by **Toons** » Thu Dec 08, 2016 7:45 pm

Has the market been going up ??
I've been on the road and outta touch.
The Dow was at 887 when I started.
I've never known it not to go up or down.

squirm · Post by **squirm** » Thu Dec 08, 2016 7:53 pm

The ol' market saying is the higher it climbs the harder it falls.

itstoomuch · Post by **itstoomuch** » Thu Dec 08, 2016 8:58 pm

Toons wrote:Has the market been going up ??
I've been on the road and outta touch.
The Dow was at 887 when I started.
I've never known it not to go up or down.

But without the Wifi or 4G, kinda out to lunch.
I have neither grim or frown.
Until I retire, it's all in the Cart.

badbreath · Post by **badbreath** » Thu Dec 08, 2016 10:49 pm

I agree it will go up and down and do not know but do I here it from my coworkers when it goes down. One thing I think is it gives other investors a confidence that it can get as high as it is and maybe higher so why not invest now to get it higher.
The old buy high and sell low

sperry8 · Post by **sperry8** » Fri Dec 09, 2016 1:37 am

joyanni wrote:How much staying power do you think this rally has ? It seems somewhat of an irrational exuberance with the Dow going down 800 points on election evening (premarket ) to more than a 1000 points up now. I think once the new administration is in power, reality will set in and it will fall again, but would like to be surprised . Any thoughts ?

sometimesinvestor wrote:At current levels I don't particularly want to buy stocks or bonds.I do not think its obvious to get out of the market at this time and I don't actually think it was clear to do so in 2007 but sometimes (spring of 2000) it is and in that sense I disagree with Jack as the amount I have on the day of retirement is important. I think it was correct to sell bonds 5 months ago(on a non results basis) but at that time the stock market was not clearly the place to be.. My next purchase will be be a move from cash (paying little) to a floating rate fund though I may sell some stocks ina taxable account early next year.. Oh well, time will tell.

Every time the market makes new highs people think it must come down. But that is a fallacy, unless you need the money in the short-term in which case it shouldn't have been in the market anyway.

Here is a great article by MarketMinder from 2013 but surely applicable to today http://www.marketminder.com/a/fisher-in ... 5c231.aspx

You can see some graphs below... look at all the new highs! That is what happens during a bull market. A new high, then another, then another!

Look at this graph of new highs through the 90's. There were... wait for it... 347 new highs made. 347! I'll bet somewhere along the way people were saying, we just hit a new high, it has to come down. No, over the long term stocks go up. Not down.

Don't like the 90's as an example? The article shows a more recent one: 2012/13

That one had 68 new highs. I'm sure if we dig back into Bogleheads you'll see posts just like this one... saying it's time to get out. But was it? No. Because once again we are at new highs and it's 2016. You think you know how to time the next high? Will it be 347 straight? 68? It cannot be done. You cannot time the top and you certainly cannot time getting back in again once you get out.

So if you're a market timer, sure go play the timing game and repost and let us know how it works out. But if you're an investor, timing is a losers game. You will not win. Stay invested and enjoy the next new high. I don't know when it will come, but come it will. And I will be in the market to see it.

rgs92 · Post by **rgs92** » Fri Dec 09, 2016 2:36 am

Personally, I'm always happy with 50/50 (stocks/fixed-income) pretty much all the time.
That way, I'm always half right, so I sleep well.

I usually keep the fixed income portion half in bonds, half in stable-value (or some short-term equivalent).
That way, if stocks and bonds are both tanking, there is at least some sort of ballast if I have some unforeseen major expense.

A bit of the stock allocation is international, just for intrigue.

As a real-world example, in 2008-2009, my whole portfolio ended up down about 20% at the lowest point, which didn't bother me much. In fact, I was pretty proud of how I had done. Now I'm up 33% from the 2007 peak, so this seems to be working nicely and I recommend it to anyone who is nervous and subject to rash decisions.

So if, say, the market goes down 30% here (a pretty big collapse) and bonds stay stable (or near it), you will be down about 15%. Not a big deal for any serious investor as a worst case. Just relax. Maybe watch some John Bogle videos on youtube. He's a very calming influence.

msk · Post by **msk** » Fri Dec 09, 2016 5:53 am

The old me: I would at this juncture have sold one-year covered Calls on SPY. With a good bit of luck, SPY is likely to drop sometime over the next year and I get to buy back my Calls at a lower price, thus making a profit. The new me: I decided recently to become a totally passive investor; move entirely to Index ETFs (100% stocks since I live off my pension) and even changed brokers. Oh, oh...! Not familiar with my new brokers trading screen, I racked up $400+k of margin loan before I realised it! Quandary: do I sell the excess ETFs immediately and lock in a small loss (commissions and bid/offer spread), or make use of the low margin interest rate and stay holding the ETF since its dividend stream is larger than the interest I pay? Unusual AA with bonds negative and stocks >100%. I held on, but submitted a Limit Sell order on the excess. Market has been nice, sold out the margin loan yesterday with a $10k profit. Absolutely pure luck. Now I can be a determined passive investor, finally

Toons · Post by **Toons** » Fri Dec 09, 2016 8:10 am

itstoomuch wrote:
Toons wrote:Has the market been going up ??
I've been on the road and outta touch.
The Dow was at 887 when I started.
I've never known it not to go up or down.

But without the Wifi or 4G, kinda out to lunch.
I have neither grim or frown.
Until I retire, it's all in the Cart.

Da5id · Post by **Da5id** » Fri Dec 09, 2016 8:25 am

sperry8 wrote: Every time the market makes new highs people think it must come down. But that is a fallacy, unless you need the money in the short-term in which case it shouldn't have been in the market anyway.

While I'm mostly on board with this (and not changing allocation in current market), it isn't a law of nature. Nikkei index still hasn't had a high since Dec 29, 1989. And has had a negative return, even with dividends reinvested, since that date. Reason enough to diversify IMHO.

ljb1234 · Post by **ljb1234** » Fri Dec 09, 2016 8:56 am

krannerd wrote:
sometimesinvestor wrote:At current levels I don't particularly want to buy stocks or bonds.
I've been worried about both stocks and bonds being overvalued for years now...everything is always too expensive and doomed to drop in value soon. Luckily, I continued to plow along with automatic investments according to my asset allocation plan and have reaped the rewards.

To the OP, I don't know where this is going but have everything allocated about as well as I can with a healthy EF. Wake me up when something happens.

+1

I agree that both stock and bond valuations seem overvalued (result of monetary easing for both?).
In fact bond prices make me a little more nervous than stock prices now. Moved some of fixed income sleeve to CD ladder to compensate for interest rate risk, but not changed overall allocation. I am very close to retirement. Right move? I don't know. I have no idea, obviously. No one does.

If you have a plan, stay with it, otherwise get one?

regards,
ljb

sperry8 · Post by **sperry8** » Fri Dec 09, 2016 12:19 pm

Da5id wrote:
sperry8 wrote: Every time the market makes new highs people think it must come down. But that is a fallacy, unless you need the money in the short-term in which case it shouldn't have been in the market anyway.
While I'm mostly on board with this (and not changing allocation in current market), it isn't a law of nature. Nikkei index still hasn't had a high since Dec 29, 1989. And has had a negative return, even with dividends reinvested, since that date. Reason enough to diversify IMHO.

Yes, I suppose tomorrow could be the start of a Japanese style 27 year L in US Stocks. Who knows? But I think preparing for such a doomsday scenario is quite unhelpful. It is terribly unlikely to occur in the US since our corporate structure is quite different as well as many other things (for example the fact that the USD is currently the reserve currency). But hey, stranger things have happened. But to fortify your portfolio against such an outlier results in too low risk being taken and thus way too low future returns. It should not be part of the conversation anymore than placing a nuclear proof bunker under your home with 5 years worth of foodstuffs should.