Betting on the Dow

[RecycleMichael]

I feel good about the stock market. It has been bouncing around and some say there is going to be a big correction soon with profit takers exiting the market.

I believe otherwise. I am willing to bet that it goes up even higher.

The Dow went from 13,412.55 to start 2013 to 16,576.66 to end 2013.

So far the Dow has struggled in 2014 dropping down to 15,804.17 to start today.

My bet is that it goes over 17,500 during some time in 2014. I am willing to bet each taker one six pack of local beer.

Who will take my bet?

[cannon_fodder]

My question isn't if there will be another run up... it is if the run up is sustainable.

Corporate profits are up.  Exports are up.  Efficiency is up.  Cash reserves are up.  The dollar has maintained as the world reserve currency.

Real wages are down.  The labor market remains weak (nationally).  Consumption is largely flat (we are a consumption/service economy). 

In the semi-long run we have baby boomers who very soon will switch from shoving money into the market to a long, steady trend of pulling money out of the market.  Will there be enough money going in to offset the money coming out?  Not unless foreign investment remains strong.  Too many young professionals (people who can invest) are still paying on student loans and trying to live their parents lifestyles before saving any money.  That could lead to a stagnant market for half a generation. 

There are contra indicators.  I was hoping for more of a fall before I put more money in.  Clearly, in the next couple of months (i.e., before 4/15) I will top off the IRA accounts as a matter of prudence.   

But beyond that, hunting for an undervalued stock is getting difficult.  The PEs in the 40s are all too common.  Unprofitable companies trading high.  Irrational acquisitions.  And a reinflated banking bubble (read:  same mess as before) don't instill confidence in me. 

I won't take your bet because I wouldn't be surprised at all to see a 12% spike in the market.  But as a long term investor, spikes aren't my thing.  Where's my steady long term trend!  Where!  I demand to know!

(I'm a young pup, another 2008 style crash wouldn't bother me (but it would devastate my retired relatives).  Have cash, want to invest.   

[RecycleMichael]

I've switched my investments into beanie babies and commemorative plates.

[Red Arrow]

I've switched my investments into beanie babies and commemorative plates.

Have some Frankoma plates?

[heironymouspasparagus]

Have some Frankoma plates?

They went up, then came back down....

[heironymouspasparagus]

But beyond that, hunting for an undervalued stock is getting difficult.  The PEs in the 40s are all too common.  Unprofitable companies trading high.  Irrational acquisitions.  And a reinflated banking bubble (read:  same mess as before) don't instill confidence in me. 

Like Twitter...what an unbelievable crock of carp.  $40 billion "valuation" for a whole bunch of nothing!!  I can think of at least one very big company - non-oil - that has a strong local, Oklahoma presence that is vastly superior in all ways one would expect in a corporation, hires a vast array of people (couple hundred thousand), very strong profits - light years beyond Twitter, and actually makes stuff here in the US!  And is valued less.   Irrational exuberance at full speed!!

[Gaspar]

I'm with Michael. The real estate market is certainly back.  Banks are back to offering interest only options to first time homeowners who can't afford the homes they are buying, and as a result that is starting to artificially increase home values.  This is great for builders and banks, and provides great fuel for the market.  Unfortunately we will pay the piper at some point, and the key will be knowing when to exit.

The oil industry is seeing record profits and production on a scale that we have never seen before spurred by the demand for larger vehicles and industrial demand.

Technology has seen significant consolidation with just a few major players wagging the dog. The same goes for telecom, who has been shifting the concept of the per-service fee into a more bundled approach for consumers, and as a result shut out many of the smaller players.

Private sector lending has changed significantly, and likely forever. High interest secured personal lending is at an all time high with companies like MoneyMutual, PaydayLoans, and multiple "drive-in" title loan franchises booming.  These are also being promoted by celebrities towards the low income and financially insecure, of which there is a far greater population unfortunately.

So basically we have had a shift in predatory lending with more focus on short term profit, and home lending based on no-principal contracts (basically renting with the bank as landlord, for all intents and purposes).  I think this is horrible because it amounts to slavery, but for the short term it will result in record profit.

All of this spells another big bubble, but probably not for another 10-20 years, so I'm with Michael.  I think we can see the market well above 17K in the next year, with the financial sector leading the way.  I think smart stuff is still the way to go though because Wall Street is less predictable from day to day than it was in the past. 

I am currently invested in mostly domestic and international corporate stock with some real estate and technology mixed in.  I was able to make 32.31% on my investments in 2013 alone!  The way the market is looking now I would expect a smaller but still outrageous return in 2014.

Here is my current holdings breakdown as of this morning.  I have some triggered entry and exit points for these stocks but for the most part this is where I currently live in the market:


I did buy gold in 2008 after the election and got quite a bit of ridicule for it on this forum for dumping stocks.  I was wrong about the market at that time, but when I sold my gold in around March of 2012 I really didn't feel to bad about my mistake  .  I think we will likely see gold prices level out at this point because of technology demand.  Palladium still offers a fun cyclical investment if purchased on a downtick and sold at the right time.  Overall, I can't see any reason for people to stay out of the market now.

I also have a fund through my employer that offers a number of investments.  If you have such, take a look at iShares funds.  They have been very reliable and automatically shift their holdings based on your forecasted exit point (typically retirement age, or a kids college burden).

If you don't already have a broker, or an online account, I would recommend TD Ameritrade because they offer a great toolkit with pattern recognition that helps even the novice understand frequent patterns that can help you know when to get in or out of a position.  The interface is slick too and runs as a java app on your desktop or phone that is unobtrusive and you can keep open during your workday, including a heat-map that lets you quickly visualize the big data behind what industries are moving the market.



I began my personal investing as more of a hobby back when Scottrade first made it easy to buy and sell stocks without a broker.  I can't even articulate the hard and valuable lessons I have learned since then.  If you see the market as just another way to gamble, you will lose as sure as you would in any of the big casinos, but if you see it as a way to invest and participate in the companies and products that you admire and use, and you enter with the expectation of really participating, it can be a lot of fun, and very rewarding.  If you don't think you can take the time, you are far better off with mutual funds and a good advisor who is paid to keep track of such things.

[Conan71]

I'm not as optimistic in growth this year, mainly due to The Fed pulling back on QE and how over-valued many stocks are already.  I'm still at a point my retirement account is a relatively long-term focus so minor gyrations here and there aren't going to be a big deal. 

[Gaspar]

This may change many investor's outlooks on the market.  Apparently Soros is hedging for a crash. 
http://www.zerohedge.com/news/2014-02-17/soros-put-hits-record-billionaires-downside-hedge-rises-154-q4-13-billion

[nathanm]

Ah Zero Hedge, the only stopped clock that isn't right at least once a day. I'm surprised the whole readership of the site didn't commit mass suicide when the US credit downgrade failed to trigger hyperinflation.

[davideinstein]

It's still a good market to buy in. But 2-3 years ago was better.

[RecycleMichael]

I feel good about the stock market. It has been bouncing around and some say there is going to be a big correction soon with profit takers exiting the market.

I believe otherwise. I am willing to bet that it goes up even higher.

The Dow went from 13,412.55 to start 2013 to 16,576.66 to end 2013.

So far the Dow has struggled in 2014 dropping down to 15,804.17 to start today.

My bet is that it goes over 17,500 during some time in 2014. I am willing to bet each taker one six pack of local beer.

Who will take my bet?

1250 points in five months. 430 to go in 2014.

How come you guys don't treat me like the genius I prove to be every day?

[TheArtist]

1250 points in five months. 430 to go in 2014.

How come you guys don't treat me like the genius I prove to be every day?

Us super-geniuses chuckle when you mere "geniuses" say things like that.  Anyway, back to creating my robot army, I have a galaxy to pillage.  

Stock market, puleeeeze.  Amateur.  Bwuhahahahahahahahaaaa!

[heironymouspasparagus]

1250 points in five months. 430 to go in 2014.

How come you guys don't treat me like the genius I prove to be every day?

I'll make a prediction now....we will be in recession somewhere between 12 and 18 months from now.  I am uneasy that it could be sooner, but I really hope not!!


We should have taken care of our debt issues at the Federal level when we had the chance....

[Gaspar]

I agree.