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First, let me say that I am a complete novice to investing. However, I have adopted the Boglehead phiosophy as it makes more sense to me than any other investment strategy. I am a wee bit confused about a couple thigs though. So, I just read this article (noise) tha pretty much summed up the fall of the dollar and subsequently US/global economy. In this article the author pointed to the Fed printing all this cash for several years as the main culprit. The author states that it is this dynamic not real recovery that has been driving stock and bond prices higher, and so on, etc..... I guess my question is.....Is this not the way that things have worked for a long while? I mean to say, isn't this and other factors the entire reason that there are market corrections? Why all the doom and gloom if this has been th SOP for years? I realize this may be a stupid question for all those who know what they are doing....but I don't...that's why I'm here
BTW I'm 71% equity and 29% bond allocation at 34 years of age. All at Vanguard, thanks to the awesome advice on this board!! Thanks in advance guys and girls!
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Several reasons I can think of:
- it gets readers ("recession porn" is one term I've heard used to describe this stuff)
- it sometimes ties into a political agenda
- it's an excuse for bearish managers who have woefully underperformed for four years and counting
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That author sounds like a person who thinks you should have all your money in gold. There has always been doomsday forecasts. A person could never invest if they would pay attention to them. Sounds like you have a good allocation so stick to your plan.
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Sensationalism sells - and making investing seem complex and fraught with peril drives people to financial advisors. Wouldn't keep too many people in business if it were well known that all you need to do is buy a few index funds and rebalance once per year, otherwise ignoring your portfolio.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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It's all noise.
One thing to realize is that there are any number of experts who will explain what the market did today, beginning one microsecond after the close. "The market was lower based on investor concerns over Greece." "The market was higher as investors shrugged off concerns about Greece."
Another thing to ask is, "How/why does he/she get paid?" Usually, the answer is ratings and advertising.
I believe most commentators are bullish, because people like to be optimistic. But, there is a culture of permabears who are continually predicting a market drop. One day some of them will be right, and they may become famous for a few months or years. (Witness: Ken Fisher.)
You should have an investment plan, and stay the course by sticking to it. Then, when the market goes up (or down) what do you really care what the explanation is? Or that there even is an explanation?
Déjà Vu is not a prediction
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why all the noise?
Same reason that the talking heads on ESPN drone on about Lebron vs Jordan, Tiger Woods, why the Yankees are terrible, etc. etc. etc
Same reason that the talking heads on cable news drone on about Paula Deen, scandals, supreme court rulings, famous trials, etc. etc. etc
People listen, rather than being out doing.
Just one man's opinion.
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Isn't that just factually incorrect? To the best of my knowledge, the US dollar has been stable against other countries with low measured inflation since the peak of the economic crisis. I am not a fortune teller so I can't tell you if the trends will hold, but that analysis is technically deficient as an explanation of past and current conditions from the sounds of it.
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Tradition. There's always doomsday noise.
They're trying to get you to buy that which their advertisers sell. Now, you tell me: under which of these perceived conditions is one most likely to buy a Ford F-150:
1) Everything's benign! Except you need to hedge gas prices and oh, one more thing: if you're in the market try to avoid buying beachfront property.
2) Emergency! Run for your lives! Only the strongest will survive and oh, one more thing: the Ford F-150 is really strong!
Phineas J. Whoopee
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Lots of people make a good living from all the noise. They don't want it to go away. As a matter of fact, they create it.
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When the market is up we worry that it's over-priced. When it's down we think it's about to crash. When interest rates fall we complain that we aren't earning anything, but if they start to rise we panic. For every prediction an economist makes you can find another economist, equally distinguished, who thinks exactly the opposite. And most of the day-to-day movement is simply random noise.
Think of it as a Rorschach test
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I started investing in the early 1980's. There was plenty of doomsday then too. The prophets of doom seem to wrong almost all the time. I remember Ravi Batra wrote best selling books about the depression that never come. Harry Dent's market predictions based on demographic trends also proved to be wrong. He was incorrectly bullish and then incorrectly bearish. BusinessWeek magazine had the famous cover "The Death of Equities". Not long after that, one of the great bull markets in history began.
A fool and his money are good for business.
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What exactly is the dollar trend he is referring to? What currencies, what time frame? Exchange rates are very volatile, far more than most US securities, and you can find about any trend you want to. And make up about any story you want to to explain it. Adjusting the scales for monthly, I'd say this is about as close to random noise as you can get for the last 5-8 years:http://www.fxstreet.com/rates-charts/usdollar-index/
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Imagine where the Dow would be if all the financial problems in the world disappeared overnight.
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