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Sunday, February 26, 2017

Bull market end

I have a “gut” target for S & P 500 to reach 2,800. At least. On the high side 4,000 is eventually possible before this bull ends. It is partly based on extremely strong economic fundamentals, improving (higher) inflation, increasing allocation to equities after a 2 year hiatus and the fact that all bull markets end in euphoria.
Currently the forward P/E on the S&P 500 is 17.6. This is overstated as employment, inflation and the weaker dollar will drive earnings much higher than currently expected. We got a good ways to go.

My personal strategy is 70-85% in REITS and 15-30% in Energy in my long term, investing (not trading) portfolio. Once oil reaches $70-$75 it will be 100% REITS. REITS are ridiculously cheap compared to their earning potential at this stage of the cycle. I expect them to give a total return (price + dividends) 15% per year for the next 5 years, regardless of when the stock market tops. London real estate, priced in US dollars is about the same level as at the heart of the 2008-2009 crisis. That is going to be a scintillating weak dollar play....much better than any pet rock, plus you get a 5% yield on it.  

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