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.
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Is the US Economy Moving Into A Higher Growth Phase?
Recent expansion of three major sectors -- housing, autos and manufacturing -- these are the bedrock components of our economy. If all three are doing fairly well, the worst that can happen is slow growth. There is simply too much of a multiplier effect of the combined total for a recession to occur with these three expanding.
Negative Summary:
Recent Payroll Tax Increase: Social Security was recently raised two percentage points to 6.2 percent. It is also by far the biggest component—$125 billion of the $190 billion—in tax increases approved by Congress to fend off a bigger wave of tax hikes from the "fiscal cliff."
Impending Sequestration Cuts: A package of automatic spending cuts that’s part of the Budget Control Act (BCA), which was passed in August 2011. The cuts, which are projected to total $1.2 trillion, are scheduled to begin in 2013 and end in 2021, evenly divided over the nine-year period. The cuts are also evenly split between defense spending and discretionary domestic spending.
I see the positives outweighing the negatives for the foreseeable future.
I think we're a permanent bubble/bust economy..going to try to time it this time since "stay invested think long-term blahblah" has never gotten me anywhere except stuck on the roller coaster.. :-/
Reply to @igno2: Hey Ig - You didn't used to use the handle "BILL" per chance? (-: (-: ... More seriously, I think your advice in general ain't too bad. I'd modify it to read: When the market's flying lighten-up. However, as I noted on another related post, there ain't alota good places to hide right now. I've fretted also, so today went a hair more cautious - moving some from DODBX, which has had a great run, & essentially shifting same amount into a 40% Equity & 60% Income hybrid. Not a dramatic shift, but should offer a bit more downside protection. BTW - small moves like that can do a lot to calm the nerves without screwing the pooch too bad in case you're wrong. Regards
Reply to @Charles: Neat chart Charles. Thanks for this and all the other cool graphics. It appears from the chart that M* considers markets about fairly valued. My best guess would be that's correct over a longer-term horizon (looking 5-10 years out). I certainly wouldn't advise somebody half my age (that would be 33.5 years) to pull $$ out of the market. In fact, if they're DCA-ing in, I'd say let her rip.
The technicians here (Flack?) may want to chime in, but my understanding is that sharp corrections can occur even in cheap or fairly valued markets. It's this possibility that some here, with perhaps shorter time-horizons, are becoming a bit concerned about - after a more than doubling of the major index averages in just a few years. And, nobody's picking Dow 14,000 as the "magic number". Heck - another 1000 point runup to 15,000 would only equal a 7% advance from here. Entirely possible this year IMHO.
Is there any way to see what M*'s reading on "fair value" was (1) at the pre-crash market high in 2007 and (2) at the bottom in 2009? Regards
Reply to @hank: Nope, I was just igno on the old site. Yeah I'm down to about 1/3 stocks now, the rest in bonds and quite a high % in MMs too, I'm only 55 but am pretty scared of what I think is coming. I think this is a classic bubble but even worse than before: I don't see what's holding it up this time. And how could we ever possibly pay off $17 trillion? Sick of being eaten up by fees too, getting out of managed stuff wherever possible.
Reply to @igno2: Igno: I remember you from FA and want to say how good it is to have you over here. (With all the diverse opinions, somebody's bound to have it right:-). Regards & good luck!
Reply to @scott: I have come full circle, since most "professional advice" comes from people who are paid by fees, I will do the opposite..go indexers, time the market, do NOT stay invested all the time..
Comments
The technicians here (Flack?) may want to chime in, but my understanding is that sharp corrections can occur even in cheap or fairly valued markets. It's this possibility that some here, with perhaps shorter time-horizons, are becoming a bit concerned about - after a more than doubling of the major index averages in just a few years. And, nobody's picking Dow 14,000 as the "magic number". Heck - another 1000 point runup to 15,000 would only equal a 7% advance from here. Entirely possible this year IMHO.
Is there any way to see what M*'s reading on "fair value" was (1) at the pre-crash market high in 2007 and (2) at the bottom in 2009? Regards