Monday, November 7, 2016

The State of the Market (Nov 2016)

Jesse Felder's most recent article is a punch in the face back to reality.

Of the 3 punches he throws, I read and respect both the views of GMO and John Hussman. Hussman points out that valuation is beyond ridiculous right now. GMO predicts future 7 year returns are -3.1%. High valuations = Shitty future returns. You don't need a CFA to work that one out.

Yet the INSANE valuations are being ignored by most investors.


While the US stock market is only 5% down from ATH (2085.18 from intra day high of 2193.81), people are already calling this a massive buying opportunity because of the weak hands that are cashing out early.

Buying into US stocks at these valuations require some serious hallucinogens or just a very general and strong lack of ability to give a f*** about what you're actually buying. 

Yes, I did get the memo that this is the longest losing streak since 1980. And sure, we're reaching technical supports in the major indices and the streak cannot go forever, so we're bound to bounce somewhere along the way.

In fact, I actually think that the US elections would be cause a temporary spike up in the stock market when Hilary wins. (Although I personally would vote for Trump if I was an American, but I am not)

(I'm not going to debate US politics on my blog today. Please comment at your own risk)

But I'm not your day trading email newsletter stock picking guru that can tell you if the market is going up or down tomorrow.

All I can say is that it the correction of these ridiculous valuations is inevitable and we're much closer to sooner rather than later.

Here's 1 bonus chart that is different from Jesse Felder's ones and it is one of my favourite charts that Doug Short updates regularly.


If you honestly, really, seriously, touch-your-heart feel that this 5% pull back in the US stock market is a good entry point for the long-term, there's nothing more I can say other than "Good Luck".

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