the market

Posted by

Just an update until some things are finished.  If you look for them there are many, bios about people who will grow old with very little savings.  The recent Wapo post put it bluntly and cruelly:  it will widen the divide between those who do and those who don’t, or those with or without.

The stock market is a way to keep in touch with things from North Korea to healthcare.  It is, when it falls, it will really put Trump behind the 8-ball.

For months now really smart and experienced people have been saying the U.S. stock market, with all its value and influence, is an overvalued bubble.  It is on a par with the worst recessions or depressions in history.  Then, over the past quarter or half a year, it went up farther.  There hasn’t been a meaningful correction in something like two years.

By valuations I mean, are these companies worth this much?  For the most part they’re the same companies from five, even ten years, ago.  Earnings and the economy are strong, but are they really worth two or three (or more) times what they were a few years ago?

For me, five, six, seven years of 17% returns, then 27% over the past year, is not sustainable.  It is also “wealth creatable.”  It is more than just savings.

“This is what we have been waiting for” one of the many, in the news analysts said maybe 6 or 9 months ago.  Specifically, the man was referring to low interest rates, strong profits, low inflation, and strong growth.  That is true.

It is not sustainable.  There are (at least) to components to stock pricing, 1) underlying fundamentals (profits, economy, etc.) and 2) market sentiment.  Right now they are both sky-high.

Trump is the least popular president in history.  He represents a lifestyle most people cannot relate to.  He is not going to change.  The next three years, beginning with the mid-term elections, may have a lot to do with his replacement.  Recently, lower corporate taxes, is perhaps his final–or just another–bubble.


So what did I do?  This is a bookmark.  Check back in a month.

Since the 2008 recession my stock funds bounced back quickly and recovered their losses.  Yet another learning:  50% down is usually followed by 50% up.  And that is extreme.  About the worst I can say about that is it adds up to two zero years.  After those two-plus years of stress and flatness they are up 17%-plus per year (quite bumpy actually, no losses, that is the average) plus close to 26-28% this year.  That is too good to not realize no matter what the sentiment, and the wise sentiment is bearish.

The week began with gains and I sold–exchanged from funds with this kind of performance into bonds.  The bond funds are now paying over 10%.

Will the stock funds earn 10% over the next year?  Probably not.  But for now consider it “trading” (sell high, buy low) so check back in a month.

Tuesday everything was up, sell more.  Ditto Wednesday and Thursday.  Friday was flat (surprisingly up a tiny) so sell a lot more.

Oil is less than half what it was and thing are still great.  Remember, stocks, they say, react on rumor not news.

Can no calamities and peaceful times delay a recession?  Will Trump create one?

Richard Thaler used the words risky and nervous.  Another link.

Psychological economics, I don’t know what it is and I would probably lose an argument with Mr. Thaler.  I think economics is trying to reduce everything to simple rules.  Psychology is everything.  Anthropology is more everything.

In terms of maximizing your investments, or trading, there is probably not a better way than no load mutual funds.  Simple, online, and free exchanging between funds has never been easier.  To be able to go into emerging market bonds or global technology stocks is not something an average investor can do without this relatively new technology.

It has never been easier to keep track of the market and trade.  And here’s a trick:  if you do it at the end of the day you can pretty much predict movements in fund pricing (NAV) by market indicators.  Twenty years ago you had to send in a check and you were completely at the mercy of market fluctuations and administrative efficiency.  It is much, much easier to dollar cost average and make smart transactions.