July 19, 2014
********Go to “Core Portfolio” for current holdings.**********
Depending on which methodology you use, the market is currently 20% to 33% overvalued.
The highly respected Ned Davis Research pegs the median P/E ratio over the long term at 16.7. At a current P/E ratio of 20.7, a fair valuation for the S&P 500 is 1553. The S&P 500 is at 1940, suggesting the market is more than 20% overvalued.
But….the decline in interest rates this week suggest that the stock market will continue higher……why would anyone buy bonds when they are paying 2.46%?? (Individual corporate bonds are ok and we own several in the Core Portfolio, along with a short term bond fund.)
Even though the low rates suggest that the US economy is CRAPPY the big institutions are buying into stocks….not bonds. The upward action on Friday illustrates this.
There is no question we are in a bubble. And it will blow-up. We just don’t know when. This market is sky high. So……. what to do.
I am staying with all positions in the Core Portfolio….for now. I want to continue earning the dividends while the gettin is good. It would not be shocking to see a small correction altho with the elections in November we should see continued upward action. BUT……….if you are risk averse you should think about raising your cash position to 50%. Or at the very least put in sell stops to protect your positions.
I am looking at Teekay LNG Partners LP. (NYSE:TGP). If it continues to drop closer to $44.00 I will buy. Here is a link:
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