I have to share this quote

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tadamsmar
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I have to share this quote

Post by tadamsmar »

This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
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Re: I have to share this quote

Post by jebmke »

Reminds me of something I overheard back in the 90s at lunch. A couple of my analysts were talking about investing. One of them said: "the good thing about stocks is that the most you can lose is all your money."
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Re: I have to share this quote

Post by whaleknives »

jebmke wrote:Reminds me of something I overheard back in the 90s at lunch. A couple of my analysts were talking about investing. One of them said: "the good thing about stocks is that the most you can lose is all your money."
Weren't they overlooking margins, shorts, and other leverage? :D
Last edited by whaleknives on Sun Mar 12, 2017 11:19 am, edited 1 time in total.
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Re: I have to share this quote

Post by Vanguard Fan 1367 »

whaleknives wrote:
jebmke wrote:Reminds me of something I overheard back in the 90s at lunch. A couple of my analysts were talking about investing. One of them said: "the good thing about stocks is that the most you can lose is all your money."
Weren't they overlooking margins, shorts, and other leverage?
Peter Lynch gives an example in one of his books of someone who got hit pretty hard in a short sale deal. Peter recommends not doing that, just buy the stock.
John Bogle: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
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Re: I have to share this quote

Post by four7s »

Overheard at a Blackjack table in Las Vegas:

As the player lost again and again he said to the dealer, " Doug, you're killing me."

Doug replied, " I think it's called suicide, sir."
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Re: I have to share this quote

Post by jebmke »

whaleknives wrote:Weren't they overlooking margins, shorts, and other leverage?
That was the point of the statement I think -- I believe the reference was to a vanilla long equity hold. Margins, shorts, options ... could end up negative.
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Re: I have to share this quote

Post by SGM »

tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
I know a lot of gamblers and they do come up with some peculiar notions. So are you taking profits off the table now before the next downturn? :happy
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Re: I have to share this quote

Post by Abe »

I was talking to some people who were going to a nearby casino. They were excited because the slot machines at this particular casino were paying back 95%. I said something like, "so they keep $5.00 of every $100.00 you put in". They didn't want to talk to me after that. :happy
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Re: I have to share this quote

Post by whaleknives »

jebmke wrote:
whaleknives wrote:Weren't they overlooking margins, shorts, and other leverage?
That was the point of the statement I think -- I believe the reference was to a vanilla long equity hold. Margins, shorts, options ... could end up negative.
I think I should have put a :D after that comment. :D
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Re: I have to share this quote

Post by pkcrafter »

tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
Thanks, definitely a post-worthy quote.

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Re: I have to share this quote

Post by Pretzel lover »

A joke to tell your broker (if you haven't kicked him/her to the curb yet):

Q: How can I make a million dollars in the stock market?

A: Start with two million!
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Re: I have to share this quote

Post by Doom&Gloom »

Abe wrote:I was talking to some people who were going to a nearby casino. They were excited because the slot machines at this particular casino were paying back 95%. I said something like, "so they keep $5.00 of every $100.00 you put in". They didn't want to talk to me after that. :happy
I was at a nearby casino not long after they had opened in my state and overheard a guy commenting to nobody in particular [as he pointed to a sign claiming that certain slot machines returned 97%], "I can't believe they put up big, bright signs warning people that they are keeping 3% of every dollar you cycle through them. And people can't wait to put their money in them!"
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Re: I have to share this quote

Post by arcticpineapplecorp. »

Doom&Gloom wrote:
Abe wrote:I was talking to some people who were going to a nearby casino. They were excited because the slot machines at this particular casino were paying back 95%. I said something like, "so they keep $5.00 of every $100.00 you put in". They didn't want to talk to me after that. :happy
I was at a nearby casino not long after they had opened in my state and overheard a guy commenting to nobody in particular [as he pointed to a sign claiming that certain slot machines returned 97%], "I can't believe they put up big, bright signs warning people that they are keeping 3% of every dollar you cycle through them. And people can't wait to put their money in them!"
This is interesting along with Abe's quote about the 95% payback rate. Perhaps people just aren't very good with math or they get confused. Hearing or reading "returned 97%" could people actually be thinking they're getting a 97% rate of return (as in making 97% on their money)? Thinking about this reminds me of how many people buy variable indexed annuities and swear they're getting 8% per year, never understanding that much of that (return) is merely their own money they're getting back. Much of the real "return" goes to the insurer. Guess there's different usages for the word "return". Return of your money is very different from return on your money.
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Re: I have to share this quote

Post by Doom&Gloom »

arcticpineapplecorp. wrote:
Doom&Gloom wrote:
Abe wrote:I was talking to some people who were going to a nearby casino. They were excited because the slot machines at this particular casino were paying back 95%. I said something like, "so they keep $5.00 of every $100.00 you put in". They didn't want to talk to me after that. :happy
I was at a nearby casino not long after they had opened in my state and overheard a guy commenting to nobody in particular [as he pointed to a sign claiming that certain slot machines returned 97%], "I can't believe they put up big, bright signs warning people that they are keeping 3% of every dollar you cycle through them. And people can't wait to put their money in them!"
This is interesting along with Abe's quote about the 95% payback rate. Perhaps people just aren't very good with math or they get confused. Hearing or reading "returned 97%" could people actually be thinking they're getting a 97% rate of return (as in making 97% on their money)? Thinking about this reminds me of how many people buy variable indexed annuities and swear they're getting 8% per year, never understanding that much of that (return) is merely their own money they're getting back. Much of the real "return" goes to the insurer. Guess there's different usages for the word "return". Return of your money is very different from return on your money.
No. I think the mistake is that many (most?) people think that xx% return means of the money you walk into the casino with or plan to gamble. So the impression is that if they intend to gamble $500, for example, they will lose $15. If they bother to do any math at all. They fail to realize that their $500 is cycled over-and-over through the machine with $15 (on average) being seized every cycle.

If you want a real glimpse into the mathematical abilities of mainstream gamblers, sit down at a blackjack table and begin a discussion of 6:5 blackjack vs 3:2 blackjack. Those ratios refer to the payouts when the player receives a natural 21 (first two cards dealt). Being paid 3:2 is vastly superior, but when casinos introduced 6:5 payouts 15 years or so ago, some players thought that was to their advantage. Not that some casinos didn't try to make it seem that way. That one change in the rules increases the house edge of the game by ~1%--put another way, the house edge becomes 3X as large as with 3:2. There are countless examples of gamblers' poor grasp of basic math in casinos.
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Re: I have to share this quote

Post by mindboggling »

As the poet Charles Bukowski said:

"...How are you going to tell the dreamer there's a 15% take on the dream?
He'll just laugh and say, Is that all?"

He was referring to horse racing, but you get the idea.

steve
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Re: I have to share this quote

Post by randomguy »

Doom&Gloom wrote:
Abe wrote:I was talking to some people who were going to a nearby casino. They were excited because the slot machines at this particular casino were paying back 95%. I said something like, "so they keep $5.00 of every $100.00 you put in". They didn't want to talk to me after that. :happy
I was at a nearby casino not long after they had opened in my state and overheard a guy commenting to nobody in particular [as he pointed to a sign claiming that certain slot machines returned 97%], "I can't believe they put up big, bright signs warning people that they are keeping 3% of every dollar you cycle through them. And people can't wait to put their money in them!"
My local movie theatre, comedy club,... keep 100% of every dollar I cycle through them. I am still happy to give them money.:)
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Re: I have to share this quote

Post by willthrill81 »

tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
The PEs have been 'high' for 25 years. And if the next 25 years produce the returns of the last 25, I'll be a very happy investor.
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Re: I have to share this quote

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It's just the ER that the casino charges.
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Re: I have to share this quote

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Abe wrote:I was talking to some people who were going to a nearby casino. They were excited because the slot machines at this particular casino were paying back 95%. I said something like, "so they keep $5.00 of every $100.00 you put in". They didn't want to talk to me after that. :happy
Heck, in my book, that's a sterling return. When I go to a casino, typically the machines keep every dollar I put in! :annoyed
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Re: I have to share this quote

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tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
No better quote to hammer in 'utility of wealth'
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Re: I have to share this quote

Post by Vanguard Fan 1367 »

willthrill81 wrote:
tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
The PEs have been 'high' for 25 years. And if the next 25 years produce the returns of the last 25, I'll be a very happy investor.
Our hero, Jack Bogle, predicts that the returns will be slimmer the next 25 years. It is another reason he gives for considering low fee index investing. If your return is maybe 5 percent and the fees take one to two percent of that you lose 2/5 of your increase, 40 percent.
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Re: I have to share this quote

Post by fishandgolf »

I have some relatives that always seem to WIN when they go to the casino......I always like to tell them...........

There are two types of people that leave Las Vegas...........Losers and Liars!
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Re: I have to share this quote

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SGM wrote:
tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
I know a lot of gamblers and they do come up with some peculiar notions. So are you taking profits off the table now before the next downturn? :happy
Not sure if that was sarcastic, ironic, or what but I will answer.

That's one thing rebalancing does (sorta). So, yes, I do that occasionally, at last yearly. My yearly RMD puts me in a position where it only makes sense to move the money from the IRA to the taxable account in a way to maintain my target AA. Best performing assets are skimmed to double down on poorer performing assets.
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Re: I have to share this quote

Post by Doom&Gloom »

fishandgolf wrote:I have some relatives that always seem to WIN when they go to the casino......I always like to tell them...........

There are two types of people that leave Las Vegas...........Losers and Liars!
Here's an interesting social psychology experiment you can do anytime you are in a casino:
Ask random people (or close friends--it makes no difference) how they are doing [with their gambling].
My prediction is that the overwhelming majority will say, "I'm down a little." It is an amazing (to me) phenomenon.
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Re: I have to share this quote

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Doom&Gloom wrote:No. I think the mistake is that many (most?) people think that xx% return means of the money you walk into the casino with or plan to gamble. So the impression is that if they intend to gamble $500, for example, they will lose $15. If they bother to do any math at all. They fail to realize that their $500 is cycled over-and-over through the machine with $15 (on average) being seized every cycle.
In general, I think you're giving most people too much credit with respect to the degree of their attempts to be rational about their gambling. I doubt most even think that far.

It's the other guys who are going to lose money. I'm going to win it big...ok, maybe it won't be this time, but eventually I'm going to hit the jackpot, enough to make up for all those other times I lost money. If I don't play, all those other times I lost will have been for nothing.

I've heard a lot of soldiers experience this sort of rationalization - they say the upcoming attack is going to be a bad one, and we might have 50% casualties. Boy do I feel bad for the guy next to me. Sounds like his number is up.

The difference, of course, is the soldier doesn't really have a choice, so suppressing acknowledgement of the risk is more of a coping mechanism for things largely beyond his control. Thinking about it rationally probably doesn't make things better.
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Re: I have to share this quote

Post by SGM »

bertilak wrote:
SGM wrote:
tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
I know a lot of gamblers and they do come up with some peculiar notions. So are you taking profits off the table now before the next downturn? :happy
Not sure if that was sarcastic, ironic, or what but I will answer.

That's one thing rebalancing does (sorta). So, yes, I do that occasionally, at last yearly. My yearly RMD puts me in a position where it only makes sense to move the money from the IRA to the taxable account in a way to maintain my target AA. Best performing assets are skimmed to double down on poorer performing assets.
No sarcasm intended just curiosity. I have been a stay the course type of investor, but I occasionally felt a little short lived twinge when I see a large paper loss like in 2008 and realize I could have bought a beach house prior to the paper losses. I stayed the course as I didn't really "need the money".

The addicted gamblers I have known from childhood are incredibly poor now, were big spenders and never saved anything in their lifetimes. There is no resemblance between those with a severe affliction and BH investors from my point of view.

I do agree with you about skimming winners to maintain an AA. I am confused as why you require moving money from an IRA to taxable for AA target? Maybe I am not thinking about this because I only have Roths and taxable and have no reason to spend from a Roth until much later n life.
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Re: I have to share this quote

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SGM wrote:I am confused as why you require moving money from an IRA to taxable for AA target? Maybe I am not thinking about this because I only have Roths and taxable and have no reason to spend from a Roth until much later n life.
It's the R in RMD: REQUIRED. "They made me do it!"

I am required by the IRS to take a specific amount out of my IRA every year but am not required to spend it so I re-invest it and the taxable account is where I do that.

It's a little complex because I need to satisfy four constraints:
  1. Total amount taken from IRA as mandated by the IRS
  2. Withhold 10% of (a) for taxes (as opted by me) leaving the rest to be reinvested in the taxable account.
  3. Only purchase equities in the taxable account for reasons of tax efficiency.
  4. Maintain overall AA. This involves swapping money between asset classes in the IRA.
It takes a bit of planning.
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Re: I have to share this quote

Post by abuss368 »

Nice. Stay the course and tune out the noise!
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Re: I have to share this quote

Post by SGM »

bertilak wrote:
SGM wrote:I am confused as why you require moving money from an IRA to taxable for AA target? Maybe I am not thinking about this because I only have Roths and taxable and have no reason to spend from a Roth until much later n life.
It's the R in RMD: REQUIRED. "They made me do it!"

I am required by the IRS to take a specific amount out of my IRA every year but am not required to spend it so I re-invest it and the taxable account is where I do that.

It's a little complex because I need to satisfy four constraints:
  1. Total amount taken from IRA as mandated by the IRS
  2. Withhold 10% of (a) for taxes (as opted by me) leaving the rest to be reinvested in the taxable account.
  3. Only purchase equities in the taxable account for reasons of tax efficiency.
  4. Maintain overall AA. This involves swapping money between asset classes in the IRA.
It takes a bit of planning.
Oops I didn't know you were in the RMD stage already. What you write is well thought out as usual. You have given me yet another reason I am glad I converted all tIRAs to Roth accounts.....simplification.
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Re: I have to share this quote

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Vanguard Fan 1367 wrote:
willthrill81 wrote:
tadamsmar wrote:This is a quote about gambling, but it perhaps it also applies to staying the course when the PEs are high:

"I hope I break even, I can really use the money." -- averagefool, internet commenter.
The PEs have been 'high' for 25 years. And if the next 25 years produce the returns of the last 25, I'll be a very happy investor.
Our hero, Jack Bogle, predicts that the returns will be slimmer the next 25 years.
That may be and it might not be. There are many on this site who tout the virtues of valuations as a means of predicting long-term returns, but the former has never explained more than 40% of the variance in the latter (meaning the majority of the variation is not explained by valuations), and even that level of explanation only occurs at about 10 years into the future. Before and after then, the amount of explained variation is even less.

Even more so, since 1992 when valuations have been in the historically 'high' range (with only a brief exception in 2008-2009), the predictive ability of valuations has shown itself to be even worse than predicting returns prior to then. And cumulative returns over the last 25 years have been good.
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Re: I have to share this quote

Post by tadamsmar »

Vanguard Fan 1367 wrote: Our hero, Jack Bogle, predicts that the returns will be slimmer the next 25 years.
Bogle tells us to only invest in US stocks. But lots of international stocks have lower PE10s:

http://www.starcapital.de/research/stockmarketvaluation

He argues that the US firms have international holdings, but they don't have the lower PE10s, all holdings are not equal when it comes to P10.

Perhaps returns will be fatter if you don't take his advice. No?
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Re: I have to share this quote

Post by NibbanaBanana »

tadamsmar wrote:
Vanguard Fan 1367 wrote: Our hero, Jack Bogle, predicts that the returns will be slimmer the next 25 years.
Bogle tells us to only invest in US stocks. But lots of international stocks have lower PE10s:

http://www.starcapital.de/research/stockmarketvaluation

He argues that the US firms have international holdings, but they don't have the lower PE10s, all holdings are not equal when it comes to P10.

Perhaps returns will be fatter if you don't take his advice. No?
That's interesting because he, at one time, recommended 20-50% international as I recall. And Vanguard recommends 20-40% now I think. Even the great John Bogle changes his thinking I guess. I have only read his classic "Bogle on Mutual Funds". That is the best book I have ever read and helped me immeasurably. It's interesting to go back and reread that book now though. That was when treasuries were yielding 7-8%.
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Re: I have to share this quote

Post by willthrill81 »

NibbanaBanana wrote:
tadamsmar wrote:
Vanguard Fan 1367 wrote: Our hero, Jack Bogle, predicts that the returns will be slimmer the next 25 years.
Bogle tells us to only invest in US stocks. But lots of international stocks have lower PE10s:

http://www.starcapital.de/research/stockmarketvaluation

He argues that the US firms have international holdings, but they don't have the lower PE10s, all holdings are not equal when it comes to P10.

Perhaps returns will be fatter if you don't take his advice. No?
That's interesting because he, at one time, recommended 20-50% international as I recall. And Vanguard recommends 20-40% now I think. Even the great John Bogle changes his thinking I guess. I have only read his classic "Bogle on Mutual Funds". That is the best book I have ever read and helped me immeasurably. It's interesting to go back and reread that book now though. That was when treasuries were yielding 7-8%.
For me, the most convincing argument against international equities is that while they have beaten U.S. equities in certain periods of time, over the long-term, they have significantly underperformed the U.S. market (about 2% over the last 100+ years). Maybe the future will be different, and maybe the period of time that you invest in them will be one of those in which they perform better, but it seems to me like a gamble where the odds are stacked against you.
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