How Overvalued Are Stocks?

Discussion of the Stock portion of the Permanent Portfolio

Moderator: Global Moderator

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 » Sun Feb 12, 2017 7:15 am

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.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 1902
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: How Overvalued Are Stocks?

Post by mathjak107 » Sun Feb 12, 2017 8:28 am

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
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 » Sun Feb 12, 2017 8:35 am

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.
barrett
Executive Member
Executive Member
Posts: 1516
Joined: Sat Jan 04, 2014 2:54 pm

Re: How Overvalued Are Stocks?

Post by barrett » Mon Feb 13, 2017 6:40 am

mathjak107 wrote:home prices are very localized . heck , our home in the pocono's is worth 60k less than it was in 2007 .
Ditto for our place in CT. It's still off the purchase price (bought in December of 2007... ouch!) by 20% or so.

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.
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 » Thu Feb 16, 2017 6:16 am

Another Harry S. Dent clone... Charles Nenner.. says Dow 5000 beginning Q3 2017, total descent will take 3-4 years.
User avatar
sophie
Executive Member
Executive Member
Posts: 3070
Joined: Mon Apr 23, 2012 7:15 pm

Re: How Overvalued Are Stocks?

Post by sophie » Thu Feb 16, 2017 8:02 am

barrett wrote:
mathjak107 wrote:home prices are very localized . heck , our home in the pocono's is worth 60k less than it was in 2007 .
Ditto for our place in CT. It's still off the purchase price (bought in December of 2007... ouch!) by 20% or so.

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.
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, 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?
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 » Sat Feb 18, 2017 9:40 pm

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.
User avatar
InsuranceGuy
Executive Member
Executive Member
Posts: 203
Joined: Sun Mar 29, 2015 1:44 pm

Re: How Overvalued Are Stocks?

Post by InsuranceGuy » Sat Feb 18, 2017 10:17 pm

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.
Not me, I only buy stocks when stocks are going up.
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 » Sat Feb 18, 2017 10:25 pm

InsuranceGuy wrote:
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.
Not me, I only buy stocks when stocks are going up.
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?
User avatar
InsuranceGuy
Executive Member
Executive Member
Posts: 203
Joined: Sun Mar 29, 2015 1:44 pm

Re: How Overvalued Are Stocks?

Post by InsuranceGuy » Sat Feb 18, 2017 10:36 pm

ochotona wrote:
InsuranceGuy wrote:
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.
Not me, I only buy stocks when stocks are going up.
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?
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 after a 10% drop.
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 » Sun Feb 19, 2017 2:58 am

Good model
User avatar
mathjak107
Executive Member
Executive Member
Posts: 1902
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: How Overvalued Are Stocks?

Post by mathjak107 » Sun Feb 19, 2017 3:42 am

InsuranceGuy wrote:
ochotona wrote:
InsuranceGuy wrote:
Not me, I only buy stocks when stocks are going up.
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?
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 after
10% drop.
There is some truth here. 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.
Post Reply