One Year To Nowhere

[Expat1 971]

Yes I believe they are going to hike them up. Speaking of bonds:

Watching a pin approach a bubble:

May: http://www.bloomberg.com/news/articles/2015-05-04/in-land-of-negative-yields-junk-bonds-are-the-new-haven-assets

June: http://www.bloomberg.com/news/articles/2015-06-12/junk-bond-defaults-growing-as-pressure-from-commodities-persists

July: http://blogs.barrons.com/incomeinvesting/2015/07/15/u-s-junk-bond-defaults-to-reach-3-by-year-end-says-moodys/

Summary: When Bloomberg declares something "a safe haven asset" run like hell. I believe that the "safe high-yield" market might be pre-disintegrating

Edited December 10, 2015 by Expat1

[Expat1 971]

Oh I forgot this one - this month

http://www.wsj.com/articles/the-stock-market-is-missing-the-warning-from-junk-1449397806

So yeah, a correction is coming. I'm just waiting for the herd. They'll figure it out.

[OriZ 3,157]

Yes I believe they are going to hike them up. Speaking of bonds:

Watching a pin approach a bubble:

May: http://www.bloomberg.com/news/articles/2015-05-04/in-land-of-negative-yields-junk-bonds-are-the-new-haven-assets

June: http://www.bloomberg.com/news/articles/2015-06-12/junk-bond-defaults-growing-as-pressure-from-commodities-persists

July: http://blogs.barrons.com/incomeinvesting/2015/07/15/u-s-junk-bond-defaults-to-reach-3-by-year-end-says-moodys/

Summary: When Bloomberg declares something "a safe haven asset" run like hell. I believe that the "safe high-yield" market might be pre-disintegrating

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.

Edited December 10, 2015 by OriZ

[Expat1 971]

If they bought in on Day one, held and sold after a 80% increase, yes.

If they were holding, bought continuously through the down turn and up turn, they would be ahead.

If you bought in on day one, held, and didn't sell you would still have lost value.

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.

I'm going with Goldman, not BoA LOL

[OriZ 3,157]

If you bought in on day one, held, and didn't sell you would still have lost value.

I'm going with Goldman, not BoA LOL

If you bought at the August bottom you're going to make roughly 1% annually on average, in the next 10 years.

But is it really worth the pain and suffering in the interim? Especially when you're gonna be able to buy alot cheaper in a few years?

Assuming no further deterioration in GDP or any other economic measures, to reach the same average historical undervaluation met in most important bottoms in the 20th century you would need a market drop of 75% from current levels. Obviously, there will be further deterioration in a recession scenario, so you would need an even bigger decline.

Do I think it's going to happen? No, I don't think we're going to see the same kind of undervaluation in the completion of this cycle(in the future we certainly will). But I'm still pretty certain it's going to be roughly 50%.

Edited December 10, 2015 by OriZ

[Expat1 971]

If you bought at the August bottom you're going to make roughly 1% annually on average, in the next 10 years.

But is it really worth the pain and suffering in the interim? Especially when you're gonna be able to buy alot cheaper in a few years?

Assuming no further deterioration in GDP or any other economic measures, to reach the same average historical undervaluation met in most important bottoms in the 20th century you would need a market drop of 75% from current levels. Obviously, there will be further deterioration in a recession scenario, so you would need an even bigger decline.

Do I think it's going to happen? No, I don't think we're going to see the same kind of undervaluation in the completion of this cycle(in the future we certainly will). But I'm still pretty certain it's going to be roughly 50%.

I'm not holding anything but cash and short term fixed income (because cash isn't a choice-bleh). Having no fun anymore, just watching.

[X Factor 1,112]

I'm not holding anything but cash and short term fixed income (because cash isn't a choice-bleh). Having no fun anymore, just watching.

You and me both.

[OriZ 3,157]

I'm not holding anything but cash and short term fixed income (because cash isn't a choice-bleh). Having no fun anymore, just watching.

I know you already sold what you bought, I was referring to the other poster's comment(which I quoted your reply to).

Citi's not happy either.

"The cumulative probability of U.S. recession reaches 65 percent next year," Citi's rates strategists wrote in their 2016 outlook published late on Tuesday. "Curve inversion will likely come more quickly than the consensus thinks."

http://www.businessinsider.com/r-watch-for-us-recession-zero-interest-rates-in-china-next-year-citi-says-2015-12

However, I'm not sure if that means there's actually more upside to come

[Rob L 3,811]

If you bought in on day one, held, and didn't sell you would still have lost value.

I'm going with Goldman, not BoA LOL

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?

[OriZ 3,157]

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 missing that you "sold" right at the top of the biggest bubble in history. It's called being lucky.

[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 missing that it was already mentioned that after 5 yrs you got your money back. Dude you bought your shares from in 2007? He doubled his while you breaking even so you could add 3 years to the earlier discussion to show that you can make some $$ too. I'm the guy who just sold to the other guy who you are describing. See how that works?

[Expat1 971]

http://www.cnbc.com/2015/12/09/massive-insider-selling-spurs-stock-market-concerns.html

Kinda like these guys are doing now LOL. Maybe they just need christmas money huh

Edited December 10, 2015 by Expat1

[Expat1 971]

Sorry to keep posting but I'm still laughing about this - 4 hours old........

Corporate insiders have been selling their shares at near-record levels, and according to some, this could be a sign for outside investors to start selling as well.

Investment research firm TrimTabs reported on Wednesday that insider selling reached $7.6 billion for the month of November, the fourth-highest monthly level on record.

Someone has GOT to get on the horn quickly and let these guys know that the very best policy is to dollar cost average. I wonder why they don't do that because that's the BEST return........right?

These crooks are fleecing the "2007 buyer" as we speak.

[OriZ 3,157]

Hey anyone who contributes can write as much or as lil as they want...yeah junk bonds indeed are one of the factors I look at to conclude my assertion that market internals have been diverging since the third quarter of 2014. Credit spreads are widening and haven been for some time now, and internal measures of breadth have been deteriorating(among those, advance-decline issues, advance-decline volume, new highs-new lows, percent of stocks above 50 and 200 day moving averages, bullish percent index, S&P equal weighted as opposed to the headline S&P(market cap weighted), and many many more that I follow). All showing signs of trouble ahead. As I've said before, stocks are always last to react, the smarter money is normally in other assets.

But have no fear! Yellen says there's nothing to worry about.

http://www.cnbc.com/2015/12/03/janet-yellen-takes-issue-with-citis-recession-call.html

Cause as we all know the FED has a great track record of staying ahead of the curve.

http://money.cnn.com/2013/01/18/news/economy/federal-reserve-transcripts/

Get it? They actually thought the greatest risk in 2007 was the economy being too strong.

I love this one - Bernanke quotes, the guy is a joke:

http://www.businessinsider.com/bernanke-quotes-2010-12

Here's some of my favorites:

Oct. 20, 2005

"House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."

Feb. 15, 2006

"Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."

March 28, 2007

"At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular,mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."

Feb. 15, 2007

"Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, anddelinquency rates on most types of consumer loans and residential mortgages remain low."

May 17, 2007

"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable."

Oct. 31, 2007

"It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions."

Jan. 10, 2008

"The Federal Reserve is not currently forecasting a recession."

Jan. 18, 2008

(Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) "They will make it through the storm."

Also, I think that the example above was a very convenient one. If we're going to have a >10 year time horizon, then the example should be of that and not 8 years. So lets see what happened by 2010 to those who bought at the 2000 top, instead:

So, assuming you got in March 2000...on March 2010, you would have lost 26%. That wasn't some unexpected or unpredicted black swan scenario, it was implied at the time by the valuation measures that are most closely correlated with actual subsequent 10-12 year returns over more than a century of data. Those same measures now imply a zero to perhaps even slightly negative return 10 years from now.

Edited December 11, 2015 by OriZ

[X Factor 1,112]

Good stuff Oriz. Taking my down (bad) memory lane. You got to do the opposite of what they are publicly saying.