Yes, yes, I know you "need" your 401k values to go up.
I know you "need" stocks to go up in order for you to retire.
I know you "need" these things.
What you NEED first though BEFORE stock prices go up are dividends that give your stock a REASON to go up in value. Seriously? Does anybody ask the question;
"What gives a stock value?"
Or do we just blindly and ignorantly invest in indexed funds via our IRA plans?
I love the little blip up in the dividend yield in 2008 with the stock market crash, only to dive below 2% once again with this recent 50% rally in stock prices.
THE STOCK MARKET IS A BUBBLE PEOPLE. WAKE UP!
Cap, I'm with you on this.
ReplyDeleteMy argument is if you look at corporations that actually are making profits, it's not because they're pulling in more revenue - it's because they have cut costs - e.g layoffs or offshoring or whatever.
The F50 company I work for has had nearly flat revenues for the last 10 years, yet the stock is flying high. They've done it by moving everything offshore as quickly as possible - increasing their margins.
So, yes, I think the market in general is artificially high, largely because so many investors are chucking $$ into their 401Ks and because of profits based on cost cutting - it's not because there is a general trend of growth - yet.
That isn't to say there aren't opportunities there - it's a stock picker's market now, but choose carefully.
The questions I have for the commenters here (and the good Capt) are:
1) How much is the market overvalued? 10%? 20%, 40%?
2) What do you do about it?
3) How do you know when to move back into stock funds?
And yes, I should take your investing classes