I haven't always got my calls on the stock exchange right. No one does. Bu what I have said, consistently, is that the current market has been overvalued for some time. The fundamentals of consumer demand to support current values do not exist; QE funding has distorted markets, companies themselves have no clue what to do with the money they've got and we have a cohort of company leaders who are intent on extracting value for themselves and not making it for others. Add that up and there's no way markets should be near all time peaks, even though they are (and yes, I do know indexation has an impact here).
I'm not alone in thinking this. The FT reports today:
US stocks are being propelled to fresh highs by investors borrowing a record amount of money in a high stakes gamble that is raising concerns over the potential for a sharp correction in the five-year bull run.
With the S&P 500 registering a fresh closing peak of 1,859.45 last week, margin debt — money borrowed to buy stocks — hit a record level in January, according to data from the New York Stock Exchange.
Peaks in the use of borrowed money have in the past been a precursor to big bear markets and viewed as a warning sign.
We're living in a speculative bubble. And we all know what happens to them.
This isn't as worrying as what' happening in Ukraine. But add it to your list. It should be there.
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Yes. Its time to buy a put option on the Dow Jones, which is more overheated than the FTSE in relative terms.
Speaking specifically about the UK market it is difficult to argue that we are in speculative territory when there are plenty of “widows & orphans” blue chip favourites (telecoms, pharma, insurance, utilities, oil) paying out well-covered 3-5% dividends in an environment where you earn pretty much zero in the bank.
Sure, QE has distorted markets. But there is always something distorting markets. Markets reflect these distortions. The biggest risks at the moment are probably political (e.g. Labour’s plans for utility company regulation).
Now I wouldn’t disagree that companies don’t have excess cash for their future growth needs. But that just adds to my argument about attractive future dividend streams.
Nor would I disagree that CEOs take out far too much personally.
I don’t actually agree with you. Firstly, if we knew what the stock market was going to do then we’d all be billionaires so you’re right on that point. Secondly, at the moment the US and the UK are deemed to be safe havens for money with all the problems in some of the BRIC countries, (which were played out in January). I think there is a bit to go yet.
Lastly, the Ukraine crisis will blow over. Seriously, what is the US and EU going to do about it? Russia is protecting it’s own interests on its doorstep.