I'm with Igy, on pretty much everything, although I recognize that the markets are a many-dimensioned social phenomenon and thus can have "a life of their own", apart from business and investing concerns.
In particular, I am with him, and coach d, on the asymmetry of compounding--which is why I have been able to do so well using the markets in an index fashion. All I have done is to have avoided the big down periods. As I have said many times before, and as Igy and coach d seem to support, that is the aspect of "doofus investing" that is critical to actual success (which is why I have been so hard on the flagpoles).
Regarding 401k's, the deficiencies of the boomer generation, and of 401k participants in general, can be characterized as either insufficient returns, insufficient contributions, or a combination of the two, according how one wants to characterize the issue. It is important to remember that 401k's do not represent the entirety of one's net worth, or of one's future income stream.
We keep a small 401k as a canary in the coal mine, the typical crappy mutual funds. VFINX 80%, VBMFX 20%. I use it to gauge my own proclivities--the temptations to rebalance, to sell, to change investments, cash out, etc. It's fascinating to consider, while I pull a flagpole and let the money sit there and see what happens over time, and during certain time periods. It makes me feel like such a plebe, and disappointed when I do some analysis and see how the down times just kill the returns.
I don't think mutual funds are a complete scam, but neither do I think they are totally worthless.
Down goes the Dow
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POTO,
You have your own spin, do with it what you want. I have always addressed your criticism, which is constant. I think you are the one that needs to learn something.
Igy -
Also, those guys only now talking about another US QE are a day late, and a dollar short.
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Maserati,
The ECB and the JCB took QE to ZIRP and more. It hasn't done anything for their stock markets, after being highly recommended by Wall Street. We may be getting to the point where central banks are powerless to control the inevitable. I find it interesting how those that thought this was so easy are finding how difficult it really is. Money isn't for nothing and the chicks are never free.
Igy -
Actually it was easy--very easy--for a time. It now appears that time has ended.
As I think you have said, individually there is a bias to the positive. Combine that with an aversion to change, and voila. -
Maserati,
If you were around me you would know that I am a very positive person. I was a track coach for nearly twenty years--you have to be. I am characterized by some here as a Debbie Downer and "sky is falling" type. Not true, I simply stated a truth, that many believe as fact, that the stock market was overvalued. Valuations are now resetting, it is what is called PE compression. The price of the stock falls until the Price (P) falls in line the Earnings (E). I agree the stock market has been divorced from reality for quite a while. So we have considerably more downside from here. One caveat would be a new round of QE which ignites another cycle of speculation. The bad side of that is the future pain for the stock market would be even greater. It is much better for all to let this stage of the economic cycle play out.
Igy -
Igy,
I do have much to learn and I am not afraid to admit it. Those who believe they know it all are fools. -
POTO,
I don't know it all and I don't want to be a fool.
Igy -
Don't worry guys, bleeding heart liberal here. Everything will be fine as soon as the Fed comes to the rescue with another round of money printing. Just remember the liberal rule of thumb: print money at all times.
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SUPER LIBERAL SMART wrote:
Don't worry guys, bleeding heart liberal here. Everything will be fine as soon as the Fed comes to the rescue with another round of money printing. Just remember the liberal rule of thumb: print money at all times.
Don't be stupid. There is 0% chance of that happening. -
Igy and Mas, You're both right...
Igy, we will have some sort of QE, and it will probably be 'infrastructure'. This may actually float the boat, but the truth is, it will only be temporary.
Mas, the hunt for money is on. Governments will close every loophole in their attempt to find, and take, money.
This thread belongs to you guys... I just simply chime in to reinforce your very good understandings and vision. -
Marty,
I would prefer policy makers stay out of the way and let market price discovery rule the day.
Igy -
You're not the only one. But, unfortunately, we are amongst a society that first runs to the policy makers, only to be handed a shovel to dig a deeper grave.
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Marty,
Hopefully not my grave. At least I am doing my part.
Igy -
Maserati wrote:
In particular, I am with him, and coach d, on the asymmetry of compounding--which is why I have been able to do so well using the markets in an index fashion. All I have done is to have avoided the big down periods. As I have said many times before, and as Igy and coach d seem to support, that is the aspect of "doofus investing" that is critical to actual success (which is why I have been so hard on the flagpoles).
The avoidance of large drawdowns is the reason trend following outperforms buy-hold by roughly a factor of 2. The way I see it, there are two main ways to outperform the market averages over time:
(1) Own a relative few stocks (a dozen, maybe 30, but not hundreds) that are stronger than the market (see "The Warren Buffet Way"). Stocks are NOT independent variables, and there a relatively few of them that are much better than the market.
(2) Do strategic investment to be in-line with the prevailing trend, and if the prevailing trend is down, you don't go tilting at windmills like Don Quixote.
Mutual fund investing does neither of these, which is why I wisely got rid of them shortly after 1987 crash.
The real issue I have, though, is more of a large absence of mathematical rigor, and quite frankly, I think that none of the financial analysis professors (professors, let alone students) with maybe the exception of Harry Markowitz could pass MIT-level math (remember, I went there).
This is the original paper by Campbell and Shiller about valuation and 10-year returns:
http://www4.fe.uc.pt/jasa/m_i_2010_2011/valuationratiosandthelongrunstockmarketoutlook.pdf
Much of the data is rather poorly distributed to draw conclusions, thus you see R-squared values as low as 0.37. R-squared values that low CAN be significant IF you have a test of statistical significance like a t-test, but there is no test of significance in this paper. It seems that the business/investing profession isn't smart enough to figure this out, but having gone through many paper writings and bayesian statistics with the R programming language with my oldest son, who is a PhD student in biochemistry....I reject the whole conclusion, because they haven't proven their case. If this paper was in biology or computation physics, or any actual science where bayesian statistics are commonly used, I don't believe this paper would have been accepted for publication. -
Question of the day - if we hit bear territory of 20% off last year's highs, would the bear market's start be considered when those highs were set last year or when the market hit bear territory this year?
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Ghost of Igloi wrote:
Ignorant,
I also agree that a flat tax would be fair. The middle class has been hurt the most in this economic cycle.
Igy
Absolutely. The wealth gap is too small. Let's shift more of the tax burden away from the rich and onto everyone else.
Good thinking. -
Try to keep up wrote:
K5 defector wrote:
1/20/16.
Dow immediately down nearly 300 points.
My move out of the market 2.5 years ago with no equity purchases since then put me behind for some time but I am now at break even or better.
Soon my move will have paid off.
The Dow is still 5% above where you bailed from. How are you at break even or better? Including dividends and some judicious sales, you would have been way ahead if you stayed in.
You are ignoring the past 2.5 years where the Dow was as much as 20% higher than it is now. Thus I bought no equities during that time when the Dow was 16k, 17k, 18k, and higher. Those who follow the buy and hold and keep buying strategy the "experts" sell us are way behind me now.
As far as the assets I held 2,5 years ago -- yes, I would have earned maybe 5% on them over the past 2.5 years. Instead, in cash and bonds, I earned about 3%.
You guys always talk about dividends and ignore the fact that money moved out of equities is not sitting in mattresses earning zero. Dividends lost vs. interest accumulated over 2.5 years is about a wash and so not a factor.
As far as judicious sales -- wtf does that mean? Isn't that what I did? Your argument depends on the fact that had I stayed in I would have somehow figured out to sell some holdings at just the right time? Please. -
Pointing Out the Obvious wrote:
Igy,
I do have much to learn and I am not afraid to admit it. Those who believe they know it all are fools.
My God, How delusional. Or just dishonest? When have you ever admitted you are wrong on this board? You have in fact been demonstrably wrong on occasion -- but have fervently denied you were when called on it.
Hilarious. -
Rod,
Frankly I do not know if there is an exact definition. But I would say 20% off the 52 week high, which would be some time last spring. Interestingly enough there are several indices already at that level.
Igy
