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it really isn't frothy when you look at interest rates . it isn't just about p/e's . interest rates are a big factor .
back in 1982 a p/e of 12 with double digit interest rates struck fear in the hearts of investors .
There are fewer assets in public hands. The main driver of the market is the largest buyer is immune to considerations of valuations and economic return.
it really isn't frothy when you look at interest rates . it isn't just about p/e's . interest rates are a big factor .
back in 1982 a p/e of 12 with double digit interest rates struck fear in the hearts of investors .
What if rates rise over the next 2 years?
Although with Yellen leaving I would think Trump hires someone who will give him accommodative monetary policy. Similar to how Yellen did for Obama and Greenspan for Bush.
More discussion from my friends at the Senior Center:
A number of my friends were talking at the local Senior Center where I hang out. A few of them said they sold most or all of their stock market investments last week and have gone to cash. (Money market funds inside their accounts).
Money market funds are not FDIC insured. Count me as one who lost a pile of money during the Great Recession when The Reserve Primary Fund (money market fund) "broke the buck" after Lehman Brothers went belly up.
Your friends might want to look at just how safe (or not safe) MM funds actually are.
Quote:
Originally Posted by want to learn
They are convinced the stock and bond market is too high and they want to get out before the crash. Their plan is to be all cash and wait for the correction or bear market to bottom and then reinvest.
All the academic evidence shows that market timing is a losing strategy. No one can reliably time the market. The market price currently reflects all known information about the future.
Quote:
Originally Posted by want to learn
I asked them how they would know when the bottom was and time to go back in. They said they could tell using technical analysis.
All the academic evidence shows you can't do that. Technical analysis doesn't work. It has never worked.
Quote:
Originally Posted by want to learn
The rest of the gang thought that sounded like a great idea and they are now planning to cash out of the stock market for now too. (And get in again at the bottom.)
That's a strategy that doesn't work. No one can forecast like that. That's called "active management" and with minor exception it just doesn't work. More accurately, if it does work it is due to random chance and not repeatable in the long run.
Quote:
Originally Posted by want to learn
I asked them how did they know the stock market was not going to go up for the next couple of years and they said they had been reading all the articles online about how expensive the market was and they agreed. Their plan was similar to someone cashing out of the stock market in mid 2007, going to cash and then going back in in April 2009 when the stock market bottomed.
No one has a crystal ball. Market timing doesn't work.
I remember my investment advisor telling me a few years ago that if an investor has missed out on the top 10 or 20 days when the market rose the most over past years, you'd have lost out on most of the gains.
I could be a bit off on my number of days, but it was a very small number of days, and made a huge difference in the total return on your stock investments over time.
This is very true.
There was a fascinating paper published quite a while ago showing the difference between:
(a) the reported returns of mutual funds, and
(b) the actual returns investors receive from mutual funds.
There is a sizeable difference, as people tend to go into and out of such funds, and of course they risk not being invested on those top 10 or 20 days. It turns out actual returns received by investors are lower than published returns for precisely that reason.
Stocks can be risky for the older players. I think I would sit this out unless your playing with mad money. You only need one set back to ruin your retirement....
True for most older people. Not true if you have enough assets & income compared to your lifestyle.
There was a fascinating paper published quite a while ago showing the difference between:
(a) the reported returns of mutual funds, and
(b) the actual returns investors receive from mutual funds.
There is a sizeable difference, as people tend to go into and out of such funds, and of course they risk not being invested on those top 10 or 20 days. It turns out actual returns received by investors are lower than published returns for precisely that reason.
Morningstar tracks investor return, which is the cash-weighted return. In other words, it includes all cash flows into and out of a fund. If investors flee a fund that is falling in price the investment return ends up being less than the simple total return of the fund. If all investors who buy into a fund stay with the fund, the investment return is the same as the total return.
Morningstar tracks investor return for some selected funds. The difference is pretty dramatic at times. It shows up more in a falling market.
His statements on the market have generally been supportive of the market since the 2008 crisis as many of his biggest holdings received government bailouts. The estimate was 150 billion dollars were provided to his firms through TARP.
You missed the part that he invested $12 billion recently.
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