How Overvalued Are Stocks?

Discussion of the Stock portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
Kbg
Executive Member
Executive Member
Posts: 1313
Joined: Fri May 23, 2014 4:18 pm

Re: How Overvalued Are Stocks?

Post by Kbg » Wed Jun 15, 2016 7:43 am

I highly recommend reading Meb Faber's asset allocation book. The bottom line is that from a returns perspective it really just doesn't matter over a long period of time as any allocation returns pretty much the same thing. It was way eye opening for me. A couple of weeks back half joking half seriously he told people to quit reading his blog and quit stressing about their ports.

I still come back to why I'm here...a very simple port that returns a little less than most standard asset allocation ports at way less volatility. Add some prudent leverage and it's an excellent risk adjusted way to grow your savings.
barrett
Executive Member
Executive Member
Posts: 1516
Joined: Sat Jan 04, 2014 2:54 pm

Re: How Overvalued Are Stocks?

Post by barrett » Wed Jun 15, 2016 10:16 am

Kbg wrote:I highly recommend reading Meb Faber's asset allocation book. The bottom line is that from a returns perspective it really just doesn't matter over a long period of time as any allocation returns pretty much the same thing. It was way eye opening for me. A couple of weeks back half joking half seriously he told people to quit reading his blog and quit stressing about their ports.
Hey Kbg,

What is the name of that book? Thanks.
User avatar
ochotona
Executive Member
Executive Member
Posts: 2660
Joined: Fri Jan 30, 2015 5:54 am

Re: How Overvalued Are Stocks?

Post by ochotona » Wed Jun 15, 2016 11:04 am

On his website which bears his name, the eBook is given away for free
barrett
Executive Member
Executive Member
Posts: 1516
Joined: Sat Jan 04, 2014 2:54 pm

Re: How Overvalued Are Stocks?

Post by barrett » Wed Jun 15, 2016 11:56 am

ochotona wrote:On his website which bears his name, the eBook is given away for free
Thanks, ocho. Now I have his book but he has MY email address.
User avatar
pugchief
Executive Member
Executive Member
Posts: 2747
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: How Overvalued Are Stocks?

Post by pugchief » Wed Jun 15, 2016 1:11 pm

barrett wrote:
ochotona wrote:On his website which bears his name, the eBook is given away for free
Thanks, ocho. Now I have his book but he has MY email address.
Use disposable email addresses and this will no longer be an issue. But Meb is not a spammer, and I'm pretty sure they don't share your info with any third parties.
User avatar
Kbg
Executive Member
Executive Member
Posts: 1313
Joined: Fri May 23, 2014 4:18 pm

Re: How Overvalued Are Stocks?

Post by Kbg » Wed Jun 15, 2016 3:14 pm

pugchief wrote:But Meb is not a spammer, and I'm pretty sure they don't share your info with any third parties.
He's not. I think I get stuff occasionally but definitely not daily or weekly.
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: How Overvalued Are Stocks?

Post by MachineGhost » Wed Jun 15, 2016 4:53 pm

Kbg wrote: I still come back to why I'm here...a very simple port that returns a little less than most standard asset allocation ports at way less volatility. Add some prudent leverage and it's an excellent risk adjusted way to grow your savings.
I guess I've got to disagree that putting 50% of my net worth at risk for a MaxDD via 2x is an "excellent" way to grow my savings. That's just not very smart in my book. The way to get more gains is to take less risk because risk by default is what eats away at gains! But less risk will requires more work to get more gains. So there's no free lunch.

I think in my next life I'll choose an alternative career to finance. ::)
Last edited by MachineGhost on Wed Jun 15, 2016 4:59 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: How Overvalued Are Stocks?

Post by MachineGhost » Wed Jun 15, 2016 4:55 pm

Kbg wrote:
pugchief wrote:But Meb is not a spammer, and I'm pretty sure they don't share your info with any third parties.
He's not. I think I get stuff occasionally but definitely not daily or weekly.
I like Meb but similar to Hussman, his ideas fail when implemented as funds. I think the problem is he's too simplistic and assumes backtests will repeat in the future without recognizing the changing dynamics of arbitrage, knowledge and computation. Since he's a Wall Street outsider, he's sort of [re]introducing simplistic 1980's ideas in the 2010's. And most of his catchet seems to be coming from going around giving speeches, etc. than any real skill as a money manager.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
Kbg
Executive Member
Executive Member
Posts: 1313
Joined: Fri May 23, 2014 4:18 pm

Re: How Overvalued Are Stocks?

Post by Kbg » Wed Jun 15, 2016 5:03 pm

MachineGhost wrote:
Kbg wrote: I still come back to why I'm here...a very simple port that returns a little less than most standard asset allocation ports at way less volatility. Add some prudent leverage and it's an excellent risk adjusted way to grow your savings.
I guess I've got to disagree that putting 50% of my net worth at risk for a MaxDD via 2x is an "excellent" way to grow my savings. That's just not very smart in my book. The way to get more gains is to take less risk because risk by default is what eats away at gains! But less risk will requires more work to get more gains. So there's no free lunch.
So watcha got that is better? During the wealth building phase, above all, the thing that kills gains is lack of compounding gains. William Bernstein does a great job of discussing life cycle investing in his book...so it depends where one is at in their life cycle and if they are grossly rich an entirely different set of rules apply, but let's see what you got. Layout your best system and let's run it against something like Sortino, UPI or CAR/MaxDD. And let's compare the alternative(s) decade by decade to see how they do.

Sharpe doesn't count as something with very little return can have agreat sharpe ratio.
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 11136
Joined: Sat Nov 12, 2011 9:31 am

Re: How Overvalued Are Stocks?

Post by MachineGhost » Wed Jun 15, 2016 6:28 pm

Kbg wrote:[quote="MachineGhost"So watcha got that is better? During the wealth building phase, above all, the thing that kills gains is lack of compounding gains. William Bernstein does a great job of discussing life cycle investing in his book...so it depends where one is at in their life cycle and if they are grossly rich an entirely different set of rules apply, but let's see what you got. Layout your best system and let's run it against something like Sortino, UPI or CAR/MaxDD. And let's compare the alternative(s) decade by decade to see how they do.
It's not that difficult. Any strategy that compounds gains more frequently than buy and pray will have superior metrics. And in most cases that reduces risk as well since time in market increases the probability of suffering through a Black Swan event. But this requires more work than just rebalancing once a year or every 2-3 years with bands, so that's the trade off. At some point it will turn into a career and that will conflict with your other career.

OTOH, I haven't found a strategy that I have a great confidence in that will continue to work on a weekly, monthly or quarterly basis. Intraday or daily sure, yearly or every few years, sure, but the in-between is very problematic. It's either a lot of work or very little work.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
User avatar
ochotona
Executive Member
Executive Member
Posts: 2660
Joined: Fri Jan 30, 2015 5:54 am

Re: How Overvalued Are Stocks?

Post by ochotona » Wed Feb 01, 2017 8:10 am

The stock market bubble is going to pop. It's getting bigger and bigger like an animated cartoon balloon.
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 1459
Joined: Mon Feb 24, 2014 2:28 pm
Location: Illinois

Re: How Overvalued Are Stocks?

Post by Cortopassi » Wed Feb 01, 2017 8:23 am

Sure, but you don't know when. Could be tomorrow. Could be once it hits 30,000.
Post Reply