Down goes the Dow

agip wrote:

If I can paraphrase:

Flagpole: Simple, time-tested investment strategies work now, have worked in the past and will most likely continue to work in the future.

Maserati: You don't know that they will continue to work. And there are many ways to invest, not just yours.

This is a good summary.

I would add that my investment strategy is just part of the picture and that there are other things you should do to get your financial house in order.

1) Get rid of any non-college loan or mortgage debt as quickly as you can and then NEVER have that kind of debt again.

2) Get rid of college debt within 15 years of completing school.

3) Retire not only with ZERO debt but with a paid-for house OR enough money so that you can rent for the rest of your life in addition to your other living expenses. People often THINK they have done the latter, so the safest bet is to do the former. Gotta live somewhere. Might as well own the damn thing.

I understand you accurately, and precisely. It is you, for whatever reason, who seems to lack comprehension.

I have never knowingly disparaged you, or what you are doing, nor have I said that investing in the markets in the way you describe is unadvisable. All I am saying is that it is distinctly sub-optimal when compared with my own investment strategy, given my options.

I have also said that yours is the strategy recommended to the everyman--the guy who has to pay for a home, go to work, buy/maintain a car, buy health insurance, care for family, etc. This is inarguable, as it is industry standard advice, sold as being best-suited for the average joe, or everyman.

You seem easily offended when your articles of faith are questioned. You include at least one in every post, one of the most recent being "it's a safe, effective way to take money you don't need today and turn it into decent income in retirement."

Do you understand how this is an article of faith? You seem a bit low on comprehension, given your last post; either that or I'm being inarticulate. With my 1950's reference I was likening your mentality to the lock-step conformity that was emblematic of the 1950's, which relied upon universal understanding and acceptance of social norms and values.

If you really understood any of this, you would also understand how I am, by your standards, ALREADY where you want to be at 55 or 60, in my mid/late 40's. I achieved this by being unlike you. Yes, for every me, there is somebody who has to wait until 75 to be in that position, and it is that outcome that you focus on, to the essential exclusion of my own outcome.

Flagpole, 55 or 60 is old. You might not think it is, but it is. By the time you are 60, you are no longer middle-aged. I spend my time "investing", exercising, traveling, and spending time with family, and have for a while now, while I am middle-aged. Yours is the type of exactly standard outcome that I have always found horrifying, if only for its standardization and utter psychological predictability, if not predictability of outcome. I almost hope for your sake that it doesn't go for you as planned.

For you, that standard outcome is "good enough", for me, it is not, never has been, and never will be. Between today and the time I am 60, I will have lived another entire life compared to you.

I encourage others to do what they know, to invest in themselves, to really understand risk, to get intimate understanding of a particular market or markets, and especially to take power for themselves and, unlike you, not cede it to nameless and faceless organizations and institutions. I encourage people to be self-reliant, to the extent that makes sense.

I'm not "rich", but I'm 10-15 years ahead of your declared schedule, which makes us completely different. 10-15 years is a LONG time, especially when the transition from your 40's to 60 is concerned.

The thing about your situation is that you will never achieve more than you expect to, and you have a fair chance of achieving less, through mechanisms entirely not in your control.

Good luck Flagpole. Why don't you just change, to posting one update every 5 years for the next 15 years?

DJIA down around 56 so far today to 16,387, SP500 off around 7 to 1913. Again, these numbers mean very little, other than that essentially nothing is happening.

Meanwhile, I have considered investing in Russia. Yes, it's a dangerous place, you have to know how to conduct yourself--but if there is one place in the world that has the history, culture, and outright balls to tell the blowhard Americans to shove it, it is Russia.

They have many weaknesses, too, which will ultimately keep them integrated in the larger world, but it is plain to see that America is on the wane. With instability comes opportunity, and instability is manifesting in Russia not through the demoralizingly grinding process that it does here, but in a very direct, understandable way, by articulated decision. They are not wasting time like America is doing.

Here again, I can invest differently than you can--I have options that you don't have. I am not American, and need not fear financial detriment as a result of anything their government might do regarding American investors. Are you beginning to understand what I'm talking about when I say that I have many options that the everyman (including yourself) does not?

Russia is "down", and I would like to see it fall further yet, and things are shaping up interestingly. As capital looks for return, it will go, and it will be up to the investor to seek protection for the added risk that comes with the added potential of return. You may be dabbling in that stuff to some limited extent, in a secondary way. If you are, good luck.

Flagpole wrote:

mob rates lower than CCcomany wrote:

DJ has dropped about 4.5% in last 3 weeks. Is that normal with-in the normal fluctuation range?

It's not a small drop, but if you do EVERYTHING you should in your financial world, it is not something to lose sleep over.

I'm not sure if your answer means it's not in the normal fluctuation range but I'm inferring it is not especially since '13 closed 16,500 and 2;40 quote was 16,375

WiT wrote:

Flagpole wrote:

It's not a small drop, but if you do EVERYTHING you should in your financial world, it is not something to lose sleep over.

I'm not sure if your answer means it's not in the normal fluctuation range but I'm inferring it is not especially since '13 closed 16,500 and 2;40 quote was 16,375

a 4.5% drop is 3 weeks is well within the range of normal. The average year sees a correction of no less than 13%. So this drop could triple and still we'd be just average.

the markets have been so quiet for so long that we've forgotten how volatile the stock market has been historically.

"It's not a small drop, but if you do EVERYTHING you should in your financial world, it is not something to lose sleep over."

This statement perhaps best illustrates the difference between myself and Flagpole.

Whereas Flagpole frames things in terms of the conservative "not something to lose sleep over", I frame things differently.

I am looking for things that will enable me to get more, and better sleep. For me, the market drop is just such a thing.

My own statement would be more like "It's not yet a sufficiently significant drop to represent any essential change in the market from the perspective of moving money into or out of the market, but if you do EVERYTHING you should in YOUR financial world, you can sleep well because you are ahead of the game, and because good opportunities await."

The slow drop in the markets gives the benefit of time to bring into focus patterns that have, for some, heretofore been uncomfortably fuzzy.

While Flagpole is concerned about losing sleep, I am concerned with sleeping well, and remaining alert.

One more thing on Russia: watch what they do with places like Argentina.

It would not surprise me if they bought up all of Argentina's meat production and did other things to enable Argentina to further irritate Singer et al.

The Russians are flexible, whereas to the American hammer, every problem looks like a nail. The Russians enjoy the game, whereas Americans are mired in manifest destiny.

I'm excited to see what they do in Argentina and elsewhere.

alls I will say, Maserati, is that following flagpole's advice makes a person extraordinary and eventually wealthy.

how many people invest regularly for decades? How many people never sell until their 50s/60s? How many people truly harness the amazing wealth production ability of the stock market over 30-50 years?

I'd say 1% of US citizens at most. The point is that FP's advice is not for the everyman - it is for that rara avis - a disciplined saver and investor.

How many people invest successfully but idiosyncratically like you do? hard to say - I'd probably put all small biz owners into that category. If you exclude small biz owners, I'd say maybe 100,000 in the US?

maybe I'm missing your point here - but I do think a lifetime of saving and investing is absolutely extraordinary and not worthy of your dismissing it as ordinary.

Signing off for today, but at 3pm EST DJIA now down about 77 to 16,367, SP500 down 10 to 1910

DJIA -1.27% YTD ignoring dividends, taxation, transaction fees, etc.

SP500 doing better.

Nothing worth seeing, yet.

by the way, re; Russia - it is usually second to Greece on the list of cheapest stock markets in the world - it's clearly cheap if you can hold your nose to all the corruption, lack of rule of law and politics.

I had some russia shares via an etf until crimea - I sold them out of principle rather than investment strategy.

I was reading a history of WW2 and came across some stories of how so many western countries shamefully supplied the third reich even as they were taking over europe. I don't want to be that guy.

agip wrote:

alls I will say, Maserati, is that following flagpole's advice makes a person extraordinary and eventually wealthy.

how many people invest regularly for decades? How many people never sell until their 50s/60s? How many people truly harness the amazing wealth production ability of the stock market over 30-50 years?

I'd say 1% of US citizens at most. The point is that FP's advice is not for the everyman - it is for that rara avis - a disciplined saver and investor.

How many people invest successfully but idiosyncratically like you do? hard to say - I'd probably put all small biz owners into that category. If you exclude small biz owners, I'd say maybe 100,000 in the US?

maybe I'm missing your point here - but I do think a lifetime of saving and investing is absolutely extraordinary and not worthy of your dismissing it as ordinary.

While I agree that investing as I have done and will continue to do until retirement IS extraordinary, it is ONLY that because so many other people do NOT invest at all. And that is sad. And then there are those who invest but do so in a very risky way. Often when they get bitten by that very risky way, they end up being non investors from then on.

Maserati,

Dude, first of all, and I've said this before, I could not care less how my situation compares to yours. I have no idea what you do or did for a living (and I don't want to know). I have no idea if you have children or a wife who works or any of that. My goals are always centered around what I want for me, not to keep up with the Joneses or the Maseratis.

I never wanted to be done with my career or working in my mid 40s. That was never a goal. If it WERE a goal, then things would have been different up until now, but dude, I have ZERO debt other than my almost-paid for house, and I haven't had any other debt for over 20 years now. You can do a lot of fun things with money that isn't earmarked toward debt. My kids have been on more vacations than any of their friends, they get to do and have things that not all of their friends do (even though we live in a wealthy community), and I make sure they realize how fortunate they are and we are and that MOSTLY it's a choice; a choice about not wasting money.

You call 55 or 60 old. Well, I don't necessarily disagree with you there; I'm 48 and I feel old now in some ways. I've never said I wanted to retire while still YOUNG. I've just said I wanted to retire by age 60 (and it is becoming increasingly possible that I could do it by age 55; something I may or may not do then even if I could; quite honestly, if we sold our house and moved to a southern state with lower property taxes and we lived on the cheap, I COULD retire today if I really wanted to. I still get enough out of working though that I'm not ready to do that.

You say you are not 'rich'. Well, then I disagree that you are 10-15 years ahead of me, because, if I do retire at age 60, I WILL BE RICH then.

Your 1950s thing was lame. LOTS of rebellion in the 50s. You can't just mention a decade with zero context and assume that the reader knows what the hell you are talking about. That's 1920s mentality. See what I mean?

Brother, I thought you said you weren't going to reply anymore. I think you should go with that. You still think that I give a crap about how anyone else does compared to me...well, actually I DO care...I hope that everyone does as well or BETTER than me, because I want to see happy people in this world, and trust me, doing as well as me (and even not as well as me) would make most people pretty damn happy.

My investing has nothing to do with being smarter than most (even though I am) or having some secret knowledge that others don't. It's simply a matter of DOING what others are not willing to do. IF you have money that you do not need today and you don't live in a Socialist country like you do that pays your way in old age (will that get you to respond? I say YES! But I couldn't care less if you do or not.), then you need to invest that money for retirement. Diversified stock mutual funds within retirement accounts are the best way...safest, efficient, takes less of your time.

When do you NEED money today? You have debt other than a mortgage or HUGE student loan debt. Can take some time to pay those off if you need to. Got car loan debt, credit card debt, any other debt, then you should focus on paying that off before investing.

I predict you will respond even though you said you will not. The reason is that you view investing as some sort of macho thing, and you want to crow again about how great your life is based on your investment strategy (which you've never really spelled out). I'll save you the time...good for you, brother. Regardless of how you say you've done, that has ZERO bearing on what is prudent for most people to do. Anecdotal evidence (or really LACK of evidence...just your word).

I've never said my advice is for everyone anyway. Paris Hilton doesn't need my financial advice. My advice is for people (and this is the VAST MAJORITY of people) who have regular lower middle class to upper middle class jobs and wish to retire wealthy no later than age 65 and preferably earlier than that. Lots of people say they will have to work until they die or their body gives out. Well, that's BS. No need for that.

On the contrary, FP's advice is aimed squarely at the everyman. It is how the average joe is supposed to act, and how his reliance on social institutions and the rule of law will favor him in the long run. The fact that only a minority of everymen follow this advice does not diminish the fact that it is the everyman at whom it is aimed.

And it's fine, if you have faith that it will work out for you.

Somehow I've given the wrong impression, although I have stated it clearly already: the vast majority of the time, I have been in the markets.

"Timing the markets", as you guys put it, 3 times over the course of 28 years, is not wildly playing--it's just basic smarts. The last time I got out was before 2008. Yes, the market rose slightly after I got out, but I made out very well. Once before that was in 2003--I got out and invested differently, but I only made as much as I would have made had I stayed in. This time, I am significantly ahead of YTD market gains to this point in the year.

It took only once for me to learn--the tech bubble. If one does not learn from one's experience, and then act on that knowledge and insight, then one is an idiot IMO--and I use "idiot" in a non-disparaging way.

Mine are not terribly risky ventures. I am in, unless I have something better to do, and "better" depends on my assessment of the near-term future of the markets, and my knowledge of what else I could be doing.

FP, let's say that you and I have followed the same investment trajectory, which is very likely, with the exception being my exits from the markets in 03, 07, and 14. From my perspective, your trajectory has been distinctly sub-optimal, as measured by actual gains. Notice that the other two times, I have re-entered the market when I thought it made sense to do so, and I will do so again a third time, unless armageddon hits.

And agip, the longer I have lived, the longer I have realized that everybody, everywhere, has their hand in the corruption pie. In the US, too. Rule of law? Don't talk to me about it, I am an attorney by training and trade.

http://news.investors.com/ibd-editorials/080614-712168-federal-spend-tracking-website-found-to-have-missed-619-billion-dollars-in-spending.htm

It's the same everywhere. Yes, the rule of law is thin in Russia, but there are other rules by which people play. You have to be careful, no matter where you play. You think that you can easily and readily vindicate your legal rights in the US? Think again.

Yes, at some point it is a question of degree, and even I have my limits--however, the most limiting factor is knowledge. You yourself have little to no idea how the companies in which you invest actually conduct their business, especially those with overseas operations. I do not worry about things like that, that are beyond my ability to control, and even to know.

well we're not really disagreeing - the advice is indeed aimed the everyman, but it is taken by only a few extraordinary people.

I'll agree that there is corruption everywhere but likeyou say it is all by degree - countries like Japan, US, Canada, Australia, Western Europe have far better protections for shareholders and individuals - but it's just protection, not guarantees.

The thing is always this - the oldest index fund I am aware of is the Vanguard 500 Index - VFINX. Been around since 8/3/1976. Almost 40 years now! an investment lifetime. All kinds of markets - boom, bust, stagnation, you name it. And that fund is up 11.02% per year since inception.

I understand you have probably captured most of that or even beat it since you are usually in the markets. But I'm just not sure how that is beatable by using insight and experience. Certainly not by me.

The caveat is that as you have pointed out, we don't have 40 year horizons. At some point the horizon shrinks and then we can't wait for a tech bust to recover.

These people can take comfort in the vanguard balanced index, 60/40 stocks/bonds, which has returned 8.3% since 1992.

although that corresponds to the 20 year bond bull market so we have to be cautious with that one.

I dunno - I just don't think applying investing experience and individual knowledge helps most people. A few, sure. A few can make wise independent decisions. But most can't - so I do think the best overall advice is to be simple and just use index funds, based on your risk tolerance and time horizon.

Maserati wrote:

From my perspective, your trajectory has been distinctly sub-optimal, as measured by actual gains.

All actual investment histories are sub-optimal.

I agree with the spirit of this. The only thing I would say is different is that I don't think you have to stay in index funds. Fine to do so, but you can just buy a ton of different funds and be ok also...especially if you do it with the low fee Vanguard or Fidelity.

Econ 101 wrote:

Maserati wrote:

From my perspective, your trajectory has been distinctly sub-optimal, as measured by actual gains.

All actual investment histories are sub-optimal.

Yes, absolutely correct, but I hope you got the message.

Alas, many things are difficult when mediated through the web.

I will assume your bona fides, and state that that was not the intended message--which was that Flagpole's "one size fits all equally well" attitude does not bear scrutiny.

Flagpole sounds like a decent guy, if somewhat staid. It is guys like him upon whom the effective continuity of US society depends. If you live anything resembling a normal life, you might do well to heed his advice.

There is geopolitical risk all over the world, actual economic growth does not "feel" like the stated numbers, housing is likely/already at least stalling/leveling, the bank with the largest derivative portfolio in the world is down 25% in the last year (36% from peak this year), there are signs Europe may spark up, etc..

The gains may continue, but I see more risk than reward in the next couple of years. I don't pretend to be an expert, but like everyone, I've got an opinion.

Thank you for the clarification, Maserati. Though I enjoy reading Flagpole's posts and typically find a lot of good information and advice in them, I agree that his formula is not for everyone. For example, I retired at 58 with two mortgages and about $250k in savings/investments between my wife and myself (she retired two years later). Though Flagpole might not approve of that, I can confidently tell you that we are "living the dream."

Btw, I also enjoy reading posts by you and agip. Thanks for the education, gentlemen.