patrick.net

zzyzzx says

Buying opportunity.

Maybe not this time....

curious2 says

AF, this note's for you:

Steal your face right off your head

There might be a correction, but short term interest rates are too low for a stock market crash.

bullshitmagnet says

There might be a correction, but short term interest rates are too low for a stock market crash.

And too low to revive a crash if it did happen

What park does she run in and how'd she get hurt?

sbh says

You can't, because even if you trot out the Nikkei you haven't eliminated its possible future recovery.

SoftShell says

What park does she run in and how'd she get hurt?

sbh says

You can't, because even if you trot out the Nikkei you haven't eliminated its possible future recovery.

Of course a recovery is possible in your lifetime. The question is whether there are better places to put your money in the interim?

bullshitmagnet says

There might be a correction, but short term interest rates are too low for a stock market crash.

And banks too solvent? http://patrick.net/?p=1237332
DB also just announced a $1.2 billion fourth quarter loss

watch everyone else flounder as I collect rental income for the rest of my natural born life.

smaulgld says

What Will You Do If/When The Stock Market Crashes?

SoftShell says

watch everyone else flounder as I collect rental income for the rest of my natural born life.

smaulgld says

What Will You Do If/When The Stock Market Crashes?

That might work assuming your renters werent harmed too much in any stock market crash
A good position would be to have some sort of steady income

smaulgld says

Perhaps it is true the stock market "always" recovers but In the two examples I gave it took between 15-25 years.

I've got plenty of time... I invest for the long haul.

LOL....no but that's a good one!

Call it Crazy says

SoftShell says

watch everyone else flounder as I collect rental income for the rest of my natural born life.

Roberta, is that you??

...Lost one round, but the prize wasn't anything but a knife in the back and just more of the same...

Rat in a drain ditch!

sbh says

And then there's the old diversification chestnut. There will always be under valued securities, even in the height of irrational exuberance. I never lost a dime during the tech/NASDAQ meltdown....just didn't own 'em.

That is the key knowing when to be in or out of the market.
My thesis is that stocks don't always recover rapidily. They will recover if the fundamentals are sound and or the Fed comes to the rescue.
I am not sure the fundamentals are sound or the fed will/can come to the rescue this time.

sbh says

smaulgld says

My thesis is

and you may be right on both counts. But being "in or out" is a thing much more easily said than done. My concept is "you have to be in (something)", and rather than trying to time the market I make sector bets. Just my thing.

after a crash is a good time to assess whether you should still be in stocks or whether you should hold cash or invest in real estate or something else.

The point of the original post was that since 1987 it has made sense to dive right back in, but after 1929 and during the late 60's and early 70's it didn't make sense to hold stocks

sbh says

make sector bets

another good point- even in down markets some sectors perform well.

As the stock market heads down, it's worth asking again

What will you do if the stock market corrects 20%

invest in the stock market 17.34% (30 votes)

remain in cash 16.18% (28 votes)

buy gold or silver 42.77% (74 votes)

buy real estate 12.72% (22 votes)

buy treasury bonds 0% (0 votes)

buy foreign currencies 2.31% (4 votes)

buy crypto currencies like bitcoin or litecoin 8.67% (15 votes)

Total Votes: 173

Before, during, or after the correction, or a combination thereof?

smaulgld says

What will you do if the stock market corrects 20%

prodigy says

Before, during, or after the correction, or a combination thereof?

smaulgld says

What will you do if the stock market corrects 20%

The poll question in the blog post is after a 20% correction but answer however you wish

http://smaulgld.com/what-happens-after-the-next-stock-market-crash-poll/

Stock market crash means RE prices has to go up!

bubblesitter says

Stock market crash means RE prices has to go up!

we learned that here from the gurus and oracles

UPDATE:

If the stock market corrects more than 20% will you:

invest in the stock market 18.61% (43 votes)

remain in cash 14.72% (34 votes)

buy gold or silver 41.13% (95 votes)

buy real estate 15.15% (35 votes)

buy treasury bonds 0.43% (1 votes)

buy foreign currencies 2.16% (5 votes)

buy crypto currencies like bitcoin or litecoin 7.79% (18 votes)

Total Votes: 231

Other countries like Belgium are picking up the slack from China to buy US Treasuries. A reduction of QE will not lead to the requirement to raise US Treasury rates in order to make them attractive. There will be foreign and domestic buyers for them.

The NY Times reports that the Defense Dept is cutting back like reducing the size of the US Army. Anticipate that the federal budget will be held in check as a percentage of GDP. The amount of US Treasuries issued will be lower as the deficit is reduced. Hence, lower and lower deficits should continue to keep interest rates low.

Per multpl.com the S&P 500's Shiller PE ratio is around 25 and near the same level it was at back in 2008. The same holds true for Warren Buffet's Total Market Cap vs GDP ratio (i.e., 115% currently with anything below 110 is normal or undervalued).

The natural gas and oil boom should help to keep inflation in check.

It is a good idea to hedge with 10 to 25% of your savings in real assets such as real property and precious metals. Vanguard Precious Metals Fund is a good holding to provide you the precious metals exposure.

Wake up and drink a beer

Oh, just watch and wait while our "government" bails out its bosses.

adarmiento says

Other countries like Belgium are picking up the slack from China to buy US Treasuries. A reduction of QE will not lead to the requirement to raise US Treasury rates in order to make them attractive. There will be foreign and domestic buyers for them.

I saw that Belgium!

Comparisons to 1987 persist

http://finance.yahoo.com/blogs/breakout/dow-hits-record-as-1987-crash-comparisons-continue-143945083.html

Just going by P/E ratio (trailing 12 months), the P/E ratio is around 18.6. Which is not that terrible considering the ratio's value back in 2000 and 2008. See : http://www.multpl.com/

Also consider the S&P 500 is currently 20% above the early 2000 peak. So the market has only appreciated about 1.5% annually from 2000 to present day :-(

Seems like because of this lackluster performance, there is more potential for the market to outperform its 2000 to 2014 record.

adarmiento says

Just going by P/E ratio (trailing 12 months), the P/E ratio is around 18.6. Which is not that terrible considering the ratio's value back in 2000 and 2008. See :

There are plenty of distortions in the market now as their were in 2000. A large number of companies with no earning and multi billion dollar market caps.

Also the PE's are skewed because many companies have engaged in share buybacks lowering their share floats making the earnings per share look better.

Finally, earnings growth is face out pacing revenue growth which means companies are getting earnings growth from share buybacks, and operational efficiencies like firing workings or moving them to part time.

Laugh. I'm pretty much out of the market. And I'm debt free and have money in the bank.

jvolstad says

Laugh. I'm pretty much out of the market. And I'm debt free and have money in the bank.

The worry with money in the bank is if the bank fails you may be required to help bail in the bank.

http://dollarvigilante.com/blog/2013/11/04/plans-in-place-for-a-us-bank-bail-in.html

http://www.zerohedge.com/contributed/2013-12-11/part-vi-how-likely-are-bail-ins-bank-england-says-us-%E2%80%9Ccould-do-today%E2%80%9D

The solution to all the bank problems: Print.

http://www.youtube.com/embed/-yblvWycttA

Poll results to date:

There are still 1/4 brave souls who will put money back into the market:

What will you do if the stock market crashes?

invest in the stock market 25.07% (91 votes)

remain in cash 12.67% (46 votes)

buy gold or silver 40.22% (146 votes)

buy real estate 13.22% (48 votes)

buy treasury bonds 0.83% (3 votes)

buy foreign currencies 1.93% (7 votes)

buy crypto currencies like bitcoin or litecoin 6% (22 votes)

Total Votes: 363

smaulgld says

What will you do if the stock market crashes?

I'm prepared.

Vicente says

I'm prepared.

I understand that Realtor's make for good fertilizer.

Current P/E ratios are not high. So a sell off based upon fundamentals seems unlikely. A sell off based upon the need to raise cash is another scenario. Like in the recent financial meltdown. So a crash of the derivatives market, a crash of RE, any type of crash where equities have to be unloaded could cause a stock market crash. But based upon P/E, I wouldn't say equities are overvalued. I haven't factored in share buy backs.

Blurtman says

Current P/E ratios are not high.

P/E are at the high end but not exorbitant but as mentioned above much of that is due not to revenue growth but rather the relatively high PE's are a result of share buy backs bough with QE low interest money to window dress and by cutting expenses and not paying raises.
Profits are set to fall.

smaulgld says

late 60's and early 70's it didn't make sense to hold stocks

'60s and 70s people had no money to invest... stagflation of the 70s
left no money to save...if you had a job. Many didnt.

The flip side, was there was no growth in the economy.

thomaswong.1986 says

'60s and 70s people had no money to invest... stagflation of the 70s

left no money to save...if you had a job. Many didnt.

The flip side, was there was no growth in the economy.

and the reason the stock market was stagnant was because of a sluggish economy and NO FED intervention in the form of zero interest rates and $4 trillion in QE

The US economy according to the way they US calculates GDP grew about $1 trillion from 2009 -2013 -the Fed printed $4 trillion. good deal?