Is anything NOT "over valued" these days?

[chesebert]

I read articles, news, analyst reports, emails from my FA and everyone has been saying pretty much the same thing for few months now:

1. stock is over valued and is due for a correction
2. bond is over valued and the interest rate can only go up.
3. residential real estate is over valued and is not worth investing in in general at this time
4. commercial real estate is over valued due to Chinese money.
5. let's not even talk about oil (it's not over valued but do you like to gamble? yes it will eventually go back up...)

Shit, what is there to invest in when broadly speaking everything is over valued?

I am just sitting pretty and watching my NW tumble right now.

[Keith123]

I read articles, news, analyst reports, emails from my FA and everyone has been saying pretty much the same thing for few months now:

1. stock is over valued and is due for a correction
2. bond is over valued and the interest rate can only go up.
3. residential real estate is over valued and is not worth investing in in general at this time
4. commercial real estate is over valued due to Chinese money.
5. let's not even talk about oil (it's not over valued but do you like to gamble? yes it will eventually go back up...)

Shit, what is there to invest in when broadly speaking everything is over valued?

I am just sitting pretty and watching my NW tumble right now.

I am literally one of those guys.  I see no opportunity to invest almost anywhere right now except the energy sector.  I've been buying VDE, Vanguard's energy ETF.  I'll keep buying as long as oil stays at ~$30 or below.  By the way, I invested in residential real estate from 2010 to this past summer.  I have stopped now as price have recovered to the point that good returns aren't very feasible, at least in my area.  It's hard to find a spot to invest right now, in my opinion.

[GuitarStv]

Nothing is overvalued.  The information you have is available to every other investor out there, and has therefore been taken into account in the price of the stuff you're talking about.

You're trying to time the market.  Historically, that doesn't usually work out well.

[Eric]

Shit, what is there to invest in when broadly speaking everything is over valued?

What does your Investor Policy Statement say? 

Mine says to invest in my target AA as soon as I have the money.  So that's what I do.  Everything else is just noise.

[RichMoose]

The Canadian and Australian markets are actually cheap today when compared to the US, especially when purchasing with US dollars. Right now Canada's market trades at about P/E 13. Australia is not much more, but has a higher dividend.

This is of course due to pessimistic views on energy and materials, which strongly influence these markets.

If you ask some people, they would say both Canada and Australia are "over-valued". However, as a Canadian I am optimistic. So I am buying as much as I can to maintain my desired AA. Because of the performance of my holdings, I am still about 56% US (thanks only to my dollar tanking a lot faster than the S&P500). So for now I patriotically buy Canadian aggressively. :)

Oh, and if your investment plans call for proper diversification you would likely be investing Internationally as well. VTIAX can be bought for the same price as it was 5 years ago, that's a deal in my eyes.

[zz_marcello]

Nothing is overvalued.  The information you have is available to every other investor out there, and has therefore been taken into account in the price of the stuff you're talking about.

You're trying to time the market.  Historically, that doesn't usually work out well.

...like 1989 in Japan when the Nikkei was at 40.000 with CAPE>90 or February 2000, when US stocks where at CAPE46 or 2007 when US residential housing was had a Shiller housing value of close to 210%.

Sorry but this:' "You're trying to time the market" reminds me sometimes of the retirement police talks. "You are not allowed to work...You are not allowed to think...
Even Benjamin Graham advocated in his "Intelligent Investor" book to invest according to price/earnings and according to dividend yields.

Markets move in cycles and they are steered by fear and greed of their participants. Because of that there are booms and busts and it would have been insanity to "invest" 1989 in the Nikkei or 2007 in Miami or Las Vegas properties.


That said with US perspective I still like my Fundrise investments that have a gross yield of ~13% and my Lending Club investment with gross ~10%.
Additionally there are many US REITS that currently yield 5-10% or High Yield ETF are also getting more interesting by the day. (HYLD for example is at ~12% yield now. At one point the chart will will bottom and then the investor will have several years of high yields plus additional appreciation of the initial investment.
Internationally there is the Singapore market STI that has a CAPE around 10 with dividend yield of more than 4% (EWS ETF from Ishares). Hong Kong is nearly as good (Hang Seng Index) CAPE12-13.

[KMB]

Jeremy Gratham's GMO year end letter recommended junk bonds. Spreads have widened much larger than they have been historically. Read it here: https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=26

[Indexer]

I read articles, news, analyst reports, emails from my FA and everyone has been saying pretty much the same thing for few months now:

1. stock is over valued and is due for a correction
2. bond is over valued and the interest rate can only go up.
3. residential real estate is over valued and is not worth investing in in general at this time
4. commercial real estate is over valued due to Chinese money.
5. let's not even talk about oil (it's not over valued but do you like to gamble? yes it will eventually go back up...)

Shit, what is there to invest in when broadly speaking everything is over valued?

I am just sitting pretty and watching my NW tumble right now.

1. People kept telling me this in 2012. Boy 2013 a great year for stocks.
2. People kept telling me this in 2013. Boy 2014 was a great year for bonds.
3. Where?   San Fran for sure. However where I'm at you can get a brand new 4 bedroom for 140k in a nice area with good schools. In a really nice area it will run over a mill, but that is another story.
4. I wouldn't invest in this anyway.
5. I'm not even going to get started on this.

Seeing that the news, analysts, articles etc. are wrong about as much as they are right you might as well ignore them. The news said bonds were probably going to have a really bad time after the fed ended QE in 2013, again 2014 was a great year because they were wrong. The news thought tech stocks were the place to be in 1999. So did Jim Cramer, and most mutual fund managers.

Ignore whether you're NW went up or down due to market fluctuations for that matter.

Do you know what I think is undervalued?  VTSAX and VTIAX. They might go up or down this year, but I bet they are way up 10-20 years from now. ;)

[MustacheAndaHalf]

> 2. bond is over valued and the interest rate can only go up.

Since this year started, 5-year treasuries have fallen 0.58% in yield.  They started at 1.73%, and now yield 1.15%.  If you believe rates will go up, you can put money in CDs instead of bonds while you wait.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2016

Much scarier is seeing multiple countries use negative bond rates.  If that becomes normal, then we can no longer count on 0% as the lowest interest rate for bonds.

[Wads]

I read articles, news, analyst reports, emails from my FA and everyone has been saying pretty much the same thing for few months now:

1. stock is over valued and is due for a correction
2. bond is over valued and the interest rate can only go up.
3. residential real estate is over valued and is not worth investing in in general at this time
4. commercial real estate is over valued due to Chinese money.
5. let's not even talk about oil (it's not over valued but do you like to gamble? yes it will eventually go back up...)

Shit, what is there to invest in when broadly speaking everything is over valued?

I am just sitting pretty and watching my NW tumble right now.

Yourself! Find a product on Amazon that has huge sales and low competition( you can find this info by searching the BSR Rank). Have the product manufactured in China from a site like Alibaba and have them ship it directly to Amazon FBA. This market isn't overvalued yet, but it will be in a few more years.

[Kaspian]

It's all a load of doomer crap.  Here's the real truth:

"The global economy is still expanding, not contracting. That means the commodity collapse is illogical, with demand for stuff like oil actually rising. Cheaper energy is also, logically, a serious boon for both consumers and consuming countries. People can spend more money buying F-150s, and less on gas, creating and sustaining manufacturing jobs. Besides, the commodity crisis is getting old. There’ll be a significant snapback because (a) the US is still swelling, (b) every week there are more humans yet no more planet and (c) the world still runs on oil and copper, aluminium or grain."  - Garth Turner

http://www.greaterfool.ca/2016/02/08/the-dilemma-4/

[GuitarStv]

Nothing is overvalued.  The information you have is available to every other investor out there, and has therefore been taken into account in the price of the stuff you're talking about.

You're trying to time the market.  Historically, that doesn't usually work out well.

...like 1989 in Japan when the Nikkei was at 40.000 with CAPE>90 or February 2000, when US stocks where at CAPE46 or 2007 when US residential housing was had a Shiller housing value of close to 210%.

Sorry but this:' "You're trying to time the market" reminds me sometimes of the retirement police talks. "You are not allowed to work...You are not allowed to think...
Even Benjamin Graham advocated in his "Intelligent Investor" book to invest according to price/earnings and according to dividend yields.

Markets move in cycles and they are steered by fear and greed of their participants. Because of that there are booms and busts and it would have been insanity to "invest" 1989 in the Nikkei or 2007 in Miami or Las Vegas properties.


That said with US perspective I still like my Fundrise investments that have a gross yield of ~13% and my Lending Club investment with gross ~10%.
Additionally there are many US REITS that currently yield 5-10% or High Yield ETF are also getting more interesting by the day. (HYLD for example is at ~12% yield now. At one point the chart will will bottom and then the investor will have several years of high yields plus additional appreciation of the initial investment.
Internationally there is the Singapore market STI that has a CAPE around 10 with dividend yield of more than 4% (EWS ETF from Ishares). Hong Kong is nearly as good (Hang Seng Index) CAPE12-13.

It's cool that things are so obvious to you.  Did you predict each of those occurrences accurately and make millions shorting them?  Did you predict the end of the bad times accurately and perfectly time your re-entrance to the market, again making millions?  If not, why not?

The issue with market timing isn't that sometimes the markets go down.  They absolutely do.  There are even broad based indicators that point towards likely down swings.  The thing is, the markets eventually go up too.  Missing out even on just two or three of the best days in a year can radically reduce the percentage gain that you will make.  Regular contributions to a widely diversified portfolio will minimize risks that a localized problem (like Japan, or like the recent drop in oil prices) will have a tremendous effect on you.

[YoungInvestor]

There's quite a bit of opportunity on the Canadian market, some companies in the US in which I'd like to invest, if the USD weren't so strong.

Opportunities are scarcer, but still very much there.

[AdrianC]

BRK.B is quite cheap.

[zz_marcello]

It's cool that things are so obvious to you.  Did you predict each of those occurrences accurately and make millions shorting them?  Did you predict the end of the bad times accurately and perfectly time your re-entrance to the market, again making millions?  If not, why not?

The issue with market timing isn't that sometimes the markets go down.  They absolutely do.  There are even broad based indicators that point towards likely down swings.  The thing is, the markets eventually go up too.  Missing out even on just two or three of the best days in a year can radically reduce the percentage gain that you will make.  Regular contributions to a widely diversified portfolio will minimize risks that a localized problem (like Japan, or like the recent drop in oil prices) will have a tremendous effect on you.

Hi.
Of course I could not and cannot predict when a bubble is bursting.
But we where talking about where to allocate new capital. I would allocate new money in areas with comparably low valuations (when growths outlook is comparable). In 1987-1989 when I would have been invested in the Nikkei and in the S&P500 I would have allocated additional $ only into the S&P. If I would have to allocate new 2007 $ in the housing market I would have put it in for example into the German housing market (Berlin) and not into Las Vegas.
 
Today I would stash additional $ into the Hong Kong and Singapore market instead in the US. There you get 4%+ Dividend yield in a still growing (and free) economy without being dependend on commodity prices. With 4%+ dividend yield the 4% withdrawal rate is 100% safe and you never have to sell a single share.

Have a nice day!

[GuitarStv]

Well, that sounds reasonable.

[CorpRaider]

Foreign (EAFE and EM) equities are pretty darn near the lower bound of historically observed valuations based on any metric you want to pick (CAPE; P/S; P/E; P/B; DIV Yield; etc...). 

[ShoulderThingThatGoesUp]

I have been losing value from my "foreign" bucket (which I have in SCHF and SCHE) faster than I've been able to put it in lately. So in some sense that should indicate that they're on sale.

[chucklesmcgee]

The information you have is available to every other investor out there, and has therefore been taken into account in the price of the stuff you're talking about.

That requires a very strict interpretation of the efficient market hypothesis. In reality though, markets fluctuate all the time even when there isn't new information presented. If a strict efficient market actually was in place, stocks would move immediately and only when new information became present (economic figures, quarterly performance reports etc).

That said, I do believe stocks and assets basically reflect people's available information. Thinking you can look at the same information and magically divine some value everyone else hasn't is a bit foolhardy.

[shelivesthedream]

The is the best article on investing and market timing ever: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

It's the story of Bob, our poor fictional stooge who only ever invests lump sums right before a huge market crash. But he's so worried about making his selling decision wrong too that he never sells a single share. Between 1972 and 2013 he invested $184k... and his portfolio was worth $1.1m when he retired in 2013. Literally only ever buying at the absolute peak right before a huge crash. And he still came out hundreds of thousands of dollars ahead. If Bob can do it, so can you!

Lesson: It doesn't matter when you buy as long as you keep buying and you don't sell.

[AdrianC]

Between 1972 and 2013 he invested $184k...

Not exactly an early retiree, was he, our Bob?

[TheAnonOne]

Between 1972 and 2013 he invested $184k...

Not exactly an early retiree, was he, our Bob?

No but the point was simply that, if you were investing that 184k spread out in weekly/monthly amounts it would be much larger.

Selling while prices are high for an early retiree doesn't get you much because you are buying up and down. You are always catching the best prices and the worst prices.

AKA: You'll be fine.

[doggyfizzle]

Bank of America is not over-valued.  Assuming a normalized 1% ROA, the company should be spitting out ~$5 billion in quarterly net income or ~$2/share in EPS.  The bank will eventually make it through the CCAR process without fucking up, and should be paying out $.50-$1.00 in dividends and buying back stock like crazy.  I made a boatload of money buying in 2011-2012 and closing my position in December (not a function of trying to market time, but rather to re-deploy into another position), and initiated another position this morning.  I never thought I would get a chance to buy below $12/share before Berkshire's warrants are likely exercised in 2017.  Rest easy knowing that:

1) The bank was actually allowed to acquire ML and Countrywide; new (2016) equity holders get the benefit of 5-8 billion in potential earnings that BAC lacked pre-crisis will be present going forward
2) The company (and the remaining mega-banks) have a nearly-unlimited credit backstop through the Federal Reserve
3) The bank has (cleverly at times) resolved almost all outstanding legal claims stemming from the 2008 financial crisis
4) Little exposure to the collapsing US energy sector

Buy it at $9-12, let it sit with dividends re-investing for a couple years, sell it in 2018-2019 and re-deploy.

[robartsd]

Between 1972 and 2013 he invested $184k...

Not exactly an early retiree, was he, our Bob?

No, if he was a MMM style early retiree, we would have invested way more than $184k over a much shorter period.

[maizefolk]

The is the best article on investing and market timing ever: http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

It's the story of Bob, our poor fictional stooge who only ever invests lump sums right before a huge market crash. But he's so worried about making his selling decision wrong too that he never sells a single share. Between 1972 and 2013 he invested $184k... and his portfolio was worth $1.1m when he retired in 2013. Literally only ever buying at the absolute peak right before a huge crash. And he still came out hundreds of thousands of dollars ahead. If Bob can do it, so can you!

Lesson: It doesn't matter when you buy as long as you keep buying and you don't sell.

That's a great link and a great point. I'll be "borrowing" it for future arguments about markets being overvalued.

[AdrianC]

Between 1972 and 2013 he invested $184k...

Not exactly an early retiree, was he, our Bob?

No, if he was a MMM style early retiree, we would have invested way more than $184k over a much shorter period.

He would. So let's say our mustachin Bob saves $25k a year starting in 1996. He invests in the S&P500 and reinvests dividends.

He puts in 100k in December 1999. That's now $180k
He puts in 200k in October 2007. That's now 247k
He puts in 200k in July 2015. That's now 182k

He invested 500k and has 609k.

Edit: So after 20 years of working and saving at a pretty good rate, Bob still doesn't have enough to retire. Valuation matters.

[forestj]

The mustachian investor who puts money in as she earns it and never sells is pretty much golden during any timeframe except for right before the fall preceding the 30s. During that time she would have had to keep working for a few extra years.

[Johnny Aloha]

If you invest some time and effort, you'll be able to find plenty of opportunities.  I have more opportunities than I can fund right now, between categories 1, 3, 4, and 5 you outlined below.  Good stuff is out there ... you just have to dig and be patient.

I read articles, news, analyst reports, emails from my FA and everyone has been saying pretty much the same thing for few months now:

1. stock is over valued and is due for a correction
2. bond is over valued and the interest rate can only go up.
3. residential real estate is over valued and is not worth investing in in general at this time
4. commercial real estate is over valued due to Chinese money.
5. let's not even talk about oil (it's not over valued but do you like to gamble? yes it will eventually go back up...)

Shit, what is there to invest in when broadly speaking everything is over valued?

I am just sitting pretty and watching my NW tumble right now.

[Socmonkey]

Platinum is cheap compared to gold these days. Historically platinum usually cost more than gold, but today is about $300 cheaper per ounce.

[Curbside Prophet]

It's all a load of doomer crap.  Here's the real truth:

"The global economy is still expanding, not contracting. That means the commodity collapse is illogical, with demand for stuff like oil actually rising. Cheaper energy is also, logically, a serious boon for both consumers and consuming countries. People can spend more money buying F-150s, and less on gas, creating and sustaining manufacturing jobs. Besides, the commodity crisis is getting old. There’ll be a significant snapback because (a) the US is still swelling, (b) every week there are more humans yet no more planet and (c) the world still runs on oil and copper, aluminium or grain."  - Garth Turner

http://www.greaterfool.ca/2016/02/08/the-dilemma-4/

This author clearly does not understand deflation and it's ramifications if it gets out of control.  Everything that is happening is absolutely logical.  Further, US nominal GDP growth is the weakest its been coming out of a recession and to get this amazingly sad growth, the Fed has embarked on the greatest monetary stimulus in the history of man.  Our debt has ballooned:

https://research.stlouisfed.org/fred2/series/GFDEBTN

And yet we cannot even achieve 3% growth.  Yields are negative in Europe and Japan.  China just devalued again.  This is way more than commodity deflation, the worry is a major global slowdown.  I'm not saying we are in a doomsday scenario but this author also greatly ignores many of the facts that are currently going on.  If the economy was great, the Fed would be raising rates again this year.  The futures market predicts no rate increases until next February at earliest.  Does anyone here honestly believe the Fed is going to raise rates four times this year as they indicated?  The market doesn't.

[RichMoose]

This author clearly does not understand deflation and it's ramifications if it gets out of control.  Everything that is happening is absolutely logical.  Further, US nominal GDP growth is the weakest its been coming out of a recession and to get this amazingly sad growth, the Fed has embarked on the greatest monetary stimulus in the history of man.  Our debt has ballooned:

https://research.stlouisfed.org/fred2/series/GFDEBTN

And yet we cannot even achieve 3% growth.  Yields are negative in Europe and Japan.  China just devalued again.  This is way more than commodity deflation, the worry is a major global slowdown.  I'm not saying we are in a doomsday scenario but this author also greatly ignores many of the facts that are currently going on.  If the economy was great, the Fed would be raising rates again this year.  The futures market predicts no rate increases until next February at earliest.  Does anyone here honestly believe the Fed is going to raise rates four times this year as they indicated?  The market doesn't.

Which makes it interesting that people are piling into gold. If deflation is truly a factor, gold should be going down in value, not up.

By the way, Mr. Turner isn't ignoring anything. He's simply a prophet of buy and hold in a properly balanced portfolio. Inflation - deflation, rate increase - rate decrease, blah blah blah. No matter what, the average investor is still going to be best off 20 years from today if they invest in a balanced portfolio. Those with a working crystal ball will naturally do much better, timing in and out of each asset class with perfection and making astounding returns. Unfortunately these ultimate wise men don't share their crystal ball intellect with others.

For now, I buy Canadian because it's still a bit below my target allocation. I'm sure in 20 years I will be happy I ignored the doomers.

[Curbside Prophet]

This author clearly does not understand deflation and it's ramifications if it gets out of control.  Everything that is happening is absolutely logical.  Further, US nominal GDP growth is the weakest its been coming out of a recession and to get this amazingly sad growth, the Fed has embarked on the greatest monetary stimulus in the history of man.  Our debt has ballooned:

https://research.stlouisfed.org/fred2/series/GFDEBTN

And yet we cannot even achieve 3% growth.  Yields are negative in Europe and Japan.  China just devalued again.  This is way more than commodity deflation, the worry is a major global slowdown.  I'm not saying we are in a doomsday scenario but this author also greatly ignores many of the facts that are currently going on.  If the economy was great, the Fed would be raising rates again this year.  The futures market predicts no rate increases until next February at earliest.  Does anyone here honestly believe the Fed is going to raise rates four times this year as they indicated?  The market doesn't.

Which makes it interesting that people are piling into gold. If deflation is truly a factor, gold should be going down in value, not up.

By the way, Mr. Turner isn't ignoring anything. He's simply a prophet of buy and hold in a properly balanced portfolio. Inflation - deflation, rate increase - rate decrease, blah blah blah. No matter what, the average investor is still going to be best off 20 years from today if they invest in a balanced portfolio. Those with a working crystal ball will naturally do much better, timing in and out of each asset class with perfection and making astounding returns. Unfortunately these ultimate wise men don't share their crystal ball intellect with others.

For now, I buy Canadian because it's still a bit below my target allocation. I'm sure in 20 years I will be happy I ignored the doomers.

Gold tends to spike when there's any sort of fear in the markets.  It's just a natural safe haven, whether rational or not, due to its historical utilization as a store of wealth.

And regardless of his investment philosophy, he's ignoring quite a bit.  He says the decline is commodities is illogical.  It's actually fundamental economics 101.  He sees no logic in a price decline because demand is still increasing yet he is ignoring the supply side.