http://www.hussmanfunds.com/wmc/wmc130204.htm
www.ritholtz.com/blog/2013/02/market-capitalization-as-a-percentage-of-gdp-4/
http://advisorperspectives.com/dshort/updates/Secular-Bull-and-Bear-Markets.php
http://advisorperspectives.com/dshort/updates/PE-Ratios-and-Market-Valuation.php
http://advisorperspectives.com/dshort/updates/Crestmont-PE-Ratio.php
https://www.frbsf.org/publications/economics/letter/2011/el2011-26.html
At a 10-yr. average P/E at 16 or higher and real reported earnings contracting yoy, the largest stock market crashes in history have occurred since the 1880s.
Moreover, there are numerous textbook technical indicators strongly suggesting a cyclical top from last Sept. to date, including Coppock Curve Killer Waves (as in '00 and '07), Tom DeMark (TD) sell signals perfecting at various time scales for world major indicies, and a weekly MACD non-confirmation at the Sept.-Oct. and recent high, which similarly occurred at major cyclical stock market tops in the past.
We also have EXTREME bullish sentiment characteristic of cyclical tops and record profits to GDP at 75-80% above the historical avg. and 130% above the avg. at cyclical recessionary and bear market troughs.
Secular bear markets are periods of valuation compression, debt deflation, and consumption of accumulated assets over the course of the preceding secular bull market.
The avg. dividend yield during secular bear markets was 5.1%. Today's dividend is barely 2%.
The avg., trough-to-trough, and peak-to-peak real total return an investor receives from the S&P 500 over the course of successive secular bull and bear markets, i.e., a working, saving, and investing lifetime, is the avg. dividend (before taxes, fees, etc.); no more, no less. Wall St. and the financial services industry won't tell you this, because they can't tell you for fear that they lose AUM from which they scalp fees and provide no value add (except to themselves) over the course of a secular bear market.
Finally, secular bear markets since the 19th century, including the UK and Japan, have had 4-5 cyclical bear markets, whereas we have had only 2 so far. Thus, we are due 2 or more cyclical bear markets to take the P/E to the 8-10 area
One more point. AAPL is negative yoy for the first time since the onset of the last two bear markets in Sept. '00 and Sept. '08. AAPL is THE leading stock for the most recent "echo-echo bubble" for stocks. The self-similar super-exponential blow-off trajectory AAPL exhibited with the NDX implies an "anti-bubble" target for AAPL at or below $100 in the next 12-18 months.
GOOG perfected a weekly and monthly TD Sell Countdown sell signal at the Jan. close AND an infamous Coppock Curve "Killer Wave" similar to AAPL in Sept. '12.
At a minimum, one should be reducing equity allocation and/or hedging long positions hereafter to retain avg. gains since '09 and enhance and protect gains and purchasing power after '14-'15.
Wall St. and economists won't tell you when to sell. Return "of" one's money is the imperative at cyclical highs during secular bear markets, not a return "on" one's money.
You cannot ignore the impact that policy makers have on securities prices. The market rises and falls quite dramatically on fiscal cliff negotiations, euro debt talks, and of course, FED QE. The markets seem to respond less to fundamental news these days, though fundamentals certainly provide a link to reality.
QE still acts as a Put option. The market knows that if things get bad, the FED will pump liquidity into the financial system. I believe we will get much more volatility when the expectation begins to creep in that QE is ending.
JIA) sank to 5,000.
