I agree. The vast majority of experts have missed every correction, crash etc. There are just to many unknowns. I have CNBC on all day and 99% of what they're doing is talking about what is current and past events.

I do think that while one certainly can't predict future movements, one can reduce risk by listening when many indicators are saying the same thing. I'm not saying make a big bet and sell everything, but when so many indicators point to over-valuation, it seems to me it would be foolhardy to ignore them completely.

At current valuation levels, I think we have enough fundamental data to show we're slightly to highly overvalued. We're above the mean so to say and downside risk is greater than upside potential. The wild card is cheap energy which may allow companies to grow into current valuations through both increased sales and margins.

Looking into things today, I read many, many articles from jan-Aug 2014 saying we were fully valued, over valued etc and due to a serious correction. I had become a little anxious, but stayed mostly fully invested and returned 25% for the year. My view then, as it is now, is that we won't see a serious correction without some now unknown pin to pop the bubble. I think the spike in commodity prices popped the housing bubble and something will pop the current stock market bubble, but don't know when it will come or what it will be.

I'm starting to sound like that horoscope reader you talked about.....

bottom line: cheap energy will put another 15% of air into the bubble though 2015...then we'll see a 30% correction in 2016 and another recession when oil starts back up along with interest rates.

I'm going to continue moving from high risk to defensive stocks & ETFs, but pretty much stay fully invested as I always have. While we're definitely above the mean on virtually all indicators, it doesn't mean we can't go further above it.

what's your call?

This post was edited on 1/14/15 at 7:22 pm

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Posted by Iowa Golfer

Heaven

Member since Dec 2013

10232 posts

Posted on 1/14/15 at 7:54 pm to Ole War Skule

I'm with you. I've taken money off the table and shifted some things around. I've been doing this for over a year. I miss upside certainly, but also miss the dramatic downward slide that is inevitable. I miss it, and have cash left to buy bargains as near the bottom as I can manage. My near the top and near the bottom is no where near perfect, but it has served me well with respect to preserving my gains. Albeit smaller gains than if I could predict things perfectly, but gains.

2008-2009 didn't trouble my net worth much as it was easy to see that one coming a mile away. I remember talking to my bank and asking questions. They were just shaking their heads at what was going on. I had bought some vacation type real estate in Florida and was considering buying more. I asked the realtor (as if they understand anything except their commission) when it was going to end. Their answer was never. The conversation with the bank was because of some suspicions I had. The realtors answer scared the crap out of me.

This one is really more tricky. Many things haven't reacted as conventional wisdom would indicate they should react after the gubmit capital infusion. It's not been a normal recovery, or whatever it is that were experiencing. Certain commodity prices acted opposite as they should have. Also some equities. I'm a simple guy, so this one has me confused.

With respect to energy we won't know the demand side of the equation for a while. At least not the true demand side of the equation as we usually learn these things in arrears.

Deflation will likely prop up my precious metals. I'm not sure deflation is where were headed though. If you asked me 6 years ago, I would have thought we'd have had inflation by now. And I think we have at the grocery store and places that matter to average folks, but not statistical inflation as defined by those smarter than I, or those (gubmit) with an agenda. Mostly I would have been wrong, notwithstanding what a decent dry aged rib eye costs currently compared to what it cost not that long ago. But I'm not arguing with bankers, fixed income traders and government bureaucrats, I'm trying to preserve and grow my capital.

Anyway, I've hedged the dollar with some conservative currency plays. I'm considering going long oil at some point, but not quite sure when. I'm in a lot of cash, and honestly can't decide what to put it in, or when to put it in.

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