U.S. Stock Market: The Train has Left the Station

Even the little that I have followed letsrun market prognostications, have shown that I Love peeps has been usually dead wrong in his predictions and flagpole has been generally right.

That said there do seem to be fundamental weaknesses both in our economy and in the political system needed to fix our economy that don't bode well for the future.

Fun discussion. I for one totally believe the OP, for the following reasons:

1) There are no trolls on LRC.

2) I have intrinsic faith in any investment advisor who has enough free time and generosity of spirit to post advice here.

3) No purpose is served by giving advice contrary to one's beliefs.

So I'm really bumming now that I missed the train. Darn it!

20-20 hindsight

ahhhh....ok

Opposite George wrote:

Investment Counselor wrote:

If you're not already invested in the market, you've missed out on a great opportunity to build wealth.

For example, if you sold instead of bought in August you missed on a wealth building opportunity.

The Dow went from 10,800 to 13,200 since then.

Yes. The point I've been trying to get across.

Conundrum wrote:

Even the little that I have followed letsrun market prognostications, have shown that I Love peeps has been usually dead wrong in his predictions and flagpole has been generally right.

That said there do seem to be fundamental weaknesses both in our economy and in the political system needed to fix our economy that don't bode well for the future.

Flagpole, while a nice guy who is fun to do battle with, doesn't see beyond superficialities like stock prices and GDP statistics. Peeps has a much more enlightened views and understands that the fundamentals of the economy are getting worse, not better. In the long term, peeps will be proven right, and unfortunately Flagpole's retirement plans won't work out as expected.

Peeps might or might not have great knowledge but he lacks judgement and unbiased perception. He lost me on that thread were he guaranteed a market crash in the next week (or something like that) You can be the most knowledgeable and the smartest guy in the world, but if you use your abilities to justify an emotionally driven belief your abilities are irrelevant. And worse, more dangerous because you can make them sound reasonable. He seems to shoot from the hip.

financial n00b wrote:

Flagpole, while a nice guy who is fun to do battle with, doesn't see beyond superficialities like stock prices and GDP statistics. Peeps has a much more enlightened views and understands that the fundamentals of the economy are getting worse, not better. In the long term, peeps will be proven right, and unfortunately Flagpole's retirement plans won't work out as expected.

Conundrum wrote:

Peeps might or might not have great knowledge but he lacks judgement and unbiased perception. He lost me on that thread were he guaranteed a market crash in the next week (or something like that)

You can be the most knowledgeable and the smartest guy in the world, but if you use your abilities to justify an emotionally driven belief your abilities are irrelevant. And worse, more dangerous because you can make them sound reasonable.

He seems to shoot from the hip.

I think he hyperbolizes/exaggerates/makes things up sometimes to amuse himself, but he has the correct long-term view on this country's economic outlook.

Investment Counselor wrote:

Opposite George wrote:

For example, if you sold instead of bought in August you missed on a wealth building opportunity.

The Dow went from 10,800 to 13,200 since then.

Yes. The point I've been trying to get across.

__

well that is one super shallow point.

Conundrum wrote:

Peeps might or might not have great knowledge but he lacks judgement and unbiased perception. He lost me on that thread were he guaranteed a market crash in the next week (or something like that)

You can be the most knowledgeable and the smartest guy in the world, but if you use your abilities to justify an emotionally driven belief your abilities are irrelevant. And worse, more dangerous because you can make them sound reasonable.

He seems to shoot from the hip.

financial n00b wrote:

Flagpole, while a nice guy who is fun to do battle with, doesn't see beyond superficialities like stock prices and GDP statistics. Peeps has a much more enlightened views and understands that the fundamentals of the economy are getting worse, not better. In the long term, peeps will be proven right, and unfortunately Flagpole's retirement plans won't work out as expected.

_______

there's are interesting studies on who makes better investment decisions - generally the more you know, the worse you do. With exceptions, of course. What happens is that the more you know, the more decisions you feel you have to make and the more actions you have to take. Which means you insert yourself into the herd and sell low and buy high.

Peeps obviously knows a lot, but I think he feels he has to use that knowledge and that gets him in trouble.

Sagarin is a more balanced investor. He is less emotional and knows his ugali.

Flagpole wins by having a good strategy and sticking to it.

The reality is that investing well is extremely easy. Even trivial. The fact that folks come on here to spout their predictions is unfortunate. The naive will sometimes listen to such nonsense and make bad decisions as a result.

One could nit-pick I suppose, but if you adhered to nothing but the following you would be doing better than 95% of all investors:

Money that you may reasonably need in less than 3 years - invest in money market funds

Money that you may need sometime between 3 and 10 years from now - invest in short/intermediate term bond funds

Money that you will not need for more than 10 years - invest in stocks funds.

Never try to guess the market. Best bet is to ignore the market entirely (and all the brilliant market prognosticators you see here and elsewhere).

Use only index funds from Vanguard.

Save as much as you can.

Stay 100% invested all the time.

Hope most of you folks are financially successful.

Does Sagarin ever actually say anything concrete and definite that isnt hedged so much that it becomes meaningless.

I generally like Flagpole's strategy too. But I wonder how many people notice that in fact he advises most people not to invest at all.

Really, how many people are there that have a steady job, no debt (except a mortgage) and a 6 month emergency fund?

The reality in this modern economy is that you may make good money one year and get laid off another. You are constantly using the emergency fund and having to replenish it. To maintain a job you perpetually have to invest in yourself through continuing education and the basics: having a safe place to sleep and rest, clothes, moving to where a job is and commuting to work, etc. And there is ever the student loans to pay down. Many have to take on the burden of their own health insurance. There is taxes on top of that as well. That is before you even get to having kids.

That is why I maintain what I said earlier. A lot of Americans are just as well off if the stock market tanks.

financial n00b wrote:

Flagpole, while a nice guy who is fun to do battle with, doesn't see beyond superficialities like stock prices and GDP statistics. Peeps has a much more enlightened views and understands that the fundamentals of the economy are getting worse, not better. In the long term, peeps will be proven right, and unfortunately Flagpole's retirement plans won't work out as expected.

[/quote]

1) Ha!

2) Ha! again!

3) Dude, you are wrong in what you think I know. REGARDLESS of whether the "fundamentals of the economy" are getting worse or not, I've always talked of stock prices, and they WILL go up no matter if the economy is long term in the tank or not. If inflation rears its ugly head, then stocks (and potentially CDs, which I've long said, will go up). Will those stocks have less buying power as a result of the inflation? Maybe...depends on how much they go up and how your reinvested dividends help.

4) I can go back to the beginning of my life (1966) and not see a period EVER where the economy wasn't doomed at some point long term. We've long had issues with national debt and viability of social security and medicare. National debt is really bad now, but that was also true at the end of the Reagan administration, and for a while we reigned that in. I can remember Johnny Carson and SNL making fun of a weak US dollar back in the 70s. There is ALWAYS something bad out there...stocks on average keep going up.

5) Peeps doesn't really make long term predictions, so I'm not sure what he's predicted that will be "eventually proven right". You are correct that my retirement won't work out as expected, because I have a spreadsheet that tracks it to the penny. Will it be off by a penny or more? Yep. I once had planned to retire at 67, then 65 then 62, and now 59 1/2. I have been able to move this date as I've acquired more for retirement and lessened debt. If the market booms in the next 10 years, I could retire at 55. If the market were to stay stagnant, I could still retire by 60, and if it goes down between now and then, I'll wait until 62 so that I can add Social Security to it (and YES, it may be a little less than predicted today, but there WILL be Social Security for me at least).

6) I love how someone has the nerve to say that a plan that involves living debt free, retiring with no debt and a paid for house, and investing 15% or more into retirement plans, that that plan plan is filled with flaw and won't work out.

7) Ha! one last time.

Ryan,Investing has risk, and to mitigate the risk, you need to set yourself up for success before you invest.1) I say 3-6 month emergency fund. Single people with no kids can do a 3 month emergency fund.2) IF you have HUGE student loan debt, then I'm ok with you investing as you get rid of that debt.3) The goal should be for people to be rid of debt by age 30 (other than a mortgage and some HUGE student loan). People can do that.4) You say that most can't do what I prescribe, and I say that most just DON'T do it. No married couple without kids who both work (at least one of them with a professional job) should ever complain about not being able to make it, yet I see this all the time. What do they do? They have cable tv and expensive cell phone plans and new cars and they eat out a lot and spend a lot of money on entertainment and on and on and on.5) It is EASY to make a plan and spend within your means. It's not rocket science. People just don't want to, so instead they would rather invest money WHILE they are in credit card debt that costs them 20% or more in interest, or they feel no issue with taking on car loans at 6.9%...it's just throwing money away.6) You should NOT be constantly using the emergency fund. I don't use mine. What if the refrigerator breaks? I COULD use the emergency fund for that, but I should also have some money budgeted for material purchases in a month, so I could just take it out of that. If the refrigerator I want costs more than I can pay out of monthly income, I use emergency fund money and pay that back in a couple months, all the while maintaining my investments. If this bothers you, then up the emergency fund by a couple months so that you don't dip below 3 months.

agip wrote:

Investment Counselor wrote:

Yes. The point I've been trying to get across.

__

well that is one super shallow point.

Super shallow point?

If we have peaked with the Dow at 13,200 and people missed on the run up, I don't see what is shallow.

If we don't move above 13,200 for the next couple years I think it is a worthwhile point for those that were on the sidelines while things went up.

Now maybe things will keep going up making this thread useless.

But if we have peaked, then the train has left the station.

I don't know and I am not calling it. But the point is, now is not the time to get in. Should have already been in.

Opposite George wrote:

But the point is, now is not the time to get in. Should have already been in.

Once upon a time there was a man named Mr. Cash who inherited $100,000 in cash, another fellow named Mr. Equity who inherited $100,000 in equities, and a third, Mr. Selfmade who didn't inherit anything at all but had prudently built up $100,000 in equities through his own efforts.

Mr. Cash looked at his brethren and decided that he liked their portfolios better than his $100,000 in cash so he matched their equity investments with his cash inheritance.

Twenty years later Mr. Cash had an equity portfolio of $450,000, Mr. Equity had the same, while Mr. Selfmade had precisely the same as well.

I sort of agree with you. But I think you are glossing over the realities of a lot households in this economy. Emergencies happen multiple times over someone's working life. I'm not talking about refrigerator's breaking down although as you point out that is just one more expense to budget for. But good workers get laid off all the time for the very reason that drives the American economy in the first place. Its a "flexible economy" where business managers are generally free to hire and fire people at will and change their business plans to quickly cut losses and take advantage of new opportunities. Health problems crop up multiple times. It can be one thing after another. Or conversely it costs money to insure yourself against all these things.

But yes, generally I agree with you that people can spend less and apply that money to paying down debt and investing. I've been arguing in other threads questioning why so many people buy I-Pads or why people should go to Disney World. They could be staying home, playing baseball in the public parks, playing board games, starting a vegetable garden. But that is another paradox of your advice. It is the consumer spending on things like I-Pads and vacations that is a big driver of the stock market. When people cut back on those, the stock market goes down, people get laid off, deflation becomes a threat and the powers that be freak out. My only point in this thread is just to argue that when that happens (and it will again)its in many people's self interest to let it happen and treat it as good news.