Question- How long do you think thid bull market will last?

[007 License To Squeal]

I personally think it's a bubble, but I'm no expert.  I don't know what will happen when the Fed reduces QE......will the market suffer a sell-off?  If so, where will the money go? Commodities?

[HOGLIGULA]

I personally think it's a bubble, but I'm no expert.  I don't know what will happen when the Fed reduces QE......will the market suffer a sell-off?  If so, where will the money go? Commodities?

Of course it will suffer a sell off CNBC will have a week long episode about it , and tell everyone the world has come to an end( ie Cramer will have a head the size of a watermelon instead of a canteloupe) !  Now in the real world LTI's will tell everyone to hang on and ride the drop(profit ahead), gamblers will move into commodities, older people(ret age) will find harbor in bonds and tbills, that they just moved out of or ride that stocks they just purchased at a high to a flat line  This is an inflated economy that will not   follow common market protocols, and will be tied from here on out to rumor(media hype)QE until QE stops.

[OldPoop]

I personally think it's a bubble, but I'm no expert.  I don't know what will happen when the Fed reduces QE......will the market suffer a sell-off?  If so, where will the money go? Commodities?

IMO if the Fed reduces QE there will be a sell off.
But that could be a great place to buy in on a lot of stocks.

Like everyone else, I have zero knowledge of the timing of future events, but I don't see the big stock crash before 2015 and possibly several years later.  Since 2008 we have survived by juggling and kicking the can down the road.  Unfortunately every year we dig our hole deeper.  There is no way of knowing how much longer that can succeed because there is no way of knowing how much longer the masses will be gullible enough to believe the phony b s numbers the government puts out. 

But from what I have read, once it happens it can be very quick.  In Argentina one day they were working and complaining about inflation and the next day the banks were closed and no one had any money and everyone was in the streets protesting.   That's why imo it's better to be 10 years too early than one day too late in preparing for bad times.

[BENTON PIGGEE]

I don't think they'll start tapering until almost everyone demands it and the economy is very strong. I'll give it 2 more years.

[BENTON PIGGEE]

I don't think they'll start tapering until almost everyone demands it and the economy is very strong. I'll give it 2 more years.

Bump.

June 2013 S&P was at 1600, now we are at 1900. Tapering has begun, but with growth so slow I still don't know when the Fed will raise rates. If things go as planned, this secular bull market should continue. I'll stick with my prediction- 1 more year(if not longer).

[HognotinMemphis]

I personally think it's a bubble, but I'm no expert.  I don't know what will happen when the Fed reduces QE......will the market suffer a sell-off?  If so, where will the money go? Commodities?

Key part of this from June, 2013:  "but I'm no expert."

[rzrbackramsfan]

I personally think it's a bubble, but I'm no expert.  I don't know what will happen when the Fed reduces QE......will the market suffer a sell-off?  If so, where will the money go? Commodities?

Look at a chart of the stock market from 1900 to now and you'll realize you should always be long the stock market. 

Id worry about it from stock to stock stabd point.  If you buy a stock with a p/e of 20 and they can't increase their earning significant, you're screwed.  Buy one with a p/e of ten and they just keep earning at their current levels plus inflation and you're talking about a 10% compounded annual rate... Not too shabby.  That's why I really liked att and still like it a bit, kkr also.  Sometimes wal mart will get in the 12-15 p/e range at which point it's a buy.  Buffalo Wild Wings has a p/e of I think 40.  If they don't quadruple their eps, you're gonna have a badd time.

[rzrbackramsfan]

[BENTON PIGGEE]

That logarithmic scale chart is amazing. On the left each line is 10x the previous line, not +1.  It would look like a cliff on a regular chart-straight up(with a few jagged edges).

[rzrbackramsfan]

That logarithmic scale chart is amazing. On the left each line is 10x the previous line, not +1.  It would look like a cliff on a regular chart-straight up(with a few jagged edges).

Alright how about this chart in my dining room haha:


It shows what $1 invested in 1926 would have become until 2012.  The dark blue is small cap stocks, the light blue is large cap index, orange is 30 year t bonds, purple filled in part is inflation, at the very bottom it shows how the s&p has deviated from its median of 15.5.

[Fletch]

If you look at things only logically, you should almost always be long the market, but not ever with all of your money. If we experience a 40%-50% decline you have no additional resources to add when things are depressed. The problem is that most people can't look at things logically, they look emotionally. So when you have a 2000-2003 or 2008-2009 type market, the emotional investor always panics out at or near the bottom, and therefore never will re-enter the market at a higher price.

Also, I say almost always because there are just those times that even logical investors are better off sitting out during time periods when it is obvious the economy is eroding, and it will take a while to get things turned around. There is never a need for any investor to sit through a 50% downturn just hoping for a turnaround IMO.

[BENTON PIGGEE]

I am at 60% stocks and 40% cash right now. If we have a greater than 10% correction, I probably will buy more stock. Using covered calls for extra income.

[HognotinMemphis]

I am at 60% stocks and 40% cash right now. If we have a greater than 10% correction, I probably will buy more stock. Using covered calls for extra income.

I am 80-20. Zero fixed income.

[Arkansasbeaux]

HIM, what are your thoughts on having zero fixed income. I am recommending to clients about 10% for those that are growth focused. Granted, I am looking at more high yield fixed income as it SHOULD act like equities when interest rates rise. I am definitely with you on being super low given that rates will certainly rise and cause bond prices, especially long term, to drop dramatically. Just wanted to get your two cents and see what advice you are giving on the subject. I always like to hear what other advisors have to say. Thanks.

[BENTON PIGGEE]

I am 80-20. Zero fixed income.

Me too- no bonds.

[HognotinMemphis]

HIM, what are your thoughts on having zero fixed income. I am recommending to clients about 10% for those that are growth focused. Granted, I am looking at more high yield fixed income as it SHOULD act like equities when interest rates rise. I am definitely with you on being super low given that rates will certainly rise and cause bond prices, especially long term, to drop dramatically. Just wanted to get your two cents and see what advice you are giving on the subject. I always like to hear what other advisors have to say. Thanks.

Regarding fixed income, I am pretty conservative. As you know, "high yield" is simply a euphemism for junk bonds. I do not ever recommend junk bonds to clients, and certainly not in a historically low rate environment that we currently have. That's just me and what keeps me comfortable.

Instead of junk bonds, why not high quality equities that have an annually growing dividend with current yield of 3% or more? Yes, equities can move around more than bond...usually, but volatility is not risk to me...risk is permanent loss of capital. And if you cannot stand much or any volatility, you should not be in equities at all and should never expect anything other than single digit annual returns in money market accounts or CD's or bonds. Or, you should be in commercial real estate or some other asset class that is not priced every second of the trading day.

With interest rates this low, I see flat to negative total returns over next 3 to 5 years in fixed income, so why even go there at all now? I am not going to advise diversifying to an asset class that is almost certain to be a permanent loss of capital over a 3 to 5 year period. While you will be losing to inflation with cash, at least you will not have a nominal loss in it.

[Arkansasbeaux]

Regarding fixed income, I am pretty conservative. As you know, "high yield" is simply a euphemism for junk bonds. I do not ever recommend junk bonds to clients, and certainly not in a historically low rate environment that we currently have. That's just me and what keeps me comfortable.

Instead of junk bonds, why not high quality equities that have an annually growing dividend with current yield of 3% or more? Yes, equities can move around more than bond...usually, but volatility is not risk to me...risk is permanent loss of capital. And if you cannot stand much or any volatility, you should not be in equities at all and should never expect anything other than single digit annual returns in money market accounts or CD's or bonds. Or, you should be in commercial real estate or some other asset class that is not priced every second of the trading day.

With interest rates this low, I see flat to negative total returns over next 3 to 5 years in fixed income, so why even go there at all now? I am not going to advise diversifying to an asset class that is almost certain to be a permanent loss of capital over a 3 to 5 year period. While you will be losing to inflation with cash, at least you will not have a nominal loss in it.

I completely agree with you on all of it and am doing much of the same. I have taken most of the allocation to fixed income and gone overweight on Growth & Income to compensate. With the higher yield, I won't do individual bonds at all. I will only do so in a fund, typically something like the Franklin Income fund which, while technically considered high yield/aggressive income, is actually a multi asset fund with a mix of high yield as well as solid dividend equities (with a 5% yield nonetheless). I practically won't touch a CD with a 10 foot pole even for short term money. I've been able to get 90 day pre-refunded muni's with anywhere from 2 to 4 percent yield. Considerably better than CD's, not to mention federally tax free.

On another note, when reviewing assets not under your management (i.e. clients 401k's), have you noticed a very low allocation to international equities? For some reason, I have been seeing a lot of that and it baffles me as to why people are so averse to international holdings. Just curious because I don't want to think I am the only one having that issue! Hahaha

[HognotinMemphis]

I completely agree with you on all of it and am doing much of the same. I have taken most of the allocation to fixed income and gone overweight on Growth & Income to compensate. With the higher yield, I won't do individual bonds at all. I will only do so in a fund, typically something like the Franklin Income fund which, while technically considered high yield/aggressive income, is actually a multi asset fund with a mix of high yield as well as solid dividend equities (with a 5% yield nonetheless). I practically won't touch a CD with a 10 foot pole even for short term money. I've been able to get 90 day pre-refunded muni's with anywhere from 2 to 4 percent yield. Considerably better than CD's, not to mention federally tax free.

On another note, when reviewing assets not under your management (i.e. clients 401k's), have you noticed a very low allocation to international equities? For some reason, I have been seeing a lot of that and it baffles me as to why people are so averse to international holdings. Just curious because I don't want to think I am the only one having that issue! Hahaha

Yes on the international equity allocation. I think that is simply due to ignorance...not US so must not be as quality or as safe. I have made more money on some non-US equities in the past 5 years than on US equities.

Not that GMO (Jeremy Grantham) is the final or best word, but take a look at its 7 yr forecast for equities and fixed income of all kinds...domestic, small cap, large cap, international, emerging markets, etc. It came out within last few days. It is a 1 page bar graph. Asset class with highest annual return over next 7 years according to GMO is timber. I already own RYN personally and in several clients' accounts.

[je100]

This guy scares the bejeebers out of me....

http://www.hussmanfunds.com/wmc/wmc140728.htm

[HognotinMemphis]

This guy scares the bejeebers out of me....

http://www.hussmanfunds.com/wmc/wmc140728.htm

Only because you are totally ignorant regarding these matters. Notice I did not say you are stupid.

John Hussman looks like a televangelist. Also eerily resembles that smooth talking home siding (or something to do with homes) salesman in LR from a few years ago. What was his name? He did all those commercials and sounded so sincere...Kim something?

Anyway, I encourage you to look at Hussman's 4 mutual funds. Talk about pure dogsh*t. He had a great year in '08 because he is a permabear. (Permabears, like broken clocks, are right every once in a blue moon.) In his main fund in '08, he was down 9% when S&P was down 36%. The next year, '09, the S&P was up 29% and he was up 4%. He had a negative return last year, 2013, when the S&P was up 32%. He has lost money every year since '09 I believe. YTD, he is in the red while the S&P is up more than 7%. His 3, 5 and 10 year returns are all negative in all of his funds. So if he scares you, it is only because you are ignorant. I would not let Hussman manage my lunch money. Dart throwing would be better for anyone than letting Hussman manage your investments. Right now in his main fund, he is something around 45% in cash and cash equivalents. Total moron.

[pheine78]

Only because you are totally ignorant regarding these matters. Notice I did not say you are stupid.

John Hussman looks like a televangelist. Also eerily resembles that smooth talking home siding (or something to do with homes) salesman in LR from a few years ago. What was his name? He did all those commercials and sounded so sincere...Kim something?

Anyway, I encourage you to look at Hussman's 4 mutual funds. Talk about pure dogsh*t. He had a great year in '08 because he is a permabear. (Permabears, like broken clocks, are right every once in a blue moon.) In his main fund in '08, he was down 9% when S&P was down 36%. The next year, '09, the S&P was up 29% and he was up 4%. He had a negative return last year, 2013, when the S&P was up 32%. He has lost money every year since '09 I believe. YTD, he is in the red while the S&P is up more than 7%. His 3, 5 and 10 year returns are all negative in all of his funds. So if he scares you, it is only because you are ignorant. I would not let Hussman manage my lunch money. Dart throwing would be better for anyone than letting Hussman manage your investments. Right now in his main fund, he is something around 45% in cash and cash equivalents. Total moron.

Well said HiM!  What say you about the bull?  I am pulling out of a lot of volatile tech (and other) stocks now because I think there will be a correction that correlates with the elections...it has happened every time since 1930, every time.  I will bank on history and buy back in right before the elections, probably the same stocks because they are good overall...I just think the market will fall back a bit.  The run will continue though at least another year or two.  It really doesn't matter to me because I am only 35, even if the bottom drops out I will still hold on to stock (and probably buy more!).  Good post HiM!

[BENTON PIGGEE]

OMG this market is on fire! I am up about 10% in the past week! I will get more conservative soon and let my september covered calls get exercised and be in a higher cash position then. The Russell 2K is turning a little and that can be an early warning sign  of a downturn.

However, I couldn't resist buying some BIDU covered calls and stock. The chart is so pretty.

When things go south, look at SH, an inverse s&p 500 etf. Also planning on short call spreads, dividend payers, and eventually bonds.

Evjoy it while it lasts!