Is the market still inflated?

[Tim]

The point is that humans have been making technological advances forever. With regard to mkt history, there were railroads, steam engines, telegraph, indoor plumbing, electricity, cars, radio, tv, airplanes, computers, internet, etc. Real earnings growth has been zero for some decades and upwards of 4% some decades, but more or less steady in low single digits, because human advances do not cause mkt-wide earnings increases.

Instead, they raise general standards of living for consumers.

Under that logic, healthcare costs should be next to nothing for consumers. Right? They would reap the benefits and just have lower costs.

[The White Coat Investor]

Perhaps I blinked. To me that was a brief plunge before the market climbed to the stratosphere for what reasons I will never understand.

All bear markets feel like that....afterward. Lots of people don't even remember the one in 2011 or the one in December 2018. Both were deeper than what we've seen so far this year.

[bovie]

my base case expectation is a secular bear mkt but i hold a sig stock portfolio because expected returns better there than elsewhere and timing is impossible.
however i keep > 10 yrs in cash to weather any storm

Seems excessive.

[CM]

.

[CM]

Not necessarily. The customer only benefits if it is a commodity good or service. No moats of any kind or scale or branding or patents needed.
Of course on a global scale, we know how effective that can be. US does the R&D and it gets used without agreements. A ton of leakage. Not everyone plays fair.
Might be why International will do better. Efficiency with out R&D is great for profits. If you have a moat, profit is not distributed to the customers.
Pharm and Apple and Microsoft and Intel are a few examples.

The point is that humans have been making technological advances forever. With regard to mkt history, there were railroads, steam engines, telegraph, indoor plumbing, electricity, cars, radio, tv, airplanes, computers, internet, etc. Real earnings growth has been zero for some decades and upwards of 4% some decades, but more or less steady in low single digits, because human advances do not cause mkt-wide earnings increases.

Instead, they raise general standards of living for consumers.

[Tim]

productivity gains dont create greater earnings growth for the mkt as a whole
only for an individual company if that company is the only one with the advance
buffet had a nice discission of this re his original purchase of berkshire, a textile company at time of purchase
productivity gains throughout the industry forced him to increase capital expenditures
comsumers r the ones who benefit

Not necessarily. The customer only benefits if it is a commodity good or service. No moats of any kind or scale or branding or patents needed.
Of course on a global scale, we know how effective that can be. US does the R&D and it gets used without agreements. A ton of leakage. Not everyone plays fair.
Might be why International will do better. Efficiency with out R&D is great for profits. If you have a moat, profit is not distributed to the customers.
Pharm and Apple and Microsoft and Intel are a few examples.

[StateOfMyHead]

my base case expectation is a secular bear mkt but i hold a sig stock portfolio because expected returns better there than elsewhere and timing is impossible.
however i keep > 10 yrs in cash to weather any storm

If were ever in the position to have >10 yrs in cash I wouldn't care what the market is doing. You have won the game kind sir.

[CM]

I guess the intended question is "should I buy now" or is there a bigger discount for waiting some more time.

my base case expectation is a secular bear mkt but i hold a sig stock portfolio because expected returns better there than elsewhere and timing is impossible.
however i keep > 10 yrs in cash to weather any storm

[CM]

There in lies the assumption that growth in real terms is linear. Productivity and efficiencies from science and tech don’t function that way. It took a decade to be able to price ANY pc at $1k.
Give away thumb drives now have 1000 times storage capacity. Not predicting exponential growth, but not just volume but at a fraction of today’s costs. Multiples increase, just the math. Profits aren’t straight line with growth in volumes.

productivity gains dont create greater earnings growth for the mkt as a whole
only for an individual company if that company is the only one with the advance
buffet had a nice discission of this re his original purchase of berkshire, a textile company at time of purchase
productivity gains throughout the industry forced him to increase capital expenditures
comsumers r the ones who benefit

[GIMD]

Yes, I think the run-ups of the market in 2020 and 2021 were irrational exuberance. I don't think companies become 40% more profitable during the pandemic. I wouldn't mind if the S&P drops to prepademic level as I have some XLE stocks that I need to sell and convert to QQQ.

[CordMcNally]

I understand there is no way I am going to buy at the lowest or sell at the highest point of anything but if things are looking one way or the other I don't think it is unreasonable to act. I'm appreciative of all the responses and different views.

The thing is that nobody knows nothin’. You don’t know, I don’t know, the gurus on TV don’t know. It’s a gamble and you don’t have an edge.

[bovie]

There in lies the assumption that growth in real terms is linear. Productivity and efficiencies from science and tech don’t function that way. It took a decade to be able to price ANY pc at $1k.
Give away thumb drives now have 1000 times storage capacity. Not predicting exponential growth, but not just volume but at a fraction of today’s costs. Multiples increase, just the math. Profits aren’t straight line with growth in volumes.

Anything but linear. Moore's Law.

[Tim]

The market return isn't magic, it's arithmetic. It's dividend payout plus growth adjusted for the change in multiple over the horizon of interest.

Payouts (yields) are low relative to history. If one adds historical growth rates to current payouts, one arrives at a low estimate for future returns. Given that current multiples are around the historical 95th percentile, I'll go out on a limb and project lower LT future multiples rather than higher. That's then a haircut to returns.

You're free to project higher real growth in the future than in the past, but then you aren't relying on history, you are relying on the future being much better than the past.

There in lies the assumption that growth in real terms is linear. Productivity and efficiencies from science and tech don’t function that way. It took a decade to be able to price ANY pc at $1k.
Give away thumb drives now have 1000 times storage capacity. Not predicting exponential growth, but not just volume but at a fraction of today’s costs. Multiples increase, just the math. Profits aren’t straight line with growth in volumes.

[StateOfMyHead]

I guess the intended question is "should I buy now" or is there a bigger discount for waiting some more time.

Actually that about sums it up. I worded it awkwardly in hopes of getting more than the usual superficial answers to continue to DCA, which I do, and not attempt to time the market which I don't mind doing a little with funds above and beyond my savings allocation. I understand there is no way I am going to buy at the lowest or sell at the highest point of anything but if things are looking one way or the other I don't think it is unreasonable to act. I'm appreciative of all the responses and different views.

[Turf Doc]

I guess the intended question is "should I buy now" or is there a bigger discount for waiting some more time.

Have you heard about bob the market timer?

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/