Down goes the Dow

[quote]OO wrote:

The decision to do that was based on my personal careful consideration of my objectives and risk tolerance.

WTF does that mean?

The Uncle Bee wrote:The decision to do that was based on my personal careful consideration of my objectives and risk tolerance.

WTF does that mean?

That means that I had a careful look at my current financial situation (assets, liabilities, current and future income), my plans for retirement (timeframe and expectations / hopes for lifestyle and associated income needs), and decided how much risk I could tolerate.

Using completely made-up round numbers to give a working example, let's say my house is worth $1M and my other assets are worth $1M, and I have about $600K in debt, for about $1.4M net worth. Combined family income is, say, $400K/yr pre-tax, and I expect a defined benefits pension to pay an inflation-adjusted $100K/yr.

Using those numbers, and thinking about retiring in maybe 10-15 years, I then have to think about how to best manage the $1M in "other assets" to optimize my chances of having a comfortable lifestyle in retirement, recognizing that my baseline condition (defined benefits pension only) is enough to live on (but no REALLY live...). Do I put them into a high interest savings account and earn a guaranteed 0.75%? Nope. Do I gamble them at the track? Nope. In my case, I've decided to put them all into stocks (not in US stocks), recognizing that I may lose as much as 50% of their value sometime in the next few years, on the hope that I will instead earn ~ 8%/yr.

That's the gist of my rationale, without using actual numbers. That may not make sense to you or to most people, but it makes sense to me and my partner, and we are the only ones who matter in this particular decision.

Ghost of Igloi wrote:

The typical DGTD poster is “yippie the market is up, look how smart I am,” rarely offering any justification for their view.

The justification is "The market has been up"

If one posts anything negative about the market expect instant reprisals and twisting.

Igy

What's been negative about the market for the past 3 years?

OO wrote:

[quote]The Uncle Bee wrote:The decision to do that was based on my personal careful consideration of my objectives and risk tolerance.

WTF does that mean?

That means that I had a careful look at my current financial situation (assets, liabilities, current and future income), my plans for retirement (timeframe and expectations / hopes for lifestyle and associated income needs), and decided how much risk I could tolerate.

Using completely made-up round numbers to give a working example, let's say my house is worth $1M and my other assets are worth $1M, and I have about $600K in debt, for about $1.4M net worth. Combined family income is, say, $400K/yr pre-tax, and I expect a defined benefits pension to pay an inflation-adjusted $100K/yr.

Using those numbers, and thinking about retiring in maybe 10-15 years, I then have to think about how to best manage the $1M in "other assets" to optimize my chances of having a comfortable lifestyle in retirement, recognizing that my baseline condition (defined benefits pension only) is enough to live on (but no REALLY live...). Do I put them into a high interest savings account and earn a guaranteed 0.75%? Nope. Do I gamble them at the track? Nope. In my case, I've decided to put them all into stocks (not in US stocks), recognizing that I may lose as much as 50% of their value sometime in the next few years, on the hope that I will instead earn ~ 8%/yr.

I think that's called guessing, or hoping, or gambling. Which is what we are basically forced into doing given relatively safe investments pay nothing these days. Let's not put a spin on it and portray it as a well thought out system using sales words like risk tolerance.

Uncle Bee wrote:I think that's called guessing, or hoping, or gambling. Which is what we are basically forced into doing given relatively safe investments pay nothing these days. Let's not put a spin on it and portray it as a well thought out system using sales words like risk tolerance.

"Sales words like risk tolerance"

In my professional life, my whole world revolves around understanding and helping others understand risk, and to make decisions about how to manage risk. Every risk-based decision is based on a balance of uncertainties. You can call it guessing if you like. From some points of view it is guessing I suppose. And we all do it, every day, usually unconsciously, making choices that balance an uncertain benefit against an uncertain loss, effectively "guessing" whether an outcome will be favourable or not.

... and let me add... we make efforts to reduce the uncertainty, and improve our guesses, by seeking information. My particular choice to invest in stocks, and my specific choices therein (number of stocks, which specific stocks, how much, etc) are made after gathering as much information and insight as I could, in an effort to make it less a guess (or a less uncertain guess) and more an estimate.

Also, I have the benefit of having learned from many investing mistakes over about 30 years, so at the very least I know many things I shouldn't do... :-)

OO wrote:

You'd have to be reading between the lines, through your own tainted glasses, to infer he'd told everyone to sell all their stocks and hide the money under the mattress. What he actually wrote was that cash is the superior asset class when risk returns to the market

Pointing out several measurements designed to imply a high level of risk in the March 2015 market, then concluding with the idea that being in cash is best at such a time certainly sounds like a recommendation to me.

Ghost of Igloi wrote:

Irving wrote:

That doesn’t change the fact that you outlined the risks inherent in the March 2015 market and recommended being in cash as a result. Of course, hindsight is 20/20, but you were clearly wrong.

Ah, I did not recommend anything. So you are clearly a jerk, and that is 20/20 and not in hindsight.

So now you don’t think cash is superior in these high risk markets?

Earnings Scorecard: For Q3 2017 (with 91% of the companies in the S&P 500 reporting actual results for the quarter), 74% of S&P 500 companies have reported positive EPS surprises and 66% have reported positive sales surprises.

EPS that Earnie quotes is a non-GAAP number, which excludes stock compensation and failed enterprises as a cost of doing business. Many poor business models continue to beat their EPS number by guiding Wall Street down over the quarter, and lowering their share count by $Billions spent on stock buybacks.

Irving, a good investment for you may be Bitcoin.

Of course that is not a recommendation.

Tainted Glasses wrote:

OO wrote:

You'd have to be reading between the lines, through your own tainted glasses, to infer he'd told everyone to sell all their stocks and hide the money under the mattress. What he actually wrote was that cash is the superior asset class when risk returns to the market

Pointing out several measurements designed to imply a high level of risk in the March 2015 market, then concluding with the idea that being in cash is best at such a time certainly sounds like a recommendation to me.

See the optometrist soon, you need a new prescription.

mellon wrote:

Ghost of Igloi wrote:

The typical DGTD poster is “yippie the market is up, look how smart I am,” rarely offering any justification for their view.

The justification is "The market has been up"

If one posts anything negative about the market expect instant reprisals and twisting.

Igy

What's been negative about the market for the past 3 years?

Ah, rising PE multiples, i.e. investors like you are paying a higher multiple for a unit of earnings. Of course you think that is smart investing.

OO wrote:

Uncle Bee wrote:I think that's called guessing, or hoping, or gambling. Which is what we are basically forced into doing given relatively safe investments pay nothing these days. Let's not put a spin on it and portray it as a well thought out system using sales words like risk tolerance.

"Sales words like risk tolerance"

In my professional life, my whole world revolves around understanding and helping others understand risk, and to make decisions about how to manage risk. Every risk-based decision is based on a balance of uncertainties. You can call it guessing if you like. From some points of view it is guessing I suppose. And we all do it, every day, usually unconsciously, making choices that balance an uncertain benefit against an uncertain loss, effectively "guessing" whether an outcome will be favourable or not.

Of course it's guessing. You have no clue as to what the next 20 years holds.

And, yes. Everyone does it and has to do it.

But only a damned fool would pay you for you to guess what's best for him.

Ghost of Igloi wrote:

mellon wrote:

What's been negative about the market for the past 3 years?

Ah, rising PE multiples, i.e. investors like you are paying a higher multiple for a unit of earnings. Of course you think that is smart investing.

It certainly was smart investing in March 2015.

Ghost of Igloi wrote:

EPS that Earnie quotes is a non-GAAP number, which excludes stock compensation and failed enterprises as a cost of doing business. Many poor business models continue to beat their EPS number by guiding Wall Street down over the quarter, and lowering their share count by $Billions spent on stock buybacks.

What is so bad about beating estimates?

“Better to be lucky than smart.” Rather unlucky (and stupid) August-September 2015 and January-February 2016, very lucky since November 4, 2016.

One man's lucky is another man's stupid.