Down goes the Dow

La gente - I respect what you say, but have to disagree with you on the more risk after a down trading year. The market for the last 60 years? has always rebounded big time from a bad year and rebounded in spades EXCEPT for 2000-2002.

good to see bonds and stocks going in opposite directions today!

for years they've been correlated, which has fouled up 60/40 accounts.

Maybe we're getting back to normal now when bonds cushion stock losses.

Some hints that the economy is slowing brings down stock prices but boosts bond prices.

10 year back under 4% which sounds good, in a sweet spot.

Makes my bond purchases over the past months look like GENIUS! Its actually good luck disguised as genius. 😅

I believe one of Benn Eifert's points might be the answer to your question.

"there are some very specific cases where this criticism is less true -
high frequency market making for example where there is a massive amount
of data over very short time periods where the underlying dynamics are
reasonably constant and models can adapt quickly"

These models run on tick data and can pick up short term patterns; e.g. mean reversion, momentum. They keep them on a short leash, value at risk. They will only play when their models show they have an edge and will fold if that edge doesn't materialize. (they don't keep the trade on and blame The Fed or claim the market is wrong). They are trading 100s of times a day in numerous markets.

https://www.wsj.com/public/resources/documents/VirtuOverview.pdf

You used the NASDAQ Index for your reference, there were days in 1973, 1974, 2000, 2001, 2002 and 2008 had you invested after a down year, you would be lower the following year. The NASDAQ Index is very volatile, 23.99% (standard deviation) from 1/1971 to 1/2024. The S&P 500 was 15.42% from 1/1972 to 12/2023. With the NASDAQ you're taking on a larger bet against volatility.

La gente - here is a chart for last 38 years. Not ONCE was a bad year followed up by a bad year.

Here is how the NASDAQ did the last 38 years.

The Nasdaq 100 index (NDX) is a technology-focused stock index that generated a 15% – 17% average return over the past 38 years, resulting in a cumulative return of over 15,44,2% including reinvestment of all cash distributions.

What other investment is even a light year away from that?

Sally read gente's words!

Not all years begin on Jan 1! Gente is measing 365.25 day periods over and over to get a broader view of how the market behaves. Years starting March 4, June 10, August 9 etc.

Oh ok. Let me go sit in the corner and put my dunce hat on.

Morgan Stanley was big on Monte Carlo simulations. I always felt they underestimated risk, or a least painted a picture that way. These plans were most often used for pre-retirees.

MS also uses a Monte Carlo simulator for retirees as well. I, too, thought it was somewhat overly positive, so took the results with a grain of salt. As an (ex) engineer I was more interested in what was behind the models--ie, their various assumptions--than in the results themselves. I chuckle at one of their terms--"end of plan"--but I guess that's better than "death."

I too ran plans for retirees, but less often. My take on “end of plan” was based on the work of Moshe Milevsky (sp?). That is, in retirement you have the reverse compounding effect of distributions offset as modeled by portfolio gains, or a less often modeled as a hole dug by losses. A few front loaded retirement investment bad years results in a premature the dreaded “end of plan.”

My suspicion is some “end of plan” is baked in to current positioning.

I like Personal Capital's retirement planner which also uses Monte Carlo, but they have a cool feature where you can simulate past recessions at any point in your projections to see how your portfolio would hold up. This is their projection for my portfolio if the 2000 dotcom bubble happened now:

Open image

Speaking of retirement planners, I have an appt. with an estate planner set up for tomorrow. Anything anyone would suggest to be mindful of or avoid? This is somebody we've worked iwth before so the level of trust is very high.

Just checking to make sure we haven't missed anything and to have my better half comfortable with the whole thing.

Just load up on Hussman Strategic - you should be fine.

You've probably got all this stuff covered but just in case:

https://www.nerdwallet.com/article/investing/estate-planning/estate-planning

be very careful around trusts. They aren't always wrong to establish, but I have seen them used as a profit center for law firms.

if you go to trust ownership it can be a pain in the neck to retitle all your accounts, they could require a second tax return, they could complicate all your transactions, and of course it can cost $10,000 to get set up.

Thanks for both those informational posts. Good to know about Trusts. I've seen them mentioned, but that's the one thing I am not fully understanding, and will discuss with the attorney.

The Nerdwallet lists are good and a few of the things they mentioned to prepare I admittedly haven't surveyed yet.

As for Hussman as an investment, losing it all with the help of that fool would admittedly make planning a lot simpler. But ah, no thank you!

The weird thing, and I almost hate to admit, this planning stuff, the tax brackets, roth conversions, estate tax (and yes, WA state has an estate tax, so I recently discovered), is somehow interesting and not half the chore I thought it would be.

Thx again for the ideas!

Not only that, but the tax can be higher in a trust. For example an A/B revocable trust where the wife lives free in the deceased husband’s house, the house has substantial appreciation at his death, wife needs to move to a rest home, and needs to sell the asset. The capital gains are locked in from the date of the husband’s death to sale date, subject to state and Federal taxes. In a simple will the house stays within the marital estate.