|The Dow Jones Industrial Average hit 20,000 this week. This is particularly interesting because it first hit 10,000 in 1999 -- coincidentally the same year our housing inventory was this low.
As Mark Twain wrote, "History doesn't repeat itself, but it often rhymes."
This newsletter was early calling the stock market bubble last year, and just as in 1999, conservative people will look foolish for a while -- until they look smart.
The best illustration I can provide to prove that the stock market is massively overvalued is the chart below from the Federal Reserve Bank of St. Louis.
Note that the ratio of the Wilshire 5000 to Gross Domestic Product peaked at just below 1.18 in Q1 2000 before the bubble burst. We are now at 1.39, totally unprecedented territory.
Here's what's really scary: the current valuation is up almost 40% from the peak of the stock market in 2007 -- from the peak!
The bottom line is now would be a wonderful time to sell stocks. You may witness the market continuing to rise, but it's better to miss out on some of the upside than get crushed on the downside. Nobody ever went broke taking a profit.
It took 17 years to go from Dow 10,000 to Dow 20,000. That's a long time to double one's money. The cash flow and appreciation on just about any type of real estate anywhere in the country beat that, and with a lot less heartburn.