Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
I thought it might be fun to take a poll of sorts to get a feeling for the market sentiment here. A lot of cautious talk here lately.
I am cautiously bullish ( how's that for fence straddling?) but ready to make moves if the market shows signs. Right now I am 62% equities and 35% fixed income. The rest is in cash.
Hey, @JohnChisum Nothing wrong with fence straddling. I do believe many call this a balanced, conservative or moderate portfolio, eh? However. This house is still playing the healthcare route for the majority of equity holdings, followed by broad U.S. equity (VTI / ITOT types), followed by U.S. real estate (still getting a whipping this year), followed by HEDJ. We also hold two stocks; ABC and DPLO, both healthcare related. The bond side is the mixed equity/bond holding of FRIFX and FTBFX, DGCIX and some PTTRX. The mix is near 65% equity and 35% bond types.
Bonds have had a butt kicking recently, too. Today was a bit of a forward move in many investment grade sectors.
Bull or bear, eh? I'll have to be a bull for both equity and bonds.......'course, depending upon what and which. Both areas are quite expensive though, I do believe. Central bank policy for some global areas are still driving the inexpensive money that continues to push equity and bonds. Scary? Yes, I really do watch carefully.
Okay......have to leave the area for now. Take care, Catch
Bullish or Bearish? With all due respect, I don't think it's that simple.
The U.S. stock market has tripled in 6 years. The Dow has gone from 6500 to 18,000. You don't need to be a rocket scientist to realize equities aren't cheap today.
I vary my allocation to cash a bit. I think doing so may help keep me out of deep doo-doo in retirement. Right now I'm dead center (18%) between "highly optimistic" - which would be 10% cash, and "deeply pessimistic" - which would be 25% cash. (I believe such high cash allocations make sense only for someone 15-20 years into retirement like myself.)
I guess you can count me "On the Fence" - but also a "Doubting Thomas" on whether the markets can grind much higher anytime soon. The Fed has the grenade in their hands. Waiting to pull the fuse and lob the thing. (I may not be very smart. But give me some credit here for the figurative language.) -
* Clarification: The 82% outside cash is invested in a very broadly diversified portfolio of funds, which includes significant exposure to the commodities markets.
I am near term bearish, due to valuation, through the summer; and, when fall comes most likely I'll turn bullish. But, I want know this until we get to late August, then it might be September and if not by then there is October and November. If there is no pullback ... Then I'll most likely remain bearish due to valuation and an aticipated rise in interest rates. Some are of the thought that the fed could begin to raise interest rates as early as June while others say look for September.
For reference, TTM Earings (as reported) are expected to be flat in the $102 range for the S&P 500 Index until we get through September. And, down year-over-year come September from the 105 range (2014) to 102 range (2015). And, if this comes to be then we are backing up. Not good. So much for those past forward estimates! Makes one wonder ... Does it not?
My portfolio's current asset allocation is about 20% cash, 20% income, 50% equity, and 10% other as analized by Morningstar's Instant Xray. Within stocks, I am 30% domestic and 20% foreign.
I think the question one now must ask themselves ... Is this a sucker's rally as we enter summer?
Getting ready to close up shop for the summer. Be back come late August or at least by the first part of September. Now, I wonder if I can't somehow catch up with tampabay as I'll be coming through FL the first part of July and will be in the Ormond Beach/Deland area perhaps even catching the race in Daytona, then on to Coco Beach; and, then on to Orlando and perhaps Tampa visiting a good number of the wife's friends and a few of mine.
1. I don't like what I am seeing with the almost ridiculous valuation of some private market companies. I do not like what I am seeing with IPOs, which are either being short squeezed to absurd levels (SHAK), or a quick move up followed by a bust (ETSY for the latest example.)
2. I don't think economic news is terribly positive. At best it's muddling through, at worst we're sitting here after multiple QE's, several years of ZIRP and not only is the ROI not that great in terms of the broader economy, you have this tension underneath the market as it disconnects further from the broader economy (while at the same time thinking bad news is good news because it means more Fed easy money.) We can't pay to avoid economic Winter, despite our trying, which merely delays it.
3. The mentality of "buy the dip" because the market is not going to fall. And you know what? That might be right because the second there's a 5% decline, you have FOMC members going, "no worries, easy money, blah blah blah." Still, there is a lot of complacency on the belief that the Fed will not let the market fall.
4. The Fed probably won't let the market fall and would never admit if QE and ZIRP did not lead to a sustainable recovery. I think the concern that I have is that, what happens if you take that view to its limit?
5. At the same time, I'm not going to sell because I'm not going to sit here and time the market, I'm not going to sell because Yellen says something one day and the market drops 300 points, because inevitably another Fed governor will be along quickly to calm the market. There's so much BS and so much noise in this market that ultimately, you have to make decisions based on silly things like if your thesis on a company changed or if the fundamentals have considerably changed for some reason.
Healthcare, despite its run, feels like safe harbor from the standpoint of I don't think valuations in major names are all that rich (obviously, case-by-case basis), it's a need (and - honestly - the focus on "needs over wants" has only become more appealing to me in the last month or two) and there have been a number of remarkable discoveries over the last few years.
I agree with @scott on the valuations of some of these newer offerings. SHAK and LOCO are two examples. This reminds me somewhat of the tech bubble before it burst.
A bigger question might be, if the economy turns negative, are we looking at a long drawn out recession or a short downwards blip? If we knew the answer to that investing would be much easier. For now, we have to rely on our gut feelings.
I suppose as long as the market continues trending higher I have to be somewhat bullish, but I would prefer and have prepared for a correction because of the same reasons others have mentioned. As long as we keep going up I expect to continue building cash because I'm just not comfortable with valuations compared to how the economy is doing and the likelihood that the Fed will raise rates one day or another.
My biggest reason for remaining somewhat bullish is exactly what people are saying here. As long as investors generally are feeling cautious and keeping some money on the sidelines there's a decent chance the market will continue going up. If everyone starts believing the market is just going up and invests all that cash so they're not missing those gains, then I'll be a lot more comfortable that we'll really get a serious correction.
@hank, I'm wondering related to your commodities exposure whether that's premised on being bullish of commodities (an increase in global growth?) or bearish of the dollar (which would tend to support commodities all else being equal)?
Surprised to see so many bears (me too but mildly= just not making any purchases though I have the cash to do) . Maybe this means MFO posters know what they are doing = great minds think similar ways or maybe it sa bullish indicator. We will know by Thanksgiving
I agree with @scott on the valuations of some of these newer offerings. SHAK and LOCO are two examples. This reminds me somewhat of the tech bubble before it burst.
As for SHAK in particular, if someone can look at this and say that that's not lunacy and is completely sustainable.....oy. I want to say that the lock-up expires for SHAK in the next month or two. That will be interesting.
"@hank, I'm wondering related to your commodities exposure whether that's premised on being bullish of commodities (an increase in global growth?) or bearish of the dollar (which would tend to support commodities all else being equal)?" - Neither LLJB - I try not to entertain views on where any market(s) are going - though bonds in general scare me. However, I'm willing to allow that even they may prosper (possibly in a deflationary environment). So, why do I include some commodities in my investments?
Reason #1: The hard assets exposure is an attempt to spread risk around as broadly as possible. I'm 70 and nearly 20 years into retirement. I feel that any market exposure beyond fixed income is risky for people my age to begin with. So, if I'm going to expose my life savings to the vicissitudes of the markets, I want at least to spread the risk around into as many different types of assets as possible. And, I don't need a very high rate of return to exceed what cash is now paying. Probably have about 20% in hard assets through ownership of PRNEX, QRAAX and PRPFX. The other holdings in traditional equities and bonds still outweigh these.
Reason #2: Retirees are especially vulnerable to the corrosive impact of high inflation - should it rear it's head again. Holding some assets that in the past have done well during inflationary periods I view as a form of insurance.
Reason #3: I have a contrarian streak in me. So part of the appeal in holding some hard assets is that nobody expects them to do well any time soon. Even Junkster, whom I respect greatly, says they're a loosing proposition.
Reason #4: Related to #3 above, I recently converted a small portion of my Traditional IRA to a Roth. At an advanced age, conversions work best if you can identify a beaten up area and convert at a very low NAV and than play the bounce. My chioce for such a fund was QRAAX, a real "hold-your-nose" choice that was trading at about $2.20 a share when I converted in January. I believe the odds are better than 50/50 that I can catch a 30-35% bounce in this fund over the next 5 years - the holding period for conversions. If correct, I'll be dollar averaging out on the way up and locking-in tax free gains. If wrong, I don't think I've risked very much. Actually, a bigger fear is that they might kill the fund (under $100 mil) before it has a chance to turn around. But, I don't think they will. Once the market reverses, hot money will start flooding back in.
I recently converted a small portion of my Traditional IRA to a Roth. At an advanced age, conversions work best if you can identify a beaten up area and convert at a very low NAV and than play the bounce. My chioce for such a fund was QRAAX, a real "hold-your-nose" choice that was trading at about $2.20 a share when I converted in January. I believe the odds are better than 50/50 that I can catch a 30-35% bounce in this fund over the next 5 years - the holding period for conversions.
Thanks for chiming in hank.
You could take your Roth distributions before the 5 year period elapse so long as you take the non-qualified portion as a SEPP. Your original contribution is always a qualified distribution at any time.
" The portion allocable to the participant’s contribution would be determined by multiplying the amount of the non-qualified distribution by the ratio of designated Roth contributions to the total designated Roth account balance. For example, if the current account balance is $10,000 and the participant contributed $8,000, 20% (the percentage of the account balance from earnings) would be included in gross income. If the participant is no longer employed with the employer sponsoring the plan, he or she could elect to have distributions made as part of a SEPP plan to avoid early withdrawal tax penalties."
I probably spend too much time reading commentary by Steven Romick, Eric Cinnamond and Don Yacktman. I'm presently sitting at 70% equities and 30% cash. I'd rather miss out than fall in.
Hello. We are overdue for 20% correction. Probably sideways for 5-12 months or another 30% downturns in one-two yrs. If i was retiring soon probably 30% stock 70% bonds
Why worry, you'll only lose sleep. I use an asset allocation scheme that I rebalance twice a year in February and August; i.e. calendar events, not market events. At rebalance times I am faced with buying low and selling high. This is difficult to do as it implies one must buy their losers and sell their winners. This requires a belief in the idea of "regression to the mean".
@johnN You noted: "Hello. We are overdue for 20% correction. Probably sideways for 5-12 months or another 30% downturns in one-two yrs. If i was retiring soon probably 30% stock 70% bonds" >>> Why is the market overdue for a 20% correction? And then 30% in one-two years ??? Who you reading for this insight???
I'm bullish, but in a mild sense, by which I mean that I decided that for this year I'd focus on paying down debt rather making larger retirement contributions, since I'm 95% in equities, but decided I'd get a better return paying off the debt this year than investing. (Also started writing up my research into a thesis. I plan to have a job paying over $22k next year! where it'll be less of an either or question).
Hi @hank I am curious as to johnN's or the author's "projection" associated with these statements. I suppose I could Google the words and discover the auther; but not on my list of things to do. 'Course, we all know about the 100's of market projections that come forth every week. I'm just curious with this particular pronouncement. I do not expect a reply to my question. Take care, Catch
Hi Catch - I took John's prognostication less seriously than you I guess. I view it along the the vein of (1) nobody really knows for sure what will happen in 1-2 years, but also (2) everyone is entitled to an opinion.
As for my (light-hearted) comment above - sometimes elections do influence stock markets during both the events beforehand and the policy changes that occur afterwards. (There's actually a well documented "election cycle" which Ted and others have referenced in the past.) John's 1-2 year forcast puts it in line with these approaching events. Additionally, I tossed out here about six months ago a possible "black swan" scenario in which disputed Florida election results in November 2016 lead to a Clinton-Bush deadlock in the Electoral College, initiating a protracted post-election Supreme Court battle that could unsettle markets. (All purely conjecture of course).
John's comment and your request for documentation or attribution caused me to wonder whether anyone has ever considered if investing is more science or art. I was surprised to discover that the question has been often discussed. Have linked just one such article. At best, I'd say John's projection appears more art than science - since he's offered no attribution for the projection nor any data to support it. Hopefully he will clear this issue up to your satisfaction. Take care.
John's projected 30% downturn in 1-2 years corresponds nicely with the November 2016 elections. Possibly he knows something?
In terms of dates we had the LTCM crisis in 1998, where Wall Street bailed out LTCM. No one learned anything. Bigger bailout in 2008 10 years after LTCM, where Fed/Gov bailed out Wall Street. No one learned anything. 10 more years and we likely see a bigger bailout that moves once more up the ladder...
I've released any thoughts I had in my younger days about making a killing in the stock market. These days I'm quite content with making more than I need to withdraw and watching the dividends roll in no matter which direction the wind, and/or Larry Swedroe, blows. We all know dividend ETF's suck.
Neutral. Feel like the market overall is a bit frothy; think some individual stocks still offer decent opportunities. NYT articles on hesitance to say the word "bubble", as well some weird cult developing that believes sitting down to a meal is a useless an outdated concept... eeyikes. I worked at a hot startup last year & it was scary how much from HBO's "Silicon Valley" series rang true...
I am bearish and that's good for a continued uptrend in the markets. Meaning I am a good contrary indicator. When I was a more active trader and into equity funds there were times I was so bearish that I would be a buyer. Sounds counterintuitive but worked much more often than not. As for now, besides the length of this bull market, the price divergences between the Dow and S&P with the Utilities and Transports are troubling. Divergences don't count until they do. Whenever we do get a serious correction of 10% or more we will look back and suddenly see all the things we didn't see when the markets were at their tops.
Comments
However.
This house is still playing the healthcare route for the majority of equity holdings, followed by broad U.S. equity (VTI / ITOT types), followed by U.S. real estate (still getting a whipping this year), followed by HEDJ. We also hold two stocks; ABC and DPLO, both healthcare related.
The bond side is the mixed equity/bond holding of FRIFX and FTBFX, DGCIX and some PTTRX.
The mix is near 65% equity and 35% bond types.
Bonds have had a butt kicking recently, too. Today was a bit of a forward move in many investment grade sectors.
Bull or bear, eh? I'll have to be a bull for both equity and bonds.......'course, depending upon what and which. Both areas are quite expensive though, I do believe. Central bank policy for some global areas are still driving the inexpensive money that continues to push equity and bonds. Scary? Yes, I really do watch carefully.
Okay......have to leave the area for now.
Take care,
Catch
The U.S. stock market has tripled in 6 years. The Dow has gone from 6500 to 18,000. You don't need to be a rocket scientist to realize equities aren't cheap today.
I vary my allocation to cash a bit. I think doing so may help keep me out of deep doo-doo in retirement. Right now I'm dead center (18%) between "highly optimistic" - which would be 10% cash, and "deeply pessimistic" - which would be 25% cash. (I believe such high cash allocations make sense only for someone 15-20 years into retirement like myself.)
I guess you can count me "On the Fence" - but also a "Doubting Thomas" on whether the markets can grind much higher anytime soon. The Fed has the grenade in their hands. Waiting to pull the fuse and lob the thing. (I may not be very smart. But give me some credit here for the figurative language.)
-
* Clarification: The 82% outside cash is invested in a very broadly diversified portfolio of funds, which includes significant exposure to the commodities markets.
For reference, TTM Earings (as reported) are expected to be flat in the $102 range for the S&P 500 Index until we get through September. And, down year-over-year come September from the 105 range (2014) to 102 range (2015). And, if this comes to be then we are backing up. Not good. So much for those past forward estimates! Makes one wonder ... Does it not?
http://www.advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.php
My portfolio's current asset allocation is about 20% cash, 20% income, 50% equity, and 10% other as analized by Morningstar's Instant Xray. Within stocks, I am 30% domestic and 20% foreign.
I think the question one now must ask themselves ... Is this a sucker's rally as we enter summer?
Getting ready to close up shop for the summer. Be back come late August or at least by the first part of September. Now, I wonder if I can't somehow catch up with tampabay as I'll be coming through FL the first part of July and will be in the Ormond Beach/Deland area perhaps even catching the race in Daytona, then on to Coco Beach; and, then on to Orlando and perhaps Tampa visiting a good number of the wife's friends and a few of mine.
Old_Skeet
1. I don't like what I am seeing with the almost ridiculous valuation of some private market companies. I do not like what I am seeing with IPOs, which are either being short squeezed to absurd levels (SHAK), or a quick move up followed by a bust (ETSY for the latest example.)
2. I don't think economic news is terribly positive. At best it's muddling through, at worst we're sitting here after multiple QE's, several years of ZIRP and not only is the ROI not that great in terms of the broader economy, you have this tension underneath the market as it disconnects further from the broader economy (while at the same time thinking bad news is good news because it means more Fed easy money.) We can't pay to avoid economic Winter, despite our trying, which merely delays it.
3. The mentality of "buy the dip" because the market is not going to fall. And you know what? That might be right because the second there's a 5% decline, you have FOMC members going, "no worries, easy money, blah blah blah." Still, there is a lot of complacency on the belief that the Fed will not let the market fall.
4. The Fed probably won't let the market fall and would never admit if QE and ZIRP did not lead to a sustainable recovery. I think the concern that I have is that, what happens if you take that view to its limit?
5. At the same time, I'm not going to sell because I'm not going to sit here and time the market, I'm not going to sell because Yellen says something one day and the market drops 300 points, because inevitably another Fed governor will be along quickly to calm the market. There's so much BS and so much noise in this market that ultimately, you have to make decisions based on silly things like if your thesis on a company changed or if the fundamentals have considerably changed for some reason.
Healthcare, despite its run, feels like safe harbor from the standpoint of I don't think valuations in major names are all that rich (obviously, case-by-case basis), it's a need (and - honestly - the focus on "needs over wants" has only become more appealing to me in the last month or two) and there have been a number of remarkable discoveries over the last few years.
A bigger question might be, if the economy turns negative, are we looking at a long drawn out recession or a short downwards blip? If we knew the answer to that investing would be much easier. For now, we have to rely on our gut feelings.
My biggest reason for remaining somewhat bullish is exactly what people are saying here. As long as investors generally are feeling cautious and keeping some money on the sidelines there's a decent chance the market will continue going up. If everyone starts believing the market is just going up and invests all that cash so they're not missing those gains, then I'll be a lot more comfortable that we'll really get a serious correction.
@hank, I'm wondering related to your commodities exposure whether that's premised on being bullish of commodities (an increase in global growth?) or bearish of the dollar (which would tend to support commodities all else being equal)?
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/05/Shak bubble.jpg
"@hank, I'm wondering related to your commodities exposure whether that's premised on being bullish of commodities (an increase in global growth?) or bearish of the dollar (which would tend to support commodities all else being equal)?"
-
Neither LLJB - I try not to entertain views on where any market(s) are going - though bonds in general scare me. However, I'm willing to allow that even they may prosper (possibly in a deflationary environment). So, why do I include some commodities in my investments?
Reason #1: The hard assets exposure is an attempt to spread risk around as broadly as possible. I'm 70 and nearly 20 years into retirement. I feel that any market exposure beyond fixed income is risky for people my age to begin with. So, if I'm going to expose my life savings to the vicissitudes of the markets, I want at least to spread the risk around into as many different types of assets as possible. And, I don't need a very high rate of return to exceed what cash is now paying. Probably have about 20% in hard assets through ownership of PRNEX, QRAAX and PRPFX. The other holdings in traditional equities and bonds still outweigh these.
Reason #2: Retirees are especially vulnerable to the corrosive impact of high inflation - should it rear it's head again. Holding some assets that in the past have done well during inflationary periods I view as a form of insurance.
Reason #3: I have a contrarian streak in me. So part of the appeal in holding some hard assets is that nobody expects them to do well any time soon. Even Junkster, whom I respect greatly, says they're a loosing proposition.
Reason #4: Related to #3 above, I recently converted a small portion of my Traditional IRA to a Roth. At an advanced age, conversions work best if you can identify a beaten up area and convert at a very low NAV and than play the bounce. My chioce for such a fund was QRAAX, a real "hold-your-nose" choice that was trading at about $2.20 a share when I converted in January. I believe the odds are better than 50/50 that I can catch a 30-35% bounce in this fund over the next 5 years - the holding period for conversions. If correct, I'll be dollar averaging out on the way up and locking-in tax free gains. If wrong, I don't think I've risked very much. Actually, a bigger fear is that they might kill the fund (under $100 mil) before it has a chance to turn around. But, I don't think they will. Once the market reverses, hot money will start flooding back in.
You could take your Roth distributions before the 5 year period elapse so long as you take the non-qualified portion as a SEPP. Your original contribution is always a qualified distribution at any time.
Here's an example and the referenced link:
do-i-have-to-wait-the-5-years-to-withdraw-money-from-my-roth-tax-free-if-i-was-over-59-12-when-i-started-contributing
" The portion allocable to the participant’s contribution would be determined by multiplying the amount of the non-qualified distribution by the ratio of designated Roth contributions to the total designated Roth account balance. For example, if the current account balance is $10,000 and the participant contributed $8,000, 20% (the percentage of the account balance from earnings) would be included in gross income. If the participant is no longer employed with the employer sponsoring the plan, he or she could elect to have distributions made as part of a SEPP plan to avoid early withdrawal tax penalties."
References to an asset allocation scheme:
http://paulmerriman.com/the-ultimate-buy-hold-strategy-2014/
Examples:
http://www.bogleheads.org/wiki/Lazy_portfolios
Metaphorically wrinkle-free.
Neutral-leaning-bearish, but cautiously opportunistic -- meaning I take smaller actions & DCA more into positions that I might do otherwise.
You noted: "Hello. We are overdue for 20% correction. Probably sideways for 5-12 months or another 30% downturns in one-two yrs. If i was retiring soon probably 30% stock 70% bonds"
>>> Why is the market overdue for a 20% correction? And then 30% in one-two years ???
Who you reading for this insight???
I am curious as to johnN's or the author's "projection" associated with these statements.
I suppose I could Google the words and discover the auther; but not on my list of things to do.
'Course, we all know about the 100's of market projections that come forth every week.
I'm just curious with this particular pronouncement.
I do not expect a reply to my question.
Take care,
Catch
As for my (light-hearted) comment above - sometimes elections do influence stock markets during both the events beforehand and the policy changes that occur afterwards. (There's actually a well documented "election cycle" which Ted and others have referenced in the past.) John's 1-2 year forcast puts it in line with these approaching events. Additionally, I tossed out here about six months ago a possible "black swan" scenario in which disputed Florida election results in November 2016 lead to a Clinton-Bush deadlock in the Electoral College, initiating a protracted post-election Supreme Court battle that could unsettle markets. (All purely conjecture of course).
John's comment and your request for documentation or attribution caused me to wonder whether anyone has ever considered if investing is more science or art. I was surprised to discover that the question has been often discussed. Have linked just one such article. At best, I'd say John's projection appears more art than science - since he's offered no attribution for the projection nor any data to support it. Hopefully he will clear this issue up to your satisfaction. Take care.
http://investing.covestor.com/2013/04/seth-klarman-investing-is-first-and-foremost-an-art-not-a-science
2018 - ?
Links:
http://www.nytimes.com/2015/05/23/technology/overvalued-in-silicon-valley-but-not-the-word-that-must-not-be-uttered.html?_r=0
http://www.nytimes.com/2015/05/25/technology/in-busy-silicon-valley-protein-powder-is-in-demand.html