Tis A Brave New World
As advisors such as Don Hays sound the trumpet what are investors to do? Join the parade at 90% invested in stocks? Hmmm? Some direct quotes from the article link above:
"The next few decades are going to witness this massive and wonderful build-out phase of the Technology Revolution, which means heightened Productivity and spreading Democracy. "We are entering this stage with massive negativity ... of course. With the S&P 500 the most under-valued of any time in the last 30 years.
"No one ever believes as new powerful trends are just beginning. But we are now about to reap the rewards of 32 years of massive reform since 1974 in this country. We've whipped inflation. We've whipped Communism and Socialism. They are not dead, but obviously on the run. We've whipped myriad legions of productivity destroyers, and now to the victor go the spoils."
But for now Hays is charging again. Currently, it recommends an asset allocation for "long term growth" of 90 % in stocks, 10 % in cash.
Sound familiar? Sounds like 2000 to me. Sounds awfully confident. We all like confidence. It replaces the lack of confidence we may have. Then again, Mr. Market typically punishes confidence. The bullish advisors may be right and we may run to massive new highs on all indices over the next few years. Now, if we march to massive returns in the next few years, that would place some indices at even higher nose bleed levels than they are today. ie, Transports, metals, broker/dealers, small caps, etc. And, it would drive the PE on the S&P to well over twenty again. Maybe thirty. Could happen. Could be different this time. Could be my work is going to turn out to be totally worthless. I'm not being cynical. Well, ok, not that cynical. But, I could be wrong and this might not be a topping formation.
Don has stated in the aforementioned article that stocks are more cheaply valued than at any time in thirty years. Pssst! Don, where'd you get your data? The S&P, the only sanely valued index, is more than 3x more expensive than it was in the mid 1970s. I'm using facts. I'm not sure what you are using.
So, let's assume this bull thesis may be valid. If we are on our way to a brave new world, why is the innovation-laden Nasdaq acting so poorly? Forget about the mega cap weighted NDX which also contains many of the components driving the S&P. The innovation leaders which will lead us to that brave new world the bulls describe. (Oh, and I do agree has potential to come true long term.) Seems rather ironic that the Nasdaq advance/decline line cratered when the market cratered in May. Then, wouldn't it follow that the advance/decline line would rise from the ashes with this brave new world being described? But, in fact, it hasn't budged. So, how can that be? Mega caps, which disproportionately weight all major indices in the US are carrying the day while most stocks languish. Unless you are in a very narrow group of stocks, your portfolio still hasn't recovered to May levels. Is that a good thing? Well, I don't think Martha would say so. And, it coincides with people starting to do really piggish things in the market as I write this. My favorite sentiment indicator which measures what people do not what they say is once again quite negative on stocks. Tis a brave new world or tis topping action?
Well, I recall said advisor called three bottoms, raised cash near the bottom and now is 90% invested in stocks again. And that was all done in a period of a few months. Are we seeing a little of lesson #12 in the prior post? "#12 Most newsletters offer both sides regarding market direction. Whichever way the market goes will then be highlighted in subsequent newsletters as if the writer knew what was coming."
The bulls may be right. And, I do hope Don is right. I generally agree with his positive thesis of western democracy and America. And, I'd rather eat a gourmet meal than a sh*t sandwich as defined by the economy any day. But, I, for one, am not so confident.
"The next few decades are going to witness this massive and wonderful build-out phase of the Technology Revolution, which means heightened Productivity and spreading Democracy. "We are entering this stage with massive negativity ... of course. With the S&P 500 the most under-valued of any time in the last 30 years.
"No one ever believes as new powerful trends are just beginning. But we are now about to reap the rewards of 32 years of massive reform since 1974 in this country. We've whipped inflation. We've whipped Communism and Socialism. They are not dead, but obviously on the run. We've whipped myriad legions of productivity destroyers, and now to the victor go the spoils."
But for now Hays is charging again. Currently, it recommends an asset allocation for "long term growth" of 90 % in stocks, 10 % in cash.
Sound familiar? Sounds like 2000 to me. Sounds awfully confident. We all like confidence. It replaces the lack of confidence we may have. Then again, Mr. Market typically punishes confidence. The bullish advisors may be right and we may run to massive new highs on all indices over the next few years. Now, if we march to massive returns in the next few years, that would place some indices at even higher nose bleed levels than they are today. ie, Transports, metals, broker/dealers, small caps, etc. And, it would drive the PE on the S&P to well over twenty again. Maybe thirty. Could happen. Could be different this time. Could be my work is going to turn out to be totally worthless. I'm not being cynical. Well, ok, not that cynical. But, I could be wrong and this might not be a topping formation.
Don has stated in the aforementioned article that stocks are more cheaply valued than at any time in thirty years. Pssst! Don, where'd you get your data? The S&P, the only sanely valued index, is more than 3x more expensive than it was in the mid 1970s. I'm using facts. I'm not sure what you are using.
So, let's assume this bull thesis may be valid. If we are on our way to a brave new world, why is the innovation-laden Nasdaq acting so poorly? Forget about the mega cap weighted NDX which also contains many of the components driving the S&P. The innovation leaders which will lead us to that brave new world the bulls describe. (Oh, and I do agree has potential to come true long term.) Seems rather ironic that the Nasdaq advance/decline line cratered when the market cratered in May. Then, wouldn't it follow that the advance/decline line would rise from the ashes with this brave new world being described? But, in fact, it hasn't budged. So, how can that be? Mega caps, which disproportionately weight all major indices in the US are carrying the day while most stocks languish. Unless you are in a very narrow group of stocks, your portfolio still hasn't recovered to May levels. Is that a good thing? Well, I don't think Martha would say so. And, it coincides with people starting to do really piggish things in the market as I write this. My favorite sentiment indicator which measures what people do not what they say is once again quite negative on stocks. Tis a brave new world or tis topping action?
Well, I recall said advisor called three bottoms, raised cash near the bottom and now is 90% invested in stocks again. And that was all done in a period of a few months. Are we seeing a little of lesson #12 in the prior post? "#12 Most newsletters offer both sides regarding market direction. Whichever way the market goes will then be highlighted in subsequent newsletters as if the writer knew what was coming."
The bulls may be right. And, I do hope Don is right. I generally agree with his positive thesis of western democracy and America. And, I'd rather eat a gourmet meal than a sh*t sandwich as defined by the economy any day. But, I, for one, am not so confident.
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