Down goes the Dow

Black Tuesday here we come.....

http://www.multpl.com/shiller-pe/

Earnings Scorecard: As of today (with 71% of the companies in the S&P 500 reporting actual results for Q4 2016), 67% of S&P 500 companies have beat the mean EPS estimate and 52% of S&P 500 companies have beat the mean sales estimate.

"According to the most recent Factset Dividend Quarterly (September 22, 2016), 42 of the S&P 500 companies paid out MORE in dividends than they earned over the past twelve months. This is the third highest number in the past 10 years. More shockingly, across the entire S&P 500, companies paid out 123% of the past twelve months earnings in both dividends and share

buybacks combined. How long can that continue?"

Grey Owl Capital Management

Earnie(ings) Fact Check

"In aggregate, companies are reporting earnings that are 3.5% above expectations. This surprise percentage is below the 1-year (+4.4%) average and below the 5-year (+4.2%) average."

Earnie(ings) FactCheck:

"In terms of revenues, 52% of companies have reported actual sales above estimated sales and 48% have reportedactual sales below estimated sales. The percentage of companies reporting sales above estimates is equal to the 1-year average (52%) but below the 5-year average (53%). "

GAAP earnings to be reported when available, likely more in-line with sales rather than the inflated numbers highlighted by Mr. Earnie.

I've been in the market since I was a 21 year old in 2008 and have seen my portfolio (all vanguard index funds) grow to $275,000 as of this week. I'm getting ancy thinking the market cant sustain this...for someone wanting to protect against the impending downtown, what should I look to move my assets too? Real estate? Bonds (short or long term)? CDs? Ride it out long term?

Some good news in these latest posts. Let's see...

Dividend payouts among the highest in years. Earnings beating expectations. A majority are beating sales estimates.

What's the problem again?

I pulled all my money out of the stock market and put it into short term bonds. Long term bonds would be a mistake. When interest rates rise - and they will - long term bond prices will plummet. Cash would be ok. The market is treading on thin ice. There will be a correction sometime in the next year or so. The odds of the economy improving over the next several years to the point that stocks are trading at a more equitable value, and all this happening without a correction, are between slim and none. Stocks never stay over valued for that long. people think they will, but then something disruptive happens, and then it is a race to the bottom. The rich know this and get out early, and that causes a significant drop, which causes further panic among the middle class and novice speculators. One further note: since you are about 29 years old, don't be too concerned with timing the market perfectly. If you pull out you probably will not know when the bottom is hit. Be satisfied with a 20% correction, and then get back in. You have many years to ride out market fluctuations. If you can hot a 20% correction then that, ultimately, is a 25% gain on your money. If you get greedy and try to time the market too much, then ultimately you will lose in the long run. Just my two cents.

- this chart shows pretty clearly that the Spp 500 is not being driven by central bank buying. Central bank balances are falling while the market keeps rising.

It's not QE pushing the market higher

I would point out that short term bonds may be riskier than you think. Iif you think the fed will raise rates. Short term bonds pay nothing - it's all risk and no return. At least intermediate and long term bonds pay a coupon and prices are set by the market.

Incorrect assumption. Central Bank Reserve Balances are not equal to Central Bank Balance Sheets. Here is the correct chart one should be looking at.

http://inflation.us/central-bank-balance-sheets/

Igy

Agip wrote:

I would point out that short term bonds may be riskier than you think. Iif you think the fed will raise rates. Short term bonds pay nothing - it's all risk and no return. At least intermediate and long term bonds pay a coupon and prices are set by the market.

Obvious ignorant statement of the Troll. A 1% rise in interest rates results in an approximate 10% loss in bond principal for a intermedite bond with a ten year term. The ETF TLT (20 Year plus Treasury) has lost about 20% since the low interest rates of July 2016. High quality short term bonds are the correct investment for this environment.

Igy

I was going mention the volatility of long term bonds, but you beat me to it.

Ghost of Igloi wrote:

Agip wrote:

I would point out that short term bonds may be riskier than you think. Iif you think the fed will raise rates. Short term bonds pay nothing - it's all risk and no return. At least intermediate and long term bonds pay a coupon and prices are set by the market.

Obvious ignorant statement of the Troll. A 1% rise in interest rates results in an approximate 10% loss in bond principal for a intermedite bond with a ten year term. The ETF TLT (20 Year plus Treasury) has lost about 20% since the low interest rates of July 2016. High quality short term bonds are the correct investment for this environment.

Igy

Igy ya calling me a troll?

come on man.

anyway, my point stands. Short term bonds pay nothing and are somewhat set by a government panel that has told us they will raise rates. Why own those? You don't get paid and you have been told rates will rise.

Interm and long term bonds MAY lose value, but at least you get paid something to wait, and their value is set by the market, not somewhat by a government panel.

I usually trust the market to set prices rather than a government panel, but feel free.

I'll put a note in my calendar to check back at the end of the year - which makes more money from today - BSV (short term bond index) or BIV (intermediate bond index)

I'm not predicting anything - I just don't see a good reason to own short term bonds. In a mutual fund anyway. Better to get 1% in a risk free savings account.

Ghost of Igloi wrote:

Incorrect assumption. Central Bank Reserve Balances are not equal to Central Bank Balance Sheets. Here is the correct chart one should be looking at.

http://inflation.us/central-bank-balance-sheets/

Igy

I'm not clear on the discrepancy

If you own a 30 year 3% $1000 bond and rates go up one percent, the value of your bond will drop to $882.24. So, you got your $30, but your asset's value dropped almost $120. Rates can't go any lower than they are now. They can only go up. And they will.

this might surprise you all.

Without looking it up, which class of bonds do you think has done better over the last year, as interest rates have risen? A year ago, the 10 yr was yielding 1.75%, now it is yielding 2.4%

An utter disaster for bonds right? And probably a particular disaster for long term bonds, right? You'd guess that the best performer was short term bonds, no?

Wrong

(using NAV)

BIV (intermed) +.61%

BSV (short) +.62%

BLV (long) +2.74%

The value of a coupon is substantial in lessening the losses from rises in interest rates.

Um, rates were raised once by 0.25%. If rates are raised by two percent over two years, you will be one hurtiin' cowboy.

Learn the annuity formulas, and then learn how to find the present value of a bond. Until then this discussion is pointless. .

Ghost of 29 wrote:

Um, rates were raised once by 0.25%. If rates are raised by two percent over two years, you will be one hurtiin' cowboy.

Learn the annuity formulas, and then learn how to find the present value of a bond. Until then this discussion is pointless. .

You don't care that the 10 year rose circa 80 bps and long term bonds still made over 3%? Irrelevant?

If so, why?

And for Pete's sake, if you are worried about the fed raising rates why in the world would you own short term bonds? They will be most affected by the Fed and they don't pay you a real coupon? Help me understand.