Down goes the Dow

Thanks for that agip. What I was considering was the % of the US equity markets that is relatively steady.

Not stupid at all. We'll see QE 4 fairly soon.

Agreed. It's the only tool available, besides outright fraudulent forgery of raw data.

The dow is now around 17,290, imo still overpriced with dividends at current levels. And also imo, many of those dividend levels will fall in 2015.

The markets are climbing out of their slump, just like Maserati said would always happen from now on. I don't know who to believe anymore. There was some guy on Bloomberg a while back who said that 2015 would be the year in which "buying the dip" wouldn't make any sense, Zorrilla I think his name was. Whatever.

for the record, I'm not buying this late day rally - small stocks and Europe are still down a lot.

but I won't throw it back either.

agip wrote:

for the record, I'm not buying this late day rally - small stocks and Europe are still down a lot.

but I won't throw it back either.

This does not sound meaningful.

Bill Gross is predicting a bad year for equity markets, suggesting everybody stick to high-quality bonds and value equities. Just one guy, but people seem to care about what he thinks.

Grossman wrote:

Just one guy, but people seem to care about what he thinks.

I don't.

Grossman wrote:

Bill Gross is predicting a bad year for equity markets, suggesting everybody stick to high-quality bonds and value equities. Just one guy, but people seem to care about what he thinks.

Bill gross is not a great foreseer of stock market returns - in January 2014 he predicted:

Stocks +5%

Bonds +3%

as it turns out,

US stocks were up 14% and bonds were up 6%. So very massive misses for Mr Gross. His overarching view is that the 10%+ historical returns for stocks leading up the financial crisis...those are gone, and in a new economic setup, returns will be far lower.

So far he has been dead wrong, as stock markets have had a phenomenal 5 years.

As for bonds - he is supposed to be a bond guy, but he completely missed the huge 2014 bond rally.

Dow 30000 wrote:

http://www.forbes.com/sites/petercohan/2014/10/02/bill-grosss-terrible-prediction/

nice - here's a cut paste from that article, showing how wrong gross has been:

Gross saw the interview and e-mailed me to express his displeasure. I asked him what he thought of stocks as an investment – he did not think much of them. As Gross told me, “things will never be the same. Risk taking has been destroyed and any animal spirits must come from Washington. Global growth rates — low, low, low — asset classes will be readjusted for that outlook. That is — stocks will be more of a subordinated income vehicle as opposed to a ‘stocks for the long run’ growth vehicle.”

This argument was great for bond fund managers such as Gross since it would tend to drive people out of stocks and into bonds. In Gross’s view, growth prospects were so dim that there was no point in owning stocks since common stock investors would not benefit when there was no economic growth. Moreover, they would be last in line for any dividends that might be available.

That was a bold prediction – and completely wrong. After all, since February 26, 2009 when I wrote in DailyFinance about my exchange with Gross, the S&P 500 Index has soared at a 19% annual rate from 735 to 1,946. This return is far in excess of the 0.8% average return on 10 year treasury bonds between 2009 and 2013 according to NYU Stern and in my view highlights just how amazing it is that Gross was able to enjoy such a long run as head of Pimco.

The lesson to be continually learned is that NO ONE accurately predicts market moves. NO ONE. Certainly not when looking at a calendar year. Too many things can and do happen that affect the markets for someone to get it right with a year-long prediction.

This is why investors should stick with norms and invest accordingly. Norms say that the stock market is UP 73% of calendar years and UP overall over time.

This is why investing should be just a PART of your financial plan.

Other parts include eliminating debt, planning to retire debt free WITH a paid for house (or enough money earmarked for rent increases the rest of your life) and either bonds in your portfolio or enough cash or other liquid asset (or income) that you can use for 3 YEARS of expenses if the market tanks.

Flagpole -

I was just thinking.

I have some cash - year end bonus.

I already have all the stocks I want - around 75%.

So I was going to buy bonds, but...they seem so massively expensive right now.

So I'll probably just pay down my mortgage - I have a 4.0% loan and not much of a tax deduction from it, so I figure I can lock in almost 4.0% by paying down the mortgage. I can't see bonds making 4.0% for a few years. I could be wrong, but there are some mathematics at work with bonds.

Dave Ramsey would be proud of me.

The only downside is that when you pay down a mortgage, you lose access to that money, whereas in a bond fund, even if you lose money, you can sell and get the money back.

agip wrote:

Flagpole -

I was just thinking.

I have some cash - year end bonus.

I already have all the stocks I want - around 75%.

So I was going to buy bonds, but...they seem so massively expensive right now.

So I'll probably just pay down my mortgage - I have a 4.0% loan and not much of a tax deduction from it, so I figure I can lock in almost 4.0% by paying down the mortgage. I can't see bonds making 4.0% for a few years. I could be wrong, but there are some mathematics at work with bonds.

Dave Ramsey would be proud of me.

The only downside is that when you pay down a mortgage, you lose access to that money, whereas in a bond fund, even if you lose money, you can sell and get the money back.

You are correct. Dave Ramsey would be proud of you.

As far as I'm concerned, IF you have enough money invested for retirement (not meaning that you have enough to retire on but that you are doing at least 15% of your income toward it and are on track at your age to have what you need by retirement time), and IF you have zero other debt and no expected big expenses on the horizon and IF you have an emergency fund of at least 3 months in place so that the ONLY debt you have is the mortgage, then it is ALWAYS more than fine to throw money at that mortgage.

IF you are ok with where your mortgage is and you want to perhaps consider retiring earlier than you had planned, you COULD put additional money into a non-retirement mutual fund (and plan not to use it until you retire).

Either way, extra money is nice.

Yep. you're right agip! The markets have had a phenomenal last 5 years! When the markets are being pumped with FED money, they are on 'high'! See what I did there? lol

Interesting how QE3 ends, and the VIX starts looking like a seismograph reading.

Janet Bernanke wrote:

Yep. you're right agip! The markets have had a phenomenal last 5 years! When the markets are being pumped with FED money, they are on 'high'! See what I did there? lol

Interesting how QE3 ends, and the VIX starts looking like a seismograph reading.

coach D - why do you always capitalize Fed?

Because, while it's not an acronym (but an obvious abbreviation), it is commonplace to capitalize this abbreviation to differentiate and identify. The FED and the Fed's are simply, two different entities.

Your lack of knowledge (understanding) of the FED, is often times, comical.

I'll give you one very clear and simple example of how 'markets' are controlled by the FED... it sets the interest rates. That is not a 'market'... that is a controlled economy.

Janet Bernanke wrote:

Because, while it's not an acronym (but an obvious abbreviation), it is commonplace to capitalize this abbreviation to differentiate and identify. The FED and the Fed's are simply, two different entities.

Your lack of knowledge (understanding) of the FED, is often times, comical.

I'll give you one very clear and simple example of how 'markets' are controlled by the FED... it sets the interest rates. That is not a 'market'... that is a controlled economy.

yes, commonplace. You nailed it.

but here's some cold knowledge for you: the Fed does not set 'the interest rate'