While I’ve been bullish this year, even I have to admit that this is getting kind of ridiculous.
free money!
No complaints here. I think we’ll see a very slow holiday season which will drag on the market towards the end of the year.
Definitely unexpected, but no complaints here either. I feel sorry for the poor schmucks that have been short for the last few months (i.e. my boss).
That’s interesting. I was thinking that consumers would go crazy this year, since they’ve been belt-tightening for a long time. For instance, the guy who didn’t buy a new TV last year due to the recession is going to do so this year. Of course, the 10% unemployment rate will offset this a little bit, but I’m still willing to bet that rabid American consumer culture will win in the end. Then again, who really knows? We’ll just have to wait and see.
Every market decline starts with a new high - you just don’t know when it is. 
Hello Mister Walrus Wrote: ------------------------------------------------------- > That’s interesting. I was thinking that consumers > would go crazy this year, since they’ve been > belt-tightening for a long time. For instance, the > guy who didn’t buy a new TV last year due to the > recession is going to do so this year. Of course, > the 10% unemployment rate will offset this a > little bit, but I’m still willing to bet that > rabid American consumer culture will win in the > end. > > Then again, who really knows? We’ll just have to > wait and see. People will probably be more likely to buy a tv than pay their mortgage. The bank won’t kick them out of their house for a few years.
No real question is what are we telling clients to do. Seeing market move up is all nice. Are we telling clients to move $ into stocks for pull back and put into bonds? I am telling client to re-allocate, move winner out of equities and put into munis and corporate bonds.
socratic questions for stocks vs bonds: - how long do you expect rates to remain this low? - which will perform better, on a risk-adjusted basis, if rates rise?
Anybody have a view on current REIT valuations, relative?
I’ve no desire to buy bonds as they are in a 28 year bull market. What most people forgot is that given enough stimulus asset prices can go up even in a weak economic environment. The Chinese central bank is pumping out liquidity. The BOE, BOJ, Fed, and Swiss Central bank are all in quant easing mood. It is very supportive of asset prices. On pullbacks silver and palladium are particularly attractive. Their ratios vs gold and platinum are low. Plus you have the substitution effect with platinum and palladium, but not in diesel engines.
“I’ve no desire to buy bonds as they are in a 28 year bull market.” And at what point was it wise to pull out of this bull market, 8 years, 13 years, 19 years, 23 years? Surely a bull market can’t last longer than 28 years!
BosyBillups Wrote: ------------------------------------------------------- > “I’ve no desire to buy bonds as they are in a 28 > year bull market.” > > And at what point was it wise to pull out of this > bull market, 8 years, 13 years, 19 years, 23 > years? Surely a bull market can’t last longer > than 28 years! yeah honestly. the last bull market in bonds lasted from the beginning of civilization until 1950ish. a bull market in equities is a new phenomenon.
Yeah but think where interest rates were 28 years ago and where they are now. If I had to put money on it, I’d say equities will significantly outperform bonds over the next 28 years.
Equities generally outperform bonds in any 28 year time span. That’s why young people are told to go heavy in equities when they first start their retirement accounts.
Hello Mister Walrus Wrote: ------------------------------------------------------- > Equities generally outperform bonds in any 28 year > time span. That’s why young people are told to go > heavy in equities when they first start their > retirement accounts. untrue. this is only a fact for the past 60 years. the 300 years of capital markets prior to 1945 show us that equities were a disaster. then again, shareholder rights have come a long way, almost to the point where equities have an unfair advantage over bonds for the degree of risk they are “supposed” to assume.
I think if you have governance, legal, and transparency in place, equities are likely to perform well because they receive the first benefits of innovation and scientific development. Debt tends to be secured - either literally by collateral, or figuratively, by being offered only where cash flows are relatively defensible. When there is some breakthrough in efficiency, debtholders may see a small capital gain due to more secure cash flows (provided the debt isn’t close to maturity), but the equity holders get the extra profits. So it looks like the conditions for equity outperforming are 1) Good corporate governance 2) Relatively low corruption 3) Good transparency 4) Large expansion of scientific and technological innovation If you don’t have major scientific and technological innovation, equity should perform in line with debt on a risk adjusted basis (i.e. something like their sharpe ratios should be similar).
MattLikesAnalysis Wrote: ------------------------------------------------------- > untrue. this is only a fact for the past 60 years. Stock market history beyond that is probably not relevant to today’s market. I mean, the world is completely different now.
Hello Mister Walrus Wrote: ------------------------------------------------------- > MattLikesAnalysis Wrote: > -------------------------------------------------- > ----- > > untrue. this is only a fact for the past 60 > years. > > Stock market history beyond that is probably not > relevant to today’s market. I mean, the world is > completely different now. true. i’m just making sure everyone realizes the incredible probability of sampling error when using historical data. choosing the best 60 years out of ~400 and using that as your sample is a very difficult assumption to justify; especially when trying to justify the next 28 yrs with only ~2 full 28 yr period as your sample. rule of 30.
Actually, in the past 60 years, there are 33 different 28-year periods. Year zero to year 28, year 1 to year 29… year 32 to year 60.