"No assumptions are necessary. Jim Stack is directing his advice to all investors: to you, to me, to MFOers, and to his legion of loyal followers."
---
Wow - If Stack's advice is to be taken seriously would his vision than not become a self-fulfilling prophecy?
Here's why: If all investors decided to ratchet-down their equity exposure by 10-15% based on Stack's forecast, equity valuations would than adjust downwards to reflect the new reality. In fact, they might well over-shoot on the downside.
I haven't learned a thing from this thread. There are hundreds of bright people like Stack whose views are worth reading. We can learn from all of them. None deserve the attention Stack seems to be receiving here. I got a lot more out of JohnC's thread on "bullish" or "bearish" as I was able to identify different types of investors (here at MFO) with the varying outlooks offered - and none of the views were served up as sacrosanct.
There's another issue here which seems to have largely escaped discussion. That's this whole notion of trying to time markets. Yes - Stack is merely advocating "reducing exposure". To me, that's a cute way of saying: try to time markets. And I think that's terrible advice for younger investors attempting to grow a retirement nest egg. For "oldsters" (probably the predominant group on this board) who have already accumulated a nest egg, timing makes a bit more sense from a defensive point of view, but is still a "dicey" (a begrudging nod to Vegas) proposition - the benefits of which are highly dependent upon both the investor's temperament and goals as well as a whole host of unknowns.

@jlev, thanks for the MFO writeup, I know I must have read it because I read every word of every commentary but I just didn't remember it.
I've been watching MOAT for years and while I'm impressed with the "idea" behind it I'm less convinced about M*'s fair value process. It seems to me they make big changes too often (for instance I think they were very far behind the eight ball on energy) and then they seem to be all over the place with their moat definitions. I'll give them credit for having a decent record but I'm just worried they'll find a way to screw it up over time.
@00BY, thanks also for the mention of IVAL. The MFO writeup provided the full context of their overall strategy. I agree with you that it appears more aggressive. In fact, with a portfolio focused far more on Japan than Europe it actually seems a bit more like the momentum version that's supposed to come later this year. My general impression from the CAPE information I look at every once in a while is that Japan is overvalued in general terms, but apparently they're finding a lot of value there.

No, no, MJG. You can squirm, doubletalk and evade all day long, but here's the straight facts, in correct sequence:
First, you said: "The planned Bay Bridge section will be a huge success and will be a lasting example of American engineering expertise for a century or more."
To which I replied: "it is evident that your commentary is completely divorced from reality."
Then, you said: Thanks for the Bay Bridge update. Obviously I knew nothing about its status or current crop of deficiencies.
I then noted the parallel with your "No, no!" diatribe against David Moran, in which you viciously castigated him for responding to you with insufficient accuracy.
Causing you to ask: "For reasons that escape me, you assume that I should be conversant with happenings in San Francisco. Why?"
To which I answered: "Pretty straightforward: In response to my observation that "I'll leave the engineering to the designers of our new Bay Bridge section" you INITIATED a commentary which strongly suggested that you were conversant with our current engineering fiasco."
You now say that "My comments represented general "good practice" engineering policy, especially after that Tacoma bridge collapse" in a pathetic attempt to re-color your earlier comments. It's quite obvious that you are applying two completely different standards to your comments, and the comments of others.

"For reasons that escape me, you assume that I should be conversant with happenings in San Francisco. Why?"
Pretty straightforward: In response to my observation that "I'll leave the engineering to the designers of our new Bay Bridge section" you INITIATED a commentary which strongly suggested that you were conversant with our current engineering fiasco. Remember that? It was only a few hours ago, after all.
Mostly Just Gas. Of course you're not repentant; your self-biased double-standard allows you that luxury. By the way, in contradiction to your speculation regarding "psyches" I kinda like my "Zebra stripes", and honestly don't consider you to be any sort of credible threat.

Hi Old Joe,
Well I guess I was wrong again with my overly optimistic hope that a Zebra would change its stripes. In your case, I suppose that will never happen.
Yes, I did send a truculent reply to a feeble response on my Broken Window submittal. In that tepid response, the sender admitted that his comments just might be off target with “point taken, thanks; I will try to respond with something thoughtful…. “. I thought that was an vague admission, and my heated posting followed. The issue was dead until you just referenced it.
You only posted selected parts of my posting. Here is the entirety of it:
“No, no! Your brief concession that you touted an inappropriate Broken Window reference doesn’t answer the muster call. It didn’t sound the trumpet; it was barely a whisper.
In your reply posting on this matter you predicted that I would not even read your reference. Well you were wrong; I did.
Apparently you posted that Link without reading it yourself. The very first paragraph in your referenced article clearly identifies it as a social policing initiative, and not one that addresses economic theory issues.
In your initial response to me you said : “This entry is thorough, if you're genuinely interested in the complex subject, which somehow I bet is not really the case…”. Well I was "genuinely" interested enough to access your article. Given its unsuitable character, I suspect you yourself never did even casually examine it. That’s shamefully dishonest.
Your creditability is shot; it is done and it is your own doing. Based on this present experience, any checking of your references is a grand time sinkhole. I will not play that wasteful game. Please don’t bother to now search for seemingly applicable counter references. You would be wasting your precious time.
I am not a devoted Austrian economics conscript. I am also not a committed Keynesian follower. Both economic schools have something to offer, but are circumstance dependent. Both are right sometimes and wrong sometimes. Krugman is right sometimes and wrong sometimes. Economics is not a hard science. What worked economically yesterday might be a complete failure today.
I never intended to get embroiled in an economic theory food fight here. It’s sloppy slogging, and surely will not be fully explored on a website designed to exchange mutual fund data and ideas. My contribution to this food fight ends now.
Apparently, other MFOers are prepared to pickup the gauntlet. Good luck to all. This debate has little chance of any meaningful resolution.”
That’s the end of my submittal. What aroused my anger most was the charge that I would not read the included reference and that I was not genuinely interested. I did and I was.
For reasons that escape me, you assume that I should be conversant with happenings in San Francisco. Why? I have visited New York city and Baltimore more recently, and still never consider reading the Baltimore Sun newspaper.
At the time of your original posting that introduced the Bay Bridge example, you did not provide references relative to its many problems, or even to hint at them. Later you do.
Indeed, I have high publishing standards. I do fact-check most, but not all, of what I quote in my informational sections. I try to clearly delineate between my opinions and the general information that I provide. If inadvertent errors are made in the general information sections, I urge folks to alert me. I will correct them. Bad stuff happens.
Sometimes my opinions run counter to others on MFO. I don’t understand why that rattles some folks as much as it does, unless they are only seeking what behaviorist call a Conformation Bias. If that’s the case, I’m the wrong guy to read. The solution is simplicity itself: just avoid my postings completely. My postings must be more dangerous to a few individual’s psyches than I intend. I’m not repentant.
Best Wishes.

FYI: As soon as the program becomes available for free, early tomorrow, I will link it.
Regards,
Ted
May 7, 2015
Dear WEALTHTRACK Subscriber,
Federal Reserve Chairwoman Janet Yellen caused a bit of a stir in an interview Wednesday when she commented that “equity market valuations at this point generally are quite high.”
It wasn’t exactly an “irrational exuberance” speech, a la Alan Greenspan in 1996, but pundits were quick to point out that his observation was about four years early, as the markets continued to rally until the March 2000 peak.
The market is expensive historically, based on several longer term measures including one of our favorites, the CAPE ratio, or Cyclically Adjusted Price Earnings ratio, created by frequent WEALTHTRACK guest, Nobel Prize winning economist Robert Shiller.
The CAPE, which is figured by taking the current price for the S&P 500, divided by the average of S&P earnings over the last ten years, adjusted for inflation, is currently around 27. That is well above its 20th century average of about 15.
Fed Chairman Yellen isn’t the only one concerned about stock market levels, professional investors are too.
According to a recent survey from State Street Global Advisors, of over 400 institutional investors worldwide, 63% of them increased their stock exposure over the last six months, but 53% wish they could decrease it and would if they had a more attractive alternative. Talk about conflicted!
Plus, 57% expect a market correction of between 10 and 20% in the next 12 months!
Normally investors could turn to bonds for income and protection, but with bond yields near record lows, they are no longer a viable option.
According to this week’s guest, Clifford Asness, both stocks and bonds are more expensive now than they have been in 90% of market history. Asness is Founder, Managing Principal and Chief Investment Officer at AQR Capital Management.
AQR stands for Applied Quantitative Research, which they use in a number of strategies.
Founded in 1998, AQR, now a global investment management firm, oversees more than 130 billion dollars in hedge funds, mutual funds and a diversified collection of investment strategies, from traditional long-only ones to multiple alternative approaches. I asked Asness how unusual it was for both stocks and bonds to be this expensive at the same time and what investors should be doing in response.
If you’d like to see the show before it airs, it is available to our PREMIUM subscribers right now. We also have an EXTRA interview with Asness, about his new venture with London Business School, available exclusively on our website.
If you have comments or questions, please connect with us via Facebook or Twitter.
Have a great weekend and make the week ahead a profitable and productive one.
Best Regards,
Consuelo

Hi Old Joe,
To quote Ronald Reagan from the 1980 Presidential debates with Jimmy Carter: “There you go again”.
What pleasure do you take in building a straw-man (that’s me), and then meaninglessly attacking that straw-man? That could be a dangerous practice for you. This straw-man chooses to fight over either flight or freezing. My posting record shows that over and over again.
In this instance, you purposely misinterpret simple declarative statements that I wrote: "If you guys want to continue this discussion, that’s fine. Everyone is free to disagree." I meant nothing more than what I said. There is no deep hidden meaning that lurks below the surface.
Somehow, with malicious intent, you distort and insinuate my real meaning to declare that I hold MFOers postings as “substandard commentary”. That’s a total fabrication that was invented in your own mind. That’s sad indeed.
But I do appreciate this addition to your continuing and gratuitous tirade directed at me.
It further documents your spiteful and nasty nature. Your written words say much more about your character than they identify my shortcomings. It permits seasoned MFOers to compare and judge the merits of your superfluous assertions against my posts. I’m sure they recognize and measure the quality to these exchanges.
I note that in your comment, you use the plural “we” when recording “our” disapproval. Given your choice of pronouns, you presume to be speaking for the bulk of the MFO community.
To satisfy my curiosity, I wonder how you assembled this imagined cohort. Did you conduct a comprehensive and independent survey? Did Professor Snowball provide you with some statistical documentation? Or are these the rants of a lone dissenter who has an old, rusted axe to grind? I suspect the latter.
Why you persist in your ill-conceived vendetta totally escapes me. But I still hope for your rapid and complete recovery from this wasteful malady.
Best Wishes (sort of since my patience is thinning but my resolve is not).

Hi Hank,
Thank you for replying.
Reading your agitated response clearly demonstrates that I was not too far off base when I commented that I was “Sorry if I touched a tender spot”. Again, based on your reply, I not only touched a tender, soft spot, I apparently violated it.
I suspect one reason for your highly charged response is at least partially connected to a Conformational bias. “A man hears what he wants to hear, and disregards the rest”. We all fall victim to this behavioral bias.
It certainly appears that you have concluded that our investment philosophies and practices differ somewhat. That’s likely true. Most of what appears on these discussions is simply market opinion. There are very few absolute rights or enduring wrongs when investing.
It seems you most strongly object to my MFO posting style. That’s presumptive on your part. But, you are welcome to your opinion. Others on MFO share that opinion, but others do not. I do not aim to please everyone.
Rather than addressing the substance of my posts, you challenge my form and format. You said: “To profess respect - and than proceed to inundate a discussion with your own doctrinaire perspective(s), superior intelligence and recommended reading list is not respect.”
Yes, I do write with purpose; I try to clearly state that purpose and my position. That’s what communication is all about. Words are powerful tools. I try very hard to assemble them to produce a lucid investment composition that is also entertaining.
I never, never claimed to be an expert. I frequently extol my amateur status and have freely admitted that I’m a self-educated investor with many shortcomings. I certainly never claimed “superior intelligence”. By the way, that’s a losers game since data shows that superior intelligence does not correlate positively with superior investment returns.
In my entire work-life, I competed for contracts with written proposals, so I do try to write with conviction and to document my positions. Hence, I provide statistics and references to buttress those positions. All this takes words and carefully crafted, logical sentences. Why some MFOers want to enforce a tight word limit escapes me. The solution is obvious: If the submittal is too long, ignore it.
For my entire FundAlarm and MFO posting period, I have stressed the benefits of a statistical understanding and the merits of Monte Carlo analyses under some conditions. This has angered some other participants, perhaps because of their mathematical limitations. But I remain committed to that purpose. If I have not yet won that battle, I surely have not yet lost it either.
“You have your way. I have my way. As for the right way, the correct way, and the only way, it does not exist.” That’s not me talking, it’s a quote from Friedrich Nietzsche.
Best Wishes.
ADDED COMMENT: Perhaps my comment that provoked your ire was too simplistic. I certainly never intended to coupled you with misguided axioms. You partially agreed with 4 of them. My misguided term referred to misled and/or misinformed investors. I may not agree with specific investors, but I still respect them.
And I really mean Best Wishes. I want all of us to succeed as investors.

"Don't piss into the wind,
Don't step on Superman's cape ..."

Yes, "the results are lackluster considering the sheer size and duration of easy monetary policy this time." No argument.
How many years did it take to escape the Great Depression?
I'll happily accept "lackluster" in lieu of another World War to revive an economy.

This chart is CAPE vs DSENX beginning with inception.
Click onto the the green/red icon at the far left end of the 350 day slider for a bar graph representation of the returns.

except with a lot of bonds (at a remove). What ratio, is my question.
This whole thread started with acknowledgment of it as LV, yes. I mean, check out the CAPE index it attempts to surpass.

ha, legs are long broken, partly, metaphorically, investment and otherwise.
Looks like about half stocks and related. How I read 'other', in other words.
See
http://www.thinkadvisor.com/2013/11/22/gundlach-on-shiller-cape-fund-a-better-mousetrap
Value orientation, in other words.
And this for the etn CAPE that DSENX also mimics:

The Index incorporates the principles of long-term investing distilled by Dr. Robert Shiller and expressed through the CAPE (cyclically adjusted price/earnings) Ratio. The index aims to provide notional long exposure to the top four US equity sectors that are relatively undervalued as defined by a modified version of the classic CAPE Ratio and possess relatively stronger price momentum over the prior twelve months. Each US equity sector is represented in the Index by one of the nine S&P Select Sector Indices (the "Sector Indices").
They also throw one sector out per some criterion to avoid value trap; I will try to find exact language. Ah, Fido summary:
It aims to identify undervalued sectors based on a modified CAPE ratio, and then uses a momentum factor to seek to mitigate the effects of potential value traps.
Hence the M* LV designation, or so I infer.
Possibly interesting take of a hatah:
http://www.etf.com/sections/blog/20177-inside-professor-shillers-cape-etn.html
I think Snowball commented recently that the delta over the etn was due chiefly to the bond play.
A key difference between the ETN and the new fund, according to DoubleLine, is that the ETN’s Treasury bill holding is fully exposed to counterparty risk, while the DoubleLine product is protected against such risk through exposure to its fixed-income structure.
Thanks for wishes. I am doing this with quite a bit of trepidation but also conviction, whatever that means.

FYI: Larry E. Swedroe and Andrew L. Berkin
Excerpted from the book, The Incredible Shrinking Alpha: And What You Can Do to Escape Its Clutches (BAM Alliance Press).
Regards,
Ted
http://wealthmanagement.com/print/investment/incredible-shrinking-alpha

You'll simply be buying shares from larger institutional holders as they cash out.
p.s. Shiller CAPE hit 27.6 on Friday. :)

Awesome! Are we hitting escape velocity yet, on the stairway to Heaven?
OOOOOOH, you're too good to be true
Can't take my eyes off of you
You'd be like Heaven to touch
I want to hold you so much
And every day I survive
I just thank God you're alive
You're just too good to be true
Can't take my eyes off of you.

How 'bout this...?
Maybe the Great Recession created more deep value opportunities that, unfortunately, are simply more volatile than in times past. Not to say it's changed always, just now. I also believe he sees financials within his circle of confidence. Often citing savings bank failures in the '80s.
So, for him at least, the volatility landscape had to change given the deep value nature of his strategy and the opportunities that have presented themselves.
That simple.

FYI: Among U.S.-listed exchange-traded products, 10 “socially responsible” products account for only $1.14 billion, or just 0.06% of ETP assets.
Regards,
Ted
http://www.investmentnews.com/article/20150127/FREE/150129922?template=printart
ETF Trends.Com: Socially Responsible ETF's
http://www.etftrends.com/?s=socially+responsible

From past commentary by Mike M, I would be very surprised if his "GI" comment was not meant sarcastically, especially given the highly dubious proposition that "Poor people can escape Poverty in the U.S........ ANYTIME they WANT TO"
tb's remarks are interesting to me because of the rather unpredictable mix of reasonable and logical commentary with obvious absurdities such as the above quote.