what if the stock market is still a bubble?

AT the turn of the last century, it was widely accepted that American stocks were virtually certain to be good long-term investments. Now, far fewer people are confident of that.

A major reason for the earlier confidence was that in the 15 years from the end of 1984 through the end of 1999, the total return of the Standard & Poor’s 500-stock index was more than 740 percent, even after adjusting for inflation. That amounted to a compound annual real return of more than 15 percent.

At the end of 2011, by contrast, the 15-year return — from the end of 1996 — was just 3 percent. And most of those gains came in the first three years of the period. Since the end of 1999, the stock market has not come close to keeping up with inflation.

In June 1964, the real return over the previous 15 years averaged 15.6 percent a year, the highest that figure had ever been. The stock market did not begin to fall then, but it could no longer maintain the torrid pace, and the 15-year return figures began to decline. On a real total return basis, stock prices hit their highs for the era in late 1968, and by the mid-1970s were in free fall as high inflation combined with a bear market.

By 1979, an investor who bought stocks in 1964, when the market seemed to be a sure moneymaker, had lost money after adjusting for inflation, even after including dividend income.

http://www.nytimes.com/2012/01/07/business/economy/a-historical-cycle-bodes-ill-for-the-markets.html

What if cream cheese makes you fat? But you still eat it.

Due to too much fast money (hedge funds, sovereign funds, prop trading) and relatively slower growth outlook globally, the stock market is not a long-term investment any more. One has to get in when things are looking pretty bad (for more sophisticated, when the risk premiums are high) and sell when things are looking good (not even too good). Unfortunately, most people save the most when things are good in the economy, and typically invest in the stocks at that time due to brain-washing by mutual fund marketing machine about stocks for the long-run. I am excluding the people who are very good stock pickers, which in my opinion is less than 1 percent of people.

Here's a clue on whether it's a good time to invest or not. When Warren Buffett writes his once-a-decade NY Times OpEd saying "buy now", it's probably a good time. Things are up 45% since that proclamation. Or if you thought he was too optimistic and waited for the bottom, you'd be up 100%.

I think most people here were busy listening to proclamations of a NYC non-bubble by posters who have trouble understanding the simplest of graphs. Some bought, others pissed away their opportunity because they were saving their cash for a downpayment trying to time a return to decent pricing. End of the day, NY RE is up only 4.5% from the absolute cherry-picked 2009 bottom, basically just inflation, despite a 30% drop in 30-year mortgages. Not nearly enough to cover the negative carry relative to renting.

Take a look here where I suggest ConEd 2 years ago because its dividend / earnings yield was crazy-high.

http://streeteasy.com/nyc/talk/discussion/19922-water-costs-going-up

It currently trades at $59. I had bought it at $35, and it has yielded $6 in dividends, so up 100%. It's a friggin' utility. Even if you had bought when I made the post, you'd be up 50%.

Hey w67th, you owe me a beer for that $50K you invested ;).

NY RE is up only 4.5% from the absolute cherry-picked 2009 bottom
At the end of 2011, by contrast, the 15-year return — from the end of 1996 — was just 3 percent

What's the difference?

The difference is that Buffett said "go long stocks" after the 2008 crash, not "go long NYC RE".

BTW, the return in S&P since then end of 1996 has been 120%, including dividends. Not sure where 3% comes from, look up Yahoo Finance. In any case, no one said S&P circa end-of-1996 was a great buy. That's when you should have been buying RE, when every saw it as a dead asset despite pretty good yields.

Buying based on the timing of someone else's recommended timing is a terrible way to invest. It's lazy and a great way to lose money. Buffet has made lots of bad calls in his life, on this one time he flipped the coin right. I suggest taping CNBC, Fox Business or bloomberg on January 1st and revisiting at year end, most gurus are wrong, and following them instead of thinking independently can be hazardous to your financial health.

Did you pick up any of that ConEd, BTW?

I didn't suggest you follow a random punter's advice feom CNBC. Sure Buffett's made a lot of bad calls in his life, but if you can't see that the coins land on his side better than 50-50, you're missing something.

Nada, Do you keep holding equities now that things are looking better on the employment front despite the risk of a large Euro Shock. My take is that we hit a peak of 1400 in SPX this year at which time, I will sell whatever I have in equities.

Yea, you can point to bonds, stocks, intl equities, small caps real estate etc and almost always find some long period of out-performance and somebody who recommended it and another long period of nonperformance. Robert Prechter , Elaine Gazarelli were geniuses until they weren't. The key to good long term performance is valuation. In the 1980's stock had good yields and low pe ratios(now they don't), that isn't to say they can't get more expensive, it just means the odds are against it a good long term move.

nada, Here is the issue with your 2009 call. Most people had no cash to invest. That is why I think you only buy stocks when things look grim and have looked so for some time. Also, do not forget to sell when thinks are looking good.

Also, 1400 SPX is only the peak. Not saying that it will hold.

Out of curiosity mercer, who do you see coming in to push the s&p 50 up 10% and which sectors do you see them favoring and why?

When in 2008 did Buffett make his call?

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&ref=opinion&oref=slogin

On October 17, 2008, Berkshire closed at $119,800.

On Friday, Berkshire closed at $114,500.

rs, no sector views. Unemployment situation is gettig better which means retail investor will finally start to put some money in after outflows last year. In addition, economic growth will be better than expected. However, I do not expect the market to hold the 1400 level due to long-term issues - that is just me. I only believe in equities for a 3-6 months ride.

riversider, just buy BAC and get it over with. You know you want to.

300_mercer: "Here is the issue with your 2009 call. Most people had no cash to invest."

People who bought an apartment within the few years leading up to 2009 perhaps. Afraid to invest the cash is not the same thing as not having cash to invest.

iversider, just buy BAC and get it over with. You know you want to.
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that's really funny....

My own feeling is that the public no longer trusts the stock market. Unlike a house that you can see and touch, you never know if there's fraud involved or the broker is Corzine.

I owe you a $25k can of beer. Inonada.

rs, People not trusting the stock is correct but when they have money, marketing by mutual funds and stock market doing well brings out the greed. Re your comment about housing, buying a coop in nyc is cheaper than renting a similar quality property if your holding period is 7y+. Average rents are almost $5 a sq ft in nice areas of manhattan (Nadas alpha generation in rent excluded). Property prices for similar quality is 1000-1100 per sq ft.

I'm still holding equities with a decade-plus horizon, mercer.

"Nadas alpha generation in rent excluded."

Heh -- "alpha generation". I'm the Warren Buffett of renting. Maybe I should charge 2 & 20? Or just give it away for free like Uncle Warren?

Is alpha generation possible for buying, or is that just the purview of renting?

It certainly is possible for buying as you have to pay rent somewhere but only with a 7+ year horizon due to transaction cost. I think I am generating alpha in buying. We absolutely love the minor renovations / lighting changes we have done to our apartment all with the 2 percent rebate we got when buying from the broker. This would not have been possible in a rental. With 5/1 I/O at least 20% cheaper than renting (at average rents) a similar place assuming at 7+ year horizon without adjusting for the ability to customize the place and emotional pain of moving. We do face the risk of rates going up as the renters face the risk of rent going up.

Risk of rents going up as credit contracts and wall street shrinks = 0
Risk of interest rates going up as 'unemployment' shrinks (mostly due to ppl no longer working) as per the FED's mandate to contain inflation (mostly wage driven) => 100%

Bet ya the $25k can of beer that NYC RE gets hammered with 6% mortgages. And then wait till 8% mortgages. WOW! Gonna suck to be mercer. But enjoy the plaster dildos on the wall.

rs, People not trusting the stock is correct but when they have money, marketing by mutual funds

---
What suckers people in are those ads with double digit 3,5,10 year past returns. Not many funds can make that claim, so I discount that.

Facebook
I rest my case

I am still trying to figure out your case? The stock market is in a bubble too?

His point is that the average person out there doesn't trust Wall Street, corporate America, or the equities of corporate America promoted by Wall Street, as evidenced by the Facebook flop, Groupon and Zynga's collapse, Knight Trading, the fact that John Corzine isn't in jail, etc. What happens the day that Sprint reports slower than expected subscriber growth because fewer people than expected wanted the new iPhone 5 or looked at their bills and decided that they don't really need more than AT&T's and Verizon's 3MB limit?

oh, and that Sprint's data speed anyway is slower than the other networks.

Flamozzzz....

ATT and VERIZON mkt cap is $350BILLION... Sprint is $15.5B... Is SPRINT's data 23.33x slower than ATT and V's?

Now now cannot know what the future holds.. but w67 was here in 2007 saying $500psf for prime NYC... it has come to pass..

5 months ago w67 said BUY sprint at $2.39 and doubled up as it went back down to $2.39... whilst fktards like you RE BORKERS and RE HUMPERS continued to TOUT NYC RE.. NOW SPRINT IS AT $5.20/share. Now mind you, Inonada is up 100% on a fking utility (w67 does want to point out the Fed's zirp policy has had huge impact on ConEd and many dividend yield play run up in the last 3 years).... but anyone financial monkey with half a banana brain can make money vs. buying NYC RE... but you RE WHORES keep pumping....

w67 wants you to hate me.. .go on short my SPRINT... not only will you gloat in sprint going down to $2.39... but YOU CAN PROFIT FROM IT! MONEY MONEY.. free money... SHORT ME YOU FKTARDS.

I need more than the 3MB limit, but I have three teenagers on my plan (don't ask, I won't tell).

Rumor has it that AT&T is following Verizon's (I believe) lead in changing their plans to a data limit per account rather than per person, which would be very helpful in this family, with two people who use little to no data on their phones (I have an ipad with a plan and husband has a company-provided blackberry) and three who use data quite a bit.

but i digress. yes, the stock market appears rather frothy again.

WOW... sprint's data speed is really slowing down up my ability to play ANGRY BIRDS space....

WHAT if in the next 4 qtrs 4G gets surpassed by 5G? Will SPRINT sprint ahead of ATT AND VERIZON's old legacy 4G towers? by bypassing 4g LTE direct to 5G? Oh NO.. .so many fking moving parts... will w67 be right on sprint hitting $10.4/share bf any of the NYC RE $1MM condos hitting $2MM in the next 4 to 8 qtrs?

WHO WILL WIN the MONEY RACE? WHO WHO WHO? GO ON SHORT ME.. like BILL Maurer on SEEKING ALPHA.. douche has been on the other side of my sprint trade for 6months... go on.... strap your dildo onto Bill's bandwagon... trade SPRINT .... up and down.. .up and down... until it explodes into an orgasm of epic dollar billz y'alll ...

GO ON SHORT MY SPRINT ... 350K shares... do it now bf it goes to $0.

I have no idea what Sprint holds. It's a highly leveraged play. Can work out great. Can be a disaster. On the way down it certainly was a disaster. You've done your fundamental analysis, you've even made product calls in your analysis. That's better than yikes has done. Or the overwhelming majority of people here. So far it's been great. Liberty made a similar bet on Sirius and it worked out really well for them. Fantastic.
But then, what if earnings or subscriers next month underwhelm? Is outperformance built in to the price now so that even if subscriber growth, revenue and profit are strong, price drops because they aren't quite strong enough?
And will you be telling others when you sell before you do so they can get out? Why hasn't inododo bought?

Doesn't the average person own equities of corporate America in their 401ks?

and btw.. .riversider.. no one forced you to take your cream cheese savings and plow it into facebook at $38/share....

no, brooks2, the average american doesn't own shit.

2 people here have acknowledged buying Sprint along with you. apt23, who bought property in Miami. And bjw who bought property in Williamsburg.

Well that was to the point. Only the top 1 % own stocks then?

w67 LEFT SPRINT 3 yrs ago BC it didn't have iPhones... I took my $300/month that I had been paying to them for 10 yrs and walked away... my ATT bill is $400/month.

Oct 2012... w67 going back to SPRINT and taking my $400/month with me... that's a $50K in PV REVENUES going from ATT to SPRINT. Who's got the time to chk how much data one is using? It's as if the cable operators started charging you more for over 200 hrs of TV viewed in a month.

ATT/V is fked. just think things thru... like Sprint was trading like a one year leap on Apple... there are SO MANY "upside" surprises in sprint than downsides... what's the downside.... sprint starts trading like a 1.25yr option on VERIZON?

FLMAOZzzzzzz... yet ppl continue to close on their $5MM condos in nyc with 30yr mortgages at 2%.... what are the chances of mortgages hitting 0% versus 8% in the next 10 yrs? if ya think it'll hit 0%, then by all means SHORT ME u fktards.

>FLMAOZzzzzzz... yet ppl continue to close on their $5MM condos in nyc with 30yr mortgages at 2%....

So does your investment stand on it's own merit, or only in perspective of a $5MM condo?

>ATT/V is fked. just think things thru...

inododo bought AT&T recently. Instead of Sprint. Why?

There iz a Steve job sperm coursing thru some vaginal wall that'll make us all fked in the long run, fked sooner rather than later:
1) nyc re
2) Euro
3) x telecom, NYSE.
4) verizon
5) AT&T
6) sprint.

So my ship is sinking slower than your ship you fktard.

brooks2, i shouldn't have to point this out, but there is a huge difference between the top 1% and the average american. I'd assume the average american is somewhere between the 25-75th percentile in terms of income, although I may be off a bit. The number of people who have anything substantial in their 401Ks is horrifying.

>So my ship is sinking slower than your ship you fktard.

Will you be telling streeteasy when you sell?
Will it be right before next quarter's earning's announcement?
Will you be hanging around the Sprint store on September 12, 13, 14, 15, -September 30 to see how iPhone sales are going in order to make up your mind?
What do you have to say about the fact that AT&T is doing well because people AREN'T upgrading their phones? Since there's such a significant, costly subsidy. And yet for Sprint to have to outlay that money, it's much more meaningful given their indebtedness. Plus the fact that Sprint's commitment is greater than AT&T's.
What happens when people buy an iPhone and see how slow the network is, and it's exacerbated based on the new activations?

Will you be telling everyone on streeteasy when you sell?

I have no position in Sprint. I'm not telling anyone to buy or sell. Though I'd caution anyone to use non-speculative dollars to invest in a single highly-levered stock. If you have that luxury, great for you.

Gotta love it. S&P up 15% since RS's "call" from 10 months ago. Up 10% since his reiteration 7 months ago. Then he shows up and says "Facebook" as if that means something. Market up 8% since FB's IPO. Who the hell said to buy FB at $38???

He asked if the stock market was a bubble. I am just trying to figure out if he meant; it's a bubble case closed or not a bubble case closed.
We are over 1400 on the SnP yet FB has been cut it half since it went public,
The subject of this thread questioned the stock market being in a bubble. That is not clear to me

>Gotta love it. S&P up 15% since RS's "call" from 10 months ago.

What about columbiacounty's negative position?

The stock market is not in a bubble, it's still below where it was 5 years ago. It may eventually get back to bubble status, but in my opinion it would have to make new highs and that's unlikely over the next 6 months. There may be a 10% correction but that doesn't mean the market is in a bubble, just that it got ahead of itself.

It will be interesting to see what the market does when and if interest rates begin to rise a couple of years down the road.

Yes. Let's see what rising interest rate does for equities which you can get out of for $10 trade versus 6% for the $5mm coops on riverside drive or maybe $2mm coop on midtown east.

Flmaozz.

"The stock market is not in a bubble, it's still below where it was 5 years ago."

That doesn't mean it is not a bubble... particularly when you are comparing to another bubble.

S&P is looking frothy to some degree. Only big counter I'll give is this... there is TONS of money out there with nowhere to go. Sovereign wealth funds with TRILLIONS in cash (hell, a friend is working with one that ALONE has trillions in cash). It needs somewhere to go.

And, S&P might look overvalued, but where else you going? Europe? China? Bonds?

The S&P will benefit from it being the tallest midget. Is that enough to offset the pressures of earnings projection reductions due to slowing China and Europe? Not sure. Will be an interesting next few months.

Personally, I've been taking profits on the run up (I buy each time we dip). It is more about moving to my target allocation now... and staying very, very happy that I chose stocks over RE...

>The S&P will benefit from it being the tallest midget.

Give us some other good ones? How about the cleanest dirty shirt?

Stay liquid, mobile and thirsty my friend.

Stock market is kept propped up by continuing expectation of future quantitative easing by the Fed and way above mean profit margins resulting from government deficits and consumers continuing to save.

Profits = Investment - Household Saving - Government Savings - Foreign Savings + Dividends

How does one have faith in the stock market when reports like this come out?

http://pcaobus.org/News/Releases/Pages/08202012_BD_Interim_Inspection_Program.aspx

There's no place else to put liquid money, CD's and Bonds are paying nothing so people are looking for dividends that pay 3% or higher. If interest rates ever begin to rise all bets are off and I expect a major downdraft in the market. Luckily the Fed has indicated rates will remain low for at least the next 2 years.

Of course if the broker you are choosing happens to be one of the 23 brokerages that had deficient audits done, what's the point?

"Gotta love it. S&P up 15% since RS's "call" from 10 months ago. Up 10% since his reiteration 7 months ago. Then he shows up and says "Facebook" as if that means something. Market up 8% since FB's IPO. Who the hell said to buy FB at $38???"

Excellent points...

Though I did shave some more today... (I've been overweighted with all these runups)

S&P hit a 4 year high today, bodes well for all sectors of the economy including real estate.

Those waiting for future crashes in the market or real estate will be sorely dissapointed over the next 24 months.

Wacky... why do we need a future RE crash? We're in a current crash...

"S&P hit a 4 year high today, bodes well for all sectors of the economy including real estate."

S&P doubled... and RE went *down*. Are you suddenly trying to claim they are correlated again (after all the cries how RE was different all these years). Again, wacky.

Consider who the post is from, a no nothing Re broker

Brooksie: The guy I was thinking about; who's always waiting to scoop up the bargain real estate after the next crash. LOL!!

I don't think too many are "waiting to for future crashes". When it makes sense for me to buy RE, I will. Like many, I am finding it much cheaper to rent.

Maybe you should stick to cheerleading, because you don't seem to know much about investing or much about Real Estate, a profession you choose. I really can't figure out how you make a living at it. Well it was pretty easy in the bubble.. good luck .. LOL

But who are you?

I'm not sure columbiacounty's question makes sense in context.

wake up! my alias brooks2. the last crash was 30 years ago, the states are doing much better than 30 years ago

http://finance.yahoo.com/blogs/daily-ticker/stock-market-debt-fueled-bubble-steve-keen-121950839.html

Steve Keen weights in. Good watch.

http://finance.yahoo.com/blogs/daily-ticker/market-bit-bubbly-risks-big-movements-robert-shiller-192414777.html;_ylt=AiQVNrHR_ZUYRweMi3GEA30p2YdG;_ylu=X3oDMTE1NzRyZGk3BG1pdANEVCBJbmRleARwb3MDMQRzZWMDTWVkaWFCbG9nSW5kZXg-;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3

“The CAPE ratio has predicted long-term returns,” Shiller explains. The other side of it, though, is “when CAPE gets high, the market does tend to go down. It’s a simple value proposition – what goes up must come down.”

“I don’t have an alarmist view about this,” he adds. “The market is high but it’s not horrible.”

but riversider, my cabbie told me today i must buy property and also stock because that is how i can build long-term wealth. don't u see? if u don't buy now u will be priced out forever.

nyc1234,
never listen to your cabbie, now if it was your barber.....

"Pop goes the weasel".

Or Mila Kunis

http://finance.yahoo.com/blogs/daily-ticker/p-500-may-fall-more-40-fall-chris-120957460.html;_ylt=Am0yPr7xxmDUkaqUxetePSgp2YdG;_ylu=X3oDMTE2ZjRqM2wzBG1pdANEVCBJbmRleARwb3MDMzUEc2VjA01lZGlhQmxvZ0luZGV4;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3#more-id

Even though the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) are hovering at all-time highs, Chris Martenson, author of PeakProsperity.com and the “Crash Course” Series, is forecasting a major market correction.

Martenson predicts the S&P could fall 40% to 60% to the 600-800 level by this fall. His last major market call was in March 2008, before the financial crisis.

Riversider, I hope you didn't listen to yourself 18 months ago.

I'm taking some nice profits.