Chart of the stock market 2000- present.

[Medic!]

Not that I would know a bubble if I were popping it! But this chart makes me nervous.
So please tell me. Are we cruising for a bruising?

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[CoastRange57]

The stock market reflects the value of publicly traded criminal enterprises. If you look at this chart and compare where the economy was in 07 and 08 and looking at what was going on then, then by these indicators we should be well beyond the glory days of 07.

If you use a comparative line analysis, then it looks we are on target for a pretty good crash. This next crash will probably hit a lot harder than the last. A lot of good solid business's were taken out in 09, I was one of them.

On the other hand, there is a lot more private money in the market right now. I know several people who were small time investors who got completely out of the market to the tune of about 5 million or so dollars. Multiply that by hundreds of thousands of other investors and you have a lot less money at risk now.

Next crash will not touch me, you get hit hard enough once by that and you make sure your sh*t is in order.

 

[Just Jim]

The government through the banks is keeping the market up. Enter at your own risk.

 

[SBC97281]

Over time there are very limited options for investments that provide returns greater than inflation. The stock market is one. Choice real estate, collectables like fine automobiles and rare firearms also have some track record of success but they all have significant liquidity risk. Gold over the last thousand years has at best kept even in terms of inflation.

So yes, the stock market wil go up. It will go down. I try to buy when it is down. I try to keep buying quality stocks and minimize my tax liability by selling wisely. There are few other games that we normal folks can play. So if you read that chart as saying the market is about to go down, I would translate that into: "There will be buying opportunities ahead!"

 

[Otter]

If it was that simple to predict we would all be rich. I've found the stock market is like flipping a coin. What will happen in the future is independent of what has happened in the past. Take a look at the stock market over a much longer time frame and you will see what I mean. Way to many factors that constantly change that influence the market to conclude a predictable pattern. The only thing I know for sure...it will go up and it will go down...try to buy low and sell high.

 

[CoastRange57]

What will happen in the future is independent of what has happened in the past. Take a look at the stock market over a much longer time frame and you will see what I mean. Way to many factors that constantly change that influence the market to conclude a predictable pattern.

My bro in law did fairly well in the market up until about 2008. He got out before it crashed. He went back in about late 11, but in his words, " every decision I make is the wrong fing decision, and I cannot predict or call the shots any more. " So he pulled out about 1.7 million, and went into commercial real estate with some of it and left the rest in cash. He says he does not need the growth anymore with his current status , and it saves him about 3 hours a day also.

My wife has some in the stock market mutual , conservative and safe and it is doing ok, recovered everything she lost in 09.

 

[The Heretic]

I survived the dot com crash.

I survived the housing bubble crash.

I guess I will survive the next crash.

Investing is pretty simple - buy low, sell high. Don't wait for a downturn - if it seems to be high, then that is the time to sell. Too many people wait too long. Most people see how high something has grown and they buy in at the peak and sell when it crashes, losing a lot of money.

 

[Certaindeaf]

Notice the upward trend, were you to snap a line.
It goes up.. especially over time. Time, not cherry picking time as in this case, is the issue.
Check it from the start of the market and you'd see that those three beads and two wampums that we crow about buying Manhattan for would buy the world many times over.. given that time and conventional 7% compounding.

 

[Certaindeaf]

This doesn't account for 2 or whatever hundred years of compound interest that I alluded to before but just total real returns..
Would you prefer $10,000 or $5.5 mil.. nevermind

 

[IronMonster]

I have proven beyond a doubt I am not capable to making good investment choices. In about September of 2011 I pulled all our money out of the market, a good chunk of that money I bought gold and silver with thinking it was a "safe" place to hold value. Well the market has gone up 40% since then and the gold and silver has tanked by 30%. The combination of the two means I could have about double the dollars if I would have just left it be. By any metric though I think the Dow or S&P index is a unsafe place to keep any investment. It may very well go up from here, maybe a lot, however that rise will be based on fake money injections and not real growth. Any rise based on monetary madness will eventually revert back to mean. All the gains of the last 5 years will be wiped out. The question is will it go up another two years or will it crash tomorrow. I thought I was playing it safe, And of course I still have all the money I put in money market accounts and I still have all the gold and silver I bought. In real terms I have not lost anything, even though the gold and silver are worth fewer dollars today. Its a tough pill to swallow though when paying it "safe" cost you a hundred grand or more.

My plan is pretty simple. Hold out till the next crash, (which will come, only question is how bad will it be an how long till it happens) and then get back in the market at the bottom and hope I have enough time before I retire that it has someplace to to. I probably would have been better off riding to the top of the market and taking the hit when it crashed. At this point there is no sense in thinking about any other alternative. The market was high by every metric when I got out three years ago, Today it is in the nose bleed insane valuation range with no fundamentals to support it.

My feeling is all the problems that caused the 07-08 crash are still present. They have papered over the problems with trillions in printed money and trillions more in new debt. The next crash, which will come, they will have no tools left in their basket of tricks. I think we are in the middle of a greater depression and I think being fully invested in the market currently is like paying Russian roulette with all the chambers loaded. The only sector of the economy that is growing is the financial and banking. I would guess the industrial sector would be doing well if the FED was allowing them to borrow at 0% interest while buying a few hundred billion a month worth of toxic assets too. The entirety of the gains are do to inflation in the monetary supply and interest rate manipulation. Those "gains" are already lost, its just no one knows it yet and its yet to be determined who is holding the bag when it reverts back to the mean.

 

[IronMonster]

As far as charts go, the rise always reverts to the mean. Draw a "average" line though that chart from 01 to 14 and that will tell you where we really should be, about 5000 points below what we are. It always overshoots to both the up and down side though. So the crash could be 10,000 points, or a 50%+ drop.

 

[The Heretic]

Housing is rising again and some are worried another bubble is growing.

I am hoping that if there is a bubble, that it lasts until after I retire in about five years, which is when I will be wanting to sell where I am at and move out towards the coast range more.

I only had about $12K in a 401K when the dot com crash happened. I kept it in and about 4 years ago when I moved it to an IRA it had almost doubled in value. Four years ago I had to move money out of a 401K because the company paying the admin fees was being sold. That was about $80K and it has since grown to about $140K.

Since then I have also been maxing out my current 401K and it grew about 20% last year, but is up and down this year at about 4% average on the plus side. I am also putting about $7K per year into a Roth IRA, but it is in very safe funds and not growing - I want that as my backup in case I lose my job or need money quickly, since any funds from that I won't have to pay taxes on. Once it is above $20K I will start putting about half of it into more growth oriented funds.

 

[SBC97281]

I have proven beyond a doubt I am not capable to making good investment choices.

I cannot advise that this strategy is perfect, but by all the statistics published since I last took a finance class in college one should be able to have better returns than most if not nearly all money managers by following one simple strategy:

Practice what is called "dollar cost averaging" on a broad based index fund such as the S&P 500 index and keep buying a fixed dollar amount every month for several years.

Market goes up, buy $350 this month. Market goes down, do the same thing $350 of the index fund.

The lower the operating cost of the index fund the higher your returns will be over time. See Certaindeaf's chart two posts above for an illustration. I am hesitant to state specific numbers as everybody faces slightly different investing challenges so it is best to do your own calculations.

If you have access to Morningstar's fund filters, watch the number of funds doing better than the S&P500 index over time approach zero.

If you are a professional in a trading capacity of some sort, you may be able to do a bit better, but there are few reliable get rich quick mechanisms in investing. Time, patience, and the self discipline to avoid selling in panics are key.

There are also several market metrics showing the dificulty that market timers have that basically come down to taking the biggest one day gain out for each month, over the course of several years or decades and total returns drop significantly.

 

[Qjay]

Always watch out for a chart that starts somewhere other than the bottom. This one starts at $6500 and goes up about $10k, which makes it seem as if there is a lot more fluctuation than there really is.

That said, when people brag about how well their stocks are doing, it is often a good time to sell. A wiser approach is long-term investing, as described by SBC above, where you just keep purchasing over time, ignoring any fluctuations up or down, until you are ready to get completely out of the market.

Monster, the thing you are describing when you talk about the money you didn't earn is called "Opportunity cost", but your actual returns are based on the amount of money you have invested, total, compared to the amount of money you have earned, total. You sometimes have to ignore "The one that got away". That said, the rest of your post shows a lot of sense, and that you are learning from the experiences here. There's a lot of people that never do that learning part.

 

[The Heretic]

Yup - I got five more years to go, whether the market crashes or not. I have been in it for the long run from the outset. Not going to panic now.

 

[Certaindeaf]

Put it all on red.

 

[Certaindeaf]

As far as charts go, the rise always reverts to the mean. Draw a "average" line though that chart from 01 to 14 and that will tell you where we really should be, about 5000 points below what we are. It always overshoots to both the up and down side though. So the crash could be 10,000 points, or a 50%+ drop.

You essentially started your yammering over/about a "chart". Don't do that.. but it seems you're plenty smart.
Perhaps just look at historical trends, rub your lucky rabbit foot and diversify.. as it seems you're doing.
Don't try to time the.. doh!

 

[IronMonster]

hu? I must not be that smart, I dont understand.

My next step is all about timing, however there is no timing involved. I am out of the market until it corrects by a substantial amount, then I'll get back in. I am not a BTFD guy nor a in and out guy.

 

[Certaindeaf]

Lol.
Well, good luck.. but that goes without saying.

 

[The Heretic]

Yup - I got five more years to go, whether the market crashes or not. I have been in it for the long run from the outset. Not going to panic now.