Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Good read. A comprehensive look at relative valuations of stocks & bonds, fed actions & consequences, and a glimpse at the mentality driving the bond bull. (Not sure why they chose "ordinary American" for title. Kind of an ambiguous term?) Thanks Ted.
The comment that it is unusual for Americans to sell during market downturns is simply inaccurate. The "ordinary" folks always sell during downturns, much of it near the bottom. And most buying is done during bull markets, much of it near the top. And I don't think most folks who have moved out of stocks in the last year have made that decision because they don't trust the markets. It's because they don't trust the government. There is a huge difference, I think.
The vast majority of people who are out of stocks now, moved to the sidelines in 2008-09 and never returned. The big sales by public pensions, etc. are mostly to reallocate stock AND bond holdings to alternatives, including a large chunk to private equity. I have not seen any evidence of large public pensions adding much to bond allocations.
I do agree with one point that the current situation is an aberration. Just wait until interest rates start moving up (and they will eventually). Folks will then run away from a lot of the bonds they have been running to over the last 5 years.
Reply to @BobC: Right on Bob. It's well documented that your typical investor sells low and buys high. I've certainly been guilty of that myself. It's been a learning experience for me to look longer term when you find your assets have dropped.
I also think the "general" American is getting older and closer to retirement. That would make them more conservative and likely to reduce equity holdings.
Reply to @MikeM/BobC: You folks are probably right. I think there could be a large corrections coming soon/or crash . If I was few years out from retirement, I would consider waiting for the rally to start, then probably sell everything/change my portfolio to 70s% bonds/ 30s% stocks. This would work for your buy low and sell high. I think we are at a somewhere past the past 3rd or start of 4th quarter of the rally.
Comments
The vast majority of people who are out of stocks now, moved to the sidelines in 2008-09 and never returned. The big sales by public pensions, etc. are mostly to reallocate stock AND bond holdings to alternatives, including a large chunk to private equity. I have not seen any evidence of large public pensions adding much to bond allocations.
I do agree with one point that the current situation is an aberration. Just wait until interest rates start moving up (and they will eventually). Folks will then run away from a lot of the bonds they have been running to over the last 5 years.
I also think the "general" American is getting older and closer to retirement. That would make them more conservative and likely to reduce equity holdings.
You folks are probably right. I think there could be a large corrections coming soon/or crash . If I was few years out from retirement, I would consider waiting for the rally to start, then probably sell everything/change my portfolio to 70s% bonds/ 30s% stocks. This would work for your buy low and sell high. I think we are at a somewhere past the past 3rd or start of 4th quarter of the rally.
http://finance.yahoo.com/news/trader-advice-expect-rally-then-115954948.html