So right and yet so wrong

[eyePod]

The posters on this site are being well vindicated for their bearishness of the last couple of years. But what I find curious is the increasing forum topics concerning the stock market. So many market bears. I don’t seem to see any gleeful reports from the shorters.

[bubble_contagion]

I would expect most regulars on this site to be surprised by this year’s incredible stock market run up. If you had all you money in CDs, too bad. But it has been crazy and againts all logic. Today, for example, Citi (the largest bank in the world) announces a 1.4 billion write down and what happens? Citi stock goes up and the Dow rallies to record highs.

[michael]

For the most part, the housing market doesn’t require substantial in depth analysis. There are relatively few variables to consider. On the other hand, capital markets have hundreds of moving parts that require serious brain power to analyze.

No doubt, there are plenty of amateurs and idiots on wall street, but for the most part, there are many sharp, Ivy League types that try to outsmart the competition and therefore create fairly efficient markets. The creation of derivitives by math whizes is what allowed the housing bubble to occur. The real estate folks were simply going along for the ride.

Take a look at the housing market and you find very few Ivy League educated Realtors and Mortgage brokers – just kids from a brain power standpoint. Order takers.

The housing market is a cute playground that allows some to feel smart and important… paint the house and add a room because that will sell the house… yes, an ARM is a great mortgage for you…

[patientrenter]

eye-pod, you won’t see much in the way of shorters’ reports until the market takes a dive… someday.

I think home prices will go down mainly because prices are so astronomically high compared to incomes and savings and rents and 10 years ago. But the stock market is being driven up by high corporate profits and a wall of money from China and other countries exporting to the USA. Who knows exactly when that will turn around? The timing is not as clear as for the overvalued residential real estate market.

Patient renter in OC

[patientlywaiting]

I agree with michael on the brain power part. The stock market is also very fast moving. With RE you can see it evolve. RE is very local.

With some little trading on my part, I mostly trust my financial planner to take care of my portfolio.

[Coronita]

It's not just shorters that are quiet. Bulls are quiet on a down day.

 

Observation: no one likes to feel like they made the wrong decision, or had bad timing.

 

You'll here the bear stock market folks on the days the dow/nas takes a beating, and then the bulls will go silent.

—– Sour grapes for everyone!

[temeculaguy]

The reason you see a lot of market comments is that a lot of the housing bears invest their surplus cash in various places that in the past and in the future will likely be back in housing, plus were bored in our rentals. Watching the housing market decline can feel like watching paint dry. Sure there are quite a few people who were shorting the builder and mortgage stocks but on average I bet most of us are not bearish on everything, just housing in certain bubble markets like Southern California. Do I understand why the market is hitting new highs while we are on the verge of a recession, no I don’t. I think the weak dollar helps but I don’t understand it all and thankfully I have some long positions and mutual funds that are doing quite nicely, still doesn’t mean I know exactly why. What I do know is that housing has less moving parts as was stated above, the fundamentals are simple for my small brain to grasp, so I can make predictions and they will likely come true. I still use a full service stock broker so you won’t hear me tell anyone what to do with regards to stocks because I still pay a guy to tell me.

[Anonymous]

Well for the folks who did the obvious play and shorted homebuilders and subprime lenders instead of the broad market, this has been a VERY, VERY gleeful year.

[(former)FormerSanDiegan]

This is why some of us believe in a balanced portfolio, including stocks (both US and foreign), cash, with some added spice of gold, commodities and some selected short positions (e.g. the dollar), plus for me … even a dash of real estate.

Some of us have been around long enough to know there are plenty of ways to be wrong about the markets. And timing is the toughest thing to be correct on.
Real estate and cash holdings helped me get through the stock bust of 2000-2003. Foreign stocks, shorting the dollar, and cash will probably help me get through the current bear market in real estate. If you have balance, you don’t have to be right every time.
For example, knowing that real estate was overvalued in 2003 didn’t do you much good if you cashed out and tried to short at that time. Same goes for following Greenspan’s irrational exubberance advice in 1996 and shorting the overvalued stock market all the way to the poorhouse. Sure he was eventually right. But timing is critical to all-or-nothing positions.

[NeetaT]

15yrs ago I read a stupid book “At the Crest of the Tidal Wave”, which prompted me to adhere to putting my money in low yielding CD type accounts. As a result, I am now scrambling to get caught up for retirement. Had I not read that book, I would have kept my money in the runaway mutual funds I was in and therefore been able to retire.

[HereWeGo]

I was a bull when the economic fundamentals supported a bull market. That is no longer the case. Yes, I’ve missed out on the post rate cut explosion (somewhat, I still have a few energy and tech equities,) but I cannot believe this bull run will last much longer. Historically, markets don’t stay high for long when the entire bull case is “hoping for another rate cut.”

[(former)FormerSanDiegan]

Historically, markets don’t stay high for long when the entire bull case is “hoping for another rate cut.”

I agree that there is certainly downside risk in the market based on decaying economic conditions. But I am not genius enough to predict the outcome. However, I disagree with the opinion that the stock market is currently “high”. Even after the recent run-up, the P/E for the S&P 500 is currently about 14.9. That’s about the average over the past 125 years.

I also don’t think the entire bull case is built on “hoping for another rate cut”. That point of view is simply the daily media chatter for explaining yesterday’s market fluctuation.

[peterk2001]

Unfortunatlety I don’t think one can predict the tops and bottoms of both the stock and real estate markets…Everything cycles and you have to be well diversified in both camps and hope that the dollar cost averaging approach will leave you looking good when you hit retirement age… Things move very quickly as I remember from the correction of the mid 90s emerging market stocks, where profits were erased in a matter of weeks….Makes me feel uneasy about adding to my foreign positions like FXI (china ETF)….Can’t put all your eggs in one basket

That being said , I wish I had a crystal ball…..

[kewp]

Meanwhile, the dollar lose purchasing power daily….

[(former)FormerSanDiegan]

Meanwhile, the dollar lose purchasing power daily….
Yes. That’s why a balanced breakfast also includes foreign stocks (e.g. EFA, EWJ, EWH etfs to name a few) , short dollar positions (e.g. UDN), Gold, maybe some commodities (e.g. DBC), and large US companies (JNJ, PG) that benefit somewhat from a weaker dollar.

[Author]

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