today

[vivacious]

The market cracked 16,000 today on the DJIA. After good trading all day the market dropped very sharply around 3 PM and ended lower than it started though there was a slight late day rally.

As I lost $1,000s I wondered what happened. Did America bomb another country? More trouble with the debt ceiling? I couldn't find anything.

Then after market close I noticed the following article. http://www.reuters.com/article/2013/11/ ... IH20131118 Carl Icahn strikes again!

While I think he was right to be somewhat cautious going over the 16,000 mark, I think he was overreacting. It was also scary how something like one man's utterances sent things plummeting. It was also a bit of a relief that it wasn't something more serious.

The S&P 500 has a reasonable P/E. I don't see what the problem is. Some companies (Tesla? LinkedIn?) may be a little overpriced but I don't see a huge problem.

There could be a problem in the future, sure. We're really just finally coming out of the recession though. Seems a little premature to think the growth is already done.

[Seneca]

An alternate theory to the idea this bull market has lots left-

http://www.hussman.net/wmc/wmc131118.htm

[workathome]

Grantham is saying something similar:

http://www.zerohedge.com/news/2013-11-1 ... value-1100

[jennypenny]

So what's everyone's best guess? (seriously)

Are you all in cash now, or mostly? Or are you planning to sell as soon as it looks like the bubble might pop? Is there anything you plan on holding through any downturn?

[elegant]

Things are scary.
Currently im 90 percent cash, 10 percent low vol large caps, both developed and emerging markets.
I cant bring myself to increase my position

[Chad]

The market cracked 16,000 today on the DJIA. After good trading all day the market dropped very sharply around 3 PM and ended lower than it started though there was a slight late day rally.

As I lost $1,000s I wondered what happened. Did America bomb another country? More trouble with the debt ceiling? I couldn't find anything.

Then after market close I noticed the following article. http://www.reuters.com/article/2013/11/ ... IH20131118 Carl Icahn strikes again!

First, the idea that every move in the market can be traced to a specific observable event is pure BS preached by the financial news channels that make their money from manufactured high drama. I'm highly doubtful everyone on Wall Street moved their money because of Icahn. It's not like his notoriety is built on market predictions. He is a "shareholder activist." Something from Soros or Buffett would make me re-examine my conclusions, but not Icahn.

Secondly, by attaching an outrageous quote to his real agenda (getting Apple to pay him...errrr....pay billions in dividends to it's "investors") he gets more exposure for his idea. If I were Apple I would tell him to go F@#$ himself.

So what's everyone's best guess? (seriously)

Are you all in cash now, or mostly? Or are you planning to sell as soon as it looks like the bubble might pop? Is there anything you plan on holding through any downturn?

This bull has legs. No doubt we see something near a 5% correction some time after mid-December and into the first couple months of the year, but that's just normal market movement. I think Bloomberg said yesterday that a drop of almost 5% happened 7 times in the last year. Either way, we average at least 3 of these drops a year. They are not crashes.

The market is at worst slightly over valued. Below is just one example of a valuation metric.

http://www.ritholtz.com/blog/2013/11/no ... cious-yet/

A handful of IPO pops like Twitter and a few momentum plays like Tesla are not worrisome. It's when this spreads to a bunch of companies we could have a problem.

Plus, everyone is now working on changing the psyche of the Street and investors by talking about tapering or tightening by the Fed. Almost no one was using the term "tightening" a month ago. I must have heard and read the "tapering vs. tightening" statement 50 times in the last couple days. This is prepping everyone, so when the "tapering" does come it won't seem as bad, as it's not "tightening." (No, I don't think this is purposeful. It seems like a "rationalization" for the talking heads, but it still serves a purpose.)

I'm about 15% cash right now. I will probably be re-examining my positions in mid-December. I would like to be 30% cash or more for when the standard 5% pullback happens, but it's hard to tell when this happens at this time (just had one in September-October).

More than likely I would be selling my US investments, with slightly more selling of my small caps for cash. The small caps have run so far, so fast, it just seems prudent. But, we will see in December.

I won't sell a ton of my foreign stocks, as I like emerging markets in the long-run. I still need to get a position in sub-Saharan Africa (sans South Africa), but haven't figured out the best way yet.

I would also like to get into Twitter if it pulls back more.

Grantham is saying something similar:

http://www.zerohedge.com/news/2013-11-1 ... value-1100

Grantham thought 2013 would be a bad year:

http://www.forbes.com/sites/schifrin/20 ... or-stocks/

Also, while Zerohedge has some good stuff, keep in mind that they play to the "doomer" crowd. The sky is always falling according to them. Even a broken clock is right twice a day. I'm being a little harsh, as they do have some good analysis, but one of the writers is barred from the security industry.

http://blogs.reuters.com/felix-salmon/2 ... ero-hedge/

Below explains how Zerohedge is useful:

http://www.thereformedbroker.com/2011/1 ... they-care/

[m741]

I'm mostly in cash, but continue to average into the market, little-by-little. I'm no big fan of gold, but GLD is starting to look reasonably priced.

[workathome]

"Fully hedged" with Put options. VIX is the lowest since 2007, so my insurance premiums are relatively cheap. My track record is poor though, so you probably shouldn't do anything I do

[GandK]

In our brokerage accounts, we are also mostly in cash at present. We have our eye on several specific stocks that we would like to buy, but they're all at least 5% higher than where we want them to be in order to pull the trigger. G monitors this closely.

We also each have a pension, which I count as bonds for the purpose of this discussion. We have a large pension that's fully funded, and a much smaller one that may eventually fall victim to the state of Ohio's pension funding issues. We hopefully will not care at that point. Together those two pensions are about a third of our total portfolio.

[Seneca]

I'm being a little harsh, as they do have some good analysis, but one of the writers is barred from the security industry.

http://blogs.reuters.com/felix-salmon/2 ... ero-hedge/

Huh, interesting stuff about ZH and at least one of their contributors, good to know.

For those that don't know, Henry Blodget, CEO of Business Insider and Yahoo host/contributor was also perma-banned for...insider activity and pump and dump BS.

http://en.wikipedia.org/wiki/Henry_Blodget

@Jenny- We're fully invested in indexes and have been since 2008. I don't have great faith in myself to call the tops or bottoms, but I'm getting closer to taking a big chunk out to cash, ~25%.

[vivacious]

So what's everyone's best guess? (seriously)

Are you all in cash now, or mostly? Or are you planning to sell as soon as it looks like the bubble might pop? Is there anything you plan on holding through any downturn?

I cashed out some stuff this morning. I lost $1,000s since yesterday. The sad thing is I was pretty happy about my investments.

[vivacious]

First, the idea that every move in the market can be traced to a specific observable event is pure BS preached by the financial news channels that make their money from manufactured high drama.

Well I think it did actually. When the DJIA cracked 16,000 and it sank in then things dropped.

As I've said the S&P 500 seems fine. The SPDR S&P 500 ETF Trust has a P/E of 9.84. What's wrong with that?

Some segments of the economy are overinflated though.

[chicago81]

The other day I sold out my VTI position in my Roth IRA, and went to 100% cash. I still have a lot, nearly fully invested in the S&P500 in my 401(k), though. I also have about 168K fully invested in my individual taxable account too (in individual dividend stocks.)

The market feels toppy to me. I generally don't like to "trade", but the run-up in equities over the past month or so just seems ridiculous to me. Then again, the market has a way of making a fool out of me, sometimes...

[leeholsen]

2nd most of chad's thoughts.

you just cant tie mkt direction to one or two opinions. dow hit 16000 euphoria and now its selling off while it catches it breath.

imo, you have to find some anaylsts you trust and follow. i have 3 and theyre all long for the next 3 months min.

right now stinks for me too, i was about 2% away from a porfolio milestone for me, but i cant time things either.

[Alcibar]

Current P/e for S&P 500 is 19.64 vs average of about 15

[workathome]

https://www.spdrs.com/product/fund.seam?ticker=SPY

Current P/E is listed as 18.07 (remember: this is on extraordinary, all-time high profit margins that are unlikely to remain a permanent feature).

[vivacious]

I wasn't attributing this to Carl Icahn btw. But you can look at the graphs yesterday. When he did his thing the market dropped. The issue was people rethinking the valuations as the 16,000 milestone was crossed.

You can argue the S&P point either way. http://www.businessinsider.com/sp-500-f ... gs-2013-11

It's high by some measures, low by others. It's still a lot lower than some of the major bubbles.

[workathome]

Forward P/E is a guesstimated metric. They're making an estimate at future earnings based on peak profit margins, supported by all-time low interest rates. Interest rates rising, or margins otherwise turning towards median levels, will throw those estimates off quite a bit - and markets hate it when analyst earnings guesstimates are missed. Though, of course, no one knows for sure! It's important to be aware when you're an an unusual or extreme situation though.

[44deagle]

@workathome Does that pe of 18 take into account that the larger companies represent a much larger percentage the s&p? Seems to me the market cap weighted pe would be lower.

[workathome]

@44deagle - I think the 18.07 is market cap weighted. It looks like 19.66 is the average (http://www.multpl.com/). Good question though, I'm not sure. I think Shiller P/E is more interesting though (http://www.multpl.com/shiller-pe/), as it helps counter the effects of really-high profit margins in current valuation ratios (http://www.thestreet.com/story/12113717 ... arket.html).