"DOW 50,000" a Wall Street legend predicts - Time to be a contrarian?

    Sentiment in excessive optimism territory

    NYSE Margin Debt close to all-time high levels

    The Buffet Indicator is at excessive levels

    DJI - An ending diagonal is close to completion

    DJI - One could make the case that the rally from 1932 is completing

"DOW 50,000" a Wall Street legend predicts - Time to be a contrarian?

I saw this headline yesterday and quickly found the article (you can read that article by clicking here). It immediately reminded my of the 1999 book that predicted would rally to DOW 36,000. You can buy that book at Amazon for USD 0.01 (The DOW 36,000 book for USD 0.01 then click here). James Glassman co. author to that book, actually repeated that prediction  in March 2013 (you can see the new prediction from March 2013 by clicking here). The funny thing is, just two years earlier James Glassman made commentary in the Wall Street Journal under the headline "Why I Was Wrong About DOW 36,000" (you can see that article by clicking here). In that article Glassman says, that the first major change was a slower US economy - Has that fact changed in 2016?

The second big change was risk, he says - Has the "new" type of risks decreased in 2016?

I don't think they have. Everyone of the risks he mentions is the same and then we have to add one more risk, which is the current rally from the March 2009 low at 6,470 now has lasted 7½ years one of the longest bull markets in history (the third longest I think).

The Margin Debt is close to its all-time high levels from April 2015, when the margin debt hit 400%, which by the way is 33% above the March 2000 margin debt top and 23% above the July 2007 margin debt top.

Finally, I think it would be appropriate to bring the Buffett indicator into play too. This indicator gained fame back in December 2001 when Warren Buffett in a interview with Fortune Magazine said "it is probably the best single measure of where valuations stand at any given moment."  

Back in 2000 this indicator peaked at 151.3%. The same indicator peaked at 115% in 2007 and now it's hovering near 125%. I'm not the inventor of this indicator, so Buffett might read it different than I do, but I don't think it's a good sign. Also taking into consideration that Berkshire's cash holdings currently is at USD 85 Billion (see this article from CNBC by clicking here). 

I think investors is "play with fire" as Buffett said in that article. But then, what do I know? 

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