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edited August 2019 in Off-Topic
This Semi-Annual Report letter takes a thoughtful look at the challenges posed by current market conditions. Here is an excerpt that caught my eye:
This has led the average household to have 44% invested in common stocks — the second-highest level in the past 18 years.(8) Crowding into equities has been a prescription that cured most ailments for more than a decade now. We suspect that not everyone knows what is in their portfolio; not everyone understands that volatility will most likely recur at some point, and not everyone fully understands how they might react to a major and sustained market downdraft. Will they panic and reduce their exposure? Or will they ride it out and maybe even buy more?
The 44% statistic can be seen on a FRED chart I have been occasionally viewing for several years. That percentage has been somewhat high for a long while now but has not yet become nearly as elevated as it did in the late 1990s.

Here is a link to the Letter:

Here is a link to the chart.


  • davfor, thanks for posting. I formerly held some FPACX, and read with eager anticipation Mr. Romick's twice-annual thoughts. Later, sold out of FPACX, and had forgotten about his missives.

    Re the chart link, I do visit from time to time, but maybe I am just denser than normal today, I do not understand exactly what I am looking at here. I understand what Mr. Romick seems to suggest it is, but the "Header" on top of that charts seems to indicate the plotted data is some type of composite of a whole bunch of things? I get brain-freeze trying to decipher that header...

    One point of concern on Mr. Romick's comments: On pg 4, he comments "Most global stock markets are trading at or near all-time highs....". That statement is "problematic". Looking at long-term (10-year) charts, MOST large-economy stock markets are NOT near all-time highs: U.K (EWU), Germany (EWG), Japan (EWJ), Brasil (EWZ), China (FXI), Hong Kong (EWH), S. Korea (EWY). In fact most major equity markets, EX-cluding the US, peaked in January 2018 and have been in a generally downward direction for 18 months. Yes, there was some "up" motion in markets from the Dec 2018 low, but that upward movement did not bring most markets up to their January 2018 highs. India "might" be considered near its high as of the FPACX report 7/31/19, but it seems to be the exception. In fact, Russia and Brazil are WAY below their highs which occured several years ago, before commodities collapsed.

    Using IXUS as a broad, market-cap weighted barometer of non-US equities, at 7/31/19, it was about 13% below its January 2018 peak. And its lower still further as I type this. 13% is NOT "at or near" all-time highs.

    My point, while I laud FPA for being prudent, I wonder if the good folks at FPA are "overselling" the notion of a global equity bubble, in order to talk their own (FPA's) book? Outside the US, I don't see a whole lot of exuberant animal spirits in capital markets.

  • @Edmond

    Its also my sense that Romick was probably overselling the height of the global bubble at this point in time....particularly if we will continue to inhabit a near zero interest rate world for an extended period of time. But, that is just his enduring view of things. I said goodbye to FPACX in my portfolio a few years ago. But, it is still part of a portfolio I look over for a relative. And, I continue to think his ruminations are useful to consider.

    As for figuring out the origin of the header in the FRED graph, I will defer to an old link that discusses the topic in some detail:
  • edited August 2019
    davfor, THAT link is pretty phenomenal.


    post-scriptum : I just noticed, the FRED chart.. it doesn't appear to be current. It stops in January. Why would that be, I wonder?
  • My one problem with FPACX is FPA let the fund get too big. Romick used to buy small caps, but no longer. He's argued better values are in large I believe, but I don't think he could trade small-caps well now even if he wanted to. This is quite a different fund than it was when it was young and nimble and the management team was hungry to make a name for itself.
  • It's from the end of 2013.

    I find these articles fascinating and persuasive; David S and Ed S and their ilk have similarly written very persuasively about overvaluation. Also Bogle and Buffett and others, I think. The math sure is clear.

    Since this article was written, the SP500 has gone up over 60%, which is somewhat under 6%, I think, at a rough compute. So that looks in line with what philo man writes.
  • same philo dude wrote, at the same time, 12/13:

    To reach the valuation high of the 1955-1969 period -– 23.88, which was registered in January 1966 -– the current S&P would have to rise to 2125. To reach the high of the 2003-2007 period, which was registered in January 2004, the S&P would have to rise by a slightly higher amount, to 2130 (note that there is no need for a dividend payout ratio adjustment in this case). To reach the high of the 1990-1997 period, which was registered in December 1997, the S&P would have to rise to 2900.
    Admittedly, a call for Shiller CAPE to go to 33.82 and for the market to go to 2900 is pushing it –- not a smart bet. But there’s no reason why the market shouldn’t at some point go back and touch the valuation peaks that it reached in the other comparable periods. It’s showing every sign of wanting to do so.

    not gloating. it is approaching 6y later. except for last memorial day, was it?, SP500 has been bouncing near and above 2900 since april fool's. today's close a bit over.
  • @Edmond Good question. I don't know why YTD info for 2019 has not been posted to the FRED graph. Yesterday was the first time I had looked at it since early in the year. Its my recollection updates have been posted during the year in the past.....but that is a somewhat vague recollection.
  • This is a 6yo post, no?
  • edited August 2019

    See the second link from my original post:

  • dig it, sorry
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