In March just past, the present rising market reached its ninth year. At this time, the S&P500 is at around 2,725. If it continues to rise until August, it will become the longest bull market in history. Like the laws of physics, the laws of chemistry, the laws of economics, and others, the stock market also has laws. One of these is the reversion to the mean. The current rising market will revert to the mean, drop below the mean and be full of bargains – someday. It is a law. Of course, no one knows when that day will come. That too is a law.
Consider the following:
- The CAPE (cyclically adjusted price/earnings) ratio, generally used to evaluate whether the market is undervalued or overvalued, now is at the level it was just before the 1929 Stock Market Crash.
- Scott Minerd, managing partner and chief investment officer at Guggenheim Partners which has over $305 billion in assets under management, recently stated that the stock market is on a collision course with disaster.1
- Justly famous investment guru Mark Mobius sees a 30% correction anytime soon. It would wipe out the last two years’ growth. In an April 2018 interview with the Financial Times of London, Mobius stated that exchange-traded funds that the Monday Morning Millionaire Program advocates would magnify a market drop. “You have computers and algorithms working 24/7, and that would basically create a snowball effect. There is no safety valve to prevent further falls, and that fall would escalate very quickly.”2
- Billionaire investor Sam Zell recently stated on Bloomberg TV that the market is hugely overpriced. He used Alan Greenspan’s phrase “irrational exuberance” to describe it.3
These renowned investors, money managers, and others like them, are exiting the market, getting into money, and accepting the resulting cash drag on their portfolios.
To whom are they selling?
They are selling to equally renowned money managers at Goldman Sachs, BMO Capital Markets, Morgan Stanley, Bank of America, Credit Suisse and others who, collectively on average see the S&P500 at 2,861, or up 5% by the end of 2018!4
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