KandJBm

We have been following an adjustment procedure for our stock and bond mutual funds since the S&P500 reached approximately 2,000. Both have been adjusted downward over that time period. Today we have reached a milestone. Our stock funds have reached zero % of our retirement funds and our bond funds have reached 10% - that is as low as the procedure will take them. So now we wait to see when we will start buying and adjusting upwards. Please don't think we think this is our call of a market top! It is just the result of a systematic reduction of risk based on our tolerance for risk and various market valuations and indices. Our adjustment procedure is not based on trying to identify a top. It does, however, take into account previous tops which tend to initiate the adjustment process. Just thought we would say all this before the top is reached rather than after, when it is too easy to brag about "getting out" at the top!

Good advice! And yet look at the people rushing into the "Dow store" today to buy their "suits" at the highest price ever seen. Makes you wonder. Of course, the folks selling those "Dow suits" today may be getting the last laugh, eh?

Amen. About the only investment advice I do read is from Vanguard. They are pretty conservative with their comments about bubbles - they seldom use the word! This article is about as negative as it ever gets (and to me scary) when you compare it to their normal calm remarks. https://vanguardblog.com/2017/09/13/phase-two-of-fed-policy-normalization-entering-trickier-waters/

I've been looking for articles on "buy and hold," re-balancing and such. Here is an author that explains what might be a problem with "buy and hold" for some investors. http://news.goldseek.com/MerkInvestments/1452698820.php The author apparently started taking his fund out of stocks last Aug. http://www.merkinvestments.com/insights/2015/2015-08-04.php In order to read the article you will have to register. It is free and you can always un-register or "junk file" any future articles that come to you. Personally I like to read some of them. K

After last week in the stock market and no new comments on this thread I was wondering if everyone was still in shock. So here is something to read by my favorite "in-your-face" non-cheerleader for Wall St. salespeople - David Stockman of course: http://davidstockmanscontracorner.com/newsflash-from-the-december-jobs-report-the-us-economy-is-dead-in-the-water/ K

Now this is about as quickly as one can expect to see this "reassuring" expected article; "Don't Panic..." http://www.bloomberg.com/news/articles/2016-01-04/so-goes-nothing-first-day-routs-weak-signal-for-annual-returns Do "they" have these things pre-written and waiting in the wings? K

Actually, I don't use Stockman for financial investment advice. I do read him for his knowledge and perspective on how the macro-economy works especially concerning the FED and its influence on the financial sector or industry and stock market. On the other hand, I am surprised with the comments that seem to be examples of that debating term, ad hominem arguments. From Wikipedia: An ad hominem (Latin for "to the man" or "to the person"[1]), short for argumentum ad hominem, is an attack on an argument made by attacking the character, motive, or other attribute of the person making the argument, rather than attacking the argument directly. When used inappropriately, it is a logical fallacy in which a claim or argument is dismissed on the basis of some irrelevant fact or supposition about the author or the person being criticized.[2] Ad hominem reasoning is not always fallacious, for example, when it relates to the credibility of statements of fact or when used in certain kinds of moral and practical reasoning." My personal goal at this forum would be to hear someone's reasons for disagreeing with an article I have posted rather than attacking the author. Like I think I did in my comments on http://realmoney.the...g-so-buy-stocks

I don't think looking backwards in time (history!) and seeing something that you think is similar to the present, "is like saying that a clock was showing the correct time now and every 12 hours when checked." The article you refer to in this quote, "Here is commentary about his proclivity for saying that the sky is falling. http://realmoney.the...g-so-buy-stocks is replete with inaccuracies. For example, the author says, "...only this time he was furious because he said that the Fed was "keeping interest rates artificially low." Stockman and others have been saying for many years that the FED (under Greenspan, Bernanke and Yellen) has been keeping interest rates too low for many, many years, even 2 to 3 decades depending on the authors. Another example is here, quote, "He was ranting about the debt and how the Chinese wouldn't "finance" us pretty soon. He had all those false beliefs like the rest of the people who are still stuck in gold standard thinking. Our dollars come from us, I tried to explain to him, not the Chinese. He wouldn't buy it." Really? Can you imagine that a past Director the the US Office of Management and Budget does not know where money comes from? Does not understand what he is saying when he says China is financing our US debt when it buys US Treasuries? The author is rather unbelievable to my way of thinking. Last example, quote, "I realize that some people will say, "Oh yeah, but you can't predict when these things will happen, but they will happen." This is useless information. It's like saying someday the earth won't be revolving around the sun anymore. Where does that get you?" Well isn't that a humorous comparison! Of course that is useless information. I would guess, however, that a 6 year bull market that has stormed upward while the economy (as measured by GDP) has grown at its lowest rates ever (outside of outright recessions) is most likely to suffer the fate of the last FED induced bulls (2000, 2008) a tad sooner than the earth stops revolving around the sun. And that could get you somewhere. It gets me to a less risky portfolio, simple as that. Only the future (a ticking clock) will show how it turns out. Perhaps the author is more like someone using a stopped clock, i.e., the stock market hasn't crashed yet (well since 2000 and 2008) so it won't.

I try to read both sides of the argument that: "stocks are in a bubble" versus "stocks are fairly priced and going higher." But I must admit that I have been more taken with the "bubble" side of the argument. So I post what I think are some good, easily read articles on that side. So here is one that I like. http://davidstockmanscontracorner.com/when-wall-street-gets-defanged-look-out-below/

Wow! What a day for stocks as the economic data continues to disappoint (or does it?). Can this mean QE4 is right around the corner with the next poor GPD report? Probably the FED will come up with a brand new name, maybe something like: monetary alignment (MA1) or perhaps money refreshment (MR1)? They are much better than I at naming and playing these "easy money" policy games. It will be an interesting quarter. Did you see that the Atlanta Fed's GDP-nowcast for the 3rd quarter is estimated to be around 1%?

So "they" didn't. So when will "they?" What's your guess? Mine is that "they" won't raise interest rates until well after the stock market crashes and is well on its way recovering and the coming recession is fully over and well on its way to full recovery and I mean a real recovery not today's pretend recovery. In other words, a long, long time.

And it seems very likely that tomorrow the Federal Reserve will announce that it will keep the cheap money (new debt) flowing, although it won't say it exactly that way. Another Stockman article tries to explain why the F.R. keeps it flowing and why that will be so detrimental. But the stock market is loving it, until it ends (if it ever does!) http://davidstockmanscontracorner.com/the-truly-stupid-case-for-more-zirp/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Wednesday

It seems the P/E ratio is one of the statistics that should be included in the next update of the classic book, "Damned Lies and Statistics." It is fairly well known that there is more than one way to calculate the P/E statistic and none is easily shown to be the "correct" method. But one of these methods appears to be the most prone to "misuse" (I won't say lying) and it just happens to be the one used by many financial analysts, especially by bullish analysts. Stockman does a critical analysis of the "misuse" in this article, http://davidstockmanscontracorner.com/this-is-not-a-retest-its-a-live-bear/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Mid+Day+Thursday I wouldn't like to be labeled an empty headed "conspiracy theorist," but this article in the Washington Post along the lines of the Federal Reserve tinkering with the economy and stock market was too interesting not to point to: http://nypost.com/2015/08/31/why-the-federal-reserve-should-be-audited/

Another spirited article about the "inflation" of the stock maket. This one is about the inflating effect due to corporate stock buybacks. http://www.counterpunch.org/2015/08/28/looting-made-easy-the-2-trillion-buyback-binge/ Roughly, an S&P 500 index fund worth 500K today would have been worth approximately 200K in 2009! Do you think that is just "reasonable growth" and do you expect that kind of "reasonable growth" over the next 6 years too? Maybe I am just too pessimistic? Actually I am developing the opinion that these are very confusing times if not frustrating times if not infuriating times. If this is another stock market bubble bursting then that makes three since 2000! How is anyone suppose to know what the "fair," long run value of their retirement funds is at any point in time? If this bubble inflating is mostly due to the Fed's tinkering with interest rates in their attempts to offset each and every slowdown in the economy or the stock market then I find we are living in infuriating times.

That is the theory of a number of financial writers, "Accordingly, after 80 months of showering Wall Street with what is a wholly unnatural and perverse financial windfall—-that is, zero cost in the money market—–the Fed has ignited a rip-roaring inflation. But the inflation is in the financial market, not the supermarket." See, http://davidstockmanscontracorner.com/stanley-fischer-speaks-airballs-from-a-dangerous-academic-fool/ for a lenghty, and spirited, explanation of a number of ways the Federal Reserve's policies of low interest rates and QE have had little effect on consumer and business spending in the economy, but have had a large effect in financial markets and emerging economies. His graph showing debt levels since 1990 seems shocking to me. Don't know whose theory is correct, but this one does have its appeal for me.

So we began to reduce our stock funds after this post and looked like "experts" after the nosedive from Aug. 19-24. We even decided to reduce a bit more on Friday after the rebound on Wed.-Thur.this past week. Now we are somewhat comfortable with our reduced risk and think we will ride it out and see what happens over the next weeks and months. Who knows how bad it may get? Who knows if we made a mistake?

Right, it doesn't tell you when to get in or when to get out, that is not its purpose. Its purpose is to "normalize," or "average out" the somewhat wild swings the P/E ratio can take from one year to the next due to the effect of changes in Earnings. It is interesting to me that while the Shiller P/E is designed to smooth our yearly extreme values in the common P/E ratio by averaging ten years of earnings for E, it actually gives an even larger current value for P/E than does the common P/E ratio (29 compared to 19). Of course that is due to recent years with elevated earnings (remember it is actually earnings per share) being averaged with lower earnings from the earlier years of the past ten years. Some authors I have read point out that since the financial crisis of 2008 many corporations have been buying back their stock shares in unusually high numbers in order to make their earnings per share look better than otherwise. And many have been doing this by actually borrowing money at the current super low interest rates thanks to the Federal Reserve's easy money policies. So they ask, has the Federal Reserve helped to create another "perfect storm" (like the housing bubble) which is now blowing through our financial markets?

The Shiller P/E ratio (http://www.multpl.com/shiller-pe/) shows an even more over valued market. This PE ratio factors in earnings from the previous ten years and thus it is less prone to wild swings in any one year (like 2009) when Earnings fell through the floor causing the P/E ratio to skyrocket. Maybe it is better, maybe not?

Stay calm. Keep hydrated.

I have recently discovered this shy commentator, http://davidstockmanscontracorner.com/the-sps-13th-trip-thru-2100-since-february-13th-call-it-monetary-rigor-mortis-the-bull-is-dead/. Anybody else here read his commentaries? Thoughts on his stuff? Seems he has been arguing that the stock market peaked months ago. Just saying.

This thread has taken me for ever to read but what a fun read. So for all that effort I think I should get to respond. I am just about ready to begin slowly reducing our stock funds, but may hold bond funds steady for awhile longer. It seems that a number of those "experts" (lucky ones) who warned about the past two stock market swoons are warning again. Is this market timing? Or is it risk adjustment? Or is it foolishness? Who knows?