Early Retirement Extreme Forums

Anyone able to offer ideas on places to invest, if your mindset is that the equity market is too high in the US?

According to the Shiller PE ratio the US market is at it's 2nd highest point in history:

http://www.multpl.com/shiller-pe/

Some current areas of interest are REIT, and tickers: GOV and then VTIAX

Another viewpoint on overall market valuation using CAPE as part of the analysis:

http://www.realclearmarkets.com/article ... 02761.html

I have a data point in support of Chad's article and one that contradicts it.

First, vanguard thinks 10 year returns between -4% and 15% are consistent with current valuations.
https://personal.vanguard.com/pdf/s338.pdf

However, starcapital disagrees that you can out think CAPE10 by comparing it to other metrics.
http://www.starcapital.de/files/publika ... imling.pdf
From Page 4:

For each of these years, plausible reasons were given for why long-standing methods of evaluation should no longer apply...Investors who invested in these overvbaluations generally experienced real losses over periods of 10-20 years.

To be clear, I'm not arguing the market is over or under valued. I'm definitely not arguing that the market won't see a pullback. I'm just suggesting that using one data point, indicator, etc. is not the best way to gauge valuation.

Updated with Robert Shiller's own cautionary take on his on indicator:

The current level of CAPE suggests a dim outlook for the American stock market over the next 10 years or so, but it does not tell us for sure nor does it say when to expect a decline. As I said, CAPE is useful, but it does not provide a clear guide to the future.

https://www.nytimes.com/2017/03/31/upsh ... tocks.html

The market could charge forward for another year; I certainly don't have any special skills when it comes to investing, but feel risk vs. reward is heavy on the risk side now - for US stocks. So the preference is for lower risk assets, and then maybe that will change if there is a pull back.

These ratios were helpful

http://www.starcapital.de/research/stockmarketvaluation

Well, what do you mean by risk? People usually talk about investment risk being inversely related to expected return.

I've got probably-too-much money in emerging market equities. I think they're a good investment because they're undervalued. I believe the *reason* they're undervalued is because human loss aversion leads to markets overestimating the risk/return ratio. But if I'm wrong it will be an expensive mistake.

"Risk" in US markets right now means something different. If you buy the market now, you're essentially betting that expert forecasts and economic metrics are wrong. MrMoneyMustache and Bogleheads.com are full of people who would agree with you.

Still, with real estate in the stratosphere, the bond interest rate risk quite high and zero return for cash instruments, the question remains where to put your money. Even at today's rich market valuations, it seems that anything outside of the stock market is definitely not going to support a 4% withdrawal rate.

Michael_00005 wrote: ↑

Thu Jul 06, 2017 9:09 am

Anyone able to offer ideas on places to invest, if your mindset is that the equity market is too high in the US?

Emerging markets and commodities seems to be reasonably priced just now.

ThisDinosaur wrote: ↑

Thu Jul 06, 2017 1:33 pm

Well, what do you mean by risk?

Nothing technical, just a gut feeling of how much the market could produce or decline in a year. And if the decline potential feels greater than the potential gain then adjust the portfolio.

It sounds like there might be some potential in emerging markets, i'd have to research commodities - Vanguard has VMIAX.

Thanks

I am not a financial adviser and I don't play one on the internet, but I'll tell you what I've been buying. There has been a shift in money recently from secular names into growth stocks like amazon. This has created an opportunity in my opinion. I've made purchases of CAG, GIS, and SJM. They trade at fairly reasonable multiples for secular growth companies that rarely trade too low because of the stability they offer. Utilities like SO are on my radar too. Though not as much buying has been involved yet.

Don't forget about old Europe.
The dollar is still fairly strong, and all metrics indicate European stocks are more fairly valued than American stocks.
They also underperformed the S&P by quite a bit in the last 20 years, which is another great sign for the next 20 (if you look at the veeeery long run, euro and us equities have returned almost the same)

I also have been thinking about commodities, first because all indexes are close to multi year lows, and recently I saw this:



My question would be, what would the best instrument to buy a well diversified basket of commodities without suffering extreme issuer risk?

I've looked at
DBC - powershares db commodity index tracking fund - 0.89% TER
GSG - ishares s&p GSCI commodity indexed trust - 0.75% ter

Any recommendations?

Seppia wrote: ↑

Sat Jul 08, 2017 11:21 am

My question would be, what would the best instrument to buy a well diversified basket of commodities without suffering extreme issuer risk?

I've looked at
DBC - powershares db commodity index tracking fund - 0.89% TER
GSG - ishares s&p GSCI commodity indexed trust - 0.75% ter

Any recommendations?

GSCI is focused mainly on energy, so I'd have a look there.

We've moved into more direct real estate ownership and peer-to-peer lending to search for better yeilds and subjective risk/reward ratio in the last few years.

Some small cap funds are down YTD.

Energy, too. I've been accumulating some XLE and XOM this year.

Definitely energy. I'm keeping an eye one EOG, CDEV, and a few of the other top tier shale producers for another good entry point. I wonder if this time oil will bottom enough to washout a few of the less well run shale companies. I can't believe that OPEC will be able to get Libya and Iraq, and to a lesser extent Nigeria, to cut production.

http://www.cnbc.com/2017/06/13/opec-oil ... n-may.html

Telecom is also trailing for the last 12 months, down 18%.

Yeah, T just hit one of my alerts this morning.

Telecom is also trailing for the last 12 months, down 18%.

And if you are really brave/foolish look at FTR!

+1 on energy.

Telecom though, there are some good reasons that nobody is buying....