Ftse 100 Reaches 7,000

[crashmonitor]

Urquart Stewart referred to the coincidence of the eclipse of 1999 and an equity boom on the BBC this morning, something I alluded to yesterday on the big black thread.

I guess then we were asking for it with p/e pumped up to 30 times as opposed to the 16-17 time today.

Back then you could get a fixed rate bond in the building society at 7%, now 2%.

Twice the yield on equities as then, a third of the yield on cash now. Crash aint going happen this time on eclipse plus 5 months imo.

[wish I could afford one]

The FTSE 100 is the only asset I will currently trade because in spite of the new record it still looks only about par value.....every other asset class gone to the the moon especially houses and bonds. Golds a bit more tricky to value especially since the 33% crash (in pounds).

Have been trading on the volatilty and bucking the index by a fair margin. However, totally caught out by the February bull having sold out in January and was lucky to get back in at 6784 ten days ago. That's the trouble with volatiltiy trading always a danger that you get caught out on a surge with no holding.

Some would say get a life, but I found the battle yesterday afternoon absolutely compelling as wave after wave of buys were repelled by the 7000 resistance.

Yet when the thin red line was finally broken 7020 was achieved within minutes.

Speaking of bonds what I find fascinating is that my All Share tracker is up 4.0% in a week but my index linked gilts tracker is up 6.7%!!

My total net worth, with no contributions made but a few dividends received, has just increased by more than £21k in a week! I spend less than that in a year. I can also assure you that my portfolio is nothing special (full portfolio disclosure here).

... and we talk about house prices going stupid.

[crashmonitor]

Speaking of bonds what I find fascinating is that my All Share tracker is up 4.0% in a week but my index linked gilts tracker is up 6.7%!!

My total net worth, with no contributions made but a few dividends received, has just increased by more than £21k in a week! I spend less than that in a year. I can also assure you that my portfolio is nothing special (full portfolio disclosure here).

... and we talk about house prices going stupid.

Bonds just crazy, most now paying negative real returns. Can only really work if we get deflation.

Meanwhile the Telegraph's take on the 7000 breach.

Certainly wouldn't be setting out on investing in the FTSE from scratch without the buffer of profits carried forward....you can afford to be more sanguine. But the press think that investors will hop on now for the blow out phase. (I think the Motley Fool has been predicting a quick rise to 8,000 once the 7,000 barrier is finally breached, we will see)

http://www.telegraph.co.uk/finance/economics/11486830/The-FTSE-100s-recovery-will-help-the-economy.html

Edited March 21, 2015 by crashmonitor

[zugzwang]

The FTSE 100 is the only asset I will currently trade because in spite of the new record it still looks only about par value.....every other asset class gone to the the moon especially houses and bonds. Golds a bit more tricky to value especially since the 33% crash (in pounds).

Have been trading on the volatilty and bucking the index by a fair margin. However, totally caught out by the February bull having sold out in January and was lucky to get back in at 6784 ten days ago. That's the trouble with volatiltiy trading always a danger that you get caught out on a surge with no holding.

Some would say get a life, but I found the battle yesterday afternoon absolutely compelling as wave after wave of buys were repelled by the 7000 resistance.

Yet when the thin red line was finally broken 7020 was achieved within minutes.

I think there's a lot to be said for your argument about the central planners intending to jam the fraudexes 25% higher than 2007. It's clear that the Krugmanites are as astonished by the recent turn of events as they were by the Lehmans collapse in 2008. We know why, of course - their economic models are unscientific garbage and they've no idea what they're doing. As an engineer if you're testing something new and unkown you build in the biggest structural safety margins you can before acting. Certainly looks like what they're doing with the markets prior to renormalising interest rates.

[wish I could afford one]

Bonds just crazy, most now paying negative real returns. Can only really work if we get deflation.

Meanwhile the Telegraph's take on the 7000 breach.

Certainly wouldn't be setting out on investing in the FTSE from scratch without the buffer of profits carried forward....you can afford to be more sanguine. But the press think that investors will hop on now for the blow out phase. (I think the Motley Fool has been predicting a quick rise to 8,000 once the 7,000 barrier is finally breached, we will see)

http://www.telegraph.co.uk/finance/economics/11486830/The-FTSE-100s-recovery-will-help-the-economy.html

I'm ok with a blow out phase. My very slow moving mechanical valuation strategy will see me gradually deleverage the FTSE as a % of total wealth if it does happen. Eventually it might revert and I can buy back in for some half decent yield again.

Of course it might not blow out and could fall tomorrow. I'm ok with that as well.

In both instances I'll still continue to collect my dividends.

[Guest_growlers_*]

http://financialresearch.gov/briefs/files/OFRbr-2015-02-quicksilver-markets.pdf

Interesting read. S&P not FTSE but all correlated.

[silver surfer]

http://financialresearch.gov/briefs/files/OFRbr-2015-02-quicksilver-markets.pdf

Interesting read. S&P not FTSE but all correlated.

Chris Dillow, the Marxist economist who writes for The Investors Chronicle, argues that the S&P 500 isn't particularly overvalued. His point is that the CAPE scores (Cyclically Adjusted P/E ratio, probably the best single measure of if a market's under or over valued) is excessively influenced by the ultra low valuations of the 1930's and to a lesser extent the 1970's. Looking at the S&P through the lens of contemporary policy he believes the S&P could go a lot, lot higher.

What I like about Chris Dillow's writing is that he's smart, evidence driven, and has if anything a negative instinct towards a rising S&P.

Personally I'm grinding my teeth about the FTSE hitting 7000. I've got a bit higher cash weighting than I'd like and I was hoping for the FTSE to fall below 6000 before addressing that. I think I'll wait some more because with Greece far from resolved I'm hopeful there'll be a better buying opportunity before the year's out.

[Guest_growlers_*]

Chris Dillow, the Marxist economist who writes for The Investors Chronicle, argues that the S&P 500 isn't particularly overvalued. His point is that the CAPE scores (Cyclically Adjusted P/E ratio, probably the best single measure of if a market's under or over valued) is excessively influenced by the ultra low valuations of the 1930's and to a lesser extent the 1970's. Looking at the S&P through the lens of contemporary policy he believes the S&P could go a lot, lot higher.

What I like about Chris Dillow's writing is that he's smart, evidence driven, and has if anything a negative instinct towards a rising S&P.

Personally I'm grinding my teeth about the FTSE hitting 7000. I've got a bit higher cash weighting than I'd like and I was hoping for the FTSE to fall below 6000 before addressing that. I think I'll wait some more because with Greece far from resolved I'm hopeful there'll be a better buying opportunity before the year's out.

Cape isn't actually great. Market cap / GDP is best correlated with subsequent returns. Its clearly in bubble territory.

This paper is very interesting too:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2222008

[bovinedealer]

Interesting stuff there.

[wish I could afford one]

Cape isn't actually great. Market cap / GDP is best correlated with subsequent returns. Its clearly in bubble territory.

This paper is very interesting too:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2222008

Have just run my monthly valuations on both the S&P500 and FTSE100 from my datasets.

By my calculation the S&P500 is now 66% over valued. We're now just above any monthly 2007 valuation.

In contrast the FTSE100 is 'only' 12% over valued. We're still 35% below any monthly 2007 valuation.

[Guest_growlers_*]

Have just run my monthly valuations on both the S&P500 and FTSE100 from my datasets.

By my calculation the S&P500 is now 66% over valued. We're now just above any monthly 2007 valuation.

In contrast the FTSE100 is 'only' 12% over valued. We're still 35% below any monthly 2007 valuation.

What metric are you using? The data is pretty crap for UK isn't it? I've not seen a chart in the UK for Tobin q or market cap gdp for example.

Be careful with cape. Profit margins are at record highs and standard cape does not account for this.

[wish I could afford one]

What metric are you using? The data is pretty crap for UK isn't it? I've not seen a chart in the UK for Tobin q or market cap gdp for example.

Be careful with cape. Profit margins are at record highs and standard cape does not account for this.

I'm using CAPE but slightly modified. For S&P500 I also incorporate forecast earnings to the month of interest. For FTSE100 I'm using FTSE Actuaries data having built my own dataset over many years because the data out there is very average as you mention.

[silver surfer]

Cape isn't actually great. Market cap / GDP is best correlated with subsequent returns. Its clearly in bubble territory.

This paper is very interesting too:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2222008

I'm not convinced that equities are "in bubble territory".

Adding two further variables to CAPE makes for a fairly strong predictive tool, explaining 46% of variation. A long way from perfect but the best I've come across. The two further variables are overseas equity purchases and the yield curve in the shape of the gap between two and ten year yields.

There's a 30% chance of a correction in the next twelve months (not abnormally high), but the greater probability is of further gains to come. If the lid stays on Europe we could easily see the FTSE over 7500 by the end of 2015.

I'm currently 40% in cash and short dated corporate bonds, higher than I'd like, if we see much of a correction in the next few months I'll be buying equities.

[Guest_growlers_*]

I'm not convinced that equities are "in bubble territory".

Adding two further variables to CAPE makes for a fairly strong predictive tool, explaining 46% of variation. A long way from perfect but the best I've come across. The two further variables are overseas equity purchases and the yield curve in the shape of the gap between two and ten year yields.

There's a 30% chance of a correction in the next twelve months (not abnormally high), but the greater probability is of further gains to come. If the lid stays on Europe we could easily see the FTSE over 7500 by the end of 2015.

I'm currently 40% in cash and short dated corporate bonds, higher than I'd like, if we see much of a correction in the next few months I'll be buying equities.

That paper I posted shows a model r2 of over 80% from memory. It also shows r2 for the other metrics. All suggest very low returns over 10 years.

[Guest_growlers_*]

Quite. Perhaps a CAPE needs to be developed that accounts for labour versus capital share of value added. Assuming that is mean reverting.

Hussman has one that adjusts for profit margins. R2 higher. Google hussman weekly comment and look back at past articles.

[200p]

A bubble is when the public participates - and that would mean a look to penny juniors (see that video Betting on the Market, posted earlier). The AIM index is nowhere near bubble - and it is full of rogue companies. Buyer beware.

2008 - 2009 was the low, but many companies did go bust (along with your money), so that is the danger at buying at the extreme low.

Edited March 22, 2015 by 200p

[200p]

I don't focus too much on the FTSE 100 - they chop and change that (as you might know) so you always get the best light on the equities.

You're better off using the FTSE all share index, which looks at everything, and that provides a better picture.

Edited March 22, 2015 by 200p

[Timak]

I'm just about to move about half my savings into shares after my cash savings rate has gone to 0.9% and 1.5% respectively.

I already know this guarantees the markets will dive to a record low.

I also know I'm the classic sucker investor going into the market at an all time high after getting very lucky on the only 3 shares I've ever purchased (Post Office (up 45%), TSB (25% profit) and Centrica about 16 years ago when I got shares for free)

Take your profits now!

[R K]

Chris Dillow, the Marxist economist who writes for The Investors Chronicle, argues that the S&P 500 isn't particularly overvalued. His point is that the CAPE scores (Cyclically Adjusted P/E ratio, probably the best single measure of if a market's under or over valued) is excessively influenced by the ultra low valuations of the 1930's and to a lesser extent the 1970's. Looking at the S&P through the lens of contemporary policy he believes the S&P could go a lot, lot higher.

What I like about Chris Dillow's writing is that he's smart, evidence driven, and has if anything a negative instinct towards a rising S&P.

Personally I'm grinding my teeth about the FTSE hitting 7000. I've got a bit higher cash weighting than I'd like and I was hoping for the FTSE to fall below 6000 before addressing that. I think I'll wait some more because with Greece far from resolved I'm hopeful there'll be a better buying opportunity before the year's out.

One could make a similar case (re 70/80s) for house prices too.

[silver surfer]

One could make a similar case (re 70/80s) for house prices too.

I see the parallels. Buying a house in the 70/80's was fortuitous to the point of uniqueness. Interest rates were at record breaking heights and would then decline for the next thirty years. Even London's population was declining to it's post war lows.

It's difficult to see when a similar house buying opportunity might ever occur again, maybe not for a generation or two. Buying a house today is a personal indulgence, like owning a boat, rather than a justifiable financial investment.

[R K]

I see the parallels. Buying a house in the 70/80's was fortuitous to the point of uniqueness. Interest rates were at record breaking heights and would then decline for the next thirty years. Even London's population was declining to it's post war lows.

It's difficult to see when a similar house buying opportunity might ever occur again, maybe not for a generation or two. Buying a house today is a personal indulgence, like owning a boat, rather than a justifiable financial investment.

I suspect that's unfortunately where were at, yup. Barring some pretty mega govt. intervention or unknown unknown apocalyptic event.

[zugzwang]

I suspect that's unfortunately where were at, yup. Barring some pretty mega govt. intervention or unknown unknown apocalyptic event.

The buying, selling and building of houses makes up a much bigger part of UK national income than is the case almost anywhere else in the world. If buying a house has become a personal indulgence like owning a boat then the UK is holed below the waterline and sinking fast.

[anonguest]

in inflation adjusted terms we are still nowhere near peak value.

avg 2.5% compound for 15 years is about 50%

we were at 6900 on the FTSE back in 2000.

so we are still about 45% off of that

the only thing that looks even reasonably normal is the index P/E ratio.

FTSE around 16* earnings(long term average about 14.5)

DOW at 29*(long term average around 14.5)

Where did you get those figures?

Checking the other day I saw 14.5-ish for the FTSE and 16.7-ish for the DOW.

[crashmonitor]

Chris Dillow, the Marxist economist who writes for The Investors Chronicle, argues that the S&P 500 isn't particularly overvalued. His point is that the CAPE scores (Cyclically Adjusted P/E ratio, probably the best single measure of if a market's under or over valued) is excessively influenced by the ultra low valuations of the 1930's and to a lesser extent the 1970's. Looking at the S&P through the lens of contemporary policy he believes the S&P could go a lot, lot higher.

What I like about Chris Dillow's writing is that he's smart, evidence driven, and has if anything a negative instinct towards a rising S&P.

Personally I'm grinding my teeth about the FTSE hitting 7000. I've got a bit higher cash weighting than I'd like and I was hoping for the FTSE to fall below 6000 before addressing that. I think I'll wait some more because with Greece far from resolved I'm hopeful there'll be a better buying opportunity before the year's out.

I think Greece is secondary to the UK general election.

Can't see a satisfactory outcome, but then I always see the glass half empty.

Best result for the FTSE 100 would be the same arrangement as the present with the Lib Dems blocking Brexit. However, it aint likely to happen.

Cameron on his own will crash the Market on Brexit fears, Salmond/ Milibot (with the former hell bent on economic sabotage) also a crash scenario.

Wind back five years and in March 10 the Market is set fair at 5700, then the election adjustment to circa 4900 by July. The same could happen again.

...may be 7250- 6500.

Sold three quarters of my tracker fund 5 minutes ago. May be I am making the classic error of not running with the profits, but have been trading the volatility and I have gone for the smash and grab option.

Edited March 23, 2015 by crashmonitor

[Guest_growlers_*]

http://www.hussmanfunds.com/rsi/eurval.htm

Interesting.