Down goes the Dow

Igy, your essential argument seems to me to be a moral one, that you don't like the bond and equity markets to be subject to gambling, speculation, or even gamesmanship.

Even though I'm not in the markets at the moment, I'm just not down with the attitude that perceptions of value should not include value that arises from having a piece in a game.

There are just too many legitimate concerns that are discounted by such a view.

What do you think about the recent noise that AAPL may look at acquiring something like NFLX?

Maserati,

Perhaps you misunderstood my comments.

I think there is a distinction between investing and speculation. Investing recognizes that cash flow and valuation should support that property. Speculation is more of a direction bet. Both investing and speculation are part of the financial markets. When a financial advisor opens an account they are required by FINRA to distinguish between the two styles. My experience has been that speculators are more akin to a gambler.

I believe current market valuations are being driven by speculators, mostly on the institutional side. Large institutional speculators generally have the ability to move the market in their favor, while retail speculators generally provide liquidity to the markets. Michael Lewis writes on one element of this in "Flash Boys." If one believes that this is true, certainly there should be concern for the masses that neither have the knowledge or net-worth to swim in this pool.

Igy

Yes Igy, but it still seems to me that you assume that the masses should have some sort of right to swim in a pool unpolluted by either reasonable bets or speculation.

Lately you have seemed to me to have been lamenting the fact that, in your opinion, valuations are high, rather than just dealing with it.

Maserati,

The financial markets are and have been how they are. That does not mean I cannot have compassion for the unprepared and less fortunate. In fact that is one of the reason I began posting in the spring of last year. Certainly I do not have all the answers, but I do believe I have added to the discussion.

I see nothing wrong with having a believe system that is based more on evidence than one of wish and hope. Of course one can find elements that can be disputed and I suppose that is what makes a market.

Igy

[quote]agip wrote:

note that over the last 10 years, even with the worst financial crisis since the great depression, a 50% stock crash, two flat years (2011 and 2015) stocks in the US are up 7.4% per year. (Vanguard total stock market index)

resilient little bugger, the US stock market.

Really?

How about over the last 15 years?

Isn't that as pertinent a period of time as the last 10 years which left out the 2000-2002 market decline?

Dow increase measured in that period was @ 2.7% per year.

How will it look it we take another big hit in 2016 like we did on 2008-09?

Is that so wrote:

Really?

How about over the last 15 years?

Isn't that as pertinent a period of time as the last 10 years which left out the 2000-2002 market decline?

Dow increase measured in that period was @ 2.7% per year.

How will it look it we take another big hit in 2016 like we did on 2008-09?

Hi, K5! It sounds like you're still butt hurt from missing most of the Bull market. Too bad, so sad.

Is that so wrote:

[quote]agip wrote:

note that over the last 10 years, even with the worst financial crisis since the great depression, a 50% stock crash, two flat years (2011 and 2015) stocks in the US are up 7.4% per year. (Vanguard total stock market index)

resilient little bugger, the US stock market.

Really?

How about over the last 15 years?

Isn't that as pertinent a period of time as the last 10 years which left out the 2000-2002 market decline?

Dow increase measured in that period was @ 2.7% per year.

How will it look it we take another big hit in 2016 like we did on 2008-09?

15 years for the vanguard total stock market index is = +5.67% per year.

That number is lower than the 10 year number because it includes much of the collapse after the tech bubble, as you point out.

So that is 5.67% per year including two 50% falls, the aftermath of the worst stock bubble in our lifetimes, the worst financial crisis since the great depression, and two flat years. Not great but not terrible either.

Sure, we should all consider 15 year returns, but we should understand the timing.

and yes if we fall 50% in 2016, it would hurt returns. Good point.

In the past, there has been absolutely nothing coercing "the unprepared and less fortunate" to participate in the markets. There have been plenty of other investment vehicles that they have used, such as T-bills, short-term deposits at their bank, and real estate.

But that calls for an education campaign, not a lament, so that they understand more fully what they are getting into.

Having said that, with the recent rise of widespread market participation through "retirement" vehicles, I think that there is now a reasonable amount of coercion. Sure, one can keep one's IRA in cash certificates, but that's not how retirement accounts are advertised. Also, there is only a limited range of investments available through 401k's (IRA's can be extremely flexible via an LLC structure), but there's still enough rope there for someone to hang himself.

So I do feel you a bit, but not much. There still needs to be individual responsibility for one's financial management. It's not hard stuff to understand. Still, nobody need be in the markets. Everyone has ready access to enough data to enable them to make their own decision on participation.

Look at me--currently I'm out. Am I lobbying for a change in the essential functioning of the markets? Apart from the potential abuses enabled by HFT and maybe black pools, no. I choose whether or not to participate, and consider options, as should everyone.

"Compassion" is a strange word. The definition is fuzzy, at best. Things like sympathy, pity, concern, etc. cover a very wide range of meanings. Sure I feel all those things for SOME people who get burned or don't do well, but certainly not for all, and certainly not to the extent that I would sacrifice the multiple dimensions of human attitude and behavior enabled by the current market environment.

Get a grip Igy, and stop whining. Walk the walk. If you think things are overpriced, sell and buy something else. If you're sitting in cash, then in a sense, you're just like everybody else talking their book--convincing everybody else that prices are too high, in the hopes that they will come down and you can then have "sold high, and bought low". I have no time for that. You can talk until you are blue in the face, and you won't convince people of your view, because you are arriving at your view by selectively excluding market factors that do not suit your narrative.

A narrative with the substance of which I happen to agree, BTW.

Here's to a relaxing 2016, where we can finally sit back, take stock of events, and watch the game unfold.

Maserati,

I have no real quarrel with anything you have said. I have an opinion that has been well documented. If in the end I am wrong I am sure I will be reminded of my views. In regards to the masses, they are generally clueless. Even the well educated would have a hard time defining the difference between high yield credit and corporate credit. Therefore, I do believe that the industry and the regulators have failed on a couple of fronts. But that is not my responsibility, but like I expressed, there is compassion for the ill-informed or less fortunate.

The toll on society will become more apparent if we face another 50% market drop in 2016.

Igy

Come on with the Vanguard Index.

Anyone can look at the Dow or the S+P and see that the average overall annual return over the past 15 years is < 3%.

And this is at a time when I think we can expect a pretty big downturn at some point soon as the march from a Dow of about 6,600 to over 18,000 from 2009-2014 would suggest as much.

Holy Crap.

This guy is quite obsessed with hurt butts.

What's with that?

Come On Brud wrote:

Come on with the Vanguard Index.

Anyone can look at the Dow or the S+P and see that the average overall annual return over the past 15 years is < 3%.

And this is at a time when I think we can expect a pretty big downturn at some point soon as the march from a Dow of about 6,600 to over 18,000 from 2009-2014 would suggest as much.

give me some good reasons why not to use the vanguard total stock market index. There is no perfect benchmark but that's the best one I know of. The Sp500 and Dow measure just large caps, and both are dominated by just a few megacaps.

For the record, here are the 15 year records for the

SP 500: =5.07%

Dow: 5.71%

Not so different.

VTSMX?

As of today, has it not realized about 7% annually, going back to Apr 1992?

If I could get that, even at current CG rates, for the next 10 or 20 years, by just dumping money into a fund, I would jump on it, if the expense ratio was reasonable.

It's Vanguard, which means the expense ratio is reasonable.

Maserati wrote:

VTSMX?

As of today, has it not realized about 7% annually, going back to Apr 1992?

If I could get that, even at current CG rates, for the next 10 or 20 years, by just dumping money into a fund, I would jump on it, if the expense ratio was reasonable.

better than that - since its inception in 1992 it is up 9.34% per year

Expense ratio is just 0.17%

What is a CG rate?

And as you know, past results do not suggest future returns.

The thing is - how many individual investors made 9.34% per year since 1992? I know I haven't, because I tried to get all fancy in earlier years.

It just doesn't have to be complicated.

Unless it's different this time, eh Igy?

I will say this - starting in 1992 is a mighty favorable start date - just 3 years before the big 25 year rally started. If this thing started in 1997 the returns would be much lower.

On the other hand, Vanguard's oldest index fund, the SP500 index, was started in 1976 and it has returned an utterly awesome 10.91% per year since inception.

Good lord. 39 years.

If I can just capture that kind of return for my clients. Or even 80% of that return...they'll be happy.

Report this Guy wrote:

Holy Crap.

This guy is quite obsessed with hurt butts.

What's with that?

He mentioned it once. So did you.

Capital gains.

Yes expense ratio HAS historically been low, but I was looking forward.

Low expense ratios are one reason why we have that micro VFINX/VBMFX 401k.

Numbers are always funny. agip how do you get 9.34%? Dividends?

Maserati wrote:

Capital gains.

Yes expense ratio HAS historically been low, but I was looking forward.

Low expense ratios are one reason why we have that micro VFINX/VBMFX 401k.

Numbers are always funny. agip how do you get 9.34%? Dividends?

well yes

but the better answer is that I got it from the Vanguard website

not sure if this link will work