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Saturday, February 21, 2015

This time it's different again

No matter how many times they are wrong, stock market watchers are just going to keep throwing out the same old line out, looking to catch the little fishies.
The Nasdaq is rapidly approaching the 5,000 level and is less than 4% away from all-time highs that were set 15 years ago. These landmark levels are bringing back bad memories of the late 1990s, when people went crazy over money-losing tech stocks (and bad pop songs). The good times ended when the bubble popped in March 2000, causing huge losses for investors and making many tech companies to disappear.

All of this begs the question: Does the fact that Nasdaq has joined peers like the Dow in record territory signal another bubble is brewing in tech stocks?

No, this tech party doesn't appear destined to end in tears. That's because today's tech stocks look all grown up. They're more fundamentally sound than their 1999 peers, and their valuations are based on something the dotcom stocks of the past never had: real earnings.

"There's no bubble when it comes to technology stocks," said Scott Kessler, head of technology equity research at S&P Capital IQ.
Counterpoint: Twitter is valued at $31 billion. Facebook is valued at $223 billion. And the world is rapidly plunging into war from the Middle East to Eastern Europe.

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58 Comments:

Blogger Mr.MantraMan February 21, 2015 7:04 AM  

I would throw in Apple as well, my guess it cash flows solely from iphone sales to China and stock buy backs for PE, but Tim Cook is gay so its all great.

Anonymous zen0 February 21, 2015 7:35 AM  

on Monday, September 15, 2008, Lehman Brothers declared bankruptcy. On Wednesday, panicky bankers withdrew $144 billion from money market funds, nearly causing a collapse. In response, the Dow plummeted 13% in October. By November 20, 2008, it fell to 7,552.29, a new low. This was not yet the true market bottom. The Dow climbed to 9,034.69 on January 2, 2009 before screeching down to 6,594.44 on March 5, 2009.

I remember that before that March low, 2 people predicted it would be the bottom and it would be all up from there. One was Mahendra the financial astrologer, the other was Jaimie R.

Jaimie R. said Bernanke had it all covered and it was going to be party time again (vague paraphrase), and it was. Since then he has gone dark, for the most part.

Later that year, some people were expecting a repeat of the pattern following the '29 crash, but that did not materialize.

If I had listened to the Aussie madman and the Indian (dot, not feather) Satanist, I would be driving something other than a 1991 3 cylinder Pontiac Firefly.

All the ZeroHedge Hindenburgh thingies, and Death Crosses, and Worst (fill in the blank) Since Lehman articles have come to naught. Zip. Nada. Nil.

Sure, its all going to end in tears, supposedly, someday, somewhere in the future, sooner or later, any minute now, can't go on forever, wait and see........................

Could be a couple of years yet.

Anonymous Cash February 21, 2015 7:47 AM  

The real tears will come in the venture capital world. The companies that made it to NASDEQ in the 90s haven't this time but are still getting crazy valuations from the VCs.

Blogger Vox February 21, 2015 7:58 AM  

I remember that before that March low, 2 people predicted it would be the bottom and it would be all up from there. One was Mahendra the financial astrologer, the other was Jaimie R.

You seem to have forgotten that I also called the bounce, albeit not as soon as Jaime. Markets never go straight up or straight down. But I certainly didn't expect them to be able to keep it propped up this long, especially in the absence of any economic growth or even credit money growth.

But if you like gambling, go for it. Just be aware that is all you are doing. You're not investing in anything, least of all an economy.

Anonymous zen0 February 21, 2015 8:14 AM  

You seem to have forgotten that I also called the bounce, albeit not as soon as Jaime.

Sorry about that. Jaimie R sticks out because I thought he was irrationally cheerleading at the time.

But if you like gambling, go for it. Just be aware that is all you are doing. You're not investing in anything, least of all an economy.

That is one thing ZeroHedge is excellent at pointing out. I used to ask my father why he was investing in stocks when going to bet on the ponies was way more fun.

Blogger LP 999/Eliza February 21, 2015 8:17 AM  

The markets are so warped, manipulated and utterly dysfunctional its beyond description when charts, graphs point to global problems and intense social/economic unrest.

To half quote 311 and I, "its zen", in the end to spend and be Keynesian.

Anonymous Salt February 21, 2015 8:19 AM  

"This time it will be different," he said.
"How so?" I asked.
"Because," and with a wry smile he said," I'm not in it."

Anonymous NorthernHamlet February 21, 2015 8:23 AM  

I remember buying metal in bundles or getting really excited when someone mockingly made fun of my little collecting habit before asking me if I wanted this old box of coins that weren't really worth all that much.

Now they all ask me if it's a good time to buy gold and silver.

Blogger Nate February 21, 2015 8:41 AM  

Stock Market Advice: Buy Low. Sell High.

Stock Market Advice: The Market just hit ANOTHER all-time high! BUY BUY BUY!

Blogger Nate February 21, 2015 8:50 AM  

"Sure, its all going to end in tears, supposedly, someday, somewhere in the future, sooner or later, any minute now, can't go on forever, wait and see........................"

remember Japan's Lost Decade?

What are we up to now? Shouldn't it be called the Lost Three Decades now?

Japan keeps kicking the can down the road. it makes me wonder if Keynesianism... at some level of insane government injection turns into like a life support system or something. The body is dead and is never going to recover. But as long as you don't unplug the machine... the blood will technically flow and the lungs will technically oxygenate it.

I don't believe that option is available to the US because of various other pressures the US deals with that Japan does not. but we'll find out in 12 to 24 months. If it hasn't gone Boom by then... then I am going to be looking at the japanese corpse on life-support idea very closely.

Blogger Nate February 21, 2015 9:04 AM  

""There's no bubble when it comes to technology stocks," said Scott Kessler, head of technology equity research at S&P Capital IQ. "

didn't someone say this back in 1998 too?

Blogger Salt February 21, 2015 9:06 AM  

Thing about Japan over the last few decades is that the World still had room to move. Japan was the "boxed into a corner" exception, but now it's the rule... globally.

OpenID simplytimothy February 21, 2015 9:08 AM  

I don't believe that option is available to the US because of various other pressures the US deals with that Japan does not. but we'll find out in 12 to 24 months. If it hasn't gone Boom by then... then I am going to be looking at the japanese corpse on life-support idea very closely.

Fundamentally transformed.

This scenario troubles me. It establishes as "normal" the economic vibrancy of North Korea and gives the statist Keynesians (possibly) enough moral capital to retain (and increase) their choke-hold on our economic liberty.

This troubles me because I hope to live to be a part of The Great Restoration of our Republic and not part of a stoner sitcom version of reality.

Anonymous Harsh February 21, 2015 9:08 AM  

The Shiller PE Ratio is at levels not seen since the late '90s, FWIW.

Anonymous Cash February 21, 2015 9:12 AM  

Nate

How are you feeling about your timeline for the end of the dollar?

Blogger JartStar February 21, 2015 9:22 AM  

I think Japan's current status is our fate, I've been saying it for a couple of years now. Everything is lining up for the same outcome, a generation of lost workers, permanently low interest rates, a slow down in innovation, a stock market which could take long term capital losses, etc., But... there's a possibility the US may blow up instead as Japan is a homogeneous society unlike the US.

Anonymous p-dawg February 21, 2015 9:26 AM  

@Nate: The new motto is "Buy high, sell higher."

Blogger James Dixon February 21, 2015 9:47 AM  

> At the peak of the mania, the Nasdaq was valued at more than 100 times forward earnings, compared with a far more sensible 20 times today, according to FactSet data. That's not much above the S&P 500's forward price-to-earnings ratio of 17.5.

20 times forward earnings isn't "sensible". 14-15 time trailing earnings is. And a stock isn't a bargain until it drops down closer to 10-12 times trailing earnings or even lower.

> The Shiller PE Ratio is at levels not seen since the late '90s, FWIW.

Yeah. This market is overvalued. We're way past due for a significant correction. We've had a couple of minor pullbacks, but nothing significant.

Anonymous zen0 February 21, 2015 10:12 AM  

> We're way past due for a significant correction

Gambler's fallacy, or, "fallacy of the maturity of chances."

> but we'll find out in 12 to 24 months.

Prepare for the 12, hope for the 24.

Anonymous Will Best February 21, 2015 10:34 AM  

20 times forward earnings isn't "sensible". 14-15 time trailing earnings is. And a stock isn't a bargain until it drops down closer to 10-12 times trailing earnings or even lower.

This was my thoughts when I started investing over a decade ago and with experience I can tell you it is utter nonsense. Following it is a great way not to make money or worse lose it, and it demonstrates why a little bit of knowledge is dangerous. PE is a tool it is not definitive.

A company can end up with a PE of 10-12 when its outlook has minimal or no growth and thus be posed to return nothing over the next 5 years. By contrast a company with a 30 PE could be a bargain because of its expected growth.

The value investor isn't just looking for a good PE, they are looking for a company that other people have lost faith in, but is trending up.

OpenID spastic0plastic February 21, 2015 10:35 AM  

Probably accurately priced based on the falling value of the dollar. The Fed will start pulling negative rates out its sleeve to keep the market up for the Boomers' retirement, wages for workers will be repriced at the Guatemalan rate

Blogger Salt February 21, 2015 10:46 AM  

From ZH -

Stocks with attractive valuation are rare in the current environment of stretched share prices. The aggregate S&P 500 trades at 17.3x forward EPS and 10.2x EV/EBITDA. The only time during the past 40 years that the index traded at a higher multiple was during the 1997-2000 Tech Bubble. The median stock sports a P/E and EV/EBITDA of 18.0x and 11.0x, respectively. These valuations rank in the 99th percentile of both P/E and EV/EBITDA multiples since 1976.


Blogger hank.jim February 21, 2015 10:51 AM  

Predicting a correction is foolish. You can certainly pull out now while the market gains another 20 percent, but if you're thinking long-term, you'll recover your losses in a year or two. Worse is selling out at the bottom. Then you buy at the top. I testify to doing all these mistakes. I have absolutely no idea if the stock market will crash near term. However there was a mini correction in January when the market went down 3 percent (100 points) and did this 3 times for 3 weeks. So the market bounced back and more. A correction should mean a 10 to 20 percent drop. We are having an oil correction. Imagine the market if oil prices bottoms out.

Anonymous Dan in Tx February 21, 2015 11:00 AM  

"No, this tech party doesn't appear destined to end in tears. That's because today's tech stocks look all grown up."

Oh come now Vox, you can't possibly counter stunning dialectic like this! It makes me want to go out and invest right now!

"...their valuations are based on something the dotcom stocks of the past never had: real earnings." I almost literally fell on the floor laughing at this one. How long have they been contorting themselves attempting to make Twitter and Facebook actually make money?

Anonymous Noah B. February 21, 2015 11:05 AM  

And for those tech companies that actually do provide useful products, it has to be assumed that their products have been compromised by the NSA.

Or are the market wizards telling us that was already priced in?

Meanwhile, worldwide industrial production is flagging as copper and most other base metals are trading at or near 5-year lows. And equities bulls had better not event think about looking at the BDI unless they're ready to wet themselves.

Blogger Robert What? February 21, 2015 11:06 AM  

As many others have observed, the main reason for this is the mad money printing by the Federal Reserve. The whole purpose of which is to make whole their crony banksters pals on their losses. Better minds than mine are wrestling with how this all ends.

Blogger Bard February 21, 2015 11:21 AM  

What do you own with twitter and facebook? Is there a server somewhere with my name on it? Their revenue is advertising. They create or manufacture nothing. They are just platforms. 223 billion...you have to be shitting me. I too am going to adjust my long term plan if we are still having this same conversation 12 months from now.

Anonymous Noah B. February 21, 2015 11:21 AM  

And the reason we see so much more of a bubble in equities than in commodities is that our credit money system is subject to politically-motivated manipulation in a way that a commodity currency is not. In order to keep their place at the spigots of credit, banks are forced to do the will of the politicians, which means investing and making loans in such a manner as to make the politicians look good.

Anonymous rho February 21, 2015 11:32 AM  

A company can end up with a PE of 10-12 when its outlook has minimal or no growth and thus be posed to return nothing over the next 5 years. By contrast a company with a 30 PE could be a bargain because of its expected growth.

The value investor isn't just looking for a good PE, they are looking for a company that other people have lost faith in, but is trending up.


P/E at 18x is insane. You can buy and sell and make money with stocks like that, but it's not "investing." It's gambling. You are always searching for the greater fool, which works well enough until you run out of money or fools.

Anonymous Will Best February 21, 2015 11:35 AM  

Predicting a correction is foolish. You can certainly pull out now while the market gains another 20 percent, but if you're thinking long-term, you'll recover your losses in a year or two.

The sitting bull strategy stopped working a while back. Over the last 15 years the S&P 500 has returned about 5% using dividend reinvest (less than 2% adjusting for taxes and inflation). That is a whole lot of volatility and risk for not a lot of real return. Might as well have just bought treasuries. And keep in mind we are sitting at near record highs right now, with a technical recession on the horizon (its been over 6 years so we are due). We could very well end up with a 20-year window where a sitting bull will do little more than break even.

Trying to time the markets fits and spits is of course going to get one into trouble, but if the market starts screaming sell as it did in Q2 of 2008 when Bear Stearns went under, one should take the opportunity lock in their returns.

Anonymous DMM February 21, 2015 12:01 PM  

Even if there wasn't a bubble in tech stocks, that doesn't mean that the rest of the stock market is sound. And while there are less completely unfounded companies out there today than there was at the height of the dotcom bubble, it doesn't mean that they are properly valued either, as VD pointed out with Twitter and Facebook.

Anonymous map February 21, 2015 12:14 PM  

The markets are rigged to create volatility. That is how Wall Street professionals make money. Volatility determines the value of the various derivative products, which are mostly insurance products designed to generate cash flow or hedge positions. What we have seen is massive volatility, which means profits have been huge for Wall Street.

The most important factor I would guess is how much money is flowing into the market from 401(k)'s and IRA's. Remember, the efficient market hypothesis convinced the general public that the best investment is dollar cost averaging into broad-market index funds. This means the market is being buoyed by billions of dollars of investment from Main Street injected periodically. If that has not collapsed, then this sort of volatile market can continue indefinitely.

Anonymous The other skeptic February 21, 2015 12:40 PM  

Isn't that the same with respect to immigration?

The advocates of a Boer Apartheid republic understood that exponential African population growth would, if unopposed, lead to them being ethno-culturally swamped — a major concern also of prominent Israelis …. To do nothing amounted to ‘national suicide’ of White South Africans. They also saw the breeding campaign as an act of war. Apartheid was their political Just War of Self Defense.

Blogger James Dixon February 21, 2015 12:42 PM  

> Gambler's fallacy, or, "fallacy of the maturity of chances."

Only if you assume it means you're going to get one. There's no fallacy in noting that we've had a longer period between corrections than is normal.

> PE is a tool it is not definitive.

Did I say it was?

> A company can end up with a PE of 10-12 when its outlook has minimal or no growth and thus be posed to return nothing over the next 5 years.

If it's a mature company paying a good dividend, that's probably acceptable to most people. It's the equivalent of holding a CD at the bank.

> By contrast a company with a 30 PE could be a bargain because of its expected growth.

Nothing is a bargain because of expected growth. Only realized future growth. I've lost count of how many companies had "expected" growth that never materialized.

> The value investor isn't just looking for a good PE

Again, I didn't say they were. I was discussing P/E because the article did, and I took issue with their statement.

> Over the last 15 years the S&P 500 has returned about 5% using dividend reinvest (less than 2% adjusting for taxes and inflation). That is a whole lot of volatility and risk for not a lot of real return

While I agree, it's not like you have a lot of other options out there at the moment. And you never know when the stock market will exhibit one of its periods of "irrational exuberance" that it's known for. We are still only at about 18X P/E. The market could easily see 24X before we get another collapse.

Blogger David-2 February 21, 2015 1:06 PM  

This article - http://www.businessinsider.com/silicon-valley-boom-bust-2015-2 - is straight to the point and though based on a single anecdote is oddly convincing.

Here's the conclusion thought he entire annotated Twitter conversation is worth reading:

In other words, I gathered, Apple will reinvent the car business by transforming cars into gigantic wireless iPhone docks, making them beautiful — Apple's designers are apparently appalled by the ugly crap we ride around in these days — and selling 20 million to 100 million of them per year. Apple will also reinvent the car business by doubling the prices people will pay for cars or halving what it costs to make them (if it's going to earn even a 30% profit margin on the cars, let alone a 50% margin, it will have to do one or the other).

I expressed some skepticism about this.

And then I received the coup de grace — the logical slam dunk that is always invoked to end all questions about Apple's fantastic future.

VALLEY BIGWIG 2: You could have said the same thing about the phone business 10 years ago.

Well, I couldn't argue with that.

Anonymous Jack Amok February 21, 2015 1:07 PM  

This was my thoughts when I started investing over a decade ago and with experience...

Son, a decade of investing isn't experience. You haven't been through a tenth of what the Stock Market can do. Not saying you're wrong about P/E, just don't put too much confidence in how much you know about investing based on what's happened the last ten years.

Blogger James Dixon February 21, 2015 1:19 PM  

For those interested in how often market corrections happen on a historical basis, this article may be of interest:

http://investment-fiduciary.com/2011/08/05/how-often-do-market-corrections-happen/

> Son, a decade of investing isn't experience. You haven't been through a tenth of what the Stock Market can do.

One of the things I like about this blog is the perspective it can give you. :)

I've personally been investing for about 30 years now, and while I know some of the basics, I wouldn't begin to call my experience comprehensive.

Anonymous Jack Amok February 21, 2015 1:21 PM  

Apple will reinvent the car business by transforming cars into gigantic wireless iPhone docks, making them beautiful ...I expressed some skepticism about this....VALLEY BIGWIG 2: You could have said the same thing about the phone business 10 years ago.

Heh, heh. It's interesting how little some people understand about entrepreneurism, even those actively involved in it. Successes like the iPhone certainly take hard work and skill, but they also take luck, and luck isn't a reliable companion. Apple had been limping along on the verge of bankruptcy for a decade before the iPhone saved their bacon, and they haven't had any significant follow-up hits since then. They're not some magic hit making machine.

They could make iCars a success, but I don't think I'd give them more than a 1 in 10 chance of pulling it off.

Blogger James Dixon February 21, 2015 1:29 PM  

Oh, and note that listed frequency of a 50% correction being every 50 years. We've pretty much had two of them in the past 15 years, and I don't discount the possibility of another one. If you can't take your investment dropping in half at what seems like a moment's notice, the stock market probably isn't for you.

Blogger hank.jim February 21, 2015 1:32 PM  

"We could very well end up with a 20-year window where a sitting bull will do little more than break even."

This is even less useful than predicting a market crash. Remaining in treasuries (cash) is fine if you don't mind inflation eating it up especially since inflation is nonexistent. The dollar is high compared to other currencies. I once considered buying euros since it was worth much more than the dollar, but it was a losing bet. So the stock market it is... For now. With perhaps some amount in cash just in case. It is still king dollar.

Blogger hank.jim February 21, 2015 1:35 PM  

I thought war was profitable.

Anonymous Rolf February 21, 2015 1:48 PM  

Markets can stay irrational longer than you (a non-bankster) can stay solvent.

That said, I think we've been living on borrowed time for a while, papering over the fundamental problems of too much bad debt, malinvestment, and too much government regulation (and too much government in general). I expect we'll start to see the beginning of a deflationary spiral as spending is withdrawn and saving goes up because of uncertainty. Au and Ag will decline a bit further as people raise cash; it may well go a bit under $1,000 and $12 per ounce, respectively. Facing the specter of a deflationary implosion, I expect central banks and government will abandon any pretense of finscal sanity and just monetize (and therefore effectively write off) most of the outstanding government debt in the world, causing a major inflationary spiral, where gold >$5,000 and silver >$100. But those prices will show up 2017 at the earliest, though the lows might well be hit later this year.

Markets gonna market, and the most you can do with the inevitable is postpone it, and the longer you do, the deeper it's going to bite.

Anonymous Roundtine February 21, 2015 2:06 PM  

Double Top

Anonymous Anon February 21, 2015 2:16 PM  

The Dow will climb over it's next benchmark of 20K. Buoyed by foreign investment.

Anonymous Jack Amok February 21, 2015 2:23 PM  

@Nate:

Japan keeps kicking the can down the road. it makes me wonder if Keynesianism... at some level of insane government injection turns into like a life support system or something.

Seems like the bankster/cronyist types have "too-big-to-fail" as their primary playbook. Immediately upon getting power they try to set things up so that the only way to get them out of power or turn away from their policies is to flip over the whole card table.

They co-opt the bulk of people into keeping the system bumbling along for fear of collapse. Ultimately if enough people are growing food and providing heat, shelter and clothing, and some entertainment, things can stay afloat regardless of what sort of mess finance really is.

Anonymous Will Best February 21, 2015 3:14 PM  

Nothing is a bargain because of expected growth. Only realized future growth. I've lost count of how many companies had "expected" growth that never materialized.

And I have lost track of the companies that are supposed to be safe good value investments that aren't. Case in point, a client's 50k in GM bonds were replaced with about $6000 worth of stock, when it should have been paid out at around $30-35k due to its creditor status. Her and everybody else like her had no idea that the rule of law could get chucked out the window in a 1st world country the way it could in Argentina. Fed Gov could default on treasuries. So in that sense everything is a gamble.

One of the things I like about this blog is the perspective it can give you. :)

I've personally been investing for about 30 years now, and while I know some of the basics, I wouldn't begin to call my experience comprehensive.


There is too much out there for anybody to be considered to have comprehensive knowledge of the entire market. But that doesn't mean you can't obtain expertise in certain areas in a shorter period of time. Nor is experience a prerequisite for knowing what to do. If it were, there would be zero stock brokers/hedge fund managers under the age of 70.

Blogger James Dixon February 21, 2015 3:37 PM  

> And I have lost track of the companies that are supposed to be safe good value investments that aren't.

Two sides of the same coin. All investments involve risk.

> So in that sense everything is a gamble.

Exactly. You have done well, grasshopper. :)

> Nor is experience a prerequisite for knowing what to do.

No, but it does seem to help. At least for most people.

Anonymous Anon February 21, 2015 4:25 PM  

BTFD!

Anonymous Jack Amok February 21, 2015 4:50 PM  

> Nor is experience a prerequisite for knowing what to do.

No, but it does seem to help. At least for most people.


The key thing is not to convince yourself that experience in Market Condition A is going to be relevant during Market Condition B, or (a close substitute) that Market Condition A is going to persist. Sooner or later, you're going to be in Market Condition B (or C or D or X), and you have no experience in that environment.

Anonymous Jack Amok February 21, 2015 4:53 PM  

Nor is experience a prerequisite for knowing what to do. If it were, there would be zero stock brokers/hedge fund managers under the age of 70.

Who said stock brokers and hedge fund managers know what they're doing?

Blogger Geoff February 21, 2015 7:21 PM  

If you're concerned about your US equity portfolio, hedging with put options isn't a bad strategy at the moment. For example, buying S&P 500 index put options will protect most of your downside without giving up the upside. All it will cost you is the price of the puts, which aren't too expensive right now given the relatively low volatility.

Anonymous Will Best February 21, 2015 8:27 PM  

The key thing is not to convince yourself that experience in Market Condition A is going to be relevant during Market Condition B, or (a close substitute) that Market Condition A is going to persist. Sooner or later, you're going to be in Market Condition B (or C or D or X), and you have no experience in that environment.

No the key is to recognize the transition from Market Condition A to B, C, D, or E. Because that is when fortunes are won and lost.

Anonymous Harsh February 21, 2015 9:59 PM  

So the stock market it is... For now. With perhaps some amount in cash just in case.

How are those QQQ shares you bought in 2000 doing?

Blogger James Dixon February 22, 2015 5:38 AM  

> Because that is when fortunes are won and lost.

If you're looking for fortunes. The old line is "Bulls make money, bears make money, pigs get slaughtered". Personally, I'm looking for market level returns. The majority of our money is in Vanguard index funds. We do have an after tax account we use for buying individual stocks, but it's only about 25% of our portfolio.

Anonymous Jack Amok February 22, 2015 1:51 PM  

No the key is to recognize the transition from Market Condition A to B, C, D, or E. Because that is when fortunes are won and lost.

As you wish, but your experience in Market Condition A won't help you recongize that transition.

Blogger RobertT February 22, 2015 4:12 PM  

Money is pouring into the Silicon Valley because there's no where else to put it. I have a money market that pays me one, one hundredth of one percent interest. But I'd bury my money in my back yard before I'd put it in the stock market. The thing that sticks in my mind about gold is when it starts down, you can't give it away. I'm beginning to look at Bitcoin. Undecided thus far, very volatile, but there's a lot of things to like about it. If you have a lot of money, farm ground still looks good to me for the long haul. Unless we kill each other in the meantime.

Blogger Kurt February 22, 2015 10:18 PM  

simple system for long term people - 12 month moving average - monthly price above = in, below = out
This will keep you in the bull market and out of a bear market without too much whipsaw.

You can tweak it some. I like using the 12 month + the 12 month hi/lo envelope. Half position above 12 MA, full at 12 month break of high. Cover half if it breaks back under 12 MA, and all when it drops under 12 mo lo.

Setup on freestockcharts.com - use monthly price bars, 12 period simple MA, and 12 mo donchian channel. Check out for example the S&P500 - it would have served you well over pretty much any long term period.

Anonymous Discard February 22, 2015 11:45 PM  

RobertT: I understand that the real estate bubble followed the dot.com bust. Apparently, there's too much money chasing too few good investments. Why are there not enough good investments? Is it because we've lost so much of our industry?
Or why is there too much money? Because money represents nothing?

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