How Overvalued Are Stocks?

Discussion of the Stock portion of the Permanent Portfolio

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dualstow
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Re: How Overvalued Are Stocks?

Post by dualstow » Thu Feb 02, 2017 11:08 am

Cortopassi wrote:Sure, but you don't know when. Could be tomorrow. Could be once it hits 30,000.
+1
It wasn't that long ago that there were discussions here about the stock market being "broken." Stocks have only surged since then.
And, remember the thread called "Which Asset Will Double First"?
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ochotona
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Re: How Overvalued Are Stocks?

Post by ochotona » Fri Feb 03, 2017 9:00 pm

My stop-loss is set at 2060 on the S&P500. That's a target based on my use of Dual Momentum (I use April '16 as my lookback reference, not February '16... I've mentioned this before. I'm being cautious).

We're at 2297 now. Some optimists think we could make 2500.

So am I willing to lose -10% in order to gain 8.8%? Not good risk:reward

If the price goes to 2160, then the risk:reward changes:

-4.6% vs. 15.7% which is much better... but then we're right at the 200 day MA, which itself is a really good momentum indicator, so as a momentum investor I can't take that bet either.

Sort of hard to stay still, hard to move. Getting boxed in.
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InsuranceGuy
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Re: How Overvalued Are Stocks?

Post by InsuranceGuy » Fri Feb 03, 2017 9:16 pm

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!
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ochotona
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Re: How Overvalued Are Stocks?

Post by ochotona » Fri Feb 03, 2017 9:25 pm

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!
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?
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mathjak107
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Re: How Overvalued Are Stocks?

Post by mathjak107 » Sat Feb 04, 2017 4:45 am

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 .
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ochotona
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Re: How Overvalued Are Stocks?

Post by ochotona » Sat Feb 04, 2017 8:17 am

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 .
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.

I'm not sure it was valuation, I think it was just "this sucks!"
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Re: How Overvalued Are Stocks?

Post by mathjak107 » Sat Feb 04, 2017 8:25 am

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 . .
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ochotona
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Re: How Overvalued Are Stocks?

Post by ochotona » Sat Feb 11, 2017 8:31 pm

P/E 12 ? Oh for the good old days mathjak!
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mathjak107
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Re: How Overvalued Are Stocks?

Post by mathjak107 » Sun Feb 12, 2017 3:00 am

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 .
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ochotona
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Re: How Overvalued Are Stocks?

Post by ochotona » Sun Feb 12, 2017 4:15 am

Maybe nominal rates were high but real rates were low in 1982?
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mathjak107
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Re: How Overvalued Are Stocks?

Post by mathjak107 » Sun Feb 12, 2017 4:30 am

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?

Post by LazyInvestor » Sun Feb 12, 2017 6:47 am

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.
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