Gyroscopic Investing

http://finance.yahoo.com/q/bc?s=VTI&t=m ... z=l&q=l&c=

still don't know how to insert image...this is VTI, max years, linear

[img ]http://LINK [/img ] (remove space after "g")
or use this  


hope this was the chart you wanted..

yeah...thx.

I"m looking at the low from 2011 to today...heading (maybe past tense?) vertical...looks at least as steep or steeper than any other ascent

As Spock would say, "Logically there are two possibility. Stocks are over valued, or they are not."

I guess this comes down to whether or not you think we are in the early stages of a meaningful economic recovery. If you answer yes to that then stocks are probably either fairly valued or maybe even still undervalued. If however your answer is no, then stocks start to look like a Fed fueled asset class bubble.

Happily I don't have to guess correctly which is true.

I'd be happy to answer your question, but my crystal ball is out for repairs.

the intent of my question strictly relates to the shape of the curve / chart...not concerned w/ fundamentals, etc.

murphy_p_t wrote: the intent of my question strictly relates to the shape of the curve / chart...not concerned w/ fundamentals, etc.

I'd be happy to answer your question, but my slide rule is out for repairs. 

murphy_p_t wrote: the intent of my question strictly relates to the shape of the curve / chart...not concerned w/ fundamentals, etc.

The strongest upward moves in stocks always happen during secular bear markets.

Look at some of the stock rallies during the Depression.  Some of them were fierce.

During a secular bull market, rather than these crazy straight up rallies, you tend to see a sustained upward drift over a much longer period. 

In the late stages of a secular bull market, you can see similar rallies as people become convinced that "it's different this time."  I would say that any time you see a straight up move as we see in the chart above, it's probably safe to say that you are either in the final stages of a secular bull market (e.g., 1995-2000) or you are in the midst of a secular bear market that probably has a while longer to go before it ends.

I just don't see that many positives in the economy right now.  It reminds me a bit of a person who has had a serious heart attack and is finally able to go home after a long hospital stay.  As he leaves the hospital he is wearing a track suit because he doesn't have any other clothes at the hospital, but the fact that he is wearing a track suit does not mean that he's ready to go to a track meet and put in personal bests in every event. 

I don't think this economy is about to start setting any records.  It's doing better, but recoveries from serious financial crises typically take decades.

Ad Orientem wrote: As Spock would say, "Logically there are two possibility. Stocks are over valued, or they are not."

That reminds me of an old Chris Rock routine about a salesman selling lottery tickets that he claimed had "a fifty percent chance of winning."

When questioned how the odds could be that high, he said, "Look at this way.  There ain't but two things that can happen.  You either win or lose -- so your odds are 50/50."

HB Reader wrote:

Ad Orientem wrote: As Spock would say, "Logically there are two possibility. Stocks are over valued, or they are not."

That reminds me of an old Chris Rock routine about a salesman selling lottery tickets that he claimed had "a fifty percent chance of winning."

When questioned how the odds could be that high, he said, "Look at this way.  There ain't but two things that can happen.  You either win or lose -- so your odds are 50/50."

LOL

I saw the following chart on Mebane Faber's site.  It compares the ten year P/E ratio of the Japanese and US stock bubbles.


http://www.mebanefaber.com/2013/05/30/a ... o-bubbles/

We ain't seen nothing yet.  The US market still has to triple before it reaches the Japanese level of 90 P/E.  I don't believe this will happen, but it could...

Gosso wrote: We ain't seen nothing yet.  The US market still has to triple before it reaches the Japanese level of 90 P/E.  I don't believe this will happen, but it could...

I doubt that we would see that kind of P/E expansion in the midst of a secular bear market.

If we decisively move past the current secular bear market (a 50% increase over current levels would make me think that the secular bear might be behind us), then all bets are off and insane P/E expansion might be in the cards.

Even secular bear markets, however, can have pockets of stupidity when it comes to P/E expansion.  The "Nifty 50" of the late 1960s and 1970s was made up of mostly large cap stocks and this group of stocks saw their average P/E go over 50 before the group delusion was harshly interrupted by reality.

MediumTex wrote:

Gosso wrote: We ain't seen nothing yet.  The US market still has to triple before it reaches the Japanese level of 90 P/E.  I don't believe this will happen, but it could...

I doubt that we would see that kind of P/E expansion in the midst of a secular bear market.

If we decisively move past the current secular bear market (a 50% increase over current levels would make me think that the secular bear might be behind us), then all bets are off and insane P/E expansion might be in the cards.

Even secular bear markets, however, can have pockets of stupidity when it comes to P/E expansion.  The "Nifty 50" of the late 1960s and 1970s was made up of mostly large cap stocks and this group of stocks saw their average P/E go over 50 before the group delusion was harshly interrupted by reality.

I agree.  For stocks to repeat a Japan type move would require the economy to be firing on all cylinders and then some, when this happens investors will project this into the future and think the valuations are justified.

I just find it crazy that Japan reached a pe of 90 and valuations still remained high after bubble burst.

Big run ups like we are discussing happen when there is some major technological change (introduction of PCs and other microprocessor products, sourced in Japan) or social order change (winning a major war, end of slavery or other subjugation, certain types of regulation or deregulation that dramatically affect the way to conduct business).  Sometimes the technological change fuels the social order change, giving an even bigger pop to the stock market.  It's not the same as a bubble, but it can seem like it on the surface, and a bubble can accompany it.  Late 1990s/early 2000s were classic example:  bubble in unsustainable internet companies' stocks (pets.com) while new technologies (telecom generally) and defacto deregulation (no taxes on internet sales, inability of governments at all levels to police internet activity) fueled new business models and stock price appreciation (Amazon, ebay, etc).

I don't see anything like this happening in the G8 nations within the next 18 months.  Eighteen years, however, is another matter.

MT,

What is the basis of your statement that we're in a secular bear market? Is that from pricing the market in oz. of gold? Or something else?

I ask...I don't think your view is widely held.

Some of the chart are low and some are increase really interesting i am wondering this year of 2013 if their is a chart for stock market.In Finland i use to be an projektipäällikkö or project manager and hopefully to enter investment and get a investment in stock market.

HB Reader wrote:

Ad Orientem wrote: As Spock would say, "Logically there are two possibility. Stocks are over valued, or they are not."

That reminds me of an old Chris Rock routine about a salesman selling lottery tickets that he claimed had "a fifty percent chance of winning."

When questioned how the odds could be that high, he said, "Look at this way.  There ain't but two things that can happen.  You either win or lose -- so your odds are 50/50."

And like the lottery, "you have to be in it to win it."
I wonder if Schrödinger would correct Spock by saying, stocks are overvalued and they're not.