As to the above....look out New York City.....Florida is making a HUGE RUN at becoming the financial center of the USA. The power of the internet and the fact that no one.......except for perhaps the "little people" (compliments to Leona Helmsley)...... is tied to one geographic location anymore. (As to the above....I assume no one under age 40 has the slightest clue who Leona Helmsley was.) "Leona Roberts Helmsley (born Lena Mindy Rosenthal; July 4, 1920 – August 20, 2007) was an American businesswoman. Her flamboyant personality and reputation for tyrannical behavior earned her the nickname Queen of Mean.[8] After allegations of non-payment were made by contractors hired to improve Helmsley's Connecticut home, she was investigated and convicted of federal income tax evasion and other crimes in 1989. Although having initially received a sentence of sixteen years, she was required to serve only nineteen months in prison and two months under house arrest. During the trial, a former housekeeper testified that she had heard Helmsley say: "We don't pay taxes; only the little people pay taxes", a quote which was identified with her for the rest of her life." https://en.wikipedia.org/wiki/Leona_Helmsley
I have been watching the markets today since about a half hour before the open. Where we are right now is not too bad. I expected worse for a Monday.
I like this little article. S&P 5000! Milestones are fun but meaningless. https://www.fisherinvestments.com/en-us/insights/market-commentary/sp-5000 (Bold Is my opinion OR What I consider important content) "Hip hip! The S&P 500 notched one of its merrier milestones in memory Friday, closing above 5,000 for the first time. To this, we offer 5,000 huzzah!s … and a friendly reminder that milestones are meaningless. Humans love round numbers. We can’t help it! The row of zeroes is aesthetically pleasing, and a higher number in front of those zeroes signals progress. But for stocks, index levels are trivial trivia. They reflect past performance, telling us where stocks have been. Past performance doesn’t predict future returns. Then too, index levels are a poor way to measure progress. Every thousand-point increment in the S&P 500’s history may be equal in these linear terms. But in percentage terms—meaning, in terms of actual returns—each increment shrinks. The journey from 3,000 to 4,000 was a 33.3% price return. From 4,000 to 5,000? 25.0%. From here, it will take a 20.0% price return to get to 6,000. Reaching 7,000 will take a mere 16.7% after that. Behold, the magic of compounding. Here is another way to see this. When 1925 began, marking the start of what we consider reliable data, the S&P 500 price index level was 10.35. Its pre-crash peak in September 1929 was a whopping 31.92.[ii] A mere 21.57-point move in just under 5 years was sufficient to qualify as a big bubble because it was a more than 200% return. Then came the crash and brutal bear market, sinking the index level to 4.41 in July 1932.[iii] That is a -27.52-point drop … and an -86.2% decline from the peak. From there, the index began a long, jagged climb to its first 1,000-point milestone. When did that arrive? Drumroll, please … February 2, 1998![iv] It took over 70 years from what we would consider the index’s inception. It dipped below 1,000 again in each of the next two bear markets (2000 – 2002 and 2007 – 2009), then finally got over the 2,000 hump in August 2014, closing at 2,000.02 on August 26.[v] So, over 70 years for the first 1,000 and just 16 and a half for the second. Which makes sense, considering that first 1,000 amounted to a 9,561.8% return from that 1925 opening level, while 2,000 was a mere 100% rise from the earlier milestone. The trip to 3,000, a 50% return, was even faster: The S&P 500 got there on July 23, 2019.[vi] The first 4,000 came lightning-fast, on April 1, 2021 (no foolin’!), and now, one shallow bear market and recovery later, the great 5k.[vii] From here, those thousand-mile markers will probably come even faster, much as they did for the Dow—to the extent that few seem to remark on them anymore. There was no great fanfare when the Dow crossed 38,000, and we doubt there will be when 39,000 arrives. Perhaps 40,000 will have enough zeroes. Maybe it is really just about having a single digit in front of a string of zeroes. Who knows! Either way, all it tells us is that stock returns compound over time, which is ancient news and the very reason people invest. It doesn’t tell us when 6,000 will arrive, when the next bear market will start or how much stocks will return between now and then. Heck, it doesn’t even tell us investors’ actual returns, because an index level is price-only returns. It excludes dividends, which both subtract from stock prices when they are paid out and contribute a big chunk of stocks’ total returns through reinvestment. So, like we said, meaningless! Fun, but meaningless. MY COMMENT No real future predictive power in new records for the markets. BUT....it is fun to CELEBRATE the past successes of the markets and investors. ONWARD AND UPWARD.....is about all that I think these milestones mean.
The NVDA train continues to POWER ON. AI frenzy puts Nvidia ahead of Amazon in market value https://finance.yahoo.com/news/ai-frenzy-puts-nvidia-ahead-144437025.html MY COMMENT Even at this price I am willing to buy small amounts of NVDA. I added 20 shares to one of my kids accounts today.....at $726.
The market today....at the open. Stocks are little changed to start the week after S&P 500 closes above 5,000 https://www.cnbc.com/2024/02/11/stock-market-today-live-updates.html (BOLD is my opinion OR what I consider important content) "U.S. stocks hovered near the flatline early Monday following a record-setting week for the S&P 500. Investors also looked ahead to key inflation data and earnings. The broad market index fell marginally along with the Dow Jones Industrial Average. The Nasdaq Composite fell 0.1%. Salesforce was the biggest drag on the Dow, with the cloud-based software stock sliding 1%. Shares of Hershey slid more than 2% following a downgrade to underweight from Morgan Stanley on the back of softer demand. On the other hand, Diamondback Energy rose 7% after announcing that it would acquire oil and gas producer Endeavor Energy Partners. On Friday, the S&P 500 closed above 5,000 for the first time in history. The broader index has now risen more than 5% since the start of the year. All three major averages are coming off their fifth straight week of gains, with the S&P 500 and Nasdaq Composite respectively adding 1.4% and 2.3% last week. The Dow edged fractionally higher. “While U.S. stocks are now pricing in plenty of good news, we believe the rally has been well-supported,” wrote Mark Haefele, chief investment officer of UBS Global Wealth Management. The S&P 500 has now gone over 70 trading days without experiencing a 2% pullback, according to Bespoke Investment Group. Some 61 names in the S&P 500 are set to report earnings in the week ahead, including gig economy stocks Lyft, Instacart and DoorDash. Companies such as AutoNation, Kraft Heinz, Hasbro and Coca-Cola will also shed light on the state of the U.S. consumer. Traders will also watch out for the latest level on the consumer price index — or CPI, a key inflationary gauge — set to be released on Tuesday morning. More key economic data is expected on Thursday and Friday, including January’s reading on retail sales, production, imports and exports, housing starts and the producer price index, or PPI. “CPI and PPI should print in line, but still be bullish,” Infrastructure Capital Advisors’ Jay Hatfield told CNBC. “We think that the market will continue to rally for the next week or two, and then maybe stall out as we wait for this inflation data to continue to come out.”" MY COMMENT Looking good right now in the markets. another week of....NOTHING....going on. CPI is probably the big event this week. Although EARNINGS should be the big story....if anyone cares to cover it.
Another day in the green. Still winning!!! ENPHASE leading my portfolio today with a 6.50% gain. Let’s remember this period of time next time someone starts crying how stocks are horrible investments during a bear market
I like the way the markets are gaining strength today as we move into mid-morning. A good start for investors. What a great ride for...long term....investors over the past 14 months. AND....actually....this little bull market goes back to July of 2022. A good day to play hookie and do something else....the markets can handle themselves. It is so nice to be BASKING.....in the no news environment. Even the breathless, fear mongers, and doom and gloomers.....have shut up at the moment.
Two of the stocks that have been mentioned on here a lot lately are....UP....today. NVDA and PLTR. PLTR is up by 4.21% at $25.40. I ended my little momentum trade at a lower price but still gained over 100 shares. Of course all is not lost since my FREE shares are participating in the gain today. NVDA....on fire...UP by 2.72% today.....or....$19.62. The 20 shares of NVDA that I bought for one of my kids accounts at the open today at $726....are participating in those.......first day of ownership gains. The stock right now is at $741.39. I am.....however....expecting a drop in NVDA after earnings.....same as we saw last earnings. People are pushing the stock up so much pre-earnings.....it is going to be very difficult to live up to the CRAZY expectations.
I am sure you MUST be extremely tired of all the winning....Zukodany. It is just exhausting. We are now seeing the payback....for all the PAIN we had to sit through in 2022.
MOST of the other big cap tech companies.....AMZN, GOOGL, MSFT, AAPL.....are NOT participating in the fun today. At the moment they are all down. it will be interesting to see if they make a turn-around by the close. When I looked earlier....my account was UP for the day....mostly due to NVDA. HD and PLTR are my ONLY other stocks that are in the green right now. That one stock.....NVDA.... has now grown to over 25% of my portfolio. Riding the wave....riding the wave.
A very good day for my lopsided AMD and NVDA account. So much for diversification! My boring S&P500 retirement account isn't doing too bad either. I agree with W that we will probably have a pretty big sell the news event at NVDA earnings. In the mean time its just a changing number on a screen.
BUMMER...NVDA faded as the day went on even though it had a gain. As a result I had a small loss in my stocks today. I had three stocks UP today.....PLTR, NVDA, and HD. I also got beat by the SP500 today by 0.26%. Looks like some pre-CPI selling and jitters today. I have no idea if this is true since I just got in and have been out of touch all day.
No surprise here: Jeff Bezos will save over $600 million in taxes by moving to Miami https://www.cnbc.com/2024/02/12/jef...-will-save-him-over-600-million-in-taxes.html Very strange....I thought all these billionaires wanted to pay more taxes. They always seem to say that in public in Davos and other meetings of the ELITES. In real life.....not so much. "......In 2022, when the tax took effect, Bezos stopped selling. He didn’t sell any Amazon stock in 2022 or 2023, gifting only $200 million of shares at the end of last year. After his move to Miami, Bezos made up for lost time. Last week, a filing with the SEC revealed that Bezos launched a pre-scheduled stock-selling plan to unload 50 million shares before Jan. 31, 2025. At today’s price, that would total more than $8.7 billion. Florida has no state income tax or a tax on capital gains. So on the $2 billion sale last week, he saved $140 million that he would have paid to Washington state. On the entire sale of 50 million shares over the next year, he will save at least $610 million......."
WELL......the CPI data. A minuscule amount above expectations. But what the data shows at 3.2%....it TOTALLY within what would be normal for our economy. Unfortunately we are.....for some cray reason....focused on the ridiculous and unsupported 2% number. If we do ever get to 2% it will mean we are in a recession or undergoing what would be worse....DEFLATION. Consumer prices rose 0.3% in January, more than expected, as the annual rate moved to 3.1% https://www.cnbc.com/2024/02/13/cpi...-the-annual-rate-moved-to-3point1percent.html (BOLD is my opinion OR what I consider important content) "Inflation rose more than expected in January as stubbornly high shelter prices weighed on consumers, the Labor Department reported Tuesday. The consumer price index, a broad-based measure of the prices shoppers face for goods and services across the economy, increased 0.3% for the month, the Bureau of Labor Statistics reported. On a 12-month basis, that came out to 3.1%, down from 3.4% in December. Economists surveyed by Dow Jones had been looking for a monthly increase of 0.2% and an annual gain of 2.9%. Excluding volatile food and energy prices, so-called core CPI accelerated 0.4% in January and was up 3.9% from a year ago. The forecast had been for 0.3% and 3.7% respectively. Shelter prices, which comprise about one-third of the CPI weighting, accounted for much of the increase. The index for that category rose 0.6% on the month, contributing more than two-thirds of the headline increase, the BLS said. On a 12-month basis, shelter increased 6%. Food prices moved higher as well, up 0.4% on the month. Energy helped offset some of the increase, down 0.9% due largely to a 3.3% slide in gasoline prices. Stock market futures slid sharply following the release. Futures tied to the Dow Jones Industrial Average were off more than 250 points and Treasury yields surged higher. The release comes as Federal Reserve officials look to set the proper balance for monetary policy in 2024. Though financial markets have been looking for aggressive interest rate cuts, policymakers have been more cautious in their public statements, focusing on the need to let the data be their guide rather than preset expectations. Fed officials expect inflation to recede back to their 2% annual target in large part because they think shelter prices will decelerate through the year. January’s increase could be problematic for a central bank looking to take its foot off the brake for monetary policy at its tightest in more than two decades. Generally, the inflation data had been encouraging, even if annual rates remain well above the Fed’s 2% target. Moreover, core inflation, which officials believe is a better guide of long-run trends, has been even more stubborn as housing costs have held higher than anticipated. In recent days, policymakers including Chair Jerome Powell have said the broader strength of the U.S. economy gives the Fed more time to process data is it doesn’t have to worry about high rates crushing growth. Market pricing prior to the CPI release indicated a tilt towards the first rate cut coming in May, with a likely total of five quarter-percentage point moves lower before the end of 2024, according to CME Group data. However, several Fed officials have said they think two or three cuts are more likely." MY COMMENT I am so tired of the media and big banks and speculators pushing the rate-cut BS. They.....the speculators and big banks will be trading like crazy today to take advantage of this little story and drive their AI PROGRAM news and headline trading. Nothing to do today but sit and watch the fun......as the short term trading skews and manipulates the big market averages for a day or two.
If the actual markets are like the futures....I would be buying today. But I have no funds to use for buying right now. So I sit and do nothing.
I like this little article. Weekly Market Pulse: Are You Ready For The Roarin’ Twenties? https://alhambrapartners.com/2024/0...e-you-ready-for-the-roarin-twenties/?src=news (BOLD is my opinion OR what I consider important content) "When I sat down to write this week’s commentary, my intention was to write – again – about the valuation of the stock market and particularly the S&P 500. And even more specifically about the top 20 stocks, which make up 42% of the index, and trade for an average forward P/E of 27.5. It is an expensive bet on future earnings growth that is far from assured and therefore would seem to carry a lot of risk. But I’ve written that article several times over the last few years – I’m far from the only one – so it isn’t exactly news. And if it isn’t news, if everyone already knows that large-cap stocks are expensive and risky, why are they still expensive? I was taught a long time ago (in a galaxy far, far away…) that one shouldn’t worry about the things that everyone is already worried about; those things are already factored into the market. I’ve also been doing this a long time so I know that isn’t always true. Everyone (well everyone who was sane) knew tech stocks were outrageously expensive in 2000 and many of us warned that it would end in tears, especially for the dot coms that had no revenue, no profits, and no hope of getting either. Of course, most of those who warned about that market did so for several years before the end finally came. And on Wall Street, if you’re three years early, you aren’t early, you’re wrong. Lately, I’ve started to see some claims that this market is similar to the dot com era and will face the same fate (the NASDAQ fell 75% in that 2000 to 2002 bear market). There are some similarities between then and now but not so much in the stock market. There were a lot of companies back then with no real value and very high stock prices. But the apt comparison to today is not to stocks like Nvidia – which is a real company with real revenue and earnings – but to the crypto market. And most of the really junky stuff, the Bored Ape NFTs and other pets.com of the crypto market, has already crashed. I am still a bitcoin skeptic because I’ve yet to see a compelling use case; it always seemed like an elegant solution to…something. But the market will eventually work out what bitcoin is really worth. If we’re just looking at technology stocks, there are a few stocks with very high valuations, some of which will not fulfill their current promise and when they don’t they’ll fall a lot. But ridiculous valuations are certainly not as widespread as they were in 1999. If large cap growth stocks are expensive and everyone knows it, does that mean that those of us who keep pointing it out are just “early”? Or is there something else going on that we’re missing? Rather than assume I’m right and everyone buying “the market” is wrong, humility – a common attribute of successful investors – requires that I question my own assumptions. Maybe stocks are trading at high valuations for good reasons. Maybe the stock market is trying to tell us something and some of us aren’t getting the message. In thinking about what that message might be, I ran across this chart of Median Usual Weekly Real Earnings. I find this chart interesting and surprising for a few reasons. First is that workers’ real earnings (adjusted for inflation) are rising at a pretty steep rate. Second is that those earnings have been rising since roughly 2014, something of which I think most people were unaware. Third is that after the spike and fall related to COVID, earnings resumed their pre-COVID trend; this is apparently unrelated to the COVID relief. Fourth is that weekly real earnings were stagnant for a very long time; there was essentially no gain for workers from the late 70s to 2014. Lastly, if real weekly earnings have been rising like this for nearly a decade it has to be because productivity is rising. If not, rising real wages would have either compressed corporate margins or pushed up prices and it doesn’t appear this did either. Margins have come down some from their artificial peak in 2021 but are still over 10% when the long-term average is around 7%. And inflation didn’t arrive until after COVID and is now falling rapidly; yes it appears it was transitory. You can see the correlation between productivity growth and real weekly earnings in this chart: We’ve had two big surges in productivity since the 70s. The first was in the 1980s and was driven by the restructuring of the US economy. I don’t know if you remember the 80s but I chuckle when I hear people today talk about all the layoffs. The 80s was the era of restructuring and downsizing when US companies became a lot more efficient. A lot of that was driven by the LBO industry (what we today call Private Equity) with takeovers financed by Michael Milken’s junk bond shop and more was driven by fear of the LBO industry and Michael Milken’s junk bond shop. It was a tumultuous time for American workers and it isn’t surprising to see that worker pay didn’t match the gains in productivity. The unemployment rate in 1982 was nearly 11% and it did fall pretty rapidly to about 7.5% by 1984 but it was still 7% in 1986. It’s hard to raise real wages with that much slack in the labor market. The second big surge came in the last half of the 90s and was driven by the internet. The dot com stocks have been derided as a bubble (did I call it a bubble above?) but the efficiency gains from the internet were real. Many of the companies that we ridicule today were just early. Pets.com didn’t make it but today, if you own pets, you use Chewy if for no other reason than you don’t have to tote that big bag of dog food to the car. Mark Cuban sold a company called Broadcast.com to Yahoo for nearly $6 billion dollars that was a forerunner of today’s streaming services; he just needed more bandwidth. The internet did raise productivity and it also raised weekly real earnings but productivity slid in the aftermath amidst low interest rates and a real estate bubble. Productivity growth continued to slide until finally hitting bottom in 2015 and starting to climb again. I’m not sure the catalyst this time and it may be more than one thing but I suspect a lot of it is driven by demographics. That is about the time unemployment slipped below 5% and headed for a generational low just before COVID – and now after. There were 5.5 million job openings in late 2015, 7.6 million by the end of 2018, and today, even after dropping over the last two years, there are 9 million job openings. I wrote a paper about this a couple of years ago and speculated that without a change in immigration policy, the chronic shortage of workers would lead to higher inflation and interest rates. But I may have underestimated the productivity factor. Economic growth is driven by workforce growth and productivity growth. If you raise both of those you’ll get more total GDP. If you hold workforce growth steady and raise productivity, you get higher GDP per capita which is what really matters for living standards. Our working-age population peaked in December of 2018 at 206.8 million and fell to 205.3 million in December of 2021 during COVID. It has since rebounded to 209.3 million, a gain of 2.5 million since the previous peak in 2018, but total nonfarm payrolls grew by 7.9 million during that same time. That’s why the unemployment rate is under 4%. If productivity grows near the long-term average of 2% – or higher – and we are smart about immigration policy, the result would be higher economic growth. Working-age population growth last year was a mere 0.5% while productivity growth was 2.7%. The two of those together is right at the actual GDP growth of 3.1% so last year’s growth makes perfect sense even if no one predicted it in advance. If we can maintain productivity growth at the long-term average of 2.1% and increase workforce growth to the long-term average of 1% then GDP growth potential would rise to over 3%. If we get 3% productivity growth like the late 90s, growth could be a lot higher than anyone now expects. To bring this back to the S&P 500 and stock valuations, a sustained period of higher-than-expected growth could certainly justify paying a higher multiple today. Does that mean I’m going to run out and buy the S&P 500? Well, no, because I still think the risk of the index is skewed by its concentration in tech and the very high valuations of some, if not all, of the top 20 stocks in the index. If one of the top 20 stumbles it may not make much of a difference (see Tesla, down 22% YTD) but if technology suffers a big selloff for any reason, the index is going to take a big hit with 31% of the index in that one sector. The index is expensive but that doesn’t mean that all the stocks in the index are; there are still opportunities in large-cap stocks if you are discerning in your choices. It also seems to me that small and mid cap stocks, with most of their business domestically oriented, would benefit greatly from higher US economic growth. Those stocks as a group are much cheaper than large caps and so if higher economic growth raises earnings growth you might see their valuations expand, something that seems less likely for the S&P 500. Is this the “right” explanation of why US large cap stocks have sustained high valuations? The point of an exercise like this isn’t to find the “truth” (which you can’t because it’s in the future) but to look at things from a different angle, to question your own analysis. The S&P 500 has been highly valued for some time and the old explanations aren’t panning out. During the post-financial crisis period, before COVID, the most common explanation for high valuations was that interest rates were essentially zero; a lower discount rate means higher valuations. Well, interest rates aren’t zero anymore and the S&P is still expensive. What’s the “right” explanation now? I don’t know. Maybe passive investing has broken the market, as some really smart hedge fund folks think but “I’m right and the market is wrong” is pretty arrogant and usually wrong. I don’t know if productivity and economic growth will keep surprising but I do know that most people are still looking for the economy to slow, as they have for the last two years. Meanwhile, the economy and the more productive Americans who make it happen, just keep surprising everyone. With productivity already rising, another boost from AI – a very speculative assumption – could really push the economy into a higher gear. Will AI be all it’s being cracked up to be? I don’t know but the odds aren’t zero. Are you ready for the Roarin’ Twenties?" MY COMMENT We are at the very start of DOT COM BOOM 2.0. Productivity as a result of AI and all the new tech will increase massively. Of course workers will take the hit...losing many jobs as a result. That should severely moderate wage hikes. In other words a golden era for the economy and business. As to the DOT COM boom of the 1990s. I remember that time very well. Much of what was going on was simply delusional fantasy. Ridiculous valuations of companies that were nothing more than a snappy name and a crude website. What is happening now is....NOTHING....like that time period. Can you say....long term....BULL MARKET.
OK. Markets are open and in typical knee jerk fashion....are down big. IDIOCY at work here.....beware.
Another nice little article. Fear of Heights https://humbledollar.com/2024/02/fear-of-heights/ (BOLD is my opinion OR what I consider important content) "THE S&P 500 INDEX just hit a new all-time high, topping 5,000 for the first time. Is it now too high? For investors concerned about market risk, this is an important question. But it isn’t an easy one to answer. For starters, there’s no single definition of “too high.” Consider the price-to-earnings (P/E) ratio, the most common measure of market valuation. By this metric, the market does indeed look pricey. The P/E of the S&P 500 stands just a hair below 20 based on expected 12-month earnings—far above its 40-year average of 15.6. Should that concern us? The reality: The economy today isn’t the same as it was 30 or 40 years ago, and that has implications for valuation ratios. Specifically, the companies that now dominate the market have very different financial profiles. The five largest S&P 500 companies today are Apple, Microsoft, Amazon, Nvidia and Alphabet (parent of Google). Together, these five companies account for more than 20% of the S&P 500’s total value. From a financial perspective, what makes them notable is that, over the past 10 years, their profits have grown at an average 25% per year—a remarkable pace for companies of their size. We can contrast these companies with the market leaders of the past. In 2001, the five largest companies in the S&P were General Electric, Microsoft, Pfizer, Citigroup and Wal-Mart. Aside from Microsoft, the market leaders consisted of an industrial company, a pharmaceutical manufacturer, a bank and a retailer. While they were all large companies, the profitability of these kinds of businesses doesn’t compare to that of the tech companies now driving the market. That’s why many argue that today’s higher valuations are justified. Another reason to see today’s market as fairly valued: Traditional valuation ratios paint a distorted picture. According to an analysis by JP Morgan, as of Jan. 1, the average P/E of the 10 largest companies in the S&P was a lofty 27. By contrast, the average valuation of the other 490 companies was just 17—not far above the index’s long-term average. Through this lens, the market today isn’t more expensive than it’s been in the past. It’s just that the unusual group of companies that sit atop the market are much larger, more profitable and faster-growing than the rest, and that makes the market appear more expensive than it really is. To be sure, some investors remain unconvinced. They argue that international markets offer far better value. Indeed, at year-end 2023, the U.S. stock market was among the world’s most expensive. That’s true—mathematically—but boosters of U.S. stocks are quick to point out why that’s the case: Nowhere else in the world is there a group of companies that matches the tech leaders in the U.S. Yes, there’s Alibaba in China, Samsung in Korea, TSMC in Taiwan and others. But no international market has the sort of concentration of fast-growing technology companies that the U.S. has. That’s another reason the market here may not be as expensive as it seems. So far, we’ve only looked at the market through the lens of the P/E ratio, but it isn’t the only yardstick. Yale University economist Robert Shiller is co-creator of an alternate barometer known as the Shiller P/E. During the 2021 rally, he made this statement: “The stock market is already quite expensive. But it is also true that stock prices are fairly reasonable right now.” Shiller explained the seeming inconsistency by arguing that there is more than one way to assess the market. Through one lens, it might appear expensive. But through another, it might appear reasonably priced. For the past several years, in fact, Shiller has advocated a successor to his original P/E. He calls the new one the excess CAPE ratio. This new metric looks at stocks relative to bonds, rather than comparing stocks to their own historical average. The upshot: It’s another example of how market valuation is in the eye of the beholder. Without the benefit of hindsight, of course, we can’t know whether the market today is actually too high. How can investors manage that uncertainty? I have three suggestions: Ignore the market. Since we can’t be sure where it’s headed, investors’ best bet may be to simply ignore where the market stands at any given time. In a recent article, researcher Nick Maggiulli asked this question: Historically, if investors had put money into the market on days when it was at all-time highs, how would those investments have done relative to investments made on all other days? His conclusion: It depends. Over one-year periods, investing at all-time highs yielded better results than investing on all other days, because the market exhibits momentum. But over five- and 10-year periods, returns were lower for investors who put money to work at all-time highs. That makes intuitive sense, but there’s an important caveat: Returns were still positive in all cases. In other words, we’d all prefer to invest when the market’s cheap, but investors were still better off putting money into the market at all-time highs than not at all. The lesson: Investors who wait on the sidelines in the hope of earning better returns may miss out on receiving any returns. Ignore commentators. I often recommend tuning out the advice of market experts. That’s because the investment world is full of commentators who became famous with one—but only one—successful prediction. These include Michael Burry, made famous by The Big Short, who in recent years has predicted a series of crashes that haven’t materialized. Robert Shiller, who himself has an above-average track record as a forecaster, acknowledges how difficult it is. Referring to his own P/E measure, he wrote in 2014 that, “The ratio has been a very imprecise timing indicator.” The implication: Market measures are interesting, but we shouldn’t see them as anything more than that. Diversify. While I’m not worried about the U.S. stock market, no one should ever be too confident. To appreciate that, look no further than Japan’s Nikkei 225 index. In December 1989, it closed at 38,957. Where is it today? At 36,897—still below where it stood more than 34 years ago. The performance has been horrendous. While Japan has faced some unique challenges, including deflation and stagnant population growth, we can’t ignore this example. Fortunately, there’s a simple solution: diversifying your portfolio internationally. That way, if a problem does materialize in the U.S., you’ll have time to wait it out. Some investors recommend holding as much as 50% of your stock portfolio outside the U.S. I prefer something closer to 20%. But the important thing is to simply have some exposure." MY COMMENT If you are not in the markets you will NEVER get market returns. It is that simple. SO.....use fundamental analysis of actual business results for the companies you are considering. ALSO....look big time....at future growth prospects. In addition....it is never a bad thing to invest in the CREAM OF THE CROP....the most ICONIC companies in the world. Do so for the long term and ignore the chaff and drama of the short term.
