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S/P 500 Market top today


drzola
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S/P500 Market Top today.

I just had to copy and paste these words of wisdom from over at Berkshire TMF board.

 

 

Since we just had a fresh all time high today, there is no *pressing* worry. Probably.

Anyone thinking of sidling quietly towards the exits before the party ends can probably do it gradually.

Most parties end pretty slowly at first as people drift out one by one. It's the late-night drunks who stay too long that can stampede.

 

Jim

 

 

 

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S/P500 Market Top today.

I just had to copy and paste these words of wisdom from over at Berkshire TMF board.

 

 

Since we just had a fresh all time high today, there is no *pressing* worry. Probably.

Anyone thinking of sidling quietly towards the exits before the party ends can probably do it gradually.

Most parties end pretty slowly at first as people drift out one by one. It's the late-night drunks who stay too long that can stampede.

 

Jim

 

Drzola:

 

You obviously don't understand!  This time it is different! ;D

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Can't tell if your "words of wisdom" comment implies sarcasm, but to be fair to Jim, I'll link the post in question and add the rest of what he wrote, in response to another poster declaring that today's break was the top:

 

http://boards.fool.com/brave-man-calling-a-market-top-is-much-harder-32741038.aspx?sort=postdate

 

Brave man. Calling a market top is much harder than calling a market bottom.

 

I won't call it yet.

 

Usually (but only usually) there is some sign of weakening breadth as the market tops cyclically.

But things are still boomin' on that front at the moment. e.g., ratio of new 52-week highs to new lows.

Breadth has been pretty strong all year, generally positive since last October/November.

 

Interestingly, there is usually no particular need to be good at calling market tops, even if you're a market timer.

The great majority of cyclical tops are pretty slow affairs.

Even 4 months after a high, the market is down from the high less than 10% on average. Usually.

 

In fact, the number of days since the latest recent high is a remarkable predictor of forward returns.

This is simply because a bull market is, more or less by definition, a period of frequent (closely spaced) fresh highs.

If you have had a fresh high lately, you're almost certainly in a bull market. (Either you are, or it *just* ended).

If no recent high lately, then...maybe not a bull.

The longer it has been, the less likely you are still in an ongoing bull market.

The less likely you are to be in a bull market, the lower the average short term market returns.

 

From a post I did a while back, looking at daily data since 1930.

 

From each start day, I looked at the forward real total return for six months.

I used average price 5.5 to 6.5 months later divided by current price, annualized, as a real total return.

Then, it's bucketed by the number of trading days since a fresh six month high.

(any day of a fresh recent high is day zero, the day after is 1, etc.)

Note the buckets overlap slightly. Each observation is counted twice.

Still, it's an amazingly smooth series.

 

 

From  0 to  19 days since fresh six month high, six month forward CAGR average 11.0%

From  10 to  29 days since fresh six month high, six month forward CAGR average  9.9%

From  20 to  39 days since fresh six month high, six month forward CAGR average  8.8%

From  30 to  49 days since fresh six month high, six month forward CAGR average  8.7%

From  40 to  59 days since fresh six month high, six month forward CAGR average  9.3%

From  50 to  69 days since fresh six month high, six month forward CAGR average 10.5%

From  60 to  79 days since fresh six month high, six month forward CAGR average 11.1%

From  70 to  89 days since fresh six month high, six month forward CAGR average  9.2%

From  80 to  99 days since fresh six month high, six month forward CAGR average  6.7%

From  90 to 109 days since fresh six month high, six month forward CAGR average  6.8%

From 100 to 119 days since fresh six month high, six month forward CAGR average  7.9%

From 110 to 129 days since fresh six month high, six month forward CAGR average  7.1%

From 120 to 139 days since fresh six month high, six month forward CAGR average  5.7%

From 130 to 149 days since fresh six month high, six month forward CAGR average  4.5%

From 140 to 159 days since fresh six month high, six month forward CAGR average  2.5%

From 150 to 169 days since fresh six month high, six month forward CAGR average  1.8%

From 160 to 179 days since fresh six month high, six month forward CAGR average  1.4%

From 170 to 189 days since fresh six month high, six month forward CAGR average  0.6%

From 180 to 199 days since fresh six month high, six month forward CAGR average -1.3%

From 190 to 209 days since fresh six month high, six month forward CAGR average -2.4%

From 200 to 219 days since fresh six month high, six month forward CAGR average -2.2%

From 210 to 229 days since fresh six month high, six month forward CAGR average -1.7%

From 220 to 239 days since fresh six month high, six month forward CAGR average -3.0%

From 230 to 249 days since fresh six month high, six month forward CAGR average -6.4%

From 240 to 259 days since fresh six month high, six month forward CAGR average -6.5%

From 250 to 269 days since fresh six month high, six month forward CAGR average -4.6%

From 260 to 279 days since fresh six month high, six month forward CAGR average -3.1%

From 270 to 289 days since fresh six month high, six month forward CAGR average -1.8%

From 280 to 299 days since fresh six month high, six month forward CAGR average -4.0%

From 290 to 309 days since fresh six month high, six month forward CAGR average -6.1%

From 300 to 319 days since fresh six month high, six month forward CAGR average -5.7%

From 310 to 329 days since fresh six month high, six month forward CAGR average -4.6%

From 320 to 339 days since fresh six month high, six month forward CAGR average -3.8%

From 330 to 349 days since fresh six month high, six month forward CAGR average -4.2%

Since we just had a fresh all time high today, there is no *pressing* worry. Probably.

Anyone thinking of sidling quietly towards the exits before the party ends can probably do it gradually.

Most parties end pretty slowly at first as people drift out one by one. It's the late-night drunks who stay too long that can stampede.

 

Jim

 

Jim is one of the most thoughtful and generous posters at the TMF BRK board.  Selectively quoting something he wrote to perhaps use as some sort of I told you so reference later is pretty bad form, IMO.

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You may like:

 

http://www.etf.com/etfanalytics/etf-fund-flows-tool

 

https://www.ici.org/research/stats

 

And relevant/interesting comments by Mr. Ed Yardeni with a possible link with the FAANGs.

 

http://blog.yardeni.com/2017/06/hannibal-spirits-s-500-climbing.html

 

If you want to know, in terms of strategy, I think that Fabius was the real hero in the second Punic War against Hannibal. (Who cares?)  The strategy of opportunistic attrition has been applied repeatedly ie British victory over the Spanish Armada, Napoléon's defeat in Russia, the guerilla in Vietnam and many others. The link with investing could be to not fight the Fed or bet on momentum. I like patience and opportunism.

 

 

 

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You may like:

 

http://www.etf.com/etfanalytics/etf-fund-flows-tool

 

https://www.ici.org/research/stats

 

And relevant/interesting comments by Mr. Ed Yardeni with a possible link with the FAANGs.

 

http://blog.yardeni.com/2017/06/hannibal-spirits-s-500-climbing.html

 

If you want to know, in terms of strategy, I think that Fabius was the real hero in the second Punic War against Hannibal. (Who cares?)  The strategy of opportunistic attrition has been applied repeatedly ie British victory over the Spanish Armada, Napoléon's defeat in Russia, the guerilla in Vietnam and many others. The link with investing could be to not fight the Fed or bet on momentum. I like patience and opportunism.

 

Thank you a lot for taking the time to shed some light on my question, Cigarbutt. It's much appreciated. I'll take it from there.

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The Grand Deja Vu ?

 

Is the 9th June 2017 the overture for a grand deja vu of 1st Feb 2000? The 1st Feb 2000 was the day when BRK A hits a low of US$ 44.000. (The old B share was at that day US$ 1466). The same day the tech stocks hit record highs and than they start to burst in the mighty bang.

 

I remember a quote of someone, he said or wrote: "in the same second when the prices of the techs got red in his computer BRK price got green..."

 

Our beloved Berkshire founds track immediatly, the rocket started and in the same way the techstocks melted down, we saw a mighty Berkshire lift of. One year later, on 1st Feb 2001, BRK reached US$ 70.300. The Techs were defeated.

 

On 9th June we saw the same direction on one singel day: Belaughed Techs FANG etc tanked and beloved BRK started to rise. Will it go on ?

 

We are fully ammutioned with 100B, let the elepphants come to us. If there is an elephant, with a profit 20 B per year, BRK should minimum double again.

 

 

 

 

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I would like to invest in FFH with shares trading at CAN $585. My concern is how their investment portfolio will perform in the coming years - they have largely missed out on the bull market the past 7 years. With US 10 year treasuries at 2.2% and stocks trading at all time highs the easy money for both bonds and stocks has likely been made for this cycle. I likely will continue to raise cash, sit in the weeds and wait for the next market sell off.

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One of the reasons why valuations are poorly understood, and their importance is wholly underestimated, is that overvaluation alone is not enough to drive prices lower over shorter segments of the market cycle.

 

For that reason, it’s essential to monitor the speculative inclinations of investors through the uniformity and divergence of market internals.

 

The inclination of investors toward speculation or risk-aversion, as measured by the quality of market internals, is the hinge between an overvalued market that continues higher and an overvalued market that collapses.

 

http://www.hussman.net/wmc/wmc170612.htm

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Conventional teaching says that earnings growth is what drives market valuations.

In fact, the correlation between earnings growth and share price appreciation is weak over periods.

That correlation gets confirmed in the longer term.

What is long term these days?

 

The big mover is multiple expansion (or multiple compression).

 

But that is based on animal spirits. If you think that Economics is a soft science, what do you think of Emotional Economics?

 

Interesting times.

 

I just read Mr. Hussman's weekly letter and despite deserved criticism, some of his points about cycles are relevant.

The last PCM commentary from Mr. Maida coincides when he asks if this time is different.

 

One perhaps has to wait for a complete cycle before comparing to some kind of benchmark.

But, of course, cycles can be long and, in the long run, we will all be dead.

To win the race; you have to finish the race.

Carpe diem?

 

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The market meandered along the peak from spring 2007 to summer 2008.  Warnings were many, especially in hindsight :-). 

 

Okay, I got tempted to buy some Apple shares this past week, after carefully avoiding it for 5 years.  Thats my squishy definition of a market top. 

 

I would like to invest in FFH with shares trading at CAN $585. My concern is how their investment portfolio will perform in the coming years - they have largely missed out on the bull market the past 7 years. With US 10 year treasuries at 2.2% and stocks trading at all time highs the easy money for both bonds and stocks has likely been made for this cycle. I likely will continue to raise cash, sit in the weeds and wait for the next market sell off.

 

Makes sense to me.  I have slowly moved all my holdings to only companies that PAY a dividend, and GROW their dividends: Examples:  Enbridge, AQN, BEP.UN, BAM, FN. 

 

If they dont pay a dividend and at least have a history of raising it they are out of the portfolio.  And I am deliberately not reaching for yield.  I want stability with growth potential. 

 

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zarley; I gave some careful thought to you putting your interpretation to my posting a few selected words.

"No Sarcasm was not implied whatsoever"

I just meant to start the above thread and from the responses I and I a

 

Cheers.

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zarley; I gave some careful thought to you putting your interpretation to my posting a few selected words.

"No Sarcasm was not implied whatsoever"

I just meant to start the above thread and from the responses I and I a

 

Cheers.

 

Drzola,

 

Thanks for the clarification.  I'm sorry for misinterpreting your post.  Intent can be a little tricky to determine in this medium.  I probably should have been more charitable to you in my interpretation.

 

To be honest, if last week was the near-term top in the market, on the front end of a significant correction, I wouldn't be too sad about it.  it seems necessary at this point.

 

Zarley

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