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Author: kelbon Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8740  
Subject: Re: secured promidary notes Date: 4/14/2014 5:06 PM
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I'd say go in at 25% below current valuations. It's extremely likely that a corresponding decline will happen within the next few years.

I agree that stock valuations are generally high; I don’t suggest putting most of your money into a S&P 500 fund at this juncture. Though, I don’t agree “It's extremely likely that a corresponding decline will happen within the next few years.” Possible, yes. Extremely likely, not so much. Here’s why:

There are a lot of people who are skittish about the market’s valuation, and, who believe that inevitably there will be a significant correction soon. I’m not sure that this was intended for me, or not…

Not to overstate a bear case or anything, but you've said things like this a couple of times now, without providing any evidence

But, there is evidence (and I’ve said this before) that, short of something from left field, the market is unlikely to see a dramatic swoon. Perhaps the biggest reason that the market has risen so significantly is interest rates.

Interest rates are at historic lows and people have gravitated to stocks seeking returns that have been denied them elsewhere. Many dividend stocks, even at these levels, have dividends that have similar yields to the 30-year treasury bond.

The fed is likely to raise interest rates in a very measured way only on evidence of a stronger economy. A stronger economy will, presumably, result in more robust earnings which will help back-stop any weakness that the market might experience from slowly rising interest rates. There is nowhere to go to get better returns than stocks now. Consider too that when interest rates rise bond prices fall, given this, unless you are very fearful, bonds are not the place to be.

Stocks are not high now because of “irrational exuberance” they are high because they are the only game in town and likely to remain so for a meaningful period.

I could be completely wrong, but this is what logic and common sense tells me.

kelbon
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