jebmke wrote: Sheepdog wrote:
Thank you, Taylor.
His piece ends with
In the midst of a six-year bull market, it is easy to talk about staying the course in the next bear market. It is a far greater challenge to stay the course when the market is actually down 25 percent and the financial media are forecasting the end of the world, as they did in 2008.
That is very true. I hope we all can when the time comes the next time.
What did you do in 2000? 2008?
This is simply a statement of what I actually did. I eased back my stock allocation a bit, gradually, over calendar year 1997, in reaction to Greenspan's "irrational exuberance" speech. I'm not completely sure where that falls on the "stupid" scale, I have my rationalizations. I stayed the course in 2000. In 2008-2009 I was terrified. I stayed the course in terms of not doing anything, but I could not bring myself to place any order to rebalance from bonds into stocks. [Corrected]
A relevant third year is 2011. That's the year in which behavioral expert Cass Sunstein admits to having sold his
stocks. I did nothing in 2011 and was only moderately jittery. The relevant thing here is that it was very
easy to believe in 2011 that the bull market was over, the "bear was out of hibernation," and that we might be seeing the beginning of a new plunge.
I do NOT think it helps things to personalize markets as "the bull" and "the bear" and use language like "when the bear's hibernation ends."
Incidentally, what exactly is he talking about when he says "It is a far greater challenge to stay the course when the market is actually down 25 percent and the financial media are forecasting the end of the world, as they did in 2008?" I think this is unreasonably dismissive in two ways. The market was down 50%, not 25%. And I think language like "forecasting the end of the world" is unfair--it suggests that the media was being Chicken Little. Well, I think the United States along with much of the developed world was really, seriously truly at risk of financial collapse. Personally, I think there was a 1 to 10% chance. What do you think? Do you think it was much less than 1%? The fact that it didn't happen didn't mean the fear was unfounded.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.