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Overbought! At its Peak! Bull getting Tired!

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February 15, 2013 – Comments (33) | RELATED TICKERS: GE , PSX , NRF

I just looked at my top 10 CAPS Active holdings.  I do this from time to time to see if I should take some huge "winnings".  With the exception of my homebuilders and USG (which is like a leveraged homebuilder), all my top 10 picks still sport a forward P/E of 10 or less.

 So with all the CNBC Yammering and "Expert Analysis" Naysayers, I'm not concerned.  Sure, we might see dips, but the overall direction still seems very positive.

 Some have likened this bull market to the 1982-1987 Bull run.  I like that.  From 777 in August 1982 to 2731 in August 1987.  5 years, easy to do the math.  If we take the February 2009 lows and go 5 years out (to February 2014), we would see a dow in the 22000's.  Then the pullback that looks like "Black Monday" would drop us back to 14,500 before climbing higher.  That sounds like a very potential scenario here.  That said, I think the forward P/E's are lower now than they were in the middle of that bull run.  This is a very cautious, value-driven Bull.

 One other thought - in 1987, you could buy 10-year Treasuries at 7%+.  Today it is around 2%.  That just makes the Stock Market that much more attractive and may drive additional "panic buying" as Bondholders jump the sinking ship (could you imagine if 10-years went back to 7% this year?!?).

 

33 Comments – Post Your Own

#1) On February 15, 2013 at 2:51 PM, mdk0611 (45.57) wrote:

I think the analogy overlooks the high inflation that occured during the 1969-1982 era.  In particular, the inflation from '78-'81.

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#2) On February 15, 2013 at 5:58 PM, ozzie (99.94) wrote:

Inflation was a good reason NOT to be in stocks during those years.  But inflation was much more subdued by 1987 - near current levels - while the 10-year Treasuries were getting creamed and yields went from 7% at the new year to 9.5% before "Black Friday".  That gave investors an attractive option.  We don't have that today.  maybe we will come February, 2014, I don't know.  

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#3) On February 15, 2013 at 10:48 PM, awallejr (81.55) wrote:

As long as we have Uncle Ben feeding the economy with 80 Billion dollars worth of MBS and Tbill purchases a month, and as long as Uncle Ben keeps interest rates near zero (which he will do for a couple more years at least - and I have credibility on this since I was the few who said back in 2009 that the FED would keep interest rates low for YEARS while the so called experts where talking months), this rally has plenty of legs.

Do we need a correction?  Yes.  Corrections are healthy in my opinion.  Is the market set to tank hard?  Of course not.  Don't listen to the pundits that say it will.  They were wrong after March 9, 2009 and they will be wrong now.   The PE multiples are nowhere near astronomical and the alternative choices really do suck.  Want .03 pct from a money market account?  Go for it.  I like my 8-15% yields from my MLPs, BDCs and REITS.  And I have no problem plowing the income generated back into them.

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#4) On February 15, 2013 at 10:58 PM, awallejr (81.55) wrote:

Correction, meant .003 pct.

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#5) On February 16, 2013 at 2:31 AM, Valyooo (99.41) wrote:

The S&P trailing P/E is 21.6, forward is 18...what are you talking about?

Also not sure if you noticed, but European recession is worsening, Japan is now in a recession, and the US reported negative GDP....and the market is about to break all time highs?  Get the f outta here....we need a 25% correction, and some real economic recovery, before we can have a bull market.

 

I have been bullish since January 2009, until October 2012...in December 2012 I became bullish until this week....now I am mega bearish.  Everybody I speak to is more bullish than I have seen in 7 years 

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#6) On February 16, 2013 at 6:43 AM, rofgile (99.32) wrote:

My Caps score is getting too high, and I am a bullish player.

I think a correction is coming.  I think with the across the board cuts coming to the US budgests in March that is when it could occur.  Congressional disfunction sunk my portfolio in 2011, why not again?

 -rof 

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#7) On February 16, 2013 at 8:47 AM, valuemoney (99.99) wrote:

Valyoo ......where are you getting your numbers from? What are your 2012 estimated earnings? I am guessing 104.5 which the trailing PE comes out to 14.5 pe when the S&P is @ 1523 and forward 2013 earnings will most likely be high than 2012's as for prior years earnings..................

#99) On March 14, 2012 at 5:37 PM, valuemoney (99.99) wrote:

Year Earnings Yield Dividend Yield S&P 500 Earnings Dividends
1960 5.34% 3.41% 58.11 3.10 1.98
1961 4.71% 2.85% 71.55 3.37 2.04
1962 5.81% 3.40% 63.1 3.67 2.15
1963 5.51% 3.13% 75.02 4.13 2.35
1964 5.62% 3.05% 84.75 4.76 2.58
1965 5.73% 3.06% 92.43 5.30 2.83
1966 6.74% 3.59% 80.33 5.41 2.88
1967 5.66% 3.09% 96.47 5.46 2.98
1968 5.51% 2.93% 103.86 5.72 3.04
1969 6.63% 3.52% 92.06 6.10 3.24
1970 5.98% 3.46% 92.15 5.51 3.19
1971 5.46% 3.10% 102.09 5.57 3.16
1972 5.23% 2.70% 118.05 6.17 3.19
1973 8.16% 3.70% 97.55 7.96 3.61
1974 13.64% 5.43% 68.56 9.35 3.72
1975 8.55% 4.14% 90.19 7.71 3.73
1976 9.07% 3.93% 107.46 9.75 4.22
1977 11.43% 5.11% 95.1 10.87 4.86
1978 12.11% 5.39% 96.11 11.64 5.18
1979 13.48% 5.53% 107.94 14.55 5.97
1980 11.04% 4.74% 135.76 14.99 6.44
1981 12.39% 5.57% 122.55 15.18 6.83
1982 9.83% 4.93% 140.64 13.82 6.93
1983 8.06% 4.32% 164.93 13.29 7.12
1984 10.07% 4.68% 167.24 16.84 7.83
1985 7.42% 3.88% 211.28 15.68 8.20
1986 5.96% 3.38% 242.17 14.43 8.19
1987 6.49% 3.71% 247.08 16.04 9.17
1988 8.69% 3.68% 277.72 24.12 10.22
1989 6.88% 3.32% 353.4 24.32 11.73
1990 6.86% 3.74% 330.22 22.65 12.35
1991 4.63% 3.11% 417.09 19.30 12.97
1992 4.79% 2.90% 435.71 20.87 12.64
1993 5.77% 2.72% 466.45 26.90 12.69
1994 6.91% 2.91% 459.27 31.75 13.36
1995 6.12% 2.30% 615.93 37.70 14.17
1996 5.49% 2.01% 740.74 40.63 14.89
1997 4.54% 1.60% 970.43 44.09 15.52
1998 3.60% 1.32% 1229.23 44.27 16.20
1999 3.52% 1.14% 1469.25 51.68 16.71
2000 4.25% 1.23% 1320.28 56.13 16.27
2001 3.38% 1.37% 1148.09 38.85 15.74
2002 5.23% 1.83% 879.82 46.04 16.08
2003 4.92% 1.61% 1111.91 54.69 17.88
2004 5.58% 1.60% 1211.92 67.68 19.407
2005 6.12% 1.79% 1248.29 76.45 22.38
2006 6.18% 1.77% 1418.3 87.72 25.05
2007 5.62% 1.89% 1468.36 82.54 27.73
2008 7.24% 3.11% 903.25 65.39 28.05
2009 5.45% 2.00% 1115.1 60.8 22.31
2010 6.65% 1.84% 1257.64 83.66 23.12
2011 7.72% 2.07% 1257.60 97.05 26.02

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#8) On February 16, 2013 at 8:55 AM, valuemoney (99.99) wrote:

If I thought S&P 2013 trailing earnings were 21.6 I would be bearish too! I would sell all my positions. Because on my estimates for 2012 which is about to be trailing earnings....the S&P would be trading at 104.5 times 21.6=  2257!!!!!!!!!!

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#9) On February 16, 2013 at 9:03 AM, valuemoney (99.99) wrote:

even if u were saying 2011 was trailing earnings which earnings were 97.05...... 21.6 times earnings the s&p would have to be trading @ 2096.28!!!!!

Jeepers I feel sorry on how you are getting your numbers. Seriously I want to know the source of your data. Our numbers are not even ballpark. You might be bearish for all the wrong reasons.

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#10) On February 16, 2013 at 9:24 AM, valuemoney (99.99) wrote:

and you buy DURING recessions because the market is MUCH higher if you wait till the recession has ended....the only way you know it has ended is by the numbers. Can anyone tell me when the recession ended in our economy 2009? well look because if you waited till it ended you missed a HUGE market move

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#11) On February 16, 2013 at 9:29 AM, valuemoney (99.99) wrote:

keep in mind you would have had to of waited 3 months AFTER the recession officially ended to see that it had numbers are always trailing.... they need to be to look at past data

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#12) On February 16, 2013 at 9:36 AM, valuemoney (99.99) wrote:

This all being said the market DOES look overbought short term! Chart and technical indicators show it. Plus common sense should tell you 7 straight weeks of S&P gains is stretching it a bit. Timing the market is dumb though..... ask warren buffett if he cared he bought HNZ when the market was up 6 straight weeks LOL.

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#13) On February 16, 2013 at 10:24 AM, valuemoney (99.99) wrote:

osborta.... I like your analysis..... I compare it more to the 1970's pull up a monthly chart. It went from 63.5 to 140.5 roughly 2.21 times now feb 2009 ........735 to 2.21 times would come out to 1628 montly average....think around that point FED will change their stance? major pull back then? :) 2 years from now? :)

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#14) On February 16, 2013 at 2:37 PM, awallejr (81.55) wrote:

Well Valyoo I will give you Value Line's numbers mainly because I happen to have a recent table of theirs and they do cover more stocks than the S&P.

Median PE is 16.6, market low was 10.3 on 3/9/09, and high was 19.7 on 7/13/07.

And we have been in a bull market for years now, although most never want to agree with that.  We don't need a deep correction like you suggest, and you are actually calling for an outright bear market with a 25% prediction.

As for the people I talk to, average retailers, they don't really care because they left the market  years ago and are content with their bonds.

And when the correction comes, and it will, you will be hearing people screaming doom and gloom.  They always do during them.  I just use it as an opportunity to plow my distributions  back into my holdings at a lower price and hence generating higher returns.

You are young, you should be doing the same.

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#15) On February 16, 2013 at 2:53 PM, awallejr (81.55) wrote:

they need to be to look at past data

They also tend to get revised too.  Wouldn't take much of a revision to turn the initial .001 pct negative into a positive number.

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#16) On February 16, 2013 at 7:03 PM, HarryCarysGhost (99.68) wrote:

You are young, you should be doing the same.

Can I double rec that?

Thats the magnificence of dollar cost averaging.

Who cares what Mr. Markets mood happens to be at any given time.

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#17) On February 17, 2013 at 12:54 PM, Valyooo (99.41) wrote:

Who cares what Mr. Markets mood happens to be at any given time.

 

The people who bought at the top i 2007 and 6 years later are not at break even :)

 

I personally like to make money immediately, rather than wait a decade.

 

Also valuemoney, when we started going in recession or showing ISM numbes below 50, the market crashed for 1.5 years.  The market has not corrected for a while, so if somebody said to you "I like to buy stocks when they are at all time highs and the country is in a recession at the same time".  Would you say "oh great idea!".  I bought stocks in January 2009, that is when I startd trading and investing.  I was 2 months early, but I bought because the correction was huge.  I don't think at an all time high its time to scream that now is a huge buying opportunity.

 

You can keep telling yourself timing the market is dumb instead of learning how to time the market. Or you could spend less time shotgun posting on here and more time learning English. 

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#18) On February 17, 2013 at 1:32 PM, HarryCarysGhost (99.68) wrote:

The people who bought at the top i 2007 and 6 years later are not at break even :)

That was my point Man, If those people were net buyers during 08-09 while reinvesting the dividends they'd be rich.

Now if they panicked and sold without reentering the market they'd be poor.

Just sayin' trying to time Mr Market is a fools game. Of course the rule buy low , sell high always applies but you don't know when that will occur until it occurs:)

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#19) On February 17, 2013 at 1:47 PM, Valyooo (99.41) wrote:

Hey Harry I wasn't knockin you.  I am a professional trader...I only make money if I time the market correctly.  and I spend 80 hours a week doing it...so please, I don't like when people tell me sometjhing I spend 80 hours a week on can't be done :)  it's as insulting as the efficient market thing, which buffet has pointed out.

 

Harry I have a question..I recently bought KO after earnings....but I don't understand why it sold off after eanings at all.  I know you love KO, can you share some insight? 

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#20) On February 17, 2013 at 4:09 PM, awallejr (81.55) wrote:

The people who bought at the top i 2007 and 6 years later are not at break even :)

Depends on what you bought no?  People who bought Citibank got crushed.  People who bought AAPL made a ton. Plus Harry answered the rest.

I personally like to make money immediately, rather than wait a decade.

You can do both and you should.  Set up a "distribution" portfolio account.  Purpose of that account is to have a nice income stream decades from now.  But you are an adult do what you want.

As for KO it was about the guidance for 2013. Management didn't seem very excited  and hinted at currency exchange rates and global softness which might impact top-line growth.  At least that is what I came away with.  Oh and if you bought KO in October of 2007 you would be ahead as well now especially if you reinvested the dividends.

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#21) On February 17, 2013 at 5:52 PM, HarryCarysGhost (99.68) wrote:

Valy, I knew you wern't taking a shot at me. This is just a fun discussion about different investment styles to me.

Obviously ours differ as you need the churn, while I can sit back a bit more. That doesn't mean I never sell (just dumped Bud after holding for four years).

KO is an excellant example of what I'm talking about-

You see I didn't even notice there was a dip, I own KO in a DRIP adding to it whenever I can.(usually $150 a pop) So I'm constantly buying with no regards to Mr Markets schizophrenic movements.

Are people going to stop drinking coke because of an earnings report?

Cheers

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#22) On February 18, 2013 at 9:46 PM, Valyooo (99.41) wrote:

@awallejr

 

I am just talking about th S&P500 , since it is an index.  It is still lower than the high in 2000...I would not have been buying during that time and saying "why bother timing the market?  I can wait 20 years".

Well, so far, 13 years later, they are almost at break even...drawdown is awful, what if you buy at the top and at the bottom you get laid off and your wife needs a $100k surgery that your insurance doesn't coverage and you are forced to sell at the bottom?  Then it sucks because you didn't have forever to wait.

 

It's just like the people who buy gold at any price...even if they own a ton of gold already they say, oh I would be happy for the price of gold to fall, then I can buy more for cheaper.  Really?  What if it fell for 100 straight years?  Would you be happy that your investment was awful until after your death?

It's just like the people who call bull/bear markets way too early..."I was right, I was just a few years early" .

No, then you were wrong.  If I say "the stock market will one day be higher than it is today", there is a 99.99999999999999999999% chance I will be right eventually...if it takes 10 years does it make me right?  No, it means I was wrong for 10 years in a row.

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#23) On February 19, 2013 at 10:11 AM, ozzie (99.94) wrote:

Lots of great discussion - thanks to all!  One thing to note is the discussion about Trailing 12-months P/E vs. Forward P/E.  Granted, one is known and one is a guesstimate.  My personal opinion, however (optimist that I am) is that the Forward P/E's are building in near-recession, and I think we'll see expansion in 2013, so they are low (IMHO).  One other thing to add to the mix is the huge caches of cash (pardon the pun) so many companies are sitting on.  This money has to go somewhere, and Treasuries ain't it.

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#24) On February 19, 2013 at 10:11 AM, ozzie (99.94) wrote:

Lots of great discussion - thanks to all!  One thing to note is the discussion about Trailing 12-months P/E vs. Forward P/E.  Granted, one is known and one is a guesstimate.  My personal opinion, however (optimist that I am) is that the Forward P/E's are building in near-recession, and I think we'll see expansion in 2013, so they are low (IMHO).  One other thing to add to the mix is the huge caches of cash (pardon the pun) so many companies are sitting on.  This money has to go somewhere, and Treasuries ain't it.

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#25) On February 19, 2013 at 11:44 AM, ozzie (99.94) wrote:

http://online.wsj.com/mdc/public/page/2_3021-peyield.html reports, as of 2/15/2013, S&P 500 Trailing P/E of 18.06 and Forward P/E of 13.78.

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#26) On February 19, 2013 at 7:20 PM, awallejr (81.55) wrote:

@Valyooo

Actually it isn't but that isn't important unless you only invest in the index.  I have always said here buy, hold and monitor.  You can go through life with a "live for today for tomorrow I may die" approach but odds are you are waking up that next day and the next day and the next day.

I'm reminded of that one scene in the movie Armageddon where Steve Buscemi's character borrows and squanders a ton of money off a loan shark expecting to go into space and die only to survive and then realize he now has to pay him back. 

Calamities can always occur. And it would be prudent to set aside an emergency fund.  But that should not be THE influencing factor in your lifetime investment strategy.

I am sure you heard the phrase "the power of compounding."  It applies to stocks just as well as to interest if you continue to reinvest back into the market. If you bought C at 54 in 2007 and rode it down to 93 cents in 2009 you deserve what you got.  You should have been re evaluating the thesis for the holding when it fell 15-20%.

 

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#27) On February 19, 2013 at 11:09 PM, Valyooo (99.41) wrote:

Yes I know what compounding is I am not retarded.  But I would rather be in cash than invested during a bear market...all I am saying is the people who say timing the market is impossible...maybe its impossible to time within a tick of the top or bottom, but if you can't time the market, hand your money over to somebody who can.

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#28) On February 19, 2013 at 11:32 PM, awallejr (81.55) wrote:

hand your money over to somebody who can.

And how many people do you know who can with great accuracy? I would think anyone would love to sell out at tops and buy back in at bottoms all the time.  But I don't know of anyone who can do that with high accuracy.

I and others have given you good advice.  As I said before, you are an adult do what you wish.

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#29) On February 20, 2013 at 10:56 AM, Valyooo (99.41) wrote:

I work at a hedge fund...if you follow markets for a living full time you should be able to call tops and bottoms, not to the T, but to a good extent.  I don't get these money managers who take pride in losing less than everybody else

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#30) On February 20, 2013 at 12:04 PM, awallejr (81.55) wrote:

Yeah well hedge funds come and go all the time, unless you have been with them for 10+ years with a profit that beat the S&P each year I take it with a grain of salt.

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#31) On March 05, 2013 at 4:39 PM, awallejr (81.55) wrote:

and the market is about to break all time highs? 

And today it did at least for the DOW.

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#32) On March 05, 2013 at 5:57 PM, ozzie (99.94) wrote:

And - even now - look at my top 10 picks based on My score in each - STILL the housebuilders are cheap and everything else is in single digit P/E's!!

 

Symbol Forward P/E
DK   9.21
NRF 5.4
HFC 6.95
STC 9.22
EMN 6.41
AHT 6.13
TSO 9.71

Homebuilders:
DHI 15.87
PHM 13.79
MTH 13.55 

 

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#33) On March 05, 2013 at 6:44 PM, awallejr (81.55) wrote:

And I still like many MLPs, BDCs and REITS that are giving you great distribution rates.  I still want a correction to make me feel better.

As for MLPs and Nat Gas producers I see considerable potential gains several years down the road once this country starts exporting lng in earnest.  The sad part is as a consumer you will see nat gas prices rise quite a bit since then you would be competing with international buyers.

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