Isn't it time to sell?

you have to consider that we are actually in a secular bear market since 2000.
My question to the board is how are those periods defined? when in a secular bear, there will be periods of a few years of rise. when in a secular bull, there will be a few years of fall.

9 secular periods have been defined according to if the market PE net rise or fall during the given period.

Since 2000 when the last bull period ended, a bear period has been defined and we are still in it.

can someone clarify the definition of secular bear and secular bull?

There always will be a regression to the mean but what mean are we talking about? is that 2 or 3 years or 25 years or a few decades?

tj

If you get out of stock now it may save you some money only in one of the 5 scenarios and only if it comes within a short time frame. You will lose in all the other scenarios.</>

The number of possible scenarios is not correlated to the risk of any of those scenarios happening. There could be 2 scenarios with one of them only 5% likely to happen, or 100 of them, but only 1 over 80% likely.

If you want to build a credible case for the first scenario, it needs to be more thorough then just pointing out that the P/E of the S&P is high.

It already has been more thorough - did you miss it?

Buffett addressed the subject in an interview last fall. At the time he felt if interest rates rose dramatically stocks were expensive. If interest rates rose modestly stocks were about fairly priced and if interest rates stayed at near historic lows, stocks were still quite cheap. Sounds about right to me. If you’re going to sell your stocks, where are you going to invest your money for a decent yield?

Don

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If you’re going to sell your stocks, where are you going to invest your money for a decent yield?

Dan,

When investing in stocks, yield is one component of total return. The 2nd is price appreciation. If I am personally expecting the prices to drop significantly (and you don’t need to agree that they will), then obviously, I can hold the cash in a bank account or short term t-bills.

While we are quoting Warren, I’ll throw one of his quotes out there too. “Cash combined with courage in a crisis is priceless”.

While I am not expecting crisis situation (crisis would warrant a 30% correction), I do expect slight correction of 10-20% because I personally believe there was only one period in Stock Market history when (1997-2002 and one quarter in 1961) when stock PEs were higher than today in a rising EPS environment.

Hence I think holding cash with zero % yield (for me) is better than risking an imminent correction.

There was a WSJ article dated 8/15/16 titled “Stock Valuations Flash a Warning” by Steven Russolillo.

His argument is that when stocks are priced as high as they are today (high does not mean all time high for average, but some valuation metric such as P/E or CAPE, then the future 10 year returns have been around 4%.

Look, for most of you, 4% is not shabby over the 10 years. Most of you are not even going to buy SPY. You guys seem to have 100% of equity portfolio in a concentrated portfolio (atleast Saul does).

This is an interesting board. Hence I posted my thoughts. I understand they are not popular. I don’t want 4% over next 10 years. I know that by waiting for an imminent crash (90% chance based on the article and my own study), I think I can wait. I am still not 100% confident, hence I do have 40% invested. If I find any potential opportunity, I can increase that to 50 or 60% even before we get the crash I am hoping for.

Here’s what I wrote to my friends when discussing this article and I will copy paste it here:

"However, and this is the reason to sell - during the next 10 years while the end result wont be shabby (if it is 4% annualized), there will be lots of peaks and valleys. There will come a time between now and 2026 when the valuations will be so depressed, it will feel like the world is coming to an end. (maybe not that bad, but certainly we will get 15-18 trailing PE). Good point on CAPE PE, I didnt think about that. But even leaving aside CAPE PE, trailing PE (using last 12 months earnings) is at historic peak of 23 to 25.7 (depending on who you ask). End result in 10 years with 4% nominal growth, 2% dividend yield, and 2% PE compression per year (which is what the article implies?) could be 19 PE with S&P at approx 2550. Question is, do we really expect this to go up in smooth line, or lots of drama along the way? Isn’t it better to cash out, watch the drama unfold, and pick your spot to get in. It’s not required that re-entry has to be at a bottom. But even if you target a re-entry at 20 trailing PE, it’s going to yield better results than 4% for the next decade. It is market timing, which is difficult game to play as you say, but only when you are somewhere in the middle of the range. At extreme ends, its probably a no-brainer. "

Huddaman

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can someone clarify the definition of secular bear and secular bull?

Secular means it leads to new all time highs. See http://www.advisorperspectives.com/dshort/updates/Secular-Bu… for instance.

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Huddaman is of course correct but no-one has spelled out why the market is at such risk. It is at risk because it is entirely artificial. The activities of all the major central bankers across the world printing money on a scale never seen or even envisaged ever before, and extremely low and in some places negative interest rates have led to high values and great danger. Why? Because when the stimulus ends (as it eventually must when bonds become no longer credible to their purchasers) the party is over. For years, valuation multiples of all assets have dramatically risen. Those values will dramatically fall. The world is awash in debt which can never be repaid. It is a strange feature of the new world that unimaginable amounts of debt which can never be repaid is regarded with a generational insouciance so complete as to be staggering. For the party to go on, someone is going to have to pay for more hooch. I wonder who will have the money. It’s nearly all gone you see. To go on printing it forever, you need credit. And after printing a few more trillions (‘a trillion here, a trillion there and soon you’re talking about real money’) that is what is going to be missing. Credit.

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And after printing a few more trillions (‘a trillion here, a trillion there and soon you’re talking about real money’) that is what is going to be missing. Credit.

But then again what is “money”? There is no underlying scarce resource that is tied to currencies, they are just fiat - a promise from the said issuers of currency (governments) for goods and services.

Sincerely,
Charlie

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can someone clarify the definition of secular bear and secular bull?

tj

If you ever went to a Catholic mass you would have heard “In saecula saeculorum” a number of times

In saecula saeculorum
From Wikipedia, the free encyclopedia

The Latin phrase in saecula saeculorum expresses the idea of eternity and is literally translated as “in a century of centuries.” It is biblical, taken from the Vulgate translation of the New Testament, translating the Greek phrase “e?? t??? a???a? t?? a???” (eis toùs aionas ton ai?non).

The usual English translation is “for ever and ever”, but in Ephesians 3:21, the KJV notably has “world without end”. Neither translation is literal, as the time span invoked is not literally eternity but multiple aiones in Greek, translated as saecula in Latin, and elevated to “aiones of aiones” or “saecula of saecula”. The saeculum in Roman antiquity was the potential maximal human lifespan, or roughly a century, and so another interpretation would be “for a lifetime of lifetimes.” The original meaning of aion was comparable, and it is so used in Homer and Hesiod. The Hebrew word ??? (olam) has a similar range of meanings: a human lifespan; the world; eternity.[1]

https://en.wikipedia.org/wiki/In_saecula_saeculorum

“For a lifetime” (of a bull or bear) is a good description of “from bottom to top” for secular bull markets and “from top to bottom” for secular bear markets.

What we can’t know at this time is if March 2009 was the end of the secular bear and the start of the secular bull. If the market drops below the March 2009 low then we are still in the 2000 secular bear market but if it doesn’t then we are in the 2009 secular bull market.

Investing is about making up your mind without having all the facts at hand and getting it right more often than wrong. :wink:

Denny Schlesinger

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But then again what is “money”? There is no underlying scarce resource that is tied to currencies, they are just fiat - a promise from the said issuers of currency (governments) for goods and services.

Charlie

A lot of people don’t realize that metal money or commodity money which exists in limited amounts does not behave like paper or fiat money which exists in infinite amounts. If the supply of money is infinite then the cost of money, the risk free rate, is ZERO. Fiat money is worthless, it has no intrinsic value. Fiat money is an inscription in a clay tablet or an electronic charge in a computer.

Clay tablets weren’t very practical for traveling merchants so they used metal instead which was more practical on the road but because metal had a value of it’s own, it changed the perception of the nature of money. A promissory note is only as good as the credit of the debtor while gold money has an intrinsic value of its own. Once we got off the gold standard we were right back to Mesopotamian clay tablets in digital form.

Denny Schlesinger

PS: The value of fiat money comes from the fact that it is legal tender and you can use it to pay taxes and extinguish any other debt.

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Huddaman,

If 60% cash is your comfort zone, then by all means.

Don

I wouldn’t call it comfort zone. It’s a strategy.

RGB -if you had been in the military at the time of the Cuban missile crisis today’s external threats to the US would seem minor.

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None of the valuation measures of the general stock market tell you anything except that returns over the next 8 to 10 years are likely to be low. Those low returns are high probability only , not a factual guarantee.
.And those are general market returns ,not the next Amazon.

There will lots of ups and downs during that time. Plenty of opportunities, plenty of risks.

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http://www.retro.ms11.net/InvestorMind.gif

That reminds me a lot of the recent chart of KORS between mid-April and mid-June. Bad news about other retail and handbag problems brought it down about 20%, and its own earnings report brought it back up almost exactly the same amount. Except for a couple of Brexit days, it’s held pretty steady since then.

On ‘what is money?’, the meaning of ‘credit’ is trust, belief. Lacking a ‘show me’ (gold) a fiat currency must not lose it. As we have all seen fit cheerfully to adopt the economic policies of Argentina and Zimbabwe, that is not a given with us any more than it was with them. We are all Gideon Gono now. Amazing. We used to regard those countries with a mixture of pity and amusement.

On the Cuban missile crisis, today’s external threats to the US do not seem minor. Indeed another Cuban missile crisis is developing right now in the South China Sea. Will America act? What if it does not act?

not to belabor a point, but during the Cuban missile crisis a Soviet sub almost launched a nuclear torpedo at a US navy vessel. It took approval of 3 crew men to launch the weapon, 2 approved , one resisted enormous pressure and did not approve.
So WW3 was avoided. By one Soviet sailer . Who was rewarded by the USSR by being demoted.

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For what it’s worth:

http://www.msn.com/en-us/money/markets/why-its-time-for-the-…

Should I buy or Should I sell…I am singing this to the tune from

" Should I stay or should go " da da da da da da dah

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I meant to include this with my last post: :slight_smile:

Seriously, I have been following this thread with interest.
I have over the last month, been trimming some and have eliminated a couple of my positions.

I guess I feel some fear that we are overdue for something bad and I think I will feel more comfortable having more cash on hand. but what do I know?

I know this: Something will happen, but we of course, do not ever, know when.

I do think though, that the Fed will keep keep us afloat until the election.

I no longer have a long timeline…I might change my strategy some,
But have not figured that out yet.

Frank

I like the enthusiasm for the market on the boards and in general. All my friends are buying too - even those who thought investing in stocks is for the losers. I’d hate to convince anyone to not buy and in my personal social circle, these days I just listen quietly unlike my usual self in the past when I used to defend stocks on the subject of investing. In rare situations, when someone asks me what I am doing I tell them the truth that I have been lightening up. I share my actions on the boards more freely because everyone here is a relative stranger to me.

Over the last 12 years, I have seen a distinct pattern emerge on the boards. When people are in despair I am usually purchasing every day and when they are content and happy I find myself selling. It has worked out for me quite well. I am sure different things work out well for others as well.

Good Luck!

Anurag

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