Down goes the Dow

Maserati wrote:Shovelling people's driveways when I was a kid was my first source of really good income. I made much more on it than on my paper route, and MAN was it a good workout. I used to do it with a friend and we would challenge ourselves to see how fast we could get it done.

To this day I love shoveling snow, but I haven't had to do it yet this year. I also live in a condo, but keep a shovel in the trunk in case the car gets snowed/plowed in somewhere.

mas, I think that's a shared Canadian experience... I shovelled a heckuva lot of snow as a kid, and used to go around the neighbourhood asking people to pay me to do their driveways, and got decent walking around money doing it. To this day, as a middle aged man, I love shovelling snow.

Bad weather at GMO...

http://www.zerohedge.com/news/2017-01-09/iconic-investor-jeremy-granthams-gmo-loses-40-billion-aum-over-two-years

Ghost of Igloi wrote:

Bad weather at GMO...

http://www.zerohedge.com/news/2017-01-09/iconic-investor-jeremy-granthams-gmo-loses-40-billion-aum-over-two-years

Saw that

I really admire Grantham - he knows a heck of a lot, has strong opinions, but acknowledges that the market isn't a computer. That all the human brainpower in the world can't figure out what it will do next.

He's aware of his limitiations, in other words.

I always learn much from his letters.

agip,

Agreed, although I would choose the GMO Asset Allocation fund over most investments at this moment.

Igy

Yes, such a pitifull creature that Igy. Jerry sucks in some mango salsa on chips while using one of his many handles, and as usual says nothing.

agip--

http://www.mymoneyblog.com/us-stock-ownership-taxable-accounts.html

http://www.cfr.org/united-states/quarterly-update-foreign-ownership-us-assets/p25685

The soft figures I have seen encompassing 2016 show the foreign ownership trend to be accelerating.

This combined with data I have been shown by a few friends working in the field that the median percentile net worth of individual investors who invest in US equities has continued to rise for some time.

Seeing that the United States as a nation (corporate, public and individual) owes the world $Trillions, it should not be surprising that in balance foreigners hold title to an increasing portion of the paper assets supporting that debt.

Igy

Bloomberg small company confidence index is at highest rating since 2004.

Same store sales had a slow week

job openings at very near all time highs...no one left to hire anymore.

Here's what I am thinking...given the very strong economic numbers and the low interest rates and low inflation...stocks would be flying in a normal time.

but given the political insecurity caused by trump stocks have risen but not a huge amount. And are stalled now as the inauguration starts.

If trump can just keep the worst from happening stocks might be in a good place. But I don't think he can manage it - he's going to make some very very serious mistakes that will cost us all, I think.

And then people will start thinking about president le pen in france and the end of the EU...just amazing to think that at this time of never before seen wealth, it's political instability in the West that is causing the problems.

Usually I would just say 'well the West is rich enough that nothing serious will happen' but the humiliation being felt by Trump and LePen voters is real and will take a toll.

again, the vix is at multi year lows

this is such a wild break - solid economics but unstable politics

I don't think a vix this low makes sense tho

Big Dog Investments wrote:

I propose another DGTD prediction contest: PREDICT THE CORRECTION.

Here are the rules:

1) Give the exact date that the Dow will reach 10% below its high.

2) Your prediction must be made before the Dow has fallen 3% from its high.

Closest to the actual date wins with the winner receiving one genuine "attaboy" as prize.

Will it happen before the end of 2016? After the inauguration? Groundhog Day?

Let's hear what you think.

My apologies to Mellon for missing his earlier prediction. It's not too late for others to join the fun!

Since the goal is to get the closest date, Igy still has some life left, but not much.

Our updated prediction pool:

Igy: January 9, 2017

Big: January 13, 2017

Econ: Feb 8, 2017

agip: March 4, 2017

Maser: June 17, 2017

Mellon: December 31, 2018

Current data (as of 1/9/17):

Dow high...19,999.63

Prediction goal...17,999.66

Cut off number...19,399.64 (make your prediction before Dow reaches this)

"Those who’ve had any brush with addiction know an addict will go to any length to support the habit, including stealing, lies and deception. The addict is aided and abetted by co-dependent friends and family members who cover up for the addict’s bizarre behavior and pretend nothing’s wrong. Breaking the addiction starts with the co-dependents recognizing their role and refusing to provide support to the addict.

Investors have been turned into stock market addicts with their addiction aided and abetted by the media, the financial community, analysts, neighbors, friends and the local checkout clerk. Since 1990, when the Internet began to mainstream investing to the average investor, millions have been lured by the promise of the lifestyles of the rich and famous by simply playing “the game.”

Now, after eight years of a bull market, investors are piling into the market for their next fix, living from one headline to the next looking for reassurance “this time is different.”

But why wouldn’t they considering they have been repeatedly told the stock market is a “sure thing”, a near guaranteed way to make money. It’s so easy, after all. You just “buy and hold” stocks and the market will return 10% a year just as it has over the last 100 years.

This fallacy has been repeatedly espoused by pundits, brokers, financial advisors, and the media. Even Dave Ramsey, the famous debt counselor, espouses buying and holding four mutual funds (25% in each of growth, growth & income, aggressive growth and international) and then bingo – you will make 12% per year.

If it were true, then explain why roughly 80% of Americans, according to numerous surveys, have less than one years salary saved up on average? Furthermore, no one who simply bought and held the S&P 500 has ever lost money over a 20-year time span. Right?

Not exactly."

--Lance Roberts, "The Trading Stock Market Addiction"

Yes many know the levels, and some even know the trends.

But that's not the important thing, the important thing is what does it reflect, and what does it mean for the markets in which we are involved. I suggest that it reflects increased risk tolerance which decreases risk premiums, which supports not only current index and P/E levels, but the time period for which they have been historically elevated. I also suggest that the essential dynamic and trend isn't going to stop any time soon.

Everything is relative. AAPL can be measured in USD; USD can be measured in gold; gold can be measured in oil, etc. We all understand that when A is expensive relative to B, it can also be inexpensive relative to C. We look to trade tradeable things in order to sell that which is expensive in terms of that which is cheap, which is what we trade for.

P/E's, index levels, debt/EBITDA, risk may seem high relative to your standards, but not to someone else. Those others are increasingly influential in the markets.

And statman the rise in median percentile net worth might be due to rising markets, in that there has been a long bull market and those in it have profited from it relative to those who have not participated, but there could be other factors as well. What it amounts to is the rich getting richer, and the rich consolidating in the markets and the not-rich leaving the markets. The richer generally have higher risk tolerance, and as market participants get richer, the risk premiums go down.

I would have expected all buy-and-holder's to have jumped on this bandwagon, as it amounts to an endorsement of their strategy.

americans don't have savings because Americans don't save. If they did save, and if they did invest wisely and for the long term, they would be mucho dinero.

I mean i read a study once - give $620 to every US citizen born in the US. Force them to own a target date fund. Can't get it until age 62. Or 59.5 or whatever. Every American would have hundreds of thousands of dollars when they hit 65.

"No matter how resolute people think they are about buying and holding, they usually fall into the same old emotional pattern of buying high and selling low.

Investors are human beings. As such we gravitate towards what feels good and we seek to avoid pain. When things are euphoric in the market, typically at the top of a long bull market, we buy when we should be selling. When things are painful, at the end of bear market, we sell when we should be buying.

In fact, it’s usually the final capitulation of the last remaining “holders” that sets up the end of the bear market and the start of a new bull market. As Sy Harding says in his excellent book “Riding The Bear,” while people may promise themselves at the top of bull markets they’ll behave differently: “No such creature as a ‘buy and hold’ investor ever emerged from the other side of the subsequent bear market.”

Statistics compiled by Ned Davis Research back up Harding’s assertion. Every time the market declines more than 10% (and “real” bear markets don’t even officially begin until the decline is 20%), mutual funds experience net outflows of investor money.

Fear is a stronger emotion than greed.

Most bear markets last for months (the norm), or even years (both the 1929 and 1966 bear markets), and one can see how the torture of losing money week after week, month after month, would wear down even the most determined “buy and hold” investor. This is also why the next true “bear market” will demolish the “RoboAdvisor” industry as “buy and hold” once again reverts to “get me the #&%@ out!”

But the average investor’s pain threshold is a lot lower than that. The research shows that it doesn’t matter if the bear market lasts less than 3 months (like the 1990 bear) or less than 3 days (like the 1987 bear). People will still sell out, usually at the very bottom, and almost always at a loss.

So THAT is how it happens.

And the only way to avoid it – is to avoid owning stocks during bear markets. If you try to ride them out, odds are you’ll fail. And if you believe that we are in a “New Era,” and that bear markets are a thing of the past, your next of kin will have my sympathies."

--Lance Roberts, "The Trading Stock Market Addiction"

And who is on the other end of those transactions? You conveniently ignore that there are two sides. When someone buys high, then someone else is selling high. For every low seller, there must be low buyer.

Patently false.

"Ghost of Igloi wrote"-

Corrections Lance Roberts wrote....but I posted....and agree....

Igy

Then you are a fool.

Reality checker wrote:

Then you are a fool.

“Let us not, in the pride of our superior knowledge, turn with contempt from the follies of our predecessors. The study of errors into which great minds have fallen in the pursuit of truth can never be uninstructive... Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one... Truth, when discovered, comes upon most of us like an intruder, and meets the intruder’s welcome... Nations, like individuals, cannot become desperate gamblers with impunity. Punishment is sure to overtake them sooner or later.”

Charles MacKay, Extraordinary Popular Delusions and The Madness of Crowds, 1841

"When we observe the greatest follies of our predecessors, the episodes of speculative madness that come most immediately to mind are the pre-crash bubble peaks of 1929, 2000, and to a lesser extent, 2007. Unfortunately, we are in the midst of yet another episode of equivalent speculative madness, but one that will only be recognized in hindsight, and in the recollections of our children. They too are likely to take pride in a feeling of superior knowledge, forgetting the same lessons, and eventually creating another bubble and collapse of their own. The herd mentality is human nature. As in 2000-2002 and 2007-2009, when the S&P 500 collapsed by 50% and 55% respectively, we’ll likely see that herd mentality expressed on the downside soon enough. That also is human nature."

John Hussman, Weekly Commentary 1-9-2017

A fool quoting other fools.