Just Simply Talk

After our regular badminton game last week, we went for our morning breakfast as usual. I have started an interesting conversation by asking what do they think about stock investment and the current market condition.

Here is an interesting view by one of them. He has been investing in stocks for some years and proudly announced that he could not recall if he had made any loss in a particular year. As far as he could remember, he made profits each year, sometimes above and sometimes below the average mutual fund performance of around 8%.
He opined that the current market in general is relatively stable and "slightly" on the low side, which is quite favourable for starting a position for long term investment. When I asked why did he think so when most indexes(from US, HK, Japan, Australia, etc) are either at all time high or multi years high, he reasoned by saying that indexes are made up of only small number of big corporations, especially US, that may not be very representative. He stressed that economy in US and Europe have just started to pick up, China and India are still showing healthy growth, Japan is having its own QE and interest rates are still relatively low.
While this sound logical, I have a different view. Yes, I have learnt that stock market is usually ahead of real economy and therefore, what he said is partially true that many countries' economy is picking up slowly but I felt the stock market is way ahead of real economy. Indexes may not be a true reflection of the entire market valuation, but what do we see now - a lot of undervalued stocks or more fairly towards slightly overvalued stocks? I don't think anyone knows when is the peak or bottom, for me, I could not agree with his view that the current market is "slightly" on the low side. On the contrary, the market may not be at its peak yet as there is no group think here. I am more worried if everyone think it is the best time to buy now.

Anyway, we are neither economist nor stock market guru, that is just one of our usual "simply talk" sessions where no one could hold the "simply talker" accountable and we respect each other's view.