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Thursday, June 4, 2015

Risk Vs. Reward!

Whenever I buy stuff, I do a lot of research to find the product at a discount price. I may spend an hour trying to save $20 on a pair of running shoes. I look for clearance prices on older models, as well as coupon codes for further discounts. Whenever I buy something on running wearhouse, I also get another 10% off using RUNBLOG10 from a blog I follow. I will often wait on a new product until there is a substantial discount available. I would like to buy a new garmin fenix 3, but not at the list price of $499......I will wait it out. As the chart above indicates, we are now in a place where the price earnings ratio  for stocks is at the highest level in 135 years with the exception of two periods....... 1929, which was followed by the great depression, and the year 2000, where the dow dropped approximately 50% over the subsequent three years. So we appear to be at one of those points again. Now no one can pick tops and bottoms in markets, but the market is spectacularly expensive. The bond market is also struggling as interest rates have begun to rise sharply. So I am currently 90% in cash, with just a few value stocks that are all currently around their 52 week lows. You have to ask that tough risk question......will the odds favor being up another 5% by years end, or down 20%?  Although I am at a place where I have a pretty solid emergency savings account that would cover any automotive, medical expense (for me for the next 18 months while I await reaching medicare age!), or household appliance or home maintenance cost, I remain very skeptical  of all the bullishness on both the world and U.S. economies. So my current paranoia makes me want to protect my meager estate as opposed to trying to increase it substantially.....

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