Usa / Uk Stock Markets

[Guest_ringledman_*]

Stockmarket followers on here, please discuss-

So the stockmarket moves in long term bull and bear markets commonly called the SECULAR cycle with shorter and smaller counter rallies called CYCLICAL trends. The former refer to powerful, long-term directional moves, while the latter represent shorter-term swings around the primary trend.

The typical secular bull is 15-25 years long and the typical secular bear 12-18 years long.

So with the current Secular bear having started in 2000 (i.e. we still havent broken through the 2000 highs) and as we are nearing these highs again (approx 15-20% below or so) my thinking is that this is way too soon to break through the highs based on history.

i.e. history shows that the secular bear last much longer than the current 11 years since the last peak.

So could we have a very short secular bear, say we rise 10-20 percent from here in the next year and then break through the previous highs of 2000 and then go onto the next huge multi year secular bull market?

Or, we go higher this year, up to the previous peak but dont manage to break through and a new cyclical bear commences and stocks fall considerably before resuming an uptrend and we then eventually break trough the previous 2000 high, some 4-5 years from now?

Personally I go with the second view. In general the markets (i.e. the indexes as a whole) still have further regression to the mean of P/Es that mark the end of a secular bear market. This may not happen through a massive crash (sorry deflationists) but through a sideways trending market with earnings growth of 15%+ pulling the P/Es lower.

So dependent on what is most likely to happen (option 2 IMO) how do you invest for the next 5 years?

I would like to buy cheap tracker but can't see myself doing so with the secular bear still probably not over.

My view is probably to maintain a value approach in more stable high yield, defensive meagacaps that bottomed in 2009 on low enough P/Es to form a secular low for this asset class. Likewise I think Japan is a good buy from a value perspective and with their index on multi decade lows.

I also subscribe to the Jeremy Grantham view of having enough cash on hand to invest in any future crash/correction. Perhaps 10% cash and accept that it will lose real value per annum.

Investment strategies welcome.

Cheers.

P.S. I made this post with the USA and UK markets in mind as these are the ones I know the best. I would be interested to hear how the European markets are fairing in relation to their secular market. I assume they are in the main all in secular bear markets and still below their early decade peak? I assume they all pretty much peaked in 2000?

Likewise the emerging market indexes are probably mid way through a secular bull market (definately not in a secular bear) and so possibly the place to remain for another 10 years or so?

Thoughts welcome.

Edited February 17, 2011 by ringledman

[The Masked Tulip]

My feeling is simple - QE has thrown everything up in the air.

All those cycles, trends, charts, etc, mean s*d all now since QE arrived, since it was given to the big banks and they have used it to go out and push up the markets.

I have no idea whether the plan is to keep this going on for the rest of the year... and next... at which point even at the ludicrously high values of stocks now it would be worth getting in right now...

Or whether the plan is to pull the rug out from underneath retail investors sometime this year and laugh all the way to the bank... but as they are the bank I suppose they would go out and laugh.

QE has changed everything.

[Guest_ringledman_*]

No further views???

[200p]

No expert here, but always learning to turn a profit. A book that is worth reading is "the invisible crash" by James Dines. Stock markets went up in the 90s but went down/remained flat in real terms adjusted for inflation/dollar devaluation and this was in the secular bull market!. After yr2000 actual hard assets will be better until 2020 as they can't go to zero. Commodity stocks will be better still, but they can still go to zero due management fraud, lawsuits, strikes +100 other things. (Paraphrasing from Jim Rogers)

This chart is all you need:

[Um_Bongo]

These charts are completely misleading - they are by their very nature a chart of success. Any poor performing components are purged on a regular basis and no 2 data points measure the same thing.

[Constable]

My feeling is simple - QE has thrown everything up in the air.

All those cycles, trends, charts, etc, mean s*d all now since QE arrived, since it was given to the big banks and they have used it to go out and push up the markets.

I have no idea whether the plan is to keep this going on for the rest of the year... and next... at which point even at the ludicrously high values of stocks now it would be worth getting in right now...

Or whether the plan is to pull the rug out from underneath retail investors sometime this year and laugh all the way to the bank... but as they are the bank I suppose they would go out and laugh.

QE has changed everything.

+1. All this secular markets talk sounds clever but it's a load of old bolux.

Markets have risen sharply for the last year or so because of intervention by governments and central banks - effectively providing a back stop for investors because they believe that a rising market is good for confidence and hence the economy - it's got nothing to do with market theory.

They don't make barge poles long enough for me to touch Japan. The Yen is seriously overvalued.

Edited February 18, 2011 by Constable

[W1zard]

I buy stocks in the US and UK based on various value / price measures for the individual equities concerned During high markets such as this I cannot find much to buy. I make this my driver for decisions on purchases and when theres nothing to buy my existing holdings tend to hit the highs which would trigger some selling. Then in lower markets I can usually find dozens of different stocks which meet my purchase criteria. This method tends to keep me out of trouble when it comes to where we are in market cycles because if theres nothing reasonably priced I dont buy and will just sell existing holdings picked up back at the time they were reasonably priced.

As for the markets in general its way too high at the moment. The economic drivers do not appear to mirror that of share price performance so I can only assume its the result of QE and little else.

[nice tuna sandwich]

I buy stocks in the US and UK based on various value / price measures for the individual equities concerned During high markets such as this I cannot find much to buy. I make this my driver for decisions on purchases and when theres nothing to buy my existing holdings tend to hit the highs which would trigger some selling. Then in lower markets I can usually find dozens of different stocks which meet my purchase criteria. This method tends to keep me out of trouble when it comes to where we are in market cycles because if theres nothing reasonably priced I dont buy and will just sell existing holdings picked up back at the time they were reasonably priced.

As for the markets in general its way too high at the moment. The economic drivers do not appear to mirror that of share price performance so I can only assume its the result of QE and little else.

This mirrors my approach. I accept I'm unlikely to ever match the returns of professionals because I have other stuff to do. My approach to shares is to buy those of businesses I like based on a simple screening method and when they rise above a certain target set a stop loss limit order. I have learned the expensive way not to buy shares of companies I don't like, even when they are trading at a low price:book. If prices drop and I keep liking the company I hold, if prices drop and I stop liking the company I sell!

In theory, in an overheated market I simply won't find anything to buy, maybe for many months, but things will get sold as the market contracts, leaving me with cash to buy when the time is right.

[W1zard]

This mirrors my approach. I accept I'm unlikely to ever match the returns of professionals because I have other stuff to do. My approach to shares is to buy those of businesses I like based on a simple screening method and when they rise above a certain target set a stop loss limit order. I have learned the expensive way not to buy shares of companies I don't like, even when they are trading at a low price:book. If prices drop and I keep liking the company I hold, if prices drop and I stop liking the company I sell!

In theory, in an overheated market I simply won't find anything to buy, maybe for many months, but things will get sold as the market contracts, leaving me with cash to buy when the time is right.

Nice, and it seems we are good company too as latest releases from Warren Buffets delayed sec filings show that hes fully exited eight positions recently, reduced positions in several more and hasnt bought anything for months. Hes not seeing anything attractively priced so hes sitting on his hands stockpiling cash for when the time is right.

[Bearfaced-Chic]

No disrespect to you Constable but all I hear about Japan is

They don't make barge poles long enough for me to touch Japan. The Yen is seriously overvalued.

...which is why I'm heavily invested there. It's pretty much the most unloved country in the world from a stock point of view and yet it's still the worlds 3rd largest economy. I understand there have been many false dawns before, the Yen is overvalued, the demographics are awful but I'm not sure there's a country in the world that's more forward looking and innovative.

As far as the next 5 years goes for US and UK markets, I don't think there's any harm in investing in solid boring blue chip stocks that pay divs. I'd rather be in those than cash.

All IMHO of course.

[Scott Sando]

I love the msm media when they say things like " everything is rising in price because commodities are going up" , Thats hoot number one in my day. Oh, what about QE.

[Killer Bunny]

We've had one of the largest secular bear cyclical bull market rallies in history.

Seems likely its close to an end. Wouldn't like to say but could be within weeks of a big high. Portugal is on radar. China too. Then Spain.

At least 20-30% pullback from next week or from Spring through to late Summer. Maybe more. Not in straight line of course.

With all the global level risks out there secular bear still growling. Expect to retest March 09 lows within 3 years. Maybe next year.

Of, er, and house prices falling from last Summer to 2013 in leg #2 down. Leg #3 from after the 2015 election to 2018.

[SHERWICK]

These charts are completely misleading - they are by their very nature a chart of success. Any poor performing components are purged on a regular basis and no 2 data points measure the same thing.

+1,000,000,000,000,000,000,000. :angry:

[200p]

Sure, bad stocks are purged leaving the better ones, but even so, during the flat years the best stocks can't even attract investment to push the indices up. A better version of the chart would be the S&P 500 stocks Vs Gold ratio price (I don't think such a chart exists), but it would be similar to the Dow/Gold ratio.

[The Masked Tulip]

The way stocks are rising by the Summer the price of many of them are going to be in the stratosphere.

Will they come back down to the norm or has QE printing so queered the market that the new stratosphere prices will become the norm?

I don't have the answer. I just look at stocks in th 40 bucks to the near 200 bucks... and some in the 300 bucks.. and the potential downside of owning just one Apple stock in a market that corrects by 10% to 30% is scary.

[alfidog]

First post, long time learner!

So if you had a 100k to invest , where would you put it?

Buy to let, bank, commodities?

I think we are all in a spinning class, get fitter, eat less, save money?

[nice tuna sandwich]

the potential downside of owning just one Apple stock in a market that corrects by 10% to 30% is scary.

Only as scary as losing a pair of shoes, or going out for a meal.

[Guest_ringledman_*]

No disrespect to you Constable but all I hear about Japan is

...which is why I'm heavily invested there. It's pretty much the most unloved country in the world from a stock point of view and yet it's still the worlds 3rd largest economy. I understand there have been many false dawns before, the Yen is overvalued, the demographics are awful but I'm not sure there's a country in the world that's more forward looking and innovative.

As far as the next 5 years goes for US and UK markets, I don't think there's any harm in investing in solid boring blue chip stocks that pay divs. I'd rather be in those than cash.

All IMHO of course.

My exact strategy.

The fact that everyone hates Japan despite it being one of the world's largest saving nations, one of the world's largest creditor nations, one of the most innovative nations on the planet, yet trades at 1980s price levels is truely stunning.

It is the only seriously undervalued asset class on the planet.

Granted there is a lot of government debt ( the individuals are awash with cash) is potentially good for the stockmarket. Only 7% or so of Japanese own stocks and once inflation hits then bye bye 1% bond returns and hello Nikkei 225.

The strong yen is an issue so need to decide whether to go with hedged funds or ignore currency as the great John Templeton used to say.

Also blue chip defensives which are still way below their 2000 highs.

Edited February 18, 2011 by ringledman

[nice tuna sandwich]

.

Edited February 18, 2011 by nice tuna sandwich

[indirectapproach]

When it comes to the markets, you will be either too early or too late.

If you can make the money you need by being too early, you might be alright.

Only ask the market for what it can give you.

Trading the market seriously is hard work.

People that think speculating is easy haven't speculated.

And never forget, fundamentally it's all,

Edited February 18, 2011 by indirectapproach

[The Masked Tulip]

Only as scary as losing a pair of shoes, or going out for a meal.

That is not the way to look at.

[nice tuna sandwich]

That is not the way to look at.

What is a single Apple share worth though, $300? If the market tanks by 30%, and Apple follows it, your single share is worth $90 less. Call it sixty quid. While losing sixty quid is as much fun as being smacked with a wet fish, I don't think I'd call it scary. Not compared to losing 30% of the value of a house for example.

[hedgefunded]

When it comes to the markets, you will be either too early or too late.

If you can make the money you need by being too early, you might be alright.

Only ask the market for what it can give you.

Trading the market seriously is hard work.

People that think speculating is easy haven't speculated.

And never forget, fundamentally it's all,

Sounds like the script for Wall Street 3.

[Britney's Piers]

+1. All this secular markets talk sounds clever but it's a load of old bolux.

Markets have risen sharply for the last year or so because of intervention by governments and central banks - effectively providing a back stop for investors because they believe that a rising market is good for confidence and hence the economy - it's got nothing to do with market theory.

They don't make barge poles long enough for me to touch Japan. The Yen is seriously overvalued.

How is the Yen overvalued? The Yen is going to where it ought to have been many years ago to balance trade (which is THE reason for floating currencies in the first place). The Japanese act the same way as the Chinese re: their currency except because they allow American bases on their land there is no opprobrium for them in the way there is for China, even though the BoJ brazenly intervene in the FX market.

Edited February 18, 2011 by Britney's Piers

[The Masked Tulip]

What is a single Apple share worth though, $300? If the market tanks by 30%, and Apple follows it, your single share is worth $90 less. Call it sixty quid. While losing sixty quid is as much fun as being smacked with a wet fish, I don't think I'd call it scary. Not compared to losing 30% of the value of a house for example.

I am using the one share as a metaphor for people investing in the markets. People tend not to just buy one share - unless they are buying into Buffett.