Jim Cramer: We Keep Aiming Higher ... and Higher

davfor

Sound familiar? This reminds me of the discussions that took place on a turn of the century weekly TV show Jim Cramer was on at the height of the tech bubble. Traditional views of P/E ratios were passe and even corporate profitability had come to be of little importance.

I know it seems too good to be true, almost like alchemy, but almost every single time that a Wall Street analyst says a stock is going higher, perhaps far higher, it works. There are that many bulls out there. There are that many people who want to believe and become buyers.

https://realmoney.thestreet.com/jim-cramer/jim-cramer-we-re-aiming-high-15537212?puc=yahoo&cm_ven=YAHOO

JD_co

The promise of additional stimulus along with continued Fed intervention create a solid floor FOR NOW. I keep reading about a "lack of sellers" in this market. I've read about Robinhood traders supposedly having an effect. Its all a bunch of BS. The stock market is too important to fail and its really become the only game in town (thanks to permanently low interest rates).

So lets just all keep goosing it and valuations be damned. This always ends well.

bee

One gut check for investing in up markets is to reference your present portfolio value with different draw downs scenarios (in percentages) and the potential recovery time (in months/years)

S&P 500 data since WWII:
Here are a few charts to help illustrate my point (averaged 14% drop over 8 months)...frequency (33% of the time):
Corrections:


Bear Markets (averaged over a 32% drop over 3 years 2months)...frequency (20% of the time):


Another view of drops from S&P 500 Highs and the subsequent time to reach new highs:


Since WWII the market has either corrected (14%) or fell into a bear market (over 30%) 38 times over the last 75 years or about half the time.

Also, a 14% loss (correction) requires a 16.25% gain to break even from that correction. A 33% loss (bear market loss) requires a 49.25% gain to break even.

At these market levels ask yourself a few questions:
Short term:
- Do I have debt that I could pay off with some of these gains (prior to a correction)?
- Do I have large one time payments (weddings, tuition, house projects, vacations, etc) that could be funded by reallocating some of your market gains to cash with some of these gains.

Long term:
- For young, long term investors, prepare yourself emotionally for sell offs of 14% - 35% at least every other year. Continue adding to your retirement (investment) by dollar cost averaging in both up and down markets.

For me...and
- For retirees using their portfolio for income, try to position 3-5 years of your income needs in less volatile investments.

I am using VFISX and VWINX for this propose in retirement. In years where the market returns are better than VWINX, I reallocate some of these gains into VFISX & VWINX. I also may take yearly income from these funds in years when they far outperform.

When the market sells off I first draw from VFISX, then VWINX. These two funds help me navigate yearly income withdrawals during market downturns while the rest of my portfolio waits for a recovery.

Reference:
heres-how-long-stock-market-corrections-last-and-how-bad-they-can-get

Sven

Agree. Bucket approach works well to ensure living expense for near term, 3-5 years. Shifting the gains from equity funds to the balanced funds make a solid approach in this low yield environment.

bee

Mohamed El-Erian sees one risk that could get investors into serious trouble.

"One of the most under covered stories is what’s happening to the US yield curve..."

To me, he fall in the camp with Grantham, Hussman & Dr Doom. They all are right, but stimulus creates price momentum and price momentum fuels animal spirits. This, along with low inflation, low interest rates, and low wages, cloud their conclusions. Until then these things change (higher inflation, interest rates & wage growth) they will appear to be crying wolf.

He's article:
mohamed-el-erian-this-is-starting-to-get-to-dangerous-levels

Article on Yield Curve Targeting:

The new tool could enable the Fed to keep yields lower for longer, without necessarily continuing to expand its balance sheet.

yield-curve-targeting

JD_co

Fed Chair Powell: 'Be careful not to exit too early' on easy monetary policy

"But Powell’s commentary may be an attempt to quell any jitteriness over the Fed pulling back on its accommodative policy. Fed Vice Chairman Richard Clarida said Wednesday that he expects the Fed to keep up its pace of asset purchases through 2021."


Got to keep those bubbles inflated! 2021 will likely be a decent year for equities. Amazing financial system we have here in the US. Simply amazing.

JonGaltIII

Exactly. https://www.marketwatch.com/story/feds-powell-downplays-risk-of-persistently-higher-inflation-11610649051?mod=home-page

davidrmoran

For some reason I cannot find the other recent thread about alltime-high investing (think it was not this one), and also hope that this is not duplicative of that:

https://www.jpmorgan.com/content/dam/jpm/securities/documents/cwm-documents/Is-it-worth-considering-investing-at-all-time-highs.pdf

It is probably going to change my thinking of how to proceed and what to do over the next month or two.

stillers

I always just used to think of Santoli as the guy who interviewed Art Cashin, but it seems as though Art's wisdom is now more frequently coming through him, as Art's air time dwindles. Here's a worthy take of his on the current state of the markets. YMMV.

https://www.cnbc.com/2021/02/06/mike-santoli-handicapping-the-markets-upside-from-here.html

catch22

@stillers
From your link:

In typical bull-market fashion, big investors rushed to trim back on equity risk the week before last only to re-load days later once the erratic short-squeeze activity abated, a prominent hedge-fund “victim” bobbed to the surface and the broader system bent without anything important breaking.

In the late-January dip, credit markets didn’t flinch and Treasury yields failed to give up much of their recent surge – which resumed last week as investors reprice debt markets for an economic acceleration and the Federal Reserve’s new vow to stoke and tolerate more inflation.

This was a sign that the turbulence was strictly an equity-positioning adjustment, allowing for a flutter of fear and confusion to cool investor expectations before they got to unstable extremes.

The Reddit, et-al crowd may not travel the same "gore the shorts group"; but they have not and will not away. IMHO, it just depends into which sectors/stocks they will travel to next. We know others with a large pile of money will follow the crowd; if not indeed attempt to front run the transactions.