Thread: Bear Cave 2 (Bull Allowed)

Thanks Que. Yes, I get P/E. My point though is if more currency is in circulation (we're at an all time high) then more dollars are available to purchase equities pushing the P in the P/E up. More people are investing through investment and retirement accts. There is just more money being put in play than ever before - it has to have an effect on the purchase price of equites. Sort of an inflation thing. I guess what I'm wondering is if P/E's of today need to be normalized in some way to be comparable to P/E's of the past (even the somewhat recent past). If true then higher valuations may not need to be as much a concern as some might want to think (within reason and considering the other important fundamentals of a company in question). Just thinking out loud here....

Originally Posted by Greensboro

Thanks Que. Yes, I get P/E. My point though is if more currency is in circulation (we're at an all time high) then more dollars are available to purchase equities pushing the P in the P/E up. More people are investing through investment and retirement accts. There is just more money being put in play than ever before - it has to have an effect on the purchase price of equites. Sort of an inflation thing. I guess what I'm wondering is if P/E's of today need to be normalized in some way to be comparable to P/E's of the past (even the somewhat recent past). If true then higher valuations may not need to be as much a concern as some might want to think (within reason and considering the other important fundamentals of a company in question). Just thinking out loud here....

I don't think most want p/e's (and the like...peg, etc.) 'normalized.' 10 x earnings means the same today as it did in the past.

For example, cars cost more now than in the past, but are they more expensive now than then? How can we know? We compare it to a constant: earnings. If cars cost one year's earnings in the past, and cost one year's earnings now; then it could be argued that they are not more expensive. The use of a ratio cancels out the inflation factor. It is a way to compare the past with now.

UPDATE: You wouldn't want to say, to the effect of, if not in these exact words, "well, let's change the formulas so that these cars today, that cost 2 years' earnings are considered the same as cars in the past that cost 1 years' earnings."

P/e is the same way.

Things will normalize themselves when the bubble bursts and irrational exuberance fades away.

Sorry I can't explain it better.

A few of the discount brokers are beginning to experience record volume transactions - it would seem mom and pop are coming back to equities. The question now is are they coming back close to a top or will they push the market much, much, higher. I think they will be buying along with me for the next decade.

Originally Posted by Birchtree

A few of the discount brokers are beginning to experience record volume transactions - it would seem mom and pop are coming back to equities. The question now is are they coming back close to a top or will they push the market much, much, higher. I think they will be buying along with me for the next decade.

The longer-term cycles indicate share prices will be deeply discounted in the next few years as the S&P 500 heads back under 1000. Since you are a long-term investor it will not matter, but I'll wait for PE ratios to get back under 10 again before I buy the S&P 500 for a position trade or an investment.

Took another beating on my GDXJ shares, so I converted 2000 shares into a Roth during this beat down so when they double or triple in the next year the money will be tax free.

Did the same thing in December of 2013 when prices were very low.... No need for us to make are next Million and have to pay taxes on it. Well, maybe a half million.

Take care and have a nice Easter.

Sometimes I don't post for a few weeks due to my health.....I'm taking Amitriptyline for fibromyalgia pain, and sometimes I'm just not up to reading or posting.

We are close to the next big move up for the gold miners in my opinion, but for now the sell-off continues. Watching to see if gold breaks thru 1280/1260 support levels...and if it does..... after that maybe much lower, but I'll keep adding shares of GDXJ like I always do.

April 21, 2014
The Federal Reserve's Two Legged Stool


So yes, the equity market is in extremely speculative territory. For the median stock, the overvaluation is more extreme than in 2000. For the broad capitalization-weighted market, the Fed has elevated valuations to the level that promises poor investment returns, and negative real returns – from present levels – for at least a decade. If the Fed truly wishes to achieve its mandate of long run price stability and maximum employment, another leg of the stool is needed in Fed policy, and that is the avoidance of actions that promote yield-seeking speculation and malinvestment.

It is too late to avoid that outcome in this cycle, as it has already occurred. Now we must manage the consequences. One hopes that those consequences will be contained to the financial markets and not the broad economy. Oversight – particularly in leveraged equity, leveraged loans, and covenant lite lending – should be far higher on the agenda than promoting further overvaluation and speculation, in the hope that some small benefit will trickle down to the masses.

Hussman Funds - Weekly Market Comment

Dear subscribers,


This is update #1994 for Sunday evening, April 20, 2014.


VIX slumped once again to another important higher low, which it has done repeatedly since March 2013 each time that U.S. equity indices are set for their next correction. Therefore, expect an upcoming decline for the S&P 500, the Russell 2000, and funds which are closely correlated with these. Meanwhile, U.S. Treasuries climbed to their highest points in ten months, which has made them vulnerable to soon resuming their bear markets which began at their all-time peaks in July 2012. As both stocks and bonds will spend the next year declining moderately, investors will be eager to own the relatively few assets which are rallying. Gold and silver mining shares have recently been weak, and should soon resume their uptrends which began in December 2013 and were interrupted by corrections after too many investors became excited about these during the late winter. At Thursday's 3:37 p.m. low of 34.525, GDXJ had slumped almost exactly one fourth from its peak of 46.00 on March 14, 2014. The next important short-term high for GDXJ will likely be in the mid-50s on its way to eventually quadrupling from its December 23, 2013 low of 28.82. As is frequently the case during corrections--but not during true bear markets--GDX has formed several higher intraday lows since March 27, 2014 which are detailed in the paragraph just above today's main topic. I am continuing to shift the most depressed assets from non-Roth retirement accounts into Roth accounts to lock in their valuations for tax purposes and to ensure that all future gains will be tax free.

True Contrarian

Originally Posted by Birchtree

A few of the discount brokers are beginning to experience record volume transactions - it would seem mom and pop are coming back to equities. The question now is are they coming back close to a top or will they push the market much, much, higher. I think they will be buying along with me for the next decade.

A comment below from Kaplan about folks coming back to equities. Now, he could be completely incorrect, or his timing could be way off and the Bull is far from over, and you are correct. We shall find out in the next few years.


Equities more recently experienced near-record inflows combined with all-time record margin debt and classic signs of investor exuberance. Thus, their bear markets are younger, and could continue for as long as three more years. The first year of a bear market is generally accompanied by moderate declines, which encourages investors to keep hanging on and hoping for the best when they should be most aggressive in reducing their exposure. We have already begun to experience a key transition in which the biggest high-flying names of the past several months, including many technology favorites, have been among the weakest performers, while some of the worst performers of 2013 have been among the most notable winners. This process is still in its early stages and hasn't been widely trumpeted by the mainstream financial media. The pattern of numerous higher lows for VIX since March 14, 2013, which was an almost exact repeat of its behavior after December 15, 2006, has been ignored by virtually everyone, while very few well-known analysts (with the notable exception of Michael A. Gayed as pointed out in a link earlier in this update) have pointed out the failure of the Russell 2000 and other small-cap benchmarks to surpass their early March 2014 all-time highs while the S&P 500 Index and Dow Jones Industrial Average were repeatedly setting new tops in April. Investors generally have no clue that we are almost certainly on the verge of another crushing bear market where U.S. equities lose more than 50% of their value--and probably more than 60%--during the next few years.

True Contrarian


http://www.minyanville.com/trading-a.../2014/id/54630

Watch Out for This "Sell" Signal
By Jeff Clark
Tuesday, April 22, 2014

If you took our advice to buy stocks last week, you're up a solid amount.

Last Tuesday, stocks looked like they were heading over the cliff. The S&P 500 traded as low as 1,815. Many investors thought the long-awaited correction was finally here.

But we said this old bull market still had one more kick left in it. So the selloff had us looking to buy stocks in anticipation of a rally going into the end of the month.

On Thursday, the S&P 500 closed at about 1,865 – up 2.7% from Tuesday's low. That's a solid return for two trading days. And there's more to come. But there's also trouble brewing around the corner...

With more than a week to go before the end of this seasonal bullish period, there's a good chance the S&P 500 will make a run at the 1,900 level.

But there's a reason Wall Street veterans "sell in May and go away." Historically, the first day of May kicks off a seasonally weak period for stock prices.

Growth Stock Wire | Stock Market Analysis, Market News & Stock Picks

This is special intraday update #1995c for Tuesday morning, April 22, 2014.


I bought HDGE at 12.79 and then at 12.69, each using 0.10% of my net worth. I would rate each of these trades as a 7.5; now that the Russell 2000 has failed to confirm the April 2014 peaks for the S&P 500, the likelihood that U.S. equities are in a bear market has become far greater. We are unlikely to have a 2014 collapse as many bearish analysts have foolishly been predicting, since most bear markets begin quietly and only accelerate after a downtrend has been intact and has been forming several lower highs for a year or more. Therefore, there will be numerous opportunities to buy HDGE at higher lows and to otherwise take advantage of what will likely be a severe bear market--perhaps leading to even greater percentage declines than the crushing 2007-2009 plunge. This is partly because we reached higher highs in 2014 than we had achieved in 2007, so if we slump to the same absolute bottoms it will represent a greater total loss for most U.S. equity indices.

True Contrarian

The Cost of Code Red

By John Mauldin

April 26, 2014


(It is especially important to read the opening quotes this week. They set up the theme in the proper context.)

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

– Ludwig von Mises

“No very deep knowledge of economics is usually needed for grasping the immediate effects of a measure; but the task of economics is to foretell the remoter effects, and so to allow us to avoid such acts as attempt to remedy a present ill by sowing the seeds of a much greater ill for the future.”

– Ludwig von Mises

“[Central banks are at] serious risk of exhausting the policy room for manoeuver over time.”

– Jaime Caruana, General Manager of the Bank for International Settlements

“The gap between the models in the world of monetary policymaking is now wider than at any time since the 1930s.”

– Benjamin Friedman, William Joseph Maier Professor of Political Economy, Harvard

To listen to most of the heads of the world’s central banks, things are going along swimmingly. The dogmatic majority exude a great deal of confidence in their ability to manage their economies through whatever crisis may present itself. (Raghuram Rajan, the sober-minded head of the Reserve Bank of India, is a notable exception.)

However, there is reason to believe that there have been major policy mistakes made by central banks – and…

The Cost of Code Red | Thoughts from the Frontline Investment Newsletter | Mauldin Economics

April 28, 2014
The Future is Now
John P. Hussman, Ph.D.

I’ve historically encouraged buy-and-hold investors to maintain their own investment discipline, though with a realistic and historically-informed understanding of prospective return and risk. At present, my concern is that many buy-and-hold investors are unaware of how dismal prospective returns are likely to be from current prices, over every investment horizon of a decade or less. Given the duration of the equity market (which mathematically works out to be roughly the market price/dividend multiple), a passive 100% exposure to equities is appropriate only for investors with a horizon of about 50 years. Passive buy-and-hold investors would be well-advised to scale their equity exposures accordingly, based on their own actual investment horizons. Meanwhile, it seems clear that investors have mentally minimized their concept of potential downside, despite two 50% bear market losses in recent memory that were both accompanied by aggressive Fed easing all the way down.

At present, the picture below is just a monthly chart of the S&P 500 since 1995. Not long from now, perhaps less than 2 or 3 years, many investors will look at the same chart with their head in their hands, asking “What was I thinking?” The central message to investors with unhedged equity positions and investment horizons shorter than about 7 years: Prospective returns have reached zero. The value you seek from selling in the future is already on the table today. The future is now.

Hussman Funds - Weekly Market Comment: The Future is Now - April 28, 2014