Down goes the Dow

I, ROBOT wrote:

You are living in the dead past.

Thank you for your contribution.

AAT wrote:

Dude, do you listen to yourslf wrote:

Stocks don't earn 6-10% annually from these valuations.

Mine do...at least some of them.

Which ones, specifically?

Dude, do you listen to yourslf wrote:

AAT wrote:

Mine do...at least some of them.

Which ones, specifically?

Seems like kind of a pointless line of discussion. Nobody can know which stocks are going to earn 6 - 10% over the next year or few years.

Fair enough. I withdraw the question.

I wish CR were still here, with this sawtooth pattern, he could be making a killing if he is trading.

Me, I'm in a 401k which I believe I can re-balance only every 6 months, or something like that. I don't like the way things are going, but neither do I have the balls to convert it all or half, to CD's, on the bet that in 6 months time I will be able to re-buy everything I now own at 85 cents on the dollar. I have a friend who did just this, his rationale being that the markets will go nowhere in 6 months, it costs him nothing to transfer stuff in his 401k (same as mine), so he's got nothing to lose.

He makes a compelling argument, but I am hesitant. Halfway through the year with not much at all to show for it, though, makes me nervous.

I would be careful whatever you do. The Federal Reserve ended Quantitative Easing (QE) in December since then the market has gone nowhere and interest rates have gone higher. Some believe ending QE has effectively started the rate hike cycle.

Meaning what, as rates ratchet up the markets ratchet down?

Wisher wrote:

Meaning what, as rates ratchet up the markets ratchet down?

well that's not the historical pattern, but that's igloi's bet.

As for valuations, Iggy, this is why I am not overly concerned - if this works, it will show that valuations are only slightly above 25 year averages. A fair response would be 1) this uses forward PE instead of trailing 12 months and 2) 25 years is too short a period.

And those would be correct. But I post this to show that valuations are not at the kind of extremes you see.

i hope this works - I'll try again if it doesn't. new tech for me.

maybe this will work?

well I don't think any of that worked

so here's the data, from JPM

first number 063015, next number 25 year average

forward PE 16.4/15.7

Shiller CAPE 27.2/25.5

Div yield 2.0/2.1

Price to book 2.9/2.9

Price to cash flow 11.7/11.4

agip wrote:

well I don't think any of that worked

so here's the data, from JPM

first number 063015, next number 25 year average

forward PE 16.4/15.7

Shiller CAPE 27.2/25.5

Div yield 2.0/2.1

Price to book 2.9/2.9

Price to cash flow 11.7/11.4

Why don't you think it worked? I can see the image perfectly.

LeT wrote:

agip wrote:

well I don't think any of that worked

so here's the data, from JPM

first number 063015, next number 25 year average

forward PE 16.4/15.7

Shiller CAPE 27.2/25.5

Div yield 2.0/2.1

Price to book 2.9/2.9

Price to cash flow 11.7/11.4

Why don't you think it worked? I can see the image perfectly.

I don't know man - I'm too old to be learning new tricks. The second try seems to have worked, ja

Flagpole wrote:

In the big drop from October 2007 to March 2009, it took me less than 3 years to get back to where I had been

You ARE telling it straight (contrary to what your haters want to claim), but I think you are missing the big picture.

For the SP500, including dividends and inflation, the Compound Aggregate Return between 1/1/2007 and 12/31/2012 was zero. Between 1/1/2007 and 12/31/2008, the CAGR was -20%, and the total loss of capital was 36%. So the opportunity cost of riding the bear market all the way down and all the way back up is that you used up about half of the return of one of the largest bull markets in history just to make up for what you lost in the preceding bear market. By comparison, while you were making zero, Bill Gross gave me a return of 63% for those 6 years in Pimco Total Return for my safe money for the same period.

The CAGR of the SP500 from 1/1/2007 until 12/31/2014 is ~5%. By comparison, this is what Bill Gross produced The objective is not to make debating points; The object is to make money. This is a case study in why buying and holding mutual funds has not worked for many people.

People like agip working in the financial industry find it inconvenient to talk about 15 year returns, but April 2000 is when I retired, and for the people I left, the CAGR since then is 1.9%.

agip wrote:

well I don't think any of that worked

so here's the data, from JPM

first number 063015, next number 25 year average

forward PE 16.4/15.7

Shiller CAPE 27.2/25.5

Div yield 2.0/2.1

Price to book 2.9/2.9

Price to cash flow 11.7/11.4

Fixed it for you.

In regards to median forward P/E: Figures 7 and 8

Also trailing P/E since 1935: Figure 1

la gente está muy loca wrote:

agip wrote:

well I don't think any of that worked

so here's the data, from JPM

first number 063015, next number 25 year average

forward PE 16.4/15.7

Shiller CAPE 27.2/25.5

Div yield 2.0/2.1

Price to book 2.9/2.9

Price to cash flow 11.7/11.4

https://www.jpmorganfunds.com/cm/Satellite?blobcol=urldata&blobkey=id&blobtable=MungoBlobs&blobwhere=1321192285079&ssbinary=true

Fixed it for you.

In regards to median forward P/E: Figures 7 and 8

http://www.yardeni.com/Pub/valucbnew.pdf

Also trailing P/E since 1935: Figure 1

http://www.yardeni.com/Pub/sp500trailpe.pdf

thanks gente

by trailing PE the market looks pretty close to 25 year averages also.

nice yardeni graphs - I'll have to poke through and see if the market looks stretched by any measures.

certainly if you start looking at 80 years, a PE of 18 is very expensive...the question is if that means anything - comparing companies of 1940 to 2015 - certainly common sense would tell you that a 2015 company is better run and potentially far more stable and profitable so maybe the stock SHOULD be valued higher. maybe over the next 80 years an 18 PE will be normal instead of 15.

Ghost of Igloi wrote:

I would be careful whatever you do. The Federal Reserve ended Quantitative Easing (QE) in December since then the market has gone nowhere and interest rates have gone higher. Some believe ending QE has effectively started the rate hike cycle.

I believe QE ended in October. At that time the DOW was well below 17000. Mortgage rates were about the same as they are today.

Fact checker wrote:

Ghost of Igloi wrote:

I would be careful whatever you do. The Federal Reserve ended Quantitative Easing (QE) in December since then the market has gone nowhere and interest rates have gone higher. Some believe ending QE has effectively started the rate hike cycle.

I believe QE ended in October. At that time the DOW was well below 17000. Mortgage rates were about the same as they are today.

It's true Fed Desk ended purchases to increase their balance sheet in Oct., but all principal payments on Agency debt and Agency MBS are used to purchase more Agency MBS to maintain level of assets on balance sheet . Currently $30-$40 billion a month.

coach d: A few quibbles, for one your comparing inflation adjusted returns on SP500 with nominal returns of PTTRX ( 63% would be 43% inflation adjusted) and nominal return on VINIX would be 14.7%.

Also most investors make contributions every year,

change the years to 2000-2014 and the results, not so shabby after all! Totally agree that if one is retiring all stock portfolio is way too risky.

agip, I know your a big fan of Meb Faber, did you know all his books are free ( kindle ) this week on Amazon. UVa won College WS.