Dejavu 2007?

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Seppia
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Re: Dejavu 2007?

Post by Seppia »

I do because I live in Italy, and I am not opposed to a bit of home bias.
I also have emerging, but it's a smaller allocation

Hankaroundtheworld
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Joined: Mon Feb 24, 2014 4:50 am

Re: Dejavu 2007?

Post by Hankaroundtheworld »

As of now (Shiller P/E 10 at 29) I went more into Cash. I was already 20% in cash in 2016, now moved it to 50% (waiting mode for correction). May be a big mistake, future will tell. Of course, if you look at the sentiment in the market, everyone is in the 2nd Trump rush because of promised Tax cuts, and in Europe, the Economy is growing above expectations (everyone forgets Greece, upcoming elections in France, etc.. for the moment). So, the market wants to go higher and more people are stepping in. I am not convinced, the fundamental problems are still there, so it looks like this stock-market rally is more like a relief-rally and that reality will catch up later this year. Anyway, these are just my opinions.

The problem with this move is that getting back into the stock-market (when everything seems to go up), becomes an extra hurdle (as you have to buy into higher levels than you sold).

Anyone else got chicken ( or clever :-) who knows), and went into a bigger Cash position?

halfmoon
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Re: Dejavu 2007?

Post by halfmoon »

Hankaroundtheworld wrote:Anyone else got chicken ( or clever who knows), and went into a bigger Cash position?
We cashed in about 10% of our stocks in December, choosing specific holdings that we felt had become overvalued. Some of that is sitting in retirement accounts waiting to be reinvested, but the major chunk went to pay down our rental mortgage. I'm very happy we did this, regardless of what happens next, and regardless of the tax-deductible nature of rental interest. I just can't stand debt.

In our case, because we invest primarily in value/dividend-paying individual stocks, it helps to keep evaluating whether the stocks are in line with our goals. Because I have no crystal ball (and a lot less analytical skill/interest than many here), I don't try to predict macro trends. Same goes for reinvesting: I watch for short-term drops in stocks I like. For example, we just bought some more GM when it temporarily dropped after the earnings reports.

*Caveat: we're older and out of the major accumulation stage (though accumulation seems to happen). When we were younger, we invested in aggressive-growth funds and just rode out the market ups and downs. It helped that we had no TV or internet. ;)

distracted_at_work
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Re: Dejavu 2007?

Post by distracted_at_work »

I haven't moved into cash and I don't think I will. I agree there are warning signs (the P/E numbers set off big alarm bells). What I have done is:

-Move out of Canadian REITS. I expect interest rates have no where to go but up. I expect a housing crash a-la 2008 if Canada (or China, hello Van + Toronto) has a another huge pull back causing unemployment. Who knows when. Too many of my friends/acquaintances post pictures of newly bought homes where I know they stretched to the limit...

-Bought / buying 4% + utility-esk dividend paying companies and turn on the drip's. This should keep me brave in the face of a major crash.

-Haven't touched my U.S or ex. N.A Developed Int indexes and I won't.

-Not going to touch pure growth stocks for a while.

Important context that I'm fully in accumulation phase with a job that speeds up in times of recession. My inner masochist almost wants to see a crash to experience how I would feel/react.

Farm_or
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Re: Dejavu 2007?

Post by Farm_or »

I'm 90% as hedged as I was in 2007. I was more than happy to sit that one out, watching and listening to my friends suffering the devaluation. Even my financial advisor singing the blues at 40% loss after nudging me to stay the course with him.

Got to temper my pessimism. It is basically a question of upside vs. downside. It's comical some of the spins I've seen regarding p/e valuations. Compensation rating from 16.5 all the way to 37? Depends on your bias, I reckon?

Hankaroundtheworld
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Joined: Mon Feb 24, 2014 4:50 am

Re: Dejavu 2007?

Post by Hankaroundtheworld »

Hedging is indeed one of the strategies. According the analysis on : http://www.gurufocus.com/shiller-PE.php
we can be lucky if in the next 8 years, the return is 1% ....

George the original one
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Re: Dejavu 2007?

Post by George the original one »

As long as the dividends keep rolling in and increasing, I don't care all that much. Endanger the dividends and I'm alert!

Hankaroundtheworld
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Re: Dejavu 2007?

Post by Hankaroundtheworld »

George the original one wrote:As long as the dividends keep rolling in and increasing, I don't care all that much. Endanger the dividends and I'm alert!
Dividend is part of this 1% calculation (see the link that I included), but you're right, if you do not sell your shares (and only use dividends), it is only on paper.

Of course, if I gambled right, I might buy those "Dividend" stocks for a lower amount in a years' time :-)

Hankaroundtheworld
Posts: 470
Joined: Mon Feb 24, 2014 4:50 am

Re: Dejavu 2007?

Post by Hankaroundtheworld »

Hankaroundtheworld wrote:As of now (Shiller P/E 10 at 29) I went more into Cash. I was already 20% in cash in 2016, now moved it to 50% (waiting mode for correction). May be a big mistake, future will tell.
So far I have been wrong. Shiller P/E is now at 29.5, and Buffet Indicator is now at 130% (http://finance.yahoo.com/news/warren-bu ... 44895.html)

Let's see, some tense elections in Europe coming our way, especially in France. It might not be a surprise (with a lot of good economic news and the so-called Trump rally) that we will see first higher values for Shiller P/E and Buffett indicator, but how long will that overshoot last? I cannot time it, and being in ER, I do not want to gamble too much. I remain high in Cash for now.

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Seppia
Posts: 2009
Joined: Tue Aug 30, 2016 9:34 am
Location: South Florida

Re: Dejavu 2007?

Post by Seppia »

I personally almost never sell but i also create a (to me) significant cash surplus every month with savings.
I usually have 1/2 of my monthly savings in auto pilot and the other 1/2 I invest opportunistically.
I have left the auto pilot alone, but I'm keeping all the extra cash and the dividends uninvested, went from 12% to 20% cash (thanks to a fairly big yearly bonus hitting in late January)

Hankaroundtheworld
Posts: 470
Joined: Mon Feb 24, 2014 4:50 am

Re: Dejavu 2007?

Post by Hankaroundtheworld »

It looks like that it is more going to be Dejavu 1997-2000. The Shiller P/E is now almost 30 (29.9), last time it broke 30 was in 1997, and it went on till 2000, so 3 years of craziness on the Stock-market. May be this will happen again? All because of Trump stimulation package? Situation is not comparable with 1997, however psychologically it could be that everyone wants to believe "it is going to be great again", and even Buffett is saying that because of low interest-rates, the current valuation is not exaggerated. If all true, I will miss for 50% a nice ride the coming years.

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