I find it pretty interesting, especially after what we've all lived through these last 7-8 years, that only now are "experts" discussing deflation. Doesn't matter, the same "experts", probably arriving at the party late again, will eventually be discussing inflation. As they just were. Before they (some of them) decided to shift to deflation.

It's almost like a horoscope with some of these folks. Make it ambiguous enough and always claim to be clairvoyant.

I'm convinced none of the "experts", including the extremely successful ones, are significantly more accurate than the average Joe. Now I do think the successful traders and investors are more accurate, but not significantly more accurate. They just do this full time. Same with economists.

Perhaps the worst of them all is the government. Anyone read their short term energy outlook? Published in December.

I guess back to the OP's original question. I don't have any answers, but I'd sure like to hear what you think. I do tend to believe the adjusted p.e. ratio is something to pay attention to. Margin debt to the extent it is retail margin debt. Institutional margin likely shouldn't be a concern.

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Posted by Ole War Skule

North Shore

Member since Sep 2003

3409 posts

Posted on 1/14/15 at 7:21 pm to Iowa Golfer

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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