Down goes the Dow

Gotta admit that Igy makes a ton more sense here than Maser.

Gobbledygook. A million experts on the market will give you a million different ideas about what is important. You say what you just said, the OP of this thread said a lot at the beginning, some other dude will concentrate on Japan and on and on and on. Reasons to get in, reasons to get out...it's all a bunch of BS, and no one is EVER proven right. They get lucky now and then, but pretty much they can't ever repeat hitting the nail on the head like they did that one time.

There really isn't much that people have to understand...the market goes up 73% of calendar years and overall the trend is up. Pay off debt. Plan to retire with ZERO debt, diversify your investments in stock mutual funds with money you do not need today. In retirement, if the market goes down, draw less from your stocks and either use cash reserves or other income (Social Security, rentals etc.) to get you by until the market goes north again...unless you have so much invested that even big drops don't matter...then just draw what you need.

Sally V,

I will take that as a compliment.

Thank you,

Igy

Sally, I wasn't trying to propound any particular position, I was just discussing with ghost, to whom I will reply in a bit.

But first, Flagpole. Flagpole, WTF is the matter with you? It's useless trying to present anything to you, other than a regurgitation of your own tired mantra. You're like a dumb machine that is capable of one thing, and one thing only. You evidence a complete lack of creativity, a complete lack of adaptability.

Can I drill this into your head: I am the same age as you, I have made much more than you, I continue to make much more than you, I don't need to work anymore although I still do to some extent, and I have hit all of your critical metrics--enough cash for years, paid off home, no debts, etc.--all because I do the same things you do, although I don't just slavishly adhere to some sort of mechanical behavior.

While your life may be exclusively about doing that which is merely adequate, mine isn't. I try to do the best. You appear to continually need to disparage anybody who isn't just like you are, even if by some measure that is important to you, they are your superior.

You're too far gone. What a dolt. Look at ghost, agip, coach d and others, they are capable of actual discussion, whereas you are not.

I will henceforth completely ignore you.

So Maserati thinks he's superior to Flagpole because he's wealthier. Nice.

Dude,

My comment wasn't to rip on you but rather to dismiss pretty much ANYONE who tells you that the market long term will be affected by X. It's just never the case. From 1978's "The death of equities" to 1987's Black October to the dot com crash to the housing crisis, etc. It's always going to be "different this time" and yet it never is. Buffet has it the most right -- invest in companies that produce something, and invest for a long time.

1) Good for you that you make more money than I do (though I just raised my rates, so who knows!).

2) Making money and employing a sound financial strategy doesn't have to be creative. If I want to be creative, I go write another song.

3) Who says that what I do is merely adequate? It's far from adequate, brother. We invested half our income the first 7 years of our marriage because we didn't want to buy a house in the area we were living, and I've averaged over 20% every year invested since (a couple of lower years in there). That's not adequate, and it puts me easily in the top 5% of all investors as a percentage of income, and I would take a guess that it's top 1%.

4) I have no need to disparage, and I don't disparage. My comments are NEVER about that. If you read them carefully, you will notice that the goal is always to get people to stop WORRYING about their investments and their finances. Getting in and out of the market causes worry to most. Looking at a peak and counting your losses from there causes worry...unnecessary worry. Don't Worry, Be Happy! Someone should write a song about that.

5) I disagree that I am incapable of discussion. I have polite discussions with people here all the time, including with those you mentioned. You are the one who just called me a Dolt. I've never called you a name.

Have a great day.

A few things:

"No I am not making a judgement call on a buy in point. Rather my view is there is substantial downside risk with little upside potential at current valuation. Making no move is a decision."

Yes, deciding to not move is a decision, but I wasn't asking you about a current decision. If you ever buy in, you will have made the decision to do so; what I was asking is if you have any criteria that you can clearly articulate, and if so, what the basis is for those criteria.

You have picked particular lows, but what if they are never achieved? Are you a momentum buyer?

With regard to scaling back risk, yes I have done that, which is why I am largely out, putting the money to work in areas that I know more about. Still some risk of course, but less.

I'm not ready to buy yet, but every day things look better, especially for a buy that avoids things that haven't taken significant losses. I assume the same applies to you, but you seem to have no idea if and when you will act--or if you do, you're not saying.

Strange position to be in. So you just sit around watching and crunching numbers, getting the feel?

I think the markets are just slowly pricing in the coming rate hike.

Of course rates are only one factor in pricing, but they are a significant one.

Also, I think the more this happens prior to the expected date of the hike, the more likely the hike will be, because the fed will be more comfortable with its effects. Everybody knows there will be market effects, we are seeing the early preparatory ones now.

If I'm right, it's amazing that one factor can have such a strong market effect. Yes the markets will probably bounce, and how much will be priced-in before the rate hike is anyone's guess.

ghost, what do you think? Do you think there will be other factors that send the markets even lower, and if so, what? And when?

Maserati,

My view is that Federal Reserve policy has distorted markets in dangerous ways. Funnily enough, the Federal Reserve stopped the QE program in November 2014, and the market has struggled ever since. I believe it will be very difficult to unwind from this easy money policy without severe market turmoil.

I will give you a fictious example of the possible cause and effect. Joe Smoe is an social media programer for Hoodie Boy, inc., and lives in Silcon Valley. Joe gets most of his compensation from Hoodie Boy stock options. Mr. Smoe has a brokerage account at Shearsom Leavesom investment firm where he holds his vested shares of Hoddie Boy stocks. Joe does not want to sell his stock since it has been advancing better than 30% a year since the financial crisis. Mr. Smoe has confidence that the stock will continue to go higher since the company is aggressively buying their stock back at a rate of 10% of the float.

Hoddie Boy, Inc. has funded it aggressive stock purchase program and stock compensation plans by offering bonds for sale. Hoddie Boy, Inc. feels that taking advantage of the low interest rate environment and their investment grade credit rating is good management.

Likewise, Joe Smoe wants to take advantage of the low interest rate to purchase a home. Mr. Smoe, like other Silcon Valley residents, has seen housing prices in the area exceed even the high of the bubble period of 2006. Joe can qualify for a million dollar house on his salary income. However to get the house he wants he will have to double that amount. Fred Fink, Mr. Smoe's broker at Sheasom Leavesom, has suggested that Joe margin his Hoddie Boy stock to come up with the funds he needs. Mr. Smoe buys his house using his margined Hoddie Boy stock.

The Federal Reserve raises interest rates. Hoddie Boy, Inc. curtails its stock purchase plan, and the stock begins to lose momentum. Mr. Smoe receives margin calls and is forced to sell Hoddie Boy into a falling market. Similar market conditions affect the businesses and stocks of other Silcon Valley companies. The rise in interest rates and general funknin Silcon Valley causes a fall of demand in the housing market.

Cause and effect.

Igy

Flagpole,

I agree with your specific advice. Pay down debt, maximize 401K/IRA contributions, invest for the long term, live within your means. I agree with your point that ordinary investors like us should keep a simple perspective.

However, if you really want to keep things to a simple truth about the stock market, I will do you one better: The stock market always goes up...except when it doesn't.

You cite this trend line that stocks will always go higher in the longer term as if the trend goes all the way back to 3000 BC. But of course it doesn't. The history of the stock market goes back to the 19th century. But really, for ordinary working people, the stock market really only began after WW2. And IMO, its only the last 40-50 years that really counts. That is about when a true, modern global economy started. So to say the stock market will always go up because it has for the last 2 or 3 generations is skating on very thin ice.

To make matters worst, for decades the stock market has relied on stimulus whenever it has gone into bear markets. I think of the line in the movie Rounders. Damon's character goes to Knish and asks for money to bail him out of trouble. Knish's response: "That's the thing, this time there is no money". Some day that could be the governments response to corporate America. There will be no more pensions to loot, no cutting or taxing of SS and Medicare to finance stimulus measures, no "privatizing" of government spending, no more interest rate cuts from the Federal Reserve.

My feeling is that a Japan-style recession could happen in the U.S. in our lifetimes. A deflationary spiral sets in along with a 2 decade long bear market in the S&P. Stocks don't fall as sharply as they did on the Nikkei in the 1990s but they drift down over a very long time.

I'm not saying that will happen or happen anytime soon. I happen to believe government will bring in economic stimulus measures in the next 5 years. Probably with infrastructure spending and legislation to bring overseas profits back to the U.S. untaxed.

But its a very distinct possibility. It really scares me how Americans take the stock market for granted and that they have come to see it like an entitlement program that is more solid than Social Security.

Ryan,

I am in your corner on the subject and one reason I started posting. To add to your point, the domestic stock market benefited from a growing nation. To expect a mature economy to continually expand is not practical or even desireable. The Fed easy money policies started under Greenspan added fuel that led to the last two boom-bust cycles. To believe it is simply game on is not only unrealistic but foolish.

It is my view we are at the end of the boom portion of the third boom-bust cycle. And this could shake confidence in the ability of central banks to positively affect the economic cycle. Critics of Keyesian economics are akin to carriers of the plague, but the recent economic statistics are supportive of their view.

I agree with Flagpole on the common sense financial advice and most of the nation would be better off by listening. However the average American is content to drive the debt higher in an effort to attain a fantasy lifestyle. Local, state, and national governments are no better, making promises for tommorrow based on unsustainable debt levels.

I read one commentary during the last Presidential election cycle where the writer opined that the tough fiscal issues would not be addressed tell they reach a crisis point. Considering demographics, peak debt, unfunded entitlements, and slower ecomic growth, it is hard to see a way out without some sacrifice by all.

Well I am off for my Saturday run.

Cheers,

Igy

Igy

Is that the best you've got? Joe sells at a profit and fewer homes get sold. Where's the crash?

POTO,

I hate to point out the obvious that you appear not to know how margin calls work. Joe's little nest egg of Hoddie Boy stock is called out on margin at 130% of his margin debit balance. Smoe's margin calls excelerate as the stock drops in price. At the same time the $2 million home now has a market value that is 40% lower. Smoe sold stock that was compensation, for an asset that increased in value for the same distorted reason. Joe's stock has a zero balance, he has $1.5 million mortgage on a house with a market value of $1.2 million. On top of these problems Hoddie Boy's credit rating is one notch above junk and management is cutting all salaries by 20%. Smoe sold his Tesla at half of what he paid for it and struggles to pay his mortgage. Joe wonders if he should just walk away from his dream home.

Just pointing out the obvious.

Igy

I hate to point out to you that your little scenario is overly contrived and full of "what ifs" and "maybes". You seem to have lost any grip on reality.

POTO,

Yes I admit I have taken on the persona of Joe Smoe. Just last week I sold my last shares of Facebook and my Tesla. Fortunately my house is paid for. I took the proceeds bought a 2001 Buick LaSabre and laddered some CDs.

Thanks for the understanding.

Igy

Thanks for admitting your story was a crock.

POTO,

Thanks. Imagination can be a bad thing. It can lead to creative thinking. Do not do that. Listen to main stream media, they will give you the answer. They are the Gohanza.

Igy

The Bullish argument is evaporating before our eyes.

That depends on how you look at it. For example, each of the major indices is up year-over-year.