Down goes the Dow

Randy Oldman wrote:

K5 wrote:

Wow. That says it all about your grasp of reality

OK - give me specifics of when it's not been a reliable investment over a period of 15 years.

1929 to 1954 the dow went nowhere.

Heck, from 1999 to 2012 the down went almost nowhere.

but

that is just because the dow is a strange, non-diversified, ill-designed index. No serious investment discussion should be limited to the Dow.That's why I keep talking about 'world stocks,' using the vanguard total world index (VT)

A diversified portfolio would have recovered from teh 1929 crash by the mid 1930s and then it was off to the races.

the Dow 1929-1954 half truth keeps a lot of people out the market - it is a good example of how knowing a little bit can be very dangerous.

agip wrote:

Randy Oldman wrote:

OK - give me specifics of when it's not been a reliable investment over a period of 15 years.

1929 to 1954 the dow went nowhere.

Heck, from 1999 to 2012 the down went almost nowhere.

but

that is just because the dow is a strange, non-diversified, ill-designed index. No serious investment discussion should be limited to the Dow.That's why I keep talking about 'world stocks,' using the vanguard total world index (VT)

A diversified portfolio would have recovered from teh 1929 crash by the mid 1930s and then it was off to the races.

the Dow 1929-1954 half truth keeps a lot of people out the market - it is a good example of how knowing a little bit can be very dangerous.

The problem is when it crashes in the next 2-3yrs, it's going to be big - probably 40%-60%. Most people are going to get wiped out unless they've been in for 20+yrs. It's a ponzi scheme, pure and simple.

Macro Economist wrote:

agip wrote:

1929 to 1954 the dow went nowhere.

Heck, from 1999 to 2012 the down went almost nowhere.

but

that is just because the dow is a strange, non-diversified, ill-designed index. No serious investment discussion should be limited to the Dow.That's why I keep talking about 'world stocks,' using the vanguard total world index (VT)

A diversified portfolio would have recovered from teh 1929 crash by the mid 1930s and then it was off to the races.

the Dow 1929-1954 half truth keeps a lot of people out the market - it is a good example of how knowing a little bit can be very dangerous.

The problem is when it crashes in the next 2-3yrs, it's going to be big - probably 40%-60%. Most people are going to get wiped out unless they've been in for 20+yrs. It's a ponzi scheme, pure and simple.

Absolutely CORRECT! It's surprising how so many people do not understand that businesses making money are all just ponzi schemes.

I'd still be making money if Dow dropped to 12,000. I'd be making more if it it hits 20,000.

"when it crashes in the next 2-3yrs, it's going to be big - probably 40%-60%"

Proof that it will crash?

Proof that alleged crash will be in the next 2-3 years?

Proof that alleged crash in 2-3 years will be big?

Proof that the magnitude of the alleged big crash in 2-3 years will be 40%-60%?

I do not disagree with your basic sentiment, but proclamations like this without any offered support are, well, garbage.

K5 wrote:

I also don't know where you live, but in the Boston area where I am, and with no mortgage or car loans (already paid off)nor college payments, my wife and me -- and helping out with out two daughters -- living a very modest life style spend about $125,000 per year.

WTF, you got someone to marry you, and you have reproduced? That is pretty frightening in itself!

Bump.

Dow at 16,138 as we speak.

Thoughts?

Maserati wrote:

Bump.

Dow at 16,138 as we speak.

Thoughts?

Lower than 16,139. Higher than 16,137.

Absolutely no significance. And ALL prognostications are nothing more than hot air.

Glad I could be of service.

fisky wrote:

Just for fun, here's a forecast.

Today, 12Feb, the Dow 15,971 as I type this. Based on chart analysis, my forecast is...

Dow 16,400 within the next two weeks... NLT 26Feb.

This move is still in play. I'll stick with it.

But meanwhile, this is disturbing. China has reduced its US Treasury holdings in December by 3.5%. It may not sound like much, but the EU (via Belgium) had to bail out the US T-bond sales with massive buys.

What's up with this? Any thoughts?

Maserati wrote:

Bump.

Dow at 16,138 as we speak.

Thoughts?

Just a number that will go up and then down and then up and over time will be up from there.

Position yourself as you should with your finances (get rid of debt except for a manageable mortgage and SOMETIMES a big student loan, invest 15% or more into retirement accounts made up of mutual funds in a diversified way...growth, growth and income, aggressive growth, international...retire completely debt free and enjoy it).

All I know is that 16,151 (which is where it is this second) is not 13,000.

fisky wrote:

fisky wrote:

Just for fun, here's a forecast.

Today, 12Feb, the Dow 15,971 as I type this. Based on chart analysis, my forecast is...

Dow 16,400 within the next two weeks... NLT 26Feb.

This move is still in play. I'll stick with it.

But meanwhile, this is disturbing. China has reduced its US Treasury holdings in December by 3.5%. It may not sound like much, but the EU (via Belgium) had to bail out the US T-bond sales with massive buys.

http://www.zerohedge.com/news/2014-02-18/china-sells-second-largest-amount-us-treasurys-december-and-guess-who-comes-rescue

What's up with this? Any thoughts?

china is always bumping treasury holdings up and down - I'm not aware of a pattern.

there is enormous global demand for us treasuries - if china does decide to cut back, it won't be a huge deal.

Mr Ponzi wrote:

Absolutely CORRECT! It's surprising how so many people do not understand that businesses making money are all just ponzi schemes.

If there were a ponzi component to stocks, it would be found in the multiple of earnings being paid for those businesses. Not to mention the earnings could also be overstated. But, we'll trust you - nothing to see here. Not much for nuances, are you.

Investor consideration of dividends seems to have gotten lost in the recent market turmoil.

Mrs Ponzi wrote:

Mr Ponzi wrote:

Absolutely CORRECT! It's surprising how so many people do not understand that businesses making money are all just ponzi schemes.

If there were a ponzi component to stocks, it would be found in the multiple of earnings being paid for those businesses. Not to mention the earnings could also be overstated. But, we'll trust you - nothing to see here. Not much for nuances, are you.

there's clearly a ponzi element to stocks - they aren't worth anything really...until someone decides to buy your shares from you, trading cash for shares.

If there is a dividend, then there is some cash flow and the shares take on some properties of a bond...except the company can stop or reduce the dividend any time they want with no legal issues.

owning stocks is a bet on the continuing stability of the world and that companies will continue to grow profits and that someone will want to buy your shares from you eventually. None of that is guaranteed.

In a sense, yes.

It is certainly true that shares of publicly-traded companies cannot be redeemed for assets--that is, the individual investor has no lawful claim over particular assets of the company. The security you take for your investment in a publicly-held company might not be as secure as you would wish.

Closely-held companies can be another matter entirely, depending of course on the nature of business conducted.

So, we're about six months into this thread and the lowest point of the Dow was the week this thread was made.

It could not have been timed worse.

Imagine if we go years and years without the Dow going below 15,000.

Everyone should bump this thread when they retire and cash out to see if it ever went lower.

We need to keep Letsrun in business just to keep this thread alive.

Fisky my advice to you is do not read Zero Hedge.So this month the EU is bailing out UST when only a few months ago they wrote the FED is bailing out the EU. Belgium is the home of Euroclear

http://en.wikipedia.org/wiki/Euroclear

Euroclear is the largest international central securities depository in the world.The Euroclear group serves clients from more than 90 countries. Most are banks, broker-dealers, and other institutions professionally engaged in managing new issues of securities, market-making, trading or holding a wide variety of securities. Retail investors are able to have direct accounts in local CSDs, according to local laws, rules and procedures. Belgium is also a tax haven

http://www.bespaarbelastingen.be/algemeen/belgium-tax-haven/

It would appear these are private purchases.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

Also see this

http://acrossthecurve.com/?p=12333

This is an analysis of the monthly Treasury report on international capital flows via Gennadiy Goldberg at TD Securities. China was a huge seller and foreigners were net sellers of agencies and corporates and equities.

Via TDSecurities:

The December TIC capital flows report showed net long-term outflows of $45.9B from US securities – the largest monthly outflow since June 2013. Treasury securities were the only bright spot during the month, with private purchases of $29.7B more than offsetting $11.9B in official selling, bringing net Treasury purchases to $17.9B. Other US securities did not fare quite so well in the wake of the December tapering announcement, with foreigners shedding agencies, corporates and equities.

Foreign investors were better sellers of Agency securities to the tune of $15.4B in December, the largest monthly sale since September 2010. Corporates also saw strong selling by private accounts, selling a net $7.5B during the month – the largest monthly sale of corporates since June 2012. The shedding of corporates and agencies may have been a factor of investors positioning for gradual normalization in Treasury yields after the start of tapering at the December FOMC meeting, with net fixed income flows seeing an outflow of -$5B during the month following last month’s -$1.2B outflow. Equities also saw a notable -$13.7B in selling during the month, with investors likely taking profits following a strong year of gains in US equity markets.

Foreign official flows showed very strong net selling in December, with China shedding an enormous $47.8B and Japan selling $3.9B. It is worth highlighting that Caribbean accounts (a proxy for hedge funds) saw no change in Treasury holdings during the month, suggesting that Treasuries were largely well-positioned to receive the December tapering announcement. One particularly interesting change in country holdings during the month was the $17.1B purchase of Treasury securities by Hong Kong, the largest of its kind on record, potentially offsetting some of the selling by China.

* wrote:

So, we're about six months into this thread and the lowest point of the Dow was the week this thread was made.

It could not have been timed worse.

Imagine if we go years and years without the Dow going below 15,000.

Everyone should bump this thread when they retire and cash out to see if it ever went lower.

We need to keep Letsrun in business just to keep this thread alive.

Yes. Worst call in the history of Letsrun.

Randy Oldman wrote:

Here's some more data for you K5.

Average Annual Returns on Investment

Since 1928

S&P 500 - 11.5%

3-month T.Bill - 3.57%

10-year T. Bond - 5.2%

Since 1964

S&P 500 - 11.29%

3-month T.Bill - 5.11%

10-year T. Bond - 6.97%

Since 2004

S&P 500 - 9.1%

3-month T.Bill - 1.56%

10-year T. Bond - 4.69%

Source: NYU Stern

The part you don't want to talk about--

Last 15 years SP500 annual return with dividends reinvested: 4.2%

Last 15 years SP500 annual return with dividends reinvested and inflation: 1.84%

Last 15 years annual return without dividends but with inflation: 0.03%

The reason for picking 15 years is that is when we changed form a long term growth market (since 1981-1984) to a trading range market, which does not appear to be ending any time soon.

Mind you, I am not short and am not expecting a top for a year or two. But I see a lot of people pulling "facts" out of their hat. What happened between 1929 and 1960 means absolutely nothing to someone seeking to save for retirement now (not my problem--I got there in the 1990s with tech stocks). Look at the world the way it really is: As Warren Buffet has pointed out, the DOW went nowhere from roughly 1964 to 1989, and as Dr. Robert Shiller has pointed out, even a 20 year holding period is not necessarily long enough for a long term investor to produce significant returns.