As in, "The market can stay irrational far longer than you can stay solvent."
BTW, one need not be right over 50% of the time. Some traders are right 90% of the time and they end up losing money, while others with a far less favorable ratio but much better risk management are profitable.
Sagarin wrote:
As in, "The market can stay irrational far longer than you can stay solvent."
BTW, one need not be right over 50% of the time. Some traders are right 90% of the time and they end up losing money, while others with a far less favorable ratio but much better risk management are profitable.
It does seem that money managers are sometimes flipping a coin when making a decision. I know they actually look at a lot of data before making a decision -- a good friend of mine a VP at a major money management firm, and has been handling my investments since mu early 20s. But, even he says it often seems like a roll of the dice.
The markets are flushing out the weak investors. CDs at 3% are their best bets. I just hope they stay away from the markets so the volatility is not as severe as it has been.
Some other suggestions to those who are afraid and want to hide their money in their mattress, don't ever buy a home, and please don't borrow on your credit cards. A cash only basis is the safest bet for you. If you don't have the cash, don't buy anything.
"The number one thing people have to get is that we are in a fundamentally different climate now than we were 82-99. And it means you can’t do the same old stuff and expect to do well. You can’t buy always, you can’t hold always. You have to have a strategy that exposes you to the expansionary part of each business cycle, and protects your capital when it turns down…"
The Abstract Runner wrote:
This Flagpole Willy a little over a year ago:
http://www.letsrun.com/forum/flat_read.php?board=1&thread=2087036&id=2087372"Calls and short sales of present day are one of the reasons why it's VERY difficult to have a big crash like in 1987 or 1929. People protect their money with such things, and when there's a big sell off, a lot of people then start buying. Never a sure thing to invest in the stock market, but it's today more of a sure thing than ever before in our nation's history. "
God Bless Flagpole. The expert (on so many things) is wrong once again. Horribly, horribly wrong.
Ha! You pull that up from over a year ago and then tell me I'm horribly wrong?! What are you smoking brother? The drop in 1987 was 22.6% in ONE DAY. As I alluded to earlier, you seem not to have the intestinal fortitude for the market if you look at a spike and a valley and honestly consider that that's why you've lost; not everyone is cut out for the market. Dude, when the DOW crested above 14,100 last October, HARDLY ANY OF MY PURCHASES were made at that level. Both before and since then, my purchases have all been at LOWER than that peak, so when the DOW eventually does make it back to 14,000 (and it will), I will not just then have broken even, but then I will be WAY ahead of the game; ESPECIALLY considering how low the market has dropped since then. Perhaps you don't understand how it all works.
People who know better are gleefully rubbing their hands together with a market this low. You say I'm a cheerleader for the market, well, I'm not sure about that, but if there were ever a time to be a cheerleader for it, it would be NOW. Look at history brother. When in a recession or economic slowdown, THAT is the best time to be buying stocks. USUALLY the market is forward looking, especially with respect to a recovery, so the market will rebound BEFORE the economy does, so you need to be in it when it recovers instead of sitting on the sidelines waiting for good economic news. When the good economic news comes pouring in, it's too late to get in and get the best returns.
Not sure why some of you are so hell bent on trying to get me to say I'm soured on the market. It just is not true. I put so much money in the market when the DOW was below 5,000 that it isn't even funny -- 50% of our income went into the market beginning when it was at 2,700 for SEVEN years. All that money I put in then has returned HUGELY, even with the last year's drop.
I'm glad to see the drop again yesterday. Kind of fun to buy a boatload of shares right now -- I'd like that to hang on for a while yet before they get more expensive. Ultimately I want it to go back up, and ultimately it will. Right now though, I couldn't care less how low it goes. I'm not selling. Why should I?
Maybe you started putting money in the market in October 2007. If so, I can understand why you aren't that happy with it, but brother, it will come back, and your situation isn't anywhere near what mine is. I'm super pleased with my returns since I started, and it will only get better down the road.
UsedToBeKnowItAll wrote:
If you buy and sell stocks completely randomly, you will have the same average returns as a well-diversified portfolio in the long run. So, all you have to do is be right 51% of the time and you beat Flagpole's sit-tight strategy.
When the market was at 14,000 last October, that was like when you're sitting at the blackjack table, counting cards, and the deck becomes heavily stacked in one direction. If you just keep betting the same amount, you're a fool. I don't try to time the market very often. But when all the indicators are saying the same thing, then it's an easy decision.
I agree that it's impossible to time the market consistently. Fortunately, you don't have to do that.
This post is such BS it isn't even funny. Yes, looking back NOW you can say that about a 14,000 DOW, but you did NOT know that then, and no one knew for sure; hindsight is 20/20; you didn't know then that the cards were stacked in one direction -- complete BS. Some financial experts were warning about a bear market when the DOW hit 12,000 for the first time (on the way UP). Should you have sold then? Would have been better to wait until it went to 14,100 don't you think?
Bull markets have all different lengths. The one starting in 1988 was 12 YEARS LONG! The one beginning in 2002 lasted just 5 years. Sometimes a bull market lasts 18 months. You just can't tell. Sure everyone is an expert now looking back, and many did call for bad economic times and a housing bubble burst and market decline, but NO ONE KNEW WHEN it would happen.
Trying to time the market is a losing battle. People who do that get out too late and get back in too late all the while usually not investing in anything else when out of the market. Just a lose-lose. Me on the other hand, I've been in the whole time, the average of my purchases over the last year are at about an 11,000 DOW, so when the DOW gets back up to there, I've broken even (actually even more than that considering dividends) with what I've put in over the last 12 months, but I'll be way up on anything I put in before that time (almost 20 years of heavy investing), and when the DOW gets back to 13,000, 14,000 and on up, any purchases I made between October 2007 and October 2008 will have brought big returns, and when we're talking of the money I put in when the DOW was at 2,700, man that's a lot of gains.
I just checked my ira and it is down 35% in 5 months. If it doesn't turn around soon they are going to tell me I owe them money!
hmmmph. wrote:
I just checked my ira and it is down 35% in 5 months. If it doesn't turn around soon they are going to tell me I owe them money!
Well, I just checked my YTD total for my retirement, and not including today's 400+ DOW gain, I'm down 36.7% YTD. Will be a tad better tomorrow morning. Why does it need to turn around soon for you? How about if it turns around eventually? Unless you are retired now or about to retire, why does it matter if it turns around soon?
Patience grasshopper.
Flagpole wrote:
This post is such BS it isn't even funny. Yes, looking back NOW you can say that about a 14,000 DOW, but you did NOT know that then, and no one knew for sure; hindsight is 20/20; you didn't know then that the cards were stacked in one direction -- complete BS. Some financial experts were warning about a bear market when the DOW hit 12,000 for the first time (on the way UP). Should you have sold then? Would have been better to wait until it went to 14,100 don't you think?
Bull markets have all different lengths. The one starting in 1988 was 12 YEARS LONG! The one beginning in 2002 lasted just 5 years. Sometimes a bull market lasts 18 months. You just can't tell. Sure everyone is an expert now looking back, and many did call for bad economic times and a housing bubble burst and market decline, but NO ONE KNEW WHEN it would happen.
Trying to time the market is a losing battle. People who do that get out too late and get back in too late all the while usually not investing in anything else when out of the market. Just a lose-lose. Me on the other hand, I've been in the whole time, the average of my purchases over the last year are at about an 11,000 DOW, so when the DOW gets back up to there, I've broken even (actually even more than that considering dividends) with what I've put in over the last 12 months, but I'll be way up on anything I put in before that time (almost 20 years of heavy investing), and when the DOW gets back to 13,000, 14,000 and on up, any purchases I made between October 2007 and October 2008 will have brought big returns, and when we're talking of the money I put in when the DOW was at 2,700, man that's a lot of gains.
Flagpole, you're a moron. You could have shifted your assets out of the market anytime between October 2006, and June 2008, and you'd be in a hell of a lot better shape than you are right now. You would have made about 3% on some crappy savings account, and right now, you'd be holding a lot of cash to buy back in at prices 25% lower than when you got out.
I'm a conservative guy, so when I moved out at 12,800, I only moved half my stuff out. And yesterday, I moved 25% of that cash back in after the 700+ tank job. I may not have timed the peak or the bottom perfectly, but I'm WAY ahead of you.
Here's what's funny Flagpole. When I pulled out at 12,800, I was guaranteed 3% on my money. It wasn't even a risk. It was obvious the market wasn't going to make huge gains with the economy sinking. I took my profits when the taking was good, waited several months for the market to tank, and now I'm back in.
Like I said, I'm conservative, so it was a shift of assets, and it was not day-trading. I wasn't trying to time the market perfectly. I was just doing what anyone with half a brain would have done. There was a 20 month window for you to act, and you missed it. Actually, there was a 10 year window. You could have sold in October 1998, put it all in a 3% CD for 10 years, and you'd still be way up on your ass. Yeah, but your investment strategy is brilliant!
UsedToBeKnowItAll wrote:
Flagpole, you're a moron. You could have shifted your assets out of the market anytime between October 2006, and June 2008, and you'd be in a hell of a lot better shape than you are right now. You would have made about 3% on some crappy savings account, and right now, you'd be holding a lot of cash to buy back in at prices 25% lower than when you got out.
I'm a conservative guy, so when I moved out at 12,800, I only moved half my stuff out. And yesterday, I moved 25% of that cash back in after the 700+ tank job. I may not have timed the peak or the bottom perfectly, but I'm WAY ahead of you.
Here's what's funny Flagpole. When I pulled out at 12,800, I was guaranteed 3% on my money. It wasn't even a risk. It was obvious the market wasn't going to make huge gains with the economy sinking. I took my profits when the taking was good, waited several months for the market to tank, and now I'm back in.
Like I said, I'm conservative, so it was a shift of assets, and it was not day-trading. I wasn't trying to time the market perfectly. I was just doing what anyone with half a brain would have done. There was a 20 month window for you to act, and you missed it. Actually, there was a 10 year window. You could have sold in October 1998, put it all in a 3% CD for 10 years, and you'd still be way up on your ass. Yeah, but your investment strategy is brilliant!
Dude, you are looking BACKWARDS and saying "if you did this, if you did that..." You CANNOT do that and have a serious argument. If I would have taken my money out right before the Dot Com bust for two years and then put it back in right before the 2003 5-year bull market start and then taken it out in October 2007 and put it back in when?...now? -- who can tell? The only thing we can be sure of is what HAS happened. Your argument is silly.
Also, when looking at the last 10 years, I'm very happy with my returns. Since 2003 it's been pretty good.
2003 - UP 43%
2004, 2005, 2006, - UP over 20% for each year
2007 - UP 8.7%
2001 and 2002 were down. So far 2008 is down. But 1998 and 1999 were way up for me as were all of the 90s.
So, with the downs of 2001 and 2002, I made all those downs back up by end of 2004, AND since I was buying buying during those down times at prices below an 8,000 DOW, those purchases are up today even but will be way up down the line.
As of this morning my funds in total are down 31.7%. Not great, but down years happen 27% of the time.
But brother, 3% over the last 10 years doesn't come CLOSE to what I've earned. When considering the gains I've made plus dividends that have been automatically reinvested, I'm closer to 10% annually on average. When you consider the extra money I've put in the market a few times (when the market was seemingly low), that just helps it all.
When I look at my gains from 2003 until today (I always track it based on calendar year), even if I end down 35% this year, I'm still way ahead over the last 6 years, AND during this supposed bad time I've continued to buy stocks at a bargain price.
Your strategy is woulda, coulda, shoulda. You lose more often than not when trying to do this -- financial experts say so all the time, and studies have shown that to be true. Dude, Bob Brinker thought the S&P 500 would be at mid 1600s by end of year 2008. Many people agreed with him. He was wrong. He does that for a living and is right most of the time but was dead wrong here. If you happened to take money out at the exact right time and then put it in at the exact right time then you were just lucky.
In fact, you didn't do either anyway. You took it out at 12,800, NOT 14,100+ and you put it back in right at about 9,000 flat instead of the 8,200 it dropped to. You haven't made out like you think you have. I've purchased the whole time the last 12 months at an average of an 11,000 point DOW (including during the day when the DOW dropped below 8,000 -- YOU didn't). AND, as long as we stay below 11,000, this average goes down even, meaning it becomes easier and easier for me to break even on this very bad market period. Let's say the DOW stays at 9,000 for another year. Well, my average buying will be then less than 11,000 for that period of time. Let's say it's 10,400. Well, then, as soon as the DOW hits 10,400 I am back to even with my purchases during this time -- guaranteed savings that will then grow later on. If the DOW stays at 9,000 for 2 more years or even drops, then my average buying price since October 2007 is even lower and is that much easier to meet when the market heads back north. Somewhere down the line, a television news person will comment after a story about the DOW reaching it's all time high of 14,100+ again that "it's taken x number of years to break even." WRONG! Someone will say that too. Ridiculous!
Too many of you look at peaks and valleys and get all geeked about them. I probably made ONE fund purchase when the DOW was at 14,000...just ONE. Do I need to get back to 14,000 to break even? No way! Not even close. Hell, considering all the money I have in the market already and all the money I could put in (and will put in) in the next 17 years, if the DOW doesn't get back to 14,000 until I retire, I'll STILL retire a multi-millionaire.
Don't get all bent out of shape over trying to squeeze every last possible cent out of your investments. Most who do that lose in the long run, and quite honestly, it isn't worth the time -- not my time anyway. Stay debt free, invest as much as you can, plan to retire with NO DEBT AT ALL, living within 80% of your means, and you'll do fine -- MORE than fine even. The goal should be to have enough money to be comfortable in retirement, NOT to have eeked out every penny you possibly could have (besides, your plan on average doesn't work better than mine anyway).
The day I retire, I get a 20+% raise because I will not be putting that income into retirement accounts. No kids in the house to buy things for and feed, no mortgage, no debt of any kind. I'll start with taking 4% of my retirement money, or just 3% if times are bad. I can make that work for 3.5 years until I get my Social Security on top of that if I want it to.
People who get all upset with me for buying an holding (what Warren Buffett says to do by the way) are those who haven't been investing as long as I have. I've seen a 12-year bull market and a 5-year bull market. We are primed to see another one when this mess is all over. I've said for over a year now that college kids who graduate in 2010 will have the world by the tail as long as they work hard. Will be time for the markets to head north again (or at least a couple years from it), the job market will begin to systematically get better and better as more and more Baby Boomers will retire, housing will still be fairly cheap. Good times ahead. I know a 23-year-old woman who just graduated and has a good job. She took some extra money she had and plunked it into the market just recently, and she's going to put in 15% right off the bat. She will be rolling in it when she retires.