One Year To Nowhere

[Expat1 971]

Almost 800 million dollars - locked up as of yesterday. Wonder if anyone was dollar cost averaging into this mutual fund - because right now the value of these holdings is essentially (zero)

http://www.wsj.com/articles/as-high-yield-debt-reels-mutual-fund-blocks-holders-from-redeeming-1449767526

A firm founded by legendary vulture investor Martin Whitman is barring investor withdrawals while it liquidates its high-yield bond fund, an unusual move that highlights the severity of the monthslong junk-bond plunge that has swept Wall Street.

The decision by Third Avenue Management LLC means investors in the $789 million Third Avenue Focused Credit Fund may not receive all their money back for months, if not more.

Third Avenue said poor bond-market trading conditions made it almost impossible to raise sufficient cash to meet redemption demands from investors without resorting to fire sales of assets.

Securities attorneys said Third Avenue’s decision to wind down the mutual fund without giving investors all their cash back could have significant repercussions for both the company and the mutual-fund industry, which for decades has thrived by promising to allow investors to take a long-term view of the markets while retaining the right to cash out shares at any time.

Edited December 11, 2015 by Expat1

[Expat1 971]

Lets test your theory.

If you took 250,000 out of your mattress and invested in an SPX based index fund on Oct 15 2007 and invested 18,500 every Oct 15 up through 2015 I would have invested 398,0000, sold for 555,584 and 83 cents and yielded a net gain of 157,584.83 for a return of 40%. If you never added another nickle you would have invested 250,000 sold for 331,785.63 , netted 81,785.63

and or 25 %. Not great for 7 years...but not a loss.

What am I missing?

dollarcostaverage.JPG

You're also missing this: When liquidity is tight your money is "safe" - until you ask for it.

[Expat1 971]

A comment on the S&P and the bubble that has been created over the last few years from Monday -

• The cyclically adjusted price-earnings (CAPE) ratio,was 26.19 in November, a value greater than 25 indicates that the stock is overpriced in comparison to its earnings history. The CAPE ratio has averaged 17 going back to 1881.
• · The Q ratio, the total price of the market divided by the replacement cost of all its companies, historically averages around .68, but is now hovering around 1.04.
• · The price-to-earnings ratio of the S&P 500 is around 19 – above the long-term historic average of 15.
• · Total market cap-to-GDP is 120, 10 percentage points above the 2007 level and eighty percentage points higher than it was in 1980.
• · The price-to-sales ratio for the S&P is 1.82. That is higher than 2007, when it was 1.52 and is at the highest since the end of 2000.
• · And finally, Advisors Perspectives chart of inflation adjusted NYSE Margin Debt and the S&P 500 demonstrates the profoundly over-leveraged condition of the market. Margin debt is over 20 percent greater than it was at the peak of the dotcom bubble

It is imperative that investors, long-term or otherwise, keep an eye on their holdings and portfolios. The "money managers" are quite happy to exchange the cash you earned and put away for your retirements or college funds or anything else that you planned to do for margin-bloated overpriced assets.

They get their salaries and bonuses no matter what happens to your money and the more of your money they can over-value the more they can skim.

This is NOT sustainable. This is a very, very bloated market that is being held up by trick accounting, company buybacks, and credit that does not have cash, cash flow, or liquidity to back it.

[Expat1 971]

No doubt. Also saw this lil nugget today:

Bank of America Merrill Lynch analyst Savita Subramanian has a crystal ball with a 10-year window on it, and she likes what she sees.

How much so? Enough that she thinks the S&P 500 stock market benchmark is likely on a journey to 3,500, where it will stand precisely at Dec. 31, 2026.

http://www.cnbc.com/2015/12/08/bank-of-america-analyst-looks-10-years-ahead.html

Lets see which Crystal ball is better. Mine or theirs. Considering they always seem to be on the wrong side I doubt it's the latter.

We started a discussion on EM awhile back. This is where the major EM/global markets stand on a basis of applying the same market cap/GDP formulas that generated the expected return on the US markets. They have been creeping up since spring, tracking inversely with the summer bloodbath, and have reached my box (well within my box,) and are currently holding there. My interest is in Asia where unlike South America they aren't dependent on oil.

I have a USD strengthening concern which I why briefly slipped in then pulled out. Right now these markets are where I am interested in investing non-retirement personal cash in the intermediate term, on a valuation basis only.

Source and formula:

http://www.gurufocus.com/global-market-valuation.php

Edited December 11, 2015 by Expat1

[OriZ 3,157]

Indeed, but that's long term and using only one of the valuation measures cited(I mentioned a few others, some of which are a little more reliable, in one of my posts).

My guess is this will happen with them rising higher and faster after the crisis, but will not prevent them from dropping in tandem with the US markets. But we'll see.

[Expat1 971]

I'll post when I hit "buy".

Watching the fun today......wondering when the herd will start hitting the buttons

[Rob L 3,811]

So will anyone lend me 50 dollars?

Juice starts on Friday

[Rob L 3,811]

You're also missing this: When liquidity is tight your money is "safe" - until you ask for it.

I don't invest any money in the equity market that I expect to use in the next 10 years

[Jacque67 7,328]

Juice starts on Friday

No idea what that means-lol.

You got my hopes up this morning-however I can now see I am dealing with a bunch of tight wads here-sigh.

[Jacque67 7,328]

[OriZ 3,157]

I'll post when I hit "buy".

Watching the fun today......wondering when the herd will start hitting the buttons

The herd normally doesn't hit the buttons till nearly the bottom. It's the professionals who sell throughout 80% of the decline. Once the herd starts selling it's capitulation time. But today could easily be erased next week - one day doesn't make a trend so we'll see what happens, could be the start of something bigger or we could get another bounce.

I don't invest any money in the equity market that I expect to use in the next 10 years

Hey I've said it before and I'll say it again - I have no objection to investors following a passive investment stance, provided that they’ve aligned their portfolio with their investment horizon and actual risk tolerance(allowing for the possibility - in my view the likelihood - of an interim loss on the order of 50%). It’s not clear to me that the existing volume of outstanding equities could actually be absorbed by investors at their current valuations if investors were to properly align their portfolios with their risk tolerances and investment horizons, yet somebody has to hold every share of stock outstanding, at every point in time.

Edited December 12, 2015 by OriZ

[Expat1 971]

I don't invest any money in the equity market that I expect to use in the next 10 years

I dont either, and of that money that I cant touch in the next 10 years anyway i dont invest in things that are only worth 60 or 70 cents on the dollar. I'll be asking around and see if you're missing anything sometime around what i believe will be late spring, at which time we can all probably get back to the business of normal investing.

The markets have been too high for awhile and we're approaching a record for how long these valuations have been propped up but the credit lines are drying up and the underlying value of the basic commodities that sets the price of things produced has dropped by 30-50 percent. The market must correct for this, It will, and this is basic economics.

[OriZ 3,157]

I dont either, and of that money that I cant touch in the next 10 years anyway i dont invest in things that are only worth 60 or 70 cents on the dollar. I'll be asking around and see if you're missing anything sometime around what i believe will be late spring, at which time we can all probably get back to the business of normal investing.

Wayyyy too soon. This is going to take time.

[Expat1 971]

Wayyyy too soon. This is going to take time.

It has taken time. This has been coming since mid 2014.

Since that time? We were flat for a year, hit the cross, we passed the doji, the credit market is drying up, it looks like an S&P star by the end of this month, and I'm thinking no more magic beyond EOY + 1 more earning season after which we can probably get back to business.

Me? I feel like I pushed the envelope there at the end.

If it extends, it extends - sometimes the ability of the market to perform magic tricks on numbers surprises us but at the end of the day the underlying value of the shares isn't there.

Edited December 12, 2015 by Expat1

[OriZ 3,157]

Always assume things are going to take longer, not shorter. Yes, internals have sucked since mid 2014, but the market top wasn't till a year later, and that is if it was the final top, which it more than likely was but like I said at this point and until a few more of my conditions are met - I can't exclude another push higher.

But lets say May was THE top. In 2007-9 it took 17 months to reach a bottom. In 2000-2002 it took 32 months to reach a bottom. So I don't see how this one takes only 12. It's probably going to extend into at least the end of 2016 if not into 2017.

BTW, if we get most of it during 2016, Hillary has no shot at winning the elections. With very few exceptions, throughout history the party(and it doesn't matter if it was the actual sitting president or not) that was in power during a major crisis normally lost the next elections, whether it was actually their fault or not.

Here's an interesting scenario - I'm not saying this is going to happen, nor do I want this person as president, I just think if it does happen it will be real funny to watch. Say we are in crisis mode next year, democrats are blamed, it's Trump vs Hillary and Trump wins(because, well, he's a businessman, so he can save the economy right?). It extends a little bit into his presidency into 2017 but then bottoms and starts improving(kinda like what happened with Obama). Everybody thinks Trump saved them. Wrong. All it is, is how cycles play out. And if I were him(or whoever ends up being pres) I'd get outta there after one term because chances are at some point during the second term(kinda like with Obama now and it's already way overdue) we'll get another one.

I hate John Maynard Keynes but one thing he said that I agree with 'the market can stay irrational longer than you can stay solvent'.

Edited December 12, 2015 by OriZ