The S&P 500, Dow and Nasdaq Since Their 2000 Highs

Marc Faber Blog

Market Crash is Yet to Come

I don't think the crash has happened yet. Say you're a young person and you're just starting to work. 

So take me in the 1970's. 

In the US, with 20 hours of work, I could buy the S&P 500. 

Now you need more than 90 hours of work to buy the S&P 500 if you're young, say with a medium income. 

When I was young you could buy a home at a reasonable price, even in Hong Kong. 

What I want to say is that the Fed has basically created with their colleagues in Japan and at the European Central Bank (ECB) and the Bank of England (BOE), they've created a colossal asset bubble. And the returns going forward are going to be disappointing.

Advance/Decline numbers 

The composition of an index is that it's usually capitalization weighted. So one stock that goes up vertically could theoretically drive up an index and 99 percent of the shares don't make new highs. We had a strong day on Wall Street, but on the New York Stock Exchange, out of more than 3,000 shares that are being traded, only less than a hundred made a 12-month new high. The advance is very narrow. 

Some markets are still strong, but the bulk is no longer moving up so in other words the advance of asset price inflation has been narrowing.

DYI Comments:  No doubt we are in a bubble especially for basic stocks and junk bonds.  A 45% to 60% decline is within the realm of the possible and probable.  Since the beginning of the secular bear market 15 years ago stocks unless traded as opposed to buy and hold have had tough time.  Below is DYI's page from the secular top til now.  Amazing despite gold's massive moves up and down it continues to be the winner since the year 2000.

11-6-15
Updated Monthly

Secular Market Top - Since January 2000

+55.8%   Dow       

+176.8% Transports 

+  96.4% Utilities

+42.9%   S&P 500

+26.5%   Nasdaq

+52.3%   30yr Treasury Bond

+275.6% Gold

  +73.0% Oil

From High to Low

+275.6% Gold

+176.8% Transports

+  96.4% Utilities 

+  73.0% Oil

+  55.8% Dow

+  52.3% 30 Year Treasury 
+  42.9% S&P 500

+  26.5% Nasdaq

It is easily seen that in the year 2000 the Nasdaq was horribly overvalued and gold was on the give away table, such lopsided returns 15 years later!

Also of interest the stodgy 30 year Treasury bond has outperformed the Dow(until just recently), S&P 500, and the Nasdaq since the year 2000.  The modern portfolio crowd back in the year 2000 would find this a very low probability outcome.  Value player's, due to extreme valuations, would have recognized this as the most likely outcome (close to a no-brainer!).

DYI's portfolio remains the same, very defensive as valuations have long since left planet earth.

   Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  11/1/15

Active Allocation Bands (excluding cash) 0% to 60%

79% - Cash -Short Term Bond Index - VBIRX

17% -Gold- Precious Metals & Mining - VGPMX

 4% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

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DYI