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DoctoRx
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Over 30 years of investing in individual stocks. Extensive business experience with small to mid-size companies, including as CEO. Many hundreds of blog posts on financial and economic matters since 2008. Focus on value with catalysts for upside price action. Background as a physician and... More
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  • Greenspan Bullish: Uh Oh 3 comments
    Mar 15, 2013 10:36 AM | about stocks: IWM

    This could be really, really bad. The man who warned against stocks with nearly four unbelievable full years of bull bull BULL lying ahead has perhaps rung the bell at the top.

    Greenspan: No 'Irrational Exuberance' in Stocks Now

    That's a bad enough headline to stop here. But let's not...

    Greenspan said in a " Squawk Box " interview that stocks by historical standards are "significantly undervalued" even considering the recent moves higher. He added that the payroll tax increase didn't dent spending because of rising asset prices.
    OK. Meanwhile, at end-January prices, Jeremy Grantham's model had as its central tendency that US stocks were priced to slightly lag anticipated 2.2% annual price inflation every year (on average) for the next seven years. But that was at lower prices.

    Grantham has a better track record than the Maestro. But of course prior success doesn't guarantee future results, etc. So we shall see.

    But with BlackRock reporting that its iShares ETF that tracks the Russell 2000 (NYSEARCA:IWM) trading near 30X trailing earnings (taking into account all the money-losing members of the R2K that Russell conveniently ignores), I think that the IWM is the Q's of our day. Woof!

    Themes: Macro market Stocks: IWM
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  • Rigorous
    , contributor
    Comments (189) | Send Message
     
    Yes, a market top. But how shallow the drop with $45 in newly created money each month available to go into stocks? That is a decent amount on the margin and add in very expert timing/manipulation you have a strong case to stay long and ride out any down turn.
    15 Mar 2013, 11:40 AM Reply Like
  • DoctoRx
    , contributor
    Comments (2846) | Send Message
     
    Author’s reply » What sways me to raise some cash and have bought some TLT hedges is Value Line's fair value estimate for the Dow 30, which I peg as about 13000 right now. 14,444 isn't crazy, though, but about 11% above a perma-bull stock advisory's guesstimate is a bit much for yours truly. Plus fiscal policy is now more restrictive than the public realizes. The second derivative of fiscal policy is strongly restrictive.
    15 Mar 2013, 11:50 AM Reply Like
  • Rigorous
    , contributor
    Comments (189) | Send Message
     
    Good points. By the way, I do think Alan Greenspan's statement is a sell signal. And a funny one.

     

    I kind of think we are at an inflection point. The U.S. economy and dollar reasserts its dominate position in the world or it doesn't.
    15 Mar 2013, 01:22 PM Reply Like
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