Would using whatever P/E10 is answer the question that the poster jdg1947 recently asked on this forum about investing in GE?

Would using whatever P/E10 is have caused me to not buy some GM baby bonds last week at a 15% yield?

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Now that P/E10=23

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What if you are an income investor? Or what if you are a dividend blend investor? Your strategy allows you to invest fully at all times. Yet, you may wish to wait for even better bargains.

 

I like the idea of adopting more than one approach. I like the idea of owning some high quality dividend payers, possibly as part of a dividend blend. I like the idea of keeping most of your money on the sidelines. But that is a matter of personality. Whatever you do, be sure that you can live with it: whether the market continues down sharply or if it recovers and shoots up for a season.

 

I do not believe that there is any statistical tool or model or theory that could possibly convince me to "wait twenty years on the sidelines" in the expectation that I'm going to be better off but I'm listening . . . . .

 

Actually, I recommend a minimum allocation of 20%. But you can get away with cutting back to zero under certain conditions (that apply at this moment).

 

Have fun.

 

John Walter Russell

 

 

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Would using whatever P/E10 is answer the question that the poster jdg1947 recently asked on this forum about investing in GE?

Would using whatever P/E10 is have caused me to not buy some GM baby bonds last week at a 15% yield?

It is a matter of personal preferences.

I like the idea of adopting more than one approach. I like the idea of owning some high quality dividend payers, possibly as part of a dividend blend. I like the idea of keeping most of your money on the sidelines. But that is a matter of personality. Whatever you do, be sure that you can live with it: whether the market continues down sharply or if it recovers and shoots up for a season.

 

I do not believe that there is any statistical tool or model or theory that could possibly convince me to "wait twenty years on the sidelines" in the expectation that I'm going to be better off but I'm listening . . . . .

 

Actually, I recommend a minimum allocation of 20%. But you can get away with cutting back to zero under certain conditions (that apply at this moment).

 

Have fun.

 

John Walter Russell

"It is a matter of personal preferences."

My guess is that most of us can sign up to that.

"Whatever you do, be sure that you can live with it: whether the market continues down sharply or if it recovers and shoots up for a season."

Yep, that makes sense to me, also.

"I recommend a minimum allocation of 20%. But you can get away with cutting back to zero under certain conditions (that apply at this moment)."

Nope, no way John.  At THIS moment (and maybe for some many moments to come), my inclination is not to cut back to zero or to cut back at all - that means selling, right?  My inclination is to buy when prices are low and yields are high.

 

Regardless of 5 or 10 or 50 years worth of relationships between overall market prices and overall market earnings, my theory is that if I want to invest in a specific quality business that has been around a while and that pays dividends and the current price of that business is such that the current price to earnings multiple is below its historical levels (which means its current dividend is above its historical levels), then ipso facto and whoop-de-doo, that's a buy, not a 'cut back.'

 

Regards.

 

Cliff

Edit:  Sorry for the garbled mess.  Can't get it to look decent.

JWR, this is really eerie... If I'm reading your post properly, P/E10 says keeps 20% or more on the sidelines all the time.

Well, I try to keep 20% in cash and, with my miniscule bond allocations, that usually means about 30% in non-equity. I want that 20% cash... Every single time I *don't* have about 20% in cash, a horrible Black Swan-type event happens where having cash-in-hand is vital. The aftermath of the markets after 9/11 is one horrific example.

Does that mean that I have been somehow practicing a quasi-P/E10 strategy all along? The reason I like that cash level is flexibility. I'm not a Nervous Nellie and cash is not my baby blanket. It's just that whenever I don't keep about 20% in cash, something horrible happens and the market tanks. Then there's a firesale and I need cash but I don't have it and can't raise it -- and I refuse to sell at a loss as a knee-jerk reaction.

I haven't had a chance to explore this stuff yet but, for the benefit of others, here's a link to your website about Shiller's P/E10 and, naturally, for Rob Bennett's valuation informed indexing.     http://www.early-retirement-planning-insights.com/lucky-7.html

Thanks, JWR!

Regards,
Susan

Perhaps I misunderstood John.

All this time I've been thinking he is advocating an 80% cash position - that is, a 20% allocation invested in equities.  And saying that now may be the time to take even that allocation to zero.

John?

Regards.

Cliff

"JWR, this is really eerie... If I'm reading your post properly, P/E10 says keeps 20% or more on the sidelines all the time."

No, Susan, what it means now is a minimum of 80% on the sidelines but he would support 100%.

 

 

What is the last date that PE10 would have supported a 70% allocation to equities for at least 1 full year?

best,

Bill

JWR, this is really eerie... If I'm reading your post properly, P/E10 says keeps 20% or more on the sidelines all the time.

I mean that you should maintain at least 20% in stocks at all times.

This is with the traditional S&P500-TIPS kind of investment mix.

Dividend strategies can support up to a 100% stock market investment now.

Keeping some money on the sidelines would allow you to purchase stocks at much, much better prices later.

The non-stock portion should be a TIPS ladder (always a good choice) or preferred stock (better).The biggest issue is converting it into cash to purchase stocks later.

Have fun.

John Walter Russell

What is the last date that PE10 would have supported a 70% allocation to equities for at least 1 full year?

It has been a long, long time. Before year 2000 with an S&P500 index portfolio.

NOTE: I generally talk about portfolio shifts in increments of one year.

A portfolio allocation of 70% to 80% would correspond to P/E10 around 14 or so. With the highest (one third of all) dividend payers, P/E10 would be around 17 or so, if I recall correctly. [I looked at Dividend Stocks in my Current Research section.]

Have fun.

John Walter Russell