Down goes the Dow

Ghost of Igloi wrote:

Swedroe: “ I will be happy to sell you as much stock ETFs that you want at record high stock valuations. In fact load up the truck.”

He didn’t say that. Could you be any more disingenuous?

Ghost of Igloi wrote:

Swedroe: “ I will be happy to sell you as much stock ETFs that you want at record high stock valuations. In fact load up the truck.”

Highly valued is not the same as overvalued.

Ghost of Igloi wrote:

A better measurement:

https://www.hussmanfunds.com/wmc/wmc170904c.png

Thanks for posting that Igy, cool graph. It suggests the long term (~ 10 to 12 years and beyond) look ahead for the S&P 500 is relatively grim. I made a similar chart comparing a modified version of my ratio (comparing S&P index value with its long term trend), which we saw earlier correlates really well with a version of the CAPE that's transformed to correct for long term upward drift over time. Here is what I get:

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The CAPE curve you shared suggests average returns of the S&P 500 over the next 10 years hovering around 0%, plus or minus a few %. My chart suggests something more like 10% gains per year over the next ten years (i.e., value in 2028 being 250% its current value).

Of note, both my chart and the Hussman chart suggest we should see a spike in gains when the 10 or 12 year projections catch up with the 2008 housing crash (note the CAPE in Hussman's chart, and the ratio in my chart, are both turned upside down to follow the projected gains; the crash is shown as an upward blip in 2008), before they start to drift back down again. So, if we want to put any faith in Hussman's chart, we should still be looking at solid gains for another couple of years, and my chart suggests good gains for several more years.

Personally, I don't put much faith in either chart, but they both make for interesting (if only to me) navel gazing...

Swedroe wrote:

Ghost of Igloi wrote:

Swedroe: “ I will be happy to sell you as much stock ETFs that you want at record high stock valuations. In fact load up the truck.”

Highly valued is not the same as overvalued.

He said record high stock valuations.

Can't you read?

John Hussman Tweet from yesterday:

“It's simplistic to advise investors to "sell" - somebody else has to buy. If your horizon is less than 10-12 yrs or couldn't tolerate a ~60% drawdown in the interim, evaluate your risk seriously. If you disagree with my work/evidence/concerns, you're the right investor to go long”

I'd like to rephrase something I wrote earlier... I wrote "Of note, both my chart and the Hussman chart suggest we should see a spike in gains when the 10 or 12 year projections catch up with the 2008 housing crash..."

That was a facile and incorrect statement. It implies that the 10 or 12-year forward gains curve's fluctuations are necessarily affected by something at the end of their horizon, whereas they are a function of the entire 10 or 12 year projection period. The big jump we should expect when the projection curve catches up to 2008 isn't a function of what will happen 10 or 12 years in the future (it could also be...) so much as it is a function of what happens right at the beginning of that period. In other words, the big rebound following the 2008 bottom is what drives the uptick in the 10 or 12-year forward projection.

What's likely to happen over time is a reversion to the mean. In Shiller's CAPE, that necessarily means a big downturn ahead and many years of marginal or negative returns. In my model (which anyone with a brain will give little or no weight), the market (US, S&P 500) is hovering right around its long term mean trend, so the way ahead seems as likely to be more up as more down, all things being equal.

Idiot,

Recently Warren Buffett said he would rather be invested over the next thirty years in the S&P 500 than the 30 Year Treasury Bond. I would agree with that statement. I would also agree with Hussman that an Investment in the S&P 500 today is likely to be flat 10-12 years from now and an investment in 10 Year Treasury over the same period to be the coupon. It is all a matter of the price you are willing to pay and your time horizon.

Igy

Like Warren Buffett (not exactly like, but heading in the same direction, in the absence of a time machine...), my time horizon is shorter than 30 years... :-) I don't have that much invested in the US market (roughly 20-25% of my portfolio). The reason I've spent so much time and effort looking at S&P 500 data is the easier availability of a long time series.

BTW, here are a couple of bonus plots, showing daily percent price fluctuations on the same time scale as the index, in both natural and log scale. You can look closely and see when the big wild daily swings have occurred:

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http://i64.tinypic.com/3163rrr.jpg[/IMG

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http://i66.tinypic.com/ogfn74.jpg[/IMG

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Canne reed wrote:

Swedroe wrote:

Highly valued is not the same as overvalued.

He said record high stock valuations.

Can't you read?

I would suggest that equities at record highs are highly valued.

Idiot,

John Hussman Tweet from 4/15:

“It's simplistic to advise investors to "sell" - somebody else has to buy. If your horizon is less than 10-12 yrs or couldn't tolerate a ~60% drawdown in the interim, evaluate your risk seriously. If you disagree with my work/evidence/concerns, you're the right investor to go long”

Ghost of Igloi wrote:

Idiot,

Recently Warren Buffett said he would rather be invested over the next thirty years in the S&P 500 than the 30 Year Treasury Bond. I would agree with that statement. I would also agree with Hussman that an Investment in the S&P 500 today is likely to be flat 10-12 years from now and an investment in 10 Year Treasury over the same period to be the coupon. It is all a matter of the price you are willing to pay and your time horizon.

Igy

Yeah...sure, easy for him to say that - he's a BILLIONAIRE and part of "The Bilderbergs" of the global elite. Like he really he cares to give investment advice to us lower-middle class peasants (i.e., "useless eaters"). You have a few things to learn about the global elite and their control of the World's money.

The real message from Warren is, sure buy today, you’ll be fine in thirty years.

http://blog.knowledgeleaderscapital.com/?p=14147

That chart is basically just the S&P 500 since 2000. What significance are we supposed to take from that?

25000! Up like the markets!

Ghost of Igloi wrote:

The real message from Warren is, sure buy today, you’ll be fine in thirty years.

http://blog.knowledgeleaderscapital.com/?p=14147

What's the matter with you Ghost? I see a chart that shows a big crash that occurred in 08 that should have been far worse if it wasn't for the Fed Reserve creating TRILLIONS of $$$ out of thin air to save Armageddon from occurring (i.e. the proverbial "kick the can down the street"). ☝️So, now we have a debt bubble of unprecedented proportions ready to blow and this time the Fed Reserve may not have any more tricks up their sleeves to save the day. ?

The Fed cannot create money.

Ghost of Igloi wrote:

The real message from Warren is, sure buy today, you’ll be fine in thirty years.

Can we see the quote of him saying that?

He did suggest the buy today approach back in March of 2015, and I think most of the people who followed his direction are fine 3 years later. Not sure how they'll be 30 years from now, but neither does anyone else.

"If I were going to own a 30-year government bond or own equities for 30 years, I think equities will considerably outperform that 30-year bond."

I guess I was wrong. Somebody does know the future. What was I thinking?