[JoeFromPA]

All,

This is just a general question. I'm not a financial expert but I try to watch trends and react accordingly - move into lower volatility when things have been up for awhile, take more risk when things have been down for awhile, etc.

I'm seeing/hearing lots of "pros" in bloomberg, elsewhere posting about how this rally is over-extended, it's not supported by the fundamentals, etc.

I avoid looking at bonds because they are too F'd (for a non-pro like me) by government instability and structuring. So I just look at equities and my favorite broad index to look at is Vanguard total stock market index.

When I look at that I see a 10 year CAGR of 7.43% with 2015 yielding .29% growth and a 5 year CAGR of 12.35% and a 1 year of 3.14%

Certainly good solid equity growth over a 5-10 year range, but in the short term it appears the market took a breather in 2015 and is still in modest growth for this stage of 2016.

I realize there's always someone proclaiming an upcoming rally, and always someone proclaiming doom, but just wanted to get thoughts on here about why people would be considering this bull market over given these numbers?

Thanks,

Joe

[bimmerfrk]

This run is not over i dont think. Money is pouring in from over seas and rates are flat to negative out side the us. China GDP growth is shrinking. No one knows the out come of Brexit and the EU. Naturally all the money is playing it safe and hanging out in US equities. Also bank earnings this quarter are coming in at par if not a bit better, this also demonstrates some strength and resiliency in the us economy contrary to whats going on in the rest of the wold.

Don't expect this rally to last forever but i think we are going to sit here if not a bit higher till end of Q4.

[JoeFromPA]

Thanks that's what I'm seeing + one or two things I hadn't considered. There doesn't appear to be some area of the economy that is propping up the rest and has transparency issues. Maybe healthcare - but even that, I don't think it's going to crash. The fundamental need and costs will remain stable, even if they stop growing.

[NemesisX]

The main reasons some people consider the bull market to be over is due to (1) historical trends on how long the interval was between major market crashes and (2) how high companies within the S&P500 were trading at relative to earnings estimates just prior to those crashes.

We had a crash in 1987 and a mini recession in '90-'91. We had a major crash in 2000. We had a major crash in 2008. People think there's a natural ebb and flow to the stock market and that crashes tend to occur roughly once every 8-12 years. It's nothing more than a curious observation, though, and like others have mentioned you have to consider the context. Are there bubbles waiting to pop? The problem is unless you're deeply invested in the financial sector there's no way to tell. Very smart people did not realize that housing was a bubble until it was too late and most (average) investors lost half of their portfolio overnight.

[NemesisX]

I mean be honest, how did you all learn about the housing bubble? Probably from the news. And for most of you it was probably too late. The problem with the news is that there's always some subset of the population (credentialed people who work or are somehow associated with the finance industry) crying gloom and doom about this and that bubble waiting to pop. There's no self-regulating mechanism to separate the bullshit from advice you should actually listen to.

I know next to nothing about the inner workings of the finance industry. There's no way an average investor like me can reasonably predict a stock market crash. I'd be a billionaire if I could.

[NemesisX]

Financial advisors are are only marginally better at betting on the "right" stocks or getting out of the market at the "right" time. The only value they provide is teaching someone how to properly mitigate risk in allocating investments within an overall portfolio which, frankly speaking, is rarely ever worth the premium they charge for that service. There are computerized programs (wealth front) that will do the same thing for you at usually lower price.

The only people who are actually privy to the inner workings of the stock market are quantitative analysts (usually with PhDs in math/comp sci/financial engineering) who have sophisticated technical knowledge on how the stock market behaves. Now what's the problem here? They all work for hedge funds for which you have to be already quite wealthy to even be considered as a potential investor. Some hedge funds win big, some lose big, but that's the point I suppose. Instead of accepting the modest CAGRs of 7-8% over 5-10 years that most of us get from investing in mostly index funds and ETFs that track Nasdaq, S&P500, etc., you can get 12-14%+ (or lose money) with hedge funds, but these investors have money to lose so it's a risk worth taking for them.

[JoeFromPA]

Originally Posted by NemesisX

I mean be honest, how did you all learn about the housing bubble? Probably from the news. And for most of you it was probably too late. The problem with the news is that there's always some subset of the population (credentialed people who work or are somehow associated with the finance industry) crying gloom and doom about this and that bubble waiting to pop. There's no self-regulating mechanism to separate the bullshit from advice you should actually listen to.

I know next to nothing about the inner workings of the finance industry. There's no way an average investor like me can reasonably predict a stock market crash. I'd be a billionaire if I could.

FYI, I learned about the housing bubble before it popped from a variety of sources including GWB. BUT...

I thought to myself, "Well, housing prices are supported by demand & income and stabilized by long-term debt cycles on current occupancy. So a crash would be modest in nature."

But I didn't know about the ridiculously leveraged instruments and their pervasive nature winding up being included, heavily, in well-rated bond funds. So thought I knew about the housing bubble, I considered it similar to other bubbles where a pop would be mitigated by underlying values.

Now i'm much more sensitive to the concept of trading an instrument/equity on which the value is heavily premised about what debt behind it is worth - and where such things are not transparent. And I think the rating agencies should be shuttered and a new model for transparency in debt-risk created.

But that's a different story I guess.

[backhill]

Originally Posted by JoeFromPA

All,

This is just a general question. I'm not a financial expert but I try to watch trends and react accordingly - move into lower volatility when things have been up for awhile, take more risk when things have been down for awhile, etc.

I'm seeing/hearing lots of "pros" in bloomberg, elsewhere posting about how this rally is over-extended, it's not supported by the fundamentals, etc.

I avoid looking at bonds because they are too F'd (for a non-pro like me) by government instability and structuring. So I just look at equities and my favorite broad index to look at is Vanguard total stock market index.

When I look at that I see a 10 year CAGR of 7.43% with 2015 yielding .29% growth and a 5 year CAGR of 12.35% and a 1 year of 3.14%

Certainly good solid equity growth over a 5-10 year range, but in the short term it appears the market took a breather in 2015 and is still in modest growth for this stage of 2016.

I realize there's always someone proclaiming an upcoming rally, and always someone proclaiming doom, but just wanted to get thoughts on here about why people would be considering this bull market over given these numbers?

Thanks,

Joe

Probably the same guys who were saying after China made the market plummet last year in in August and again this January, who said nothing would recover for a long time. But here we are.

[backhill]

Originally Posted by JoeFromPA

And I think the rating agencies should be shuttered and a new model for transparency in debt-risk created.

But that's a different story I guess.

One would hope.

[Flying Ace]

Central banks has extended this 7 year bull market on a scale we've never seen before.

I think the next catalyst will be a real sovereign debt crisis in Euro zone or Japan.

[1MOREMOD]

Invest in guns there's gonna be a big run on them shortly if Hilary takes office.

[wdb]

Election cycle mania.

[bosstones]

Originally Posted by JoeFromPA

FYI, I learned about the housing bubble before it popped from a variety of sources including GWB. BUT...

I thought to myself, "Well, housing prices are supported by demand & income and stabilized by long-term debt cycles on current occupancy. So a crash would be modest in nature."

But I didn't know about the ridiculously leveraged instruments and their pervasive nature winding up being included, heavily, in well-rated bond funds. So thought I knew about the housing bubble, I considered it similar to other bubbles where a pop would be mitigated by underlying values.

Now i'm much more sensitive to the concept of trading an instrument/equity on which the value is heavily premised about what debt behind it is worth - and where such things are not transparent. And I think the rating agencies should be shuttered and a new model for transparency in debt-risk created.

But that's a different story I guess.

Same here, but more from gut feel. I didn't think the end of the housing run would have been as catastrophic as it was. I get people losing their job, but, generally speaking, how the f*** can people not know what they can really afford?! The person getting commission off of 'selling' you a loan package does not care if you can sustain paying it!

Wrt the stock market, we're in the 2nd longest bull market ever. That plus the repeated market highs, flip-flopping jobs and earnings #, and sense of overvaluation make folks including myself, nervous. You know it is going to peak but you just don't know when. I have some scratch in a couple of accounts I haven't used to buy into anything yet because I don't really want to buy in at the peak of things (even a 500 index) but at the same time, the money does nothing just sitting there. Double edged sword. :/