How Overvalued Are Stocks?
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- InsuranceGuy
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Re: How Overvalued Are Stocks?
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Last edited by InsuranceGuy on Mon Mar 08, 2021 9:14 pm, edited 1 time in total.
Re: How Overvalued Are Stocks?
When you look at the VIX, it makes these concave-upward "bowls" with a period of 4-5 months, and we're in the low part of a bowl now. A couple of more months and something might happen. March or April?InsuranceGuy wrote:Right now it seems that a Trump reduction in corporate taxes is priced in. Stocks have been steadily increasing since March 2016 for the most part.
Disclaimer: my momentum investing model has me in 100% stocks currently, could be a wild ride!
- mathjak107
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Re: How Overvalued Are Stocks?
trying to predict what over valued means can be futile .
stocks were deemed to be so over valued in 1982 that investors were told to stay away .
in one year p/e's jumped by 50% . well as we now now that was the kick off to one of the greatest bull markets in history . most investors missed the biggest gains in the beginning because they thought things were over valued .
stocks were deemed to be so over valued in 1982 that investors were told to stay away .
in one year p/e's jumped by 50% . well as we now now that was the kick off to one of the greatest bull markets in history . most investors missed the biggest gains in the beginning because they thought things were over valued .
Re: How Overvalued Are Stocks?
Mathjak, I was only 21 in 1982, so I was not plugged in. Who was saying stocks were overvalued in 1982? Looking back at CAPE and any other price-to-whatever ratio, they were not. I can imagine, though, after years and years of poor real performance, people just plain capitulated and gave up on stocks. I remember in 1984 I was buying 13% and 14% CDs, so there must have been high-paying CDs in 1982 also to entice people away from stocks.mathjak107 wrote:trying to predict what over valued means can be futile .
stocks were deemed to be so over valued in 1982 that investors were told to stay away .
in one year p/e's jumped by 50% . well as we now now that was the kick off to one of the greatest bull markets in history . most investors missed the biggest gains in the beginning because they thought things were over valued .
I'm not sure it was valuation, I think it was just "this sucks!"
- mathjak107
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Re: How Overvalued Are Stocks?
oh yes they were overvalued. remember we had double digit interest rates . the p/e's jumped from the 7's to almost 12 in one year . that was insane with double digit rates . interest rates are a big factor in valuations and judging high or low . .
Re: How Overvalued Are Stocks?
P/E 12 ? Oh for the good old days mathjak!
- mathjak107
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Re: How Overvalued Are Stocks?
with double digit rates that was an insane multiple back then , especially because the year started at 7. but who knew that was going to be the sstart of the greatest bull market .
Re: How Overvalued Are Stocks?
Maybe nominal rates were high but real rates were low in 1982?
- mathjak107
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Re: How Overvalued Are Stocks?
well real stock returns were low too , so on a valuation level stocks appeared very high especially because real returns were so low on them . real returns work both ways , they make stocks even worse of a value as real return on them drops .
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Re: How Overvalued Are Stocks?
Bogle says expected long term equity returns are ~2% real taking into account overvaluation.
I don't follow this since according to his formula, for example, European market should return the same but if I look at the charts European has under-performed US significantly.
I don't follow this since according to his formula, for example, European market should return the same but if I look at the charts European has under-performed US significantly.
Re: How Overvalued Are Stocks?
The case Shiller home price index is back to July 2005 levels. The SP500 peaked October 2007. Maybe we have a timeframe like that remaining before bubbles pop.
- mathjak107
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Re: How Overvalued Are Stocks?
home prices are very localized . heck , our home in the pocono's is worth 60k less than it was in 2007 .
the hardest hit areas in the down turn tended to bounce up the most . many area's are still below their old highs
the hardest hit areas in the down turn tended to bounce up the most . many area's are still below their old highs
Re: How Overvalued Are Stocks?
LazyInvestor wrote:Bogle says expected long term equity returns are ~2% real taking into account overvaluation.
I don't follow this since according to his formula, for example, European market should return the same but if I look at the charts European has under-performed US significantly.
These figures usually come from CAPE ratio analysis...which does not work at all as a timing mechanism but in hindsight usually works out to be a pretty good prediction.
Re: How Overvalued Are Stocks?
Ditto for our place in CT. It's still off the purchase price (bought in December of 2007... ouch!) by 20% or so.mathjak107 wrote:home prices are very localized . heck , our home in the pocono's is worth 60k less than it was in 2007 .
As I've mentioned a time or two in other threads, our municipality is so dependent on property taxes for revenue that we have now hit a point where there is a real danger of a further home devaluation as a critical mass of owners are trying to sell their homes to be rid of the recurring tax burden.
If anyone is interested, Shiller's data is available on his website here:
http://www.econ.yale.edu/~shiller/data.htm
Just click on "US Home Prices 1890-Present" but be forewarned that the data is in pdf format.
Re: How Overvalued Are Stocks?
Another Harry S. Dent clone... Charles Nenner.. says Dow 5000 beginning Q3 2017, total descent will take 3-4 years.
Re: How Overvalued Are Stocks?
Probably there are different reasons in each of these instances. In one case, the home prices shouldn't ever have increased that much to begin with. There are only so many people who can be supported by the economy of the Poconos.barrett wrote:Ditto for our place in CT. It's still off the purchase price (bought in December of 2007... ouch!) by 20% or so.mathjak107 wrote:home prices are very localized . heck , our home in the pocono's is worth 60k less than it was in 2007 .
As I've mentioned a time or two in other threads, our municipality is so dependent on property taxes for revenue that we have now hit a point where there is a real danger of a further home devaluation as a critical mass of owners are trying to sell their homes to be rid of the recurring tax burden.
If anyone is interested, Shiller's data is available on his website here:
http://www.econ.yale.edu/~shiller/data.htm
Just click on "US Home Prices 1890-Present" but be forewarned that the data is in pdf format.
Barrett, has the town thought about doing something to rein in costs? If the situation is that dire, the council should consider options like cutting school programs, raising fees on the municipal swimming pool and commuter parking lot, closing underpopulated schools, reducing trash pickup days, cutting town employees, renegotiating contracts etc. Not much use having all those wonderful services when there's a mass exodus going on because people can't pay for them. Get a few people together and storm the next open council meeting?
Re: How Overvalued Are Stocks?
If we get a 10% correction in stocks, who is buying? I'm on the fence. I have new 401(k) money.
Maybe I'd buy some IVV or VOO, but then put a really tight stop on those specific new shares.
Maybe I'd buy some IVV or VOO, but then put a really tight stop on those specific new shares.
- InsuranceGuy
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Re: How Overvalued Are Stocks?
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Last edited by InsuranceGuy on Mon Mar 08, 2021 9:14 pm, edited 1 time in total.
Re: How Overvalued Are Stocks?
OK, let's say there is a correction, but you still have + trend based on your favorite measure... 10 month MA, 1 year momentum, whatever. Are you a buyer? Or does valuation scare you away?InsuranceGuy wrote:Not me, I only buy stocks when stocks are going up.ochotona wrote:If we get a 10% correction in stocks, who is buying? I'm on the fence. I have new 401(k) money.
Maybe I'd buy some IVV or VOO, but then put a really tight stop on those specific new shares.
- InsuranceGuy
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Re: How Overvalued Are Stocks?
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Last edited by InsuranceGuy on Mon Mar 08, 2021 9:14 pm, edited 1 time in total.
Re: How Overvalued Are Stocks?
Good model
- mathjak107
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Re: How Overvalued Are Stocks?
There is some truth here. More money has been lost trying to buy low and sell high than any other mantra.InsuranceGuy wrote:I am not likely a buyer but not because of the valuation. My model takes into account momentum and volatility, so I would have to see stable upward momentum which is unlikely afterochotona wrote:OK, let's say there is a correction, but you still have + trend based on your favorite measure... 10 month MA, 1 year momentum, whatever. Are you a buyer? Or does valuation scare you away?InsuranceGuy wrote:
Not me, I only buy stocks when stocks are going up.
10% drop.
We all thought low was when we fell 2000 points in 2008-2009. Who knew we had 4000 more to go.
Many investors ended up hitting stop losses or running for the exits.
What makes money more times than not is buying high and selling higher. The trend is your friend as they say.
Trying to time where low is rarely ends well. In fact more money in gains is generally given up waiting for that dip then you gain.
Re: How Overvalued Are Stocks?
I do have a stop, it's 2070 on the S&P. My gamble, and it is a gamble, is that if we get a stumble, and I can buy the S&P500 index lower than were it is, but still above the stop, then maybe there will be a bounce back and the Trumpmania will resume. The worst case is, it goes down lower, I hit my stop, and I'm out. If I buy at 2170 and sell at 2070, I lose 5% on those shares, of less than 1% of my total portfolio.mathjak107 wrote: More money has been lost trying to buy low and sell high than any other mantra.
We all thought low was when we fell 2000 points in 2008-2009. Who knew we had 4000 more to go.
Many investors ended up hitting stop losses or running for the exits.
What makes money more times than not is buying high and selling higher. The trend is your friend as they say.
Trying to time where low is rarely ends well. In fact more money in gains is generally given up waiting for that dip then you gain.
My real pain is if I get stopped out, and them some bozo central banker then announces "free ice cream!" and markets reply, "huzzah" and the bubble inflation begins anew... then I'm whipsawed. But, I will ultimately have the last laugh (cry).
- dualstow
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Re: How Overvalued Are Stocks?
I have considered buying puts, but I have never made use of my options application, even to sell covered calls.
Re: How Overvalued Are Stocks?
I just don't like the idea of options expiring worthless.dualstow wrote:I have considered buying puts, but I have never made use of my options application, even to sell covered calls.