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Friday, October 19, 2012

This time, it's different

I am growing in concern once again about market valuations to the extreme, my position changed on October 1st of this month in post titled "Getting out of the Market".

I wanted to take a step back and look at the market long term from two different angles.  First from 1995 to present, the more recent history of market valuations.  Using this history as an example, looks pretty compelling that we are in for a market correction.

The market hasn't seen below SPX 700 (except briefly in 2009) since 1996.  Assuming SPX 700 is the new bottom, then the rise in 1996-2000 was about 115%, in line with the last two bull markets.

However, if we look back to 1995-6, the market moved from a norm range of 400 to 700 and has never looked back.  That rise was in fact "this time its different".
The market moved from a whole new level.  So using the logic back in 1997 as market went from 400 to 800, you would have been sorely mistaken.

Wanted to give some perspective of market view, from the last 18 years, and from before.   I for one think 1996 was the realization of technology, and the last two bubbles have been  ponzi-scheme-like driven. However, Nano-tech, makers, biotech, alternate energy could be poised to bring us to the new level.

The market may recover and hit a new all time high, but I can't get on board with SPX 1400 moving to 2000 or 2800 in the next 3 years.  A MAJOR random element of course is USD currency valuations.  I simply cannot see a major USD decline until 2016-17.

Pictures for thought.  Fixed income, some core precious metals (small) and possibly short fund. (I'll do post on ETF short fund HDGE).  To the charts!



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