Stock Market Is High - Am I too late?

[SDREMNGR]

I for one am a believer in the PE10 or Shiller P/E, whatever you want to call it.  It's not a perfect predictor, but it should be one of the things you look at to take a sense of the market.  As much as I love to index invest, I am SOOOOOO getting ready to flee the ship in the next year or two, when this economy's wheels start to fall off again.

The naysayers of the high PE10 ratio of 25.x right now say that it's only 18.x right now on trailing 12 month PE.  But you do know that the recent corporate earnings in the last 3 years have been some of the highest in modern history.  Have things changed for good?  I don't believe they have.  I believe that this is pent up demand and Fed induced money coursing through the economy and when the music stops in October, things may get ugly.  Or it may happen before that, or some time after that.  But my belief is that it will happen, and I'm watching the trailing PMA to signal when I'm heading for the doors.

[waltworks]

I wonder how many times per week we have to have this discussion.

You can either believe that A) The world is full of really smart people doing their best to solve problems and create awesome new stuff and with some minor hiccups, any broad investment in the economy of the US/world will do great over the long run, or B) the world is full of grave dangers and you should spend all your time being paranoid and waiting for the signal to pull all your money out/put all your money in.

I guess there are probably a few "this time is different! Dow 36k! Woot!" crazies who want to sell you things like timeshares, too but I'll leave them out.

The evidence is that market timing and active trading are a dead end for most small investors. I don't think there is really any controversy about that but you can always gamble on being one of the lucky few who beats the odds and times it right.

-W

[Tyler]

You can either believe that A) The world is full of really smart people doing their best to solve problems and create awesome new stuff and with some minor hiccups, any broad investment in the economy of the US/world will do great over the long run, or B) the world is full of grave dangers and you should spend all your time being paranoid and waiting for the signal to pull all your money out/put all your money in.

It's not necessarily either/or.  A wise investor can believe that the broad economy will continue to grow over long periods while recognizing that it is volatile and dangerous when you look at short to intermediate time frames (although I agree completely that market timing is a losing bet).  There are lots of good resources for passive asset allocation strategies that provide good returns with less volatility than the stock market alone while simultaneously removing the timing aspect from investing (Boglehead, Permanent Portfolio, etc).  I'd recommend the OP spend his energy researching how to invest rather than when to invest.

[Eric]

Here's a pretty good thesis for why the CAPE has been higher for a long time http://philosophicaleconomics.wordpress.com/2013/12/13/shiller/

Thanks for posting this.  That was a really interesting read.

[wtjbatman]

Same exact title as this thread started by another new member: http://forum.mrmoneymustache.com/investor-alley/stock-market-is-hight-am-i-too-late/

All signs point to MMM forums being trolled.

[Eric]

Same exact title as this thread started by another new member: http://forum.mrmoneymustache.com/investor-alley/stock-market-is-hight-am-i-too-late/

All signs point to MMM forums being trolled.

That's some Twilight Zone type shit right there!  :)

[foobar]

Corporate earning should be setting new highs on a regular. Populations are still growing, productivity is increasing and the dollar is worth less every year:)

FWIW you can just skip CAPE and just sell stocks whenever a republican is president.  Seriously. You had the great depression. 1973-1974, Black monday. 2001-2 (2000 was bill),  and 2007-2008 all with a republican president.  If the democratic president isn't FDR, your pretty safe from crashes.:)  Maybe political policy matters more than things like CAPE:) Of course now you have to decide if the republicans do poorly because they come after democrats or if it is because of policies. Until one party gets a 20 year run it will be hard to say;)

I for one am a believer in the PE10 or Shiller P/E, whatever you want to call it.  It's not a perfect predictor, but it should be one of the things you look at to take a sense of the market.  As much as I love to index invest, I am SOOOOOO getting ready to flee the ship in the next year or two, when this economy's wheels start to fall off again.

The naysayers of the high PE10 ratio of 25.x right now say that it's only 18.x right now on trailing 12 month PE.  But you do know that the recent corporate earnings in the last 3 years have been some of the highest in modern history.  Have things changed for good?  I don't believe they have.  I believe that this is pent up demand and Fed induced money coursing through the economy and when the music stops in October, things may get ugly.  Or it may happen before that, or some time after that.  But my belief is that it will happen, and I'm watching the trailing PMA to signal when I'm heading for the doors.

[dragoncar]

Same exact title as this thread started by another new member: http://forum.mrmoneymustache.com/investor-alley/stock-market-is-hight-am-i-too-late/

All signs point to MMM forums being trolled.

That's some Twilight Zone type shit right there!  :)

What are you guys even talking about?  Are you hight right now?

[wtjbatman]

Same exact title as this thread started by another new member: http://forum.mrmoneymustache.com/investor-alley/stock-market-is-hight-am-i-too-late/

All signs point to MMM forums being trolled.

That's some Twilight Zone type shit right there!  :)

What are you guys even talking about?  Are you hight right now?

I didn't post in this thread! The thread I posted in had the exact same title, but must have been merged into this one (which is why the link in my post links to the thread we're in right now.

That, or, you know. Crazy.

[jnik]

I agree with you that population growth in the US is definitely slowing down, although it wouldn't take but an act of Congress to let in more people and reverse that trend.

That's a huge difference between the US and Japan: even now, roughly speaking, the US allows immigration and Japan really doesn't, big obstacles both legal and cultural. Japan has also long been a nation of savers, which is good vs. debt-fueled consumption, but they tend a bit towards mattress-stuffing.

[hodedofome]

I haven't looked at the data but is Japan a nation of savers historically or just because they've experienced 24 years of deflation and a sucky stock market? That'd sure make me learn to stuff my $ in a mattress.

To be sure, the US used to be a nation of savers as well, but it's only been on the last several decades that we turned into spenders. Thanks mom and dad.

[foobar]

http://www.economicshelp.org/blog/1313/economics/japan-savings-ratio/  . The savings rate has been dropping so I don't think it is a response to their market performance problems.  Note that savings rate is one of those poorly defined terms and they change the definition on a regular basis.  Some studies don't include taxable investment accounts, other don't include IRA/401(ks), some include pensions, and some just look at bank accounts/CDs.

I haven't looked at the data but is Japan a nation of savers historically or just because they've experienced 24 years of deflation and a sucky stock market? That'd sure make me learn to stuff my $ in a mattress.

To be sure, the US used to be a nation of savers as well, but it's only been on the last several decades that we turned into spenders. Thanks mom and dad.

[hammiehaack]

Same exact title as this thread started by another new member: http://forum.mrmoneymustache.com/investor-alley/stock-market-is-hight-am-i-too-late/

All signs point to MMM forums being trolled.

That's some Twilight Zone type shit right there!  :)

OP here,
No trolling. Realized I made a typo on the title of the thread and went back and edited the title. That's all. Mystery solved. :)

[crypie]

There are lots of good comments here and thought I would show a real life example. I just recently sold some of my company's stock and wanted to invest the proceeds into VTSAX. While I'm a buy and hold guy I was nervous about buying a relatively large amount at one time instead of the dollar cost averaging I've been doing with my other retirement investments.

I decided to go for it and purchase it at the stock market peak. Lo and behold, a couple days later the stock market is reaching another record.

Of course, I could lose 20% as easily as gain a few more % but the bottom line is that it is way to difficult to predict the market.

One piece of advice I received from an adviser was that the biggest investment mistake people make is procrastination. They wait for the valleys or wait for the perfect financial situation to make an investment and before they know it, months or years have passed and they have missed the opportunity to invest.

Anyway, I know this is rocket science or a major revelation for most but thought I'd chime in with the hope that others will benefit.

[Khan]

SDREMNGR, I highly recommend you read this link:
http://philosophicaleconomics.wordpress.com/2013/12/13/shiller/

It is fantastic reading.

foobar, an interesting take on president's, but I'd remind you of the 1960's shift in the Republican party when attempting to compare pre-1960's Republicans to later ones. I don't necessarily disagree with your idea, but, without getting into a political discussion, times change.(... and that party shifts ever rightward...) I'd also remind you that President's effect on the economy is actually vanishingly small and overblown in political messaging.
http://freakonomics.com/2012/03/08/it%E2%80%99s-not-the-president-stupid-a-new-marketplace-podcast/

[Mr Mark]

dow, SP, NASDAQ

record highs again.

if you had followed an AA you are happy. If you want, rebalance (by aquisition, not selling).

If you didn't, you are even more uncertain what to do. Eventually, as perhaps this bull market may continue, you'll be drawn in. Having lost valuable (and reinvested, yo, hit it doubled down) dividends in the meantime.

Will there be market corrections in the future, yes.

But most graphic or bullet point descriptions of SP500 returns are totally misleading. The graphs tend to ignore the impact of (reinvested) dividends and the effective impact of regular investing/rebalancing, or the impact of a % of bonds, real estate, etc concurrent with a portfolio.

or there are the tales of insurance salesmen, who say things like, " lets say you put everything you own from cash straight into SP500 just before the big crash of XXXX, OMG, you'd loose everything!!!!"

FOFL