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Stock Market Is Currently Overvalued And Irrational to 2013 Nobelist

edited October 2013 in Fund Discussions
In this month's Mutual Fund Research Newsletter Dr. Madell writes ...

"Investors who wish to follow the advice of Nobelist Shiller, legend Buffett, and yes, fund aficionado me, should heed the yellow flags currently being waved. Although no one can predict when the stock market will start to go the other way, rationally thinking investors will not be putting more into the stock market, but rather, reducing their positions now. While there's no guarantee that stocks won't continue to go higher, there's really no good excuse not to act. I predict, although obviously I could be wrong, that procrastinators, or just those who just choose to buy and hold, will eventually suffer. While these investors may eventually wind up OK, they will not enjoy the ride going from point A to point B to get to point C, assuming that point B will be where the market may be say in the next year or two, but perhaps even sooner."

The complete newsletter is linked below for your reading enjoyment.

http://funds-newsletter.com/nov13-newsletter/nov13.htm

I wish all … “Good Investing.”

Skeeter


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Comments

  • edited October 2013
    Yes - probably true. But like Ted's Orange Blossom Special it keeps chugging along. Dow's up about 90 points as I write. Noise and hoopla if you're 30 years old and gainfully employed. Noteworthy if you're many years into retirement. Am lighter than normal on equities and have been for couple years. But, don't - by any means - believe we've reached a total "blowoff" stage, so continue to hold fair amount of equities - mostly through allocation & balanced products. Thanks for the story Skeet. (When these Nobel Prize winners talk, it's wise to listen.) Regards
  • edited October 2013
    Hi hank and others,

    I make this type of post for informational purposes only. It has been my experience when I bought at or towards the top in my prior years of investing it seems it was not too long after that there would come a good size pull back … and, with what, the smile on my face turned into a frown as I went form having gains to losses.

    I believe all investors should invest based upon their risk tolerance, goals, time horizon and capacity. Now, I not speaking about those that take up positions for momentum based strategies as this falls more under trading than investing, to me. I think sometimes the two get mixed as being one in the same. An investor, to me, is invested for the long term picture and builds their positions up over time while a trader is in and out of positions and only holds these positions for short periods of time. And, they usualy employee some type of timming strategy. At times, I have employeed some trading strategies myself. No doubt this is currently a market for traders. As an investor, I established my core positions years ago when valuations were more reasonable and the markets were undersold. Since then, I have added to them through time when value could be found. Again ... currently, I am finding little value.

    In addition, I cut my special equity spiff positions loose some months ago ... and, yes I could trim some more (core holdings). And indeed, I may do so sometime next year if the equity train continues its upward climb. Currently, Morningstar is reporting that stocks are overbought by about five percent. In general, an investor is now paying $105.00 for $100.00 worth of assets by their valuation measures. I strive to buy when good discounts are available. Can stocks go higher? Absoutely. It seems the high valuation water mark reported by Morningstar came in December of 2004 at 114%.

    http://www.morningstar.com/market-valuation/market-fair-value-graph.aspx

    Thanks for stopping by and making your comments.

    My best,

    Skeeter
  • edited October 2013
    Reply to @Skeeter: Good advice. BF "Experience keeps a dear school..." Let me add, I've been good at lightening up far in advance - but terrible at calling the blow-off stage. Still had more $$ on the table in 2000 and 2007 than would have liked in retrospect.
  • edited October 2013
    From Seeking Alpha
    Fink: "Bubble-like" markets have returned
    "It’s imperative that the Fed begins to taper," says BlackRock chief Larry Fink. "We’ve seen real bubble-like markets again. We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.”A check of the scoreboard finds the S&P 500 ahead 24% YTD after a 13% advance in 2012. The high-yield bond spread to Treasurys is just 444 basis points - about the lowest in years, but not as tight as the 250 bps seen in the late 90s or in the months leading up to the financial crisis (though absolute yields were far higher then).Earlier: 2013 is on pace to surpass 2000 as the biggest year ever for equity fund inflows.

    | 9:09 PM|
    More from Bloomberg
    http://www.bloomberg.com/news/2013-10-29/blackrock-s-fink-says-there-are-bubble-like-markets-again-1-.html
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