World Indices Roundup 2020

What your saying is correct. But did earnings go up enough last year and this year to be able to say that a 30% increase is fair value?

 

While I am checking for 'bargains' also noticed that portfolio was slightly up today. Emotions are being lifted by timely arrival of dividends now & over next few months, take some 'darkness' away from price movements & a solid reminder of 'the plan'.

 

But what is "fair value"? It is different for everyone. I'd argue the only thing that isn't different for each individual is the market price, because that is the only price you are able to purchase for at that point in time. If you personally don't think the price represents fair value you wont buy. If someone else does, they will buy.

I don't know if earnings went up or not. My point is that simply because prices have gone up that does not, in and of itself and in isolation, mean prices are "due" to come back down.

 

I think we have moved too far from the context of the original post we are disputing. It started with @Barny saying he believed we were due for a pull back. You questioned why and said something along the lines of if earnings had gone up 50% last year would a 30% increase in market price be justified. But earnings didn't go up 50% last year. So if your comparing the market price increase over the last 12 months to the earnings increase then the two don't match and as a comparison its no longer fair value. Unless you believe that the market price last year was undervalued compared to the earnings.

Again its all relative to what one believes the markets earnings are worth. I believe market history suggests thats somewhere around 15 X. Is 15 x still fair value today? That's up to each individual to decide.

My opinion is even a little higher than 15 x is fair considering the current rates and other viable options. But maybe not as high as what the market was offering prior to this pull back.

 

Great question, Really depends on many things. Why did earnings go up? Is it a one off? Will earnings continue etc etc etc.

But short story is earnings didn’t go up 50%

 

At the moment I don't have the time to answer @Piston_Broke comments but I do appreciate them and that they were delivered with respect.

A person's view is of course likely to be heavily based upon their observations etc. of the techniques put into practice. From what I observe on facebook.com, tradingview.com etc. there are many that practise the EWP and they are hopeless! Some of this is understandable as once one is dealing with non text book examples it is extremely difficult (case in point the XJO!) to apply the EWP. Even more challenging is doing it in literally real time. The posts I made commencing 3 February warning of a potential approaching downturn because wave patterns were technically complete, then saying no we're not there yet (because of strong but weak internally rises) but it's now imminent have turned out to be quite reliable, even if the wave labeling is not correct.

From personal experience one generally works mainly at the daily time frame when counting waves for a forecast of the type I share here and you use weekly and monthly time frames to obtain clarity. The problem is even at the daily time frame a wave pattern that one might think is perfectly clear (has the right look to be a pattern and conforms to rules and guidelines) can eventually become something completely different. The opposite is true also. For example, a wave pattern that is clearly corrective (i.e. against the dominant trend) may not display the basic up-down-up (or down-up-down) sequence that you would commonly see at a daily time frame. The reality is that when ones applies the EWP you will never be correct 100% of the time. Patterns can be so complex, there will be alternatives that you may have not even considered etc. etc.

Anyway, a quick update. XJO has broken a critical threshold of my preferred wave count. The diagram below shows the XJO's status as of last night. The critical price level at ((b)) was broken today (not shown). The problem is that wave (ii) has now retraced more than wave (i) which breaks a rule. I'll be watching next week very carefully to see if I can offer some more comment.

 

Ok, if price goes up it is automatically due to come down, that must be why throughout history there are an equal number of up days compared to down days and up years compared to down years I suppose.

Oh, wait a minute....

 

Not sure anyone suggested that. If markets continue to move up and at some point earnings don’t move up with it, then I would imagine at some point the market will stop going up or come down when something rattles the markets.
Unless you believe that earnings can stay the same and markets will continue going up indefinitely.

 

Quality commentary
If that holds it looks like it’s off to the races?

 

Not sure what you’re on about. Pull back doesn’t mean it will go back to its start point.
Anyhow the better question I should ask you is why did the market (pullback) drop in value?

 

That was sort of exactly the point of my original comment.

Price moving up, taken in isolation without considering any other factors, is not a reason why the market is "due" for a fall.

 

Well hang on. If price moving up automatically means the market is due to fall then it must fall until it is back at the starting point. Otherwise price is still up (compared to where it was before the price went up) and therefore the market would still be due for a fall right?

As for why I think the market has dropped in value, I have no idea. Plenty of stories are being told to try to explain it though. Coronavirus, subdued earnings, animal spirits, business confidence. You name it, I'm sure there's someone out there using it as a reason to explain the drop. Some make some sort of sense (coronavirus fears) while others, taken in isolation, make as much sense to me as saying the price is higher today therefore the market is due for a drop. Of course that's just my uneducated opinion.

 

The markets have moved up, way too much and are now falling. They were due to fall as they were overbought. The trigger (fear) is coronavirus among other things.
You gonna play symantics with this?

 

Back on topic. US has now reached the 10% correction point and Aus could be there if not very close today. I did a small buy yesterday with the expectation that it would most likely go down further. I'm guessing there is another at least 5% further to go. I personally am getting ready to hit buy again shortly.

I was initially thinking the 10%,15%,20% marks as the trigger points. But maybe break up the buys into even smaller lots and do what I did yesterday. Hit buy at 7%. Then again at that 10-11% mark with another little lump sum. I feel if you are to focused at an exact rounded figure you might miss the buy opportunity for a 1% difference.

 

Are you buying or wait and see approach

 

I love how everyone becomes an expert on market valuation after a small fall.

Markets are never due for anything. If anything, the US market is due to quadruple in the next 10 years.

 

I like your approach as you're buying regardless so you don't miss the uptrend, but do you feel this could perhaps get a little worse than another 5% drop?
I'm going to wait till end of day and watch and also buy a small amount, then if it continues next week and so on do what you are doing. I only have 200k to play with, so I want to spread it out similar to what you are doing.

 

One opinion doesn't make me an expert, just like your opinion to quadruple.

 

Prime Minister Shinzo Abe took the drastic step on Thursday of asking all the country’s schools to close for about a month.

With the number of cases steadily rising and Japan suddenly confronting talk that the Tokyo Olympics may have to be canceled, Mr. Abe is eager to show that he is moving aggressively to control the virus.

 

It's not my personal opinion, it's just a forecast based on prior 20-year return.

The Investor's Fallacy – Of Dollars And Data