Down goes the Dow

But I am fairly confident that you, as his newly appointed financial advisor, quickly adjusted his portfolio holdings and soon had his portfolio up around $1.5 million again.

That was my point.

Cherry picking refers to the act of selecting the best or most desirable elements from a group, often in a way that may be considered unfair or selective. It can involve choosing only the most favorable aspects or individuals, leaving out others that may not be as advantageous. This term is commonly used in various contexts, including politics, media, and business, to describe the practice of favoring certain viewpoints or outcomes.

Yeah, all of that, and In Vester, too, but I think it is useful to consider if only to understand worst case scenarios.

The charts don't lie and you can see some significant downturns. And it is hard for most investors to keep them in perspective when entrenched in one. This is critically important because studies find that most investors sell at the wrong time, and that is human nature. That is why most investors don't outperform market indices.

The best advice I've heard is to adopt an investment strategy that fits your unique risk tolerance, investment horizon, goals, etc. It should frankly be individualized.

Actually, like many here would do, he left me because I was too conservative. Sued Morgan Stanley, rejoined his former financial advisor.

The end of the story, the Morgan Stanley manager was fired for improper supervision, the former financial advisor lost his state securities license, wife divorced him, died a relatively early death. Same shortened life span for the client. Likely never recovered former riches.

Things do not always end well.

I don’t disagree with any of that, Seattle. But to those that have only experienced the best of the last fifteen years, 1929, 2000, and 2008 serves as a reminder of what can happen at extremes.

What you don’t seem to comprehend is the correlation between dates and their relevance to history, and possibilities to the future.

I’m 40 and still working. I’ll be able to weather a 2000 or 2008 before I stop working and start drawing down. With dividends, and ultimately pension & SS, I may not need to draw down.

Are you saying that we should all get out of the market now?

In Vester wrote:

Are you saying that we should all get out of the market now?
Igy has never said that. He is cautioning people to factor the possibility of a major correction or crash into their investment thinking.

Depends on your level of risk.

Okay, fine. But what if that's the only message? What if the message is to confine their outlook to a phenomenon that happens only about less than 10% of the time?

And how about if that message, perenially delivered, carries no qualification as to it's limited applicablity?

It leads to missed opportunities, if I may say.

We already had a pretty significant correction with Covid and the market bounced back quite nicely.

Igy has been talking about the likelihood of a major crash for years now just like his brethren Permabears. And it never comes to fruition. For 15 years we have been warned by the Permabears that a market collapse is coming and they have been wrong for 15 years.

Good one.

Did the client win the law suit? I would guess they lost.

But even with all that crap the broker went through, it would be ridiculously appropriate if his investments went on to kick butt, in a good way. Maybe for his heirs.

Tell another one.

I have a really hard time believing the client's portfolio went from $1.5 million to $200,000 unless there was some shenanigans going on. Igy - how could his portfolio drop so much unless some stealing was going on?

Yeah, I was thinking the same, Sally.

So yesterday plugged in the Nasdaq index from the ATH to the lowest point of the dip for the dot.com crash, and it did lose like 75% of its value, at its worst. So, for a particularly aggressive portfolio, a drop like the one mentioned, and it was 82% if my recollection of the math is good, could happen. It could happen to an aggressive portfolio.

Why someone wouldn't have done a little selling and protection of assets on the way down, I don't know.

He said the client’s portfolio was very risky, and the way he framed the situation was as a worst-case example, or at least that’s how I read it. Of course not everyone lost almost 90% of their investments at that time, but if this investor were heavily leveraged or heavily weighted in a few of the bigger disappointments, this is easily credible. I lost well over 90% of a couple of holdings - Nortel and JDS Uniphase - but thankfully did not gave all my eggs in that basket. If such worst-case scenarios seem impossible to you, then you haven’t paid attention. Whether such warnings are reasonable or realistic for anyone in this thread depends on the risk they are carrying. If you don’t have a high concentration of volatile holdings, perhaps you can safely ignore the advice.

While I also think Igy is probably more bearish than is merited for most of us (but perhaps not for his own circumstances), some in the thread strike me as way too risk tolerant for their own good. But perhaps I’m wrong… only the fullness of time will tell.

AI:

The Nasdaq experienced a massive loss from its March 2000 peak to its October 2002 bottom, with declines ranging from around 77% to 83%, marking the dot-com bubble burst, with significant yearly drops of roughly 39% in 2000, 21% in 2001, and 31% in 2002.

The client was heavily invested in technology, IPOs, and on margin. The financial advisor was in charge of IPO allocations for the Boise office. The client said to me, and I fortunately for firm recorded at the time his comment of “Milt lost me a lot of money, but made me a lot of money.” My recorded response was “I do things differently than Milt.” The allegations included the advisor taking discretion by putting IPOs in client accounts. That was one reason the manager was relieved of his duties. Since I was not the advisor at the time of the loss, and the client left the firm before the lawsuit, I was not privy to the settlement. I do know it went thru arbitration.

I have a strong valuation slant to my style of investing, which makes me appear Bearish. I am certainly not risk adverse. I do believe my views are colored as one who managed money thru both the Tech Bubble and the Great Financial Crisis. Saw some careers end, and financial plans crushed. I see my role on this thread as one of the few voices willing to take the other side.

Today at the YMCA two gentlemen were discussing the marvels of AI. One giving glowing reviews of the promise of AI. While the other remarked that Jensen Huang was a man of the people, not like the CEOs of Apple and Google. Then the one popped out that his daughter worked at Nvidia, and she has received $500,000 in stock based compensation.

The entire dialog was reminiscent of Barton Biggs’ plumber.