Down goes the Dow

Question of the day:

Going back to 1946 there have been 17 mid term elections. In the year following each of these (Oct 31 - Oct 31), how many of these have been positive years for the s&p 500? Extra credit - For the positive years, what was the average gain?

Pointing Out the Obvious wrote:

agip wrote:

some truth to what you are saying -that market predictions are worthless and should not be the basis of investment strategy.

I don't think it is quite right, but I have to think about it.

Where it clearly falls down is on the behavioral side. If having a 5% position in gold makes Maserati more likely to stay invested in markets over time and not chicken out of being invested, then it would make sense. As sort of a comfort blanket, or insurance policy that lets him take wise risks elsewhere.

I may get back to you on the other if I have anything to add.

You are truly a remarkable individual.

And I completely agree with your comment regarding the behavioral side of things.

- Your Biggest Fan

thanks friend.

much appreciated.

I have thought about gold on-and-off, but have never pulled the trigger, other than a few coins lying around.

However, having sat in cash for a while, I can see the value in gold. Compared to cash, it has merits, even if it experiences larger dips in price.

I have enough that I could afford to buy some gold, and not beat myself up if it went to $400. Yes, as a crisis hedge. The thing with crises is that they mostly pass, and you will do OK if you can make it through to the sun on the other side. I'm not terribly worried about a USD crisis in the near future, but the benefit of the security of physical gold is appealing, and for me may offset the costs of ownership.

It's just like insurance, or a spare tire, or any of those emergency supplies, something which you may never need, but of which you may be able to get some cost recovery. Or, if you are lucky, actually make some money.

Regarding an infrastructure crisis, yes, I still believe one is coming. The boomers have sucked everything dry, and will continue to do so in their retirement, leaving less and less for infrastructure and ergo for personal consumption. Only recently have we begun to distribute critical systems in any meaningful way.

Even though I could own gold with no problem, I currently do not, and have no immediate plans to buy any. I am sticking with my high-number market EOY prediction, with gyrations along the way. I will extend that into, as I said before, March to May 2015.

Will I buy back into the markets on this prediction? Yes, at some point.

DJIA up another 100 today, WOO-HOO! agip, time for a lunchtime drink, don't you think?

Maserati wrote:

The thing with crises is that they mostly pass, and you will do OK if you can make it through to the sun on the other side.

This is precisely why I don't sell stocks when the market corrects. I just keep buying every month, realizing that when the sun shines down the road, my balances will be looking rosy.

It would be cool to have a few gold bars around the house, but I'm too paranoid about theft to seriously consider it. And keeping them in a safety deposit box would take away all the fun of rubbing them in my hand and getting a woody.

Yes, well that depends on what type of "house" you live in.

A friend of mine and I had the childhood fantasy of hiding platinum by casting/machining it into very modern kitchen drawer/door pulls and other details, like cabinet supports, as needed. Still sounds like a fun idea.

DJIA now down up around 80.

Emotion in the market wrote:

Question of the day:

Going back to 1946 there have been 17 mid term elections. In the year following each of these (Oct 31 - Oct 31), how many of these have been positive years for the s&p 500? Extra credit - For the positive years, what was the average gain?

No takers?

Okay the answer is the last 17 of 17 mid-term years were positive years with an average gain of 17.5%.

This is why I am sticking with my high-number prediction.

Some guy named David Malpass, writing for Forbes, wrote in the Sept 8/2014 issue that "Major countries won't tolerate the devaluations suffered from the 1970s through the Asia crisis in the 1990s, so the additions to nominal returns from asset-price inflation--which came at the expense of devastating increases in prices and declines in median living standards--aren't likely to recur."

He is entirely conclusory, with the additional problem that he seems to ignore many obvious factors. I now believe that there is still significant room to grow via asset-price inflation. The index numbers I have guessed here are CONSERVATIVE. This thing could go sky-high, and I mean sky-high--but the major problem is INFORMATION asymmetry. And by information, I'm talking about information about the asset. Also because things change everywhere, local conditions will be subject to international economic shifts, so it won't last forever...but in the coming years, it could go very, very high, even given its existing run-up and so-called "full valuations".

Much will depend on the effectiveness of system ratcheting during critical times. There is a lot of money, and nowhere for it to go, which is why you see people paying $100m for a Giacometti, or $50m for a piece of real property. Overpriced? Maybe from an external perspective, but that's not what matters. What ELSE are you going to do with your money? Many people with lots of money aren't enterprising, you know--and that's fine. But they have to do SOMETHING.

Going forward, I think that valuation criteria will need to change to reflect new realities, because I think the old ones are self-referential and outmoded. Yes, I can see a significant rise in valuations and in market indexes, as return takes a back seat to security, etc.

Equities, secure? In a way, yes.

DJIA up 25 today after half an hour of trading.

By valuation criteria changing, what I mean is that there will have to be changes to the influences upon, and the price structure of, risk.

I was warned in this thread to "enjoy the ride down".

Ok. Still waiting for that.

Though, of course, I don't really care if it goes down a lot or not. I'll keep investing and one day those investments at that lower level will pan out.

If only people would just invest as they should based on age and nearness to retirement, there would be no need to get all geeked about a drop or rise in the market. To me, other than the fact it's a bit interesting and it DOES help the economy when the market goes up (as retired people have some money to spend), I'm ho-hum about it. Up, down, at this point, I don't really care much...still too far away from retirement.

Yes, well, you are unresponsive. You miss out on opportunities to do better, and fair enough. Also, you still consider yourself a long-termer.

Yes, I got geeked-up about the 2013 gains, and I realized that gain, took the money, and made more with it this year, also realized. Getting geeked-up by the recent run-up is no flaw, either. You are confusing cause with effect--you don't get geeked-up, because you don't do anything to permit yourself to get geeked-up. It's a self-fulfilling prophecy.

I am getting geeked-up also by the (to me, increasingly real) prospect of significant gains over the next period. You must have an oatmeal life, or be sedated, to not permit yourself to get geeked. The difference is that if we are both in, I plan to realize gains after a period, whereas you don't. Through inaction, you are insulating yourself from the dynamics of life.

If there is one thing I have learned to not have, it is certitude in these matters. I wish you good fortune, but I could never be as passive as you are.

I do think you will enjoy a good ride up in the coming cycle, though through no fault of your own.

It is odd that so many internet heroes are amazingly adept at timing the market's ups and downs while it has been proven time and again that the professionals do no better at this game than they would by randomly flipping a coin.

Maserati wrote:

I do think you will enjoy a good ride up in the coming cycle, though through no fault of your own.

what do you mean by that? "No fault of your own"? FP's strategy is as valid as any other as a strategy. And the stats suggest it is far better than most.

So why don't you give him full credit for having a strategy and makign money with it? why the snigher? (I had to add in the h to get past the lrc inappropriate language filter)

not exactly true - something like 1/4 pros do beat the market. picking which ones will beat the market is the challenge, and sticking with them even when they have a temporary setback makes that game difficult.

or looking at it another way - the problem with the pros are mostly their fees - I read a study that suggested that >50% beat the market, but the fees they incur doing so push them back below the market.

So in theory, if a talented individual can hold his costs down, he has a better shot than you would think to beat the market.

"something like 1/4 pros do beat the market." - Guess which fraction would beat the market if they were all just flipping random coins.

"picking which ones will beat the market is the challenge" - I'm going to guess that it would be pretty difficult to pick which random coin flippers would continue to flip more heads than tails.

Seriously agip - I expect better thinking from you.

I have laid it out there. I am not "amazingly adept", although I have, yes HAVE, beaten the markets the very few times I have gotten in and out. 3 times over 30 years is not a big deal, I do not trade actively as some do.

Look at it this way: if you are responsive and can get out in the early part of a good down cycle and buy back what you previously owned and have money left over, why is that a bad thing? It's not.

And this time, I didn't "time the market". I knew that there was no way the market was likely to match other gains I could realize. I understood that there was likely to be market gain in the meantime, and even specified what I thought it would be, in this thread--and I was right. I was also right about the timing of the correction--and if you will notice, I didn't do a massive buy-in at that time, thus not "timing the market". And I have said that I believe a decent period of gain is coming, yet I haven't yet bought back in--again most definitely not timing the market.

What amazes me is how people like you seem to project your inadequacies onto others of us, to the point where you have to invent facts to suit your convenient narrative.

Also, you lump all "professionals" together as though they were all the same, as though they all do the same things in the same way, as though they all have the same goals. Do you consider me a "professional" because I consider where my money goes, and how to invest? Or not, because I manage my own money and not someone else's?

I don't make a living by managing other people's money. I'm not an active trader, I'm just a guy with resources, managing them as best I can. And the equity and bond markets are just 2 of many markets available for resource deployment, although you may limit yourself to them, I certainly do not. And you know what? If you want to talk diversification, I am likely diversified into many more markets than you are, and am therefore likely to be in a stronger position than you are, and the fact that my returns beat those of the markets that you are in should come as no surprise to a thinking person.

Simply put, I have more options than you do, and I use them to my benefit, whereas you cannot.

So don't run your mouth about "timing the market", like it is some sort of be-all and end-all criticism. Your problem, like many, is that you are self-referential, which is a nice way of saying that you have your head up your a$$. You judge things according to only the world you know, and your ignorance shows, both in your facile commentary, and in your weaker position.

You should be more careful in throwing around disparagements like "internet heroes". It does you less good than you might think.

well ok - I was sort of answering a different question than you were posing - I was answering 'do pros beat the market' not 'do pros beat a flipped coin'

so I missed by being non responsive, but still we should keep in mind that beating the market is not impossible.

Ah, I see an internet hero has been offended. Dear me!

Here are a few items in your post wherein your words speak to something of which you are completely ignorant:

"What amazes me is how people like you seem to project your inadequacies onto others of us, to the point where you have to invent facts to suit your convenient narrative."

There are multiple fallacies involved here. 1) I have no "inadequacies" relevant to this conversation. 2) I am not projecting anything onto anyone - just stating facts. 3) I do not invent facts - I only report them.

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"Also, you lump all "professionals" together as though they were all the same, as though they all do the same things in the same way, as though they all have the same goals."

False again. I never said anything about them all doing the same thing in the same way. Those are your words, not mine. I did say that " it has been proven time and again that the professionals do no better at this game than they would by randomly flipping a coin." And indeed it has.

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" If you want to talk diversification, I am likely diversified into many more markets than you are"

Actually you have absolutely no idea as the extent of my diversification. As such, your comment if nothing but pure and unadulterated ignorance.

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"Simply put, I have more options than you do"

Again, pure and unadulterated ignorance. You have zero idea as to my 'options'.

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"Your problem, like many, is that you are self-referential, which is a nice way of saying that you have your head up your a$$."

OK, you get major points for that one. The humor is undeniable coming from someone who has done nothing but blow hot air this entire thread.

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Here, let me make it easier for you. If you avoid talking about things of which you have no knowledge you will be less likely to be wrong. As things stand, you are wrong about an awful lot. Oh, and as part of that, try to avoid putting words into other people's mouths. You are pretty much always wrong when you do that.

Go ahead, see if you can do it.

To be fair, it's not "FP's strategy", it is an industry standard strategy that FP has chosen to employ--one that requires little to no individual thought or synthesis on his part, and one that requires very little action on his part, and then only action that is prescribed by somebody else's normative standards and ensuing recommendations.

FP is an essentially passive participant on a ride that he doesn't operate. The only things he chooses are when to get on, and when to get off.

Which, like I said, is fine--but none of the gains he realizes will be due to anything that he has done of his own initiative.

And no, doing what everybody else does, and what is recommended that everybody else do, is not initiative.

And the thing is that initiative can be rewarded more than passivity. For instance, I have already realized gains this year that, after tax, will beat the pre-tax market gains in the calendar year, almost with certainty--and those are only my realized gains.

And yes, the markets can be a good place to be, IMO. I know more than a few people who lost their shirts during the dotcom bubble, and have vowed to never again play the market lottery. They are now mostly managing real estate empires.

People like Flagpole often believe that they have options in life, when they really do not. One of my favorite lines from certain adults is that they "sacrificed" so much for their kids. What a bunch of hooey, they think they were all going to be Pavarotti or Usain Bolt or Buzz Aldrin or the Pope.

Most people sacrifice absolutely nothing, because they don't have the faintest idea what to do with freedom. They need to be told what to do and how, and they follow external prescriptions for how to live, and what to do--just like Flagpole's choice of investment strategy. He is sacrificing nothing, because if he was left to his own devices, he likely wouldn't know what to do with himself.

There is a great fear of the blank canvas. Only those with native creativity have the inner wherewithal to create something from nothing. Flagpole does what is expected of him by others, nothing more. He continues to work, while "investing for retirement", precisely what is expected of him. He is entirely dependent on the system that embodies this expectation of conduct--without it, he would be screwed.

By necessity, he absolutely must believe that this system will endure, because without it, he is nowhere. This is yesterday's way of thinking, when the social contract had some meaning. It's a different world now, where the social contract is modified near the point of recission.

I have seen this many, many times--and then when something big happens, these people have this helpless, befuddled mentality, like "what went wrong? I did everything I was supposed to". Flagpole believes that he is secure, but he is anything but. If it works out for him, it will not be the result of his initiative, but of dumb luck of timing.

And that is fine, if he owns it, and if there are other areas in his life to which he devotes much time and energy, that make him an individual in those respects.

I DO give Flagpole the full credit of which he is worthy.

Again, I have nothing against him personally, or anybody like him. Make no mistake, I am not disparaging him.

But I do see the reality. And I'm OK with it.

DJIA up around 45 at midday.

Maserati wrote:

What amazes me is how people like you seem to project your inadequacies onto others of us, to the point where you have to invent facts to suit your convenient narrative.

...

I am likely diversified into many more markets than you are, and am therefore likely to be in a stronger position than you are...Simply put, I have more options than you do, and I use them to my benefit, whereas you cannot....Your problem, like many, is that you are self-referential, which is a nice way of saying that you have your head up your a$$. You judge things according to only the world you know, and your ignorance shows, both in your facile commentary, and in your weaker position.

Oh, the irony!