"SUCCESS is counted sweetest By those who ne'er succeed. To comprehend a nectar Requires sorest need. Not one of all the purple host Who took the flag to-day Can tell the definition, So clear, of victory, As he, defeated, dying, On whose forbidden ear The distant strains of triumph Break, agonized and clear." - Emily Dickinson
Bit surprised by the boldness of this buying. That said, if you are looking at markets from a five year perspective, 1200, 1100, what difference does it make, when SPX might be 1700 in five years. Still, a bit bold...
Sure it is possible, but I am in the camp that believes the DOW will be at 20,000 in the next few years.
I now have a very rough form of the GDP weighted FV model. The results surprised me a bit. What I have found is that the value of FV becomes sensitive to the initial condition that we input as GDP. For example, I get a continuum of FV from ~1189 to about ~1260, depending on the odds of a recession and therefore GDP estimates. Raw is 1337.38. If I enter lower GDP numbers, FV drops even more dramatically, around 1050. This range is too big for the time frame that I am hoping to use FV model for, but it may be ok for longer than one year investment horizons. On the other hand, I could continuously estimate the odds of recession on each indicator announcement, but that seems curve fitting. It is probably what the market itself does though! Remember, I am hoping to lead the market, not follow it. I may start giving three FVs, the lower range, the higher range, and raw, but even I am beginning to doubt myself in this endeavor. In the absence of recession doubts, those three numbers should converge. Now I clearly understand why markets swing wildly on uncertainty - the mathematics gives you a range you can drive a truck through and you are just guessing. Therefore, VIX at 30 ish is probably FV.
what about taking next quarter gdp estimates, or current annualized estimates. What is fair value for example with flat 2011 gdp?