Very confused with the current market

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nedsaid
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Re: Very confused with the current market

Post by nedsaid » Mon Jun 18, 2018 8:40 am

capcase wrote:
Sun Jun 17, 2018 9:57 pm
I remember Warren buffet once said: buy the dips and value investing.

the stock market always go higher due to inflation in the long term, however, should not we buy the dips? Are those crazy tech stocks still value investing ? I am expecting the dips.
Economic growth is the big driver of the stock market. Inflation is a driver too but even that is driven by growth in the economy and the country getting wealthier and wealthier.
A fool and his money are good for business.

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David Jay
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Re: Very confused with the current market

Post by David Jay » Mon Jun 18, 2018 8:42 am

Here is a link to the Boglehead Philosophy: https://www.bogleheads.org/wiki/Boglehe ... philosophy

Coming on this forum and asking us not to suggest BH philosophy seems counter-productive.

Our approach is one of humility. We don't know what the market is going to do. And we don't pretend to know, unlike the talking heads on the financial channels (and financial print media). Instead, we set an asset allocation that we can "live with" through up markets and down markets and then stay the course.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Flymore
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Re: Very confused with the current market

Post by Flymore » Mon Jun 18, 2018 8:46 am

To time the market is simple.
When I buy, the market will go down and when I sell the market will go up. :shock:
Simply do opposite of what I do.
Since I'm not buying and selling anymore, (retired) you see the market has stabilized. :D

Xrayman69
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Re: Very confused with the current market

Post by Xrayman69 » Mon Jun 18, 2018 9:00 am

Roulette wheel anaology: lands on black 10x consecutively. Next Soin has the exact same odds of red vs black regardless of the prior spins. Throw in two greens and the odds of red or black are less then 50:50.

Odds at the roulette wheel take effect over long periods of time and will normalize to statistical avergaes but the variablility of various periods is exactly that, can be quite variable and not obey “expected long term averages”.

Market timing can be equated to individual investors psychological variability and risk tolerance or comfort. Investing regularly over the past 70-80years has been a winning strategy for those generations. Who know what the next 70-80 years will bring with regards to variability and timing for which much can be influenced in the short term by market psychology and group think. Warren Buffett, be fearful when everyone is exuberant and be greedy when everyone is fearful (to this effect not a direct quote).

In short I have no inside knowledge except what is my own personal time frame. Otherwise slow and steady ahead with weekly, monthly, and annual contributions in low cost and diversified funds.

To the OP, I too fully expect a significant pullback or correction - again, and in fact likely several that will feel painful. However, dollar cost averaging and low cost funds seems to be historically safe(r) over time compared to market timing.

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EyeYield
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Re: Very confused with the current market

Post by EyeYield » Mon Jun 18, 2018 9:01 am

Very confused with the current market
When were you not confused about the market? Let’s start there.

What’s confusing to me is why you’re confused now. The reasons you have given thus far don’t exist.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

alex_686
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Re: Very confused with the current market

Post by alex_686 » Mon Jun 18, 2018 9:09 am

international001 wrote:
Mon Jun 18, 2018 3:20 am
Nothing is black and white
Now CAPE is high and the curve yield is flattened

Doesn't it means the probability of a recession is higher than 5 years ago? Wouldn't this (just probability) hold by backtesting?
CAPE does not indicate if the market is overvalued, nor is it designed to. Back-testing shows no statistical power.

A inverted yield curve is a valid signal. Do we have a inverted yield curve? Sure, it is flat. Anyways, we could have a recession but that does not mean that the market will go down. Then you have to time the whole thing.

vested1
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Re: Very confused with the current market

Post by vested1 » Mon Jun 18, 2018 9:26 am

capcase wrote:
Sun Jun 17, 2018 9:57 pm
I am expecting the dips.
No, you are predicting (guessing about) the dips. Another word for that is gambling.

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HomerJ
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Re: Very confused with the current market

Post by HomerJ » Mon Jun 18, 2018 9:56 am

capcase wrote:
Sun Jun 17, 2018 9:57 pm
I remember Warren buffet once said: buy the dips and value investing.

the stock market always go higher due to inflation in the long term, however, should not we buy the dips? Are those crazy tech stocks still value investing ? I am expecting the dips.
Warren Buffet didn't say "Anticipate the dips and get out before they happen".

Here's the real thing though... You don't need to avoid the crashes to make a good long-term return in the stock market...

The long-term nominal average return of 10%? That INCLUDES the crashes. Read that again. You didn't have to avoid 2000 or 2008 to make good money in the stock market. You didn't even have to buy the dips. Just buying and holding paid off.
The J stands for Jay

Crisium
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Re: Very confused with the current market

Post by Crisium » Mon Jun 18, 2018 10:17 am

What's your time horizon that makes you so prone to market timing rather than buy-and-hold?

Buying an SP500 fund today at 2000 or 2008 peak prices would be a wonderful discount that we'd all love to do. 2018 prices are way higher. But there will be a future date when you will wish you could buy at peak 2018 prices. If you do not believe that the market will go up (at least in long term 15+ years) then why invest in it? I expect the SP500 to be 3000, 4000, 5000, etc in my lifetime before I retire. Why should I be fearful of buying it at ~2700 just because it could drop below that at any time within the next decade?

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Re: Very confused with the current market

Post by roymeo » Mon Jun 18, 2018 10:28 am

capcase wrote:
Sun Jun 17, 2018 2:34 pm
- It has been history higher and higher.
- the fundamental law says it will recycle every 10 years
- I had been on cash for 10 months

Please don't tell me I should not time the market.

What's going wrong?
The market can keep going up longer than your patience.
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FOGU
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Re: Very confused with the current market

Post by FOGU » Mon Jun 18, 2018 10:52 am

alex_686 wrote:
Sun Jun 17, 2018 10:13 pm
FOGU wrote:
Sun Jun 17, 2018 4:50 pm
Just downloaded the free Kindle version. I was looking for a new book. A new free book. Thank you for the citation.
Can you report back here on what you think? I think it is a great book and I have recommended it before, but it is a bit dense and technical.
You bet.
~ Don't just do something. Sit there. ~

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Re: Very confused with the current market

Post by WhiteMaxima » Mon Jun 18, 2018 11:05 am

100% in cash? Why not 50/50. Yes the equity to very rich and could probably loose 20% tomorrow. if you look back 10 years from now, any peak then is a good entry point. It is how long you have in the market not when. 50/50 is a very neutral point to be in this market.

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corn18
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Re: Very confused with the current market

Post by corn18 » Mon Jun 18, 2018 11:08 am

I'm betting the market will go down and up.

Image

Carol88888
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Re: Very confused with the current market

Post by Carol88888 » Mon Jun 18, 2018 11:23 am

The Deloite article article was very good. I think of predicting the next recession like picking out the right lotto numbers. There is a set of numbers but there are so many ways these numbers can combine that getting it right is really pure chance - not knowledge or skill.

Just remember: How many people foresaw that we would have 2 steep market declines (2001 & 2008) within ten years? So how many people do you think will time the next one?

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Re: Very confused with the current market

Post by WhiteMaxima » Mon Jun 18, 2018 11:26 am

corn18 wrote:
Mon Jun 18, 2018 11:08 am
I'm betting the market will go down and up.

Image
I see what you saying. But investing is not gambling. No one can time it 100% of the time. It could loose 20% in one day and rebound 25% the next day. Being through 2000 dot come bust and 2008 big recession, we learned that stay in course not guessing what's happening tomorrow or next week. If you look forward 10 years or further, today will be the best time to invest.

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Re: Very confused with the current market

Post by MotoTrojan » Mon Jun 18, 2018 11:30 am

WhiteMaxima wrote:
Mon Jun 18, 2018 11:26 am
corn18 wrote:
Mon Jun 18, 2018 11:08 am
I'm betting the market will go down and up.

Image
I see what you saying. But investing is not gambling. No one can time it 100% of the time. It could loose 20% in one day and rebound 25% the next day. Being through 2000 dot come bust and 2008 big recession, we learned that stay in course not guessing what's happening tomorrow or next week. If you look forward 10 years or further, today will be the best time to invest.
While I agree via my actions, the US has had expedient rebounds. See Japan.

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Re: Very confused with the current market

Post by chevca » Mon Jun 18, 2018 12:11 pm

Interesting thread the OP started 5 years ago...

viewtopic.php?f=1&t=115916&p=1687411#p1687411

I have to wonder when the OP was ever certain about the market?

WhiteMaxima
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Re: Very confused with the current market

Post by WhiteMaxima » Mon Jun 18, 2018 12:26 pm

If you are not certain about tomorrow, why not go 50/50? 100 in cash, you can earn 2.9% by 10 year treasure bond, not bad if you fear of losing money in the short run. I am pretty much sure that equity will return more than 2.9% plus dividend, so the total return before inflation is around 4 to 5% every year.

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Re: Very confused with the current market

Post by gmaynardkrebs » Mon Jun 18, 2018 12:35 pm

capcase wrote:
Sun Jun 17, 2018 2:34 pm
- It has been history higher and higher.
- the fundamental law says it will recycle every 10 years
- I had been on cash for 10 months

Please don't tell me I should not time the market.

What's going wrong?
Well done. No BHer can resist clickbait like this.

WhiteMaxima
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Re: Very confused with the current market

Post by WhiteMaxima » Mon Jun 18, 2018 12:46 pm

There is nothing wrong to hold 100% cash. CD can earn you 1.5% now. It's your money, you should handle it according to you risk tolerance. Equity market always has risk, even during a bull market.

markcoop
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Re: Very confused with the current market

Post by markcoop » Mon Jun 18, 2018 2:13 pm

First, let me say I'm not a fan of market timing. However, in general, I think alot of people are at least feeling the same sentiment as the OP - eventually there will be a correction. The longer the market climbs, the more I will be expecting it. One question is should one invest according to those emotions? It is certainly easy to beat one's chest and say no. Even though I don't want to admit it, I do it a little. For example, in anticipation of a bear market I have thought about where I would get the money to buy on a large dip. In fact, sometimes when the market hits an all-time high I will take a little more off the table. For example, if my AA is 60-40, I may go to 55-45. Still close to my AA, but over-re-balancing a bit. I do realize this is a little bit of market timing. I like to view this as nibbling at the edges. So, I'm not a fan, but I do get a little sucked into the temptation. I wonder how many people here criticizing it do it on some level?
Mark

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Pajamas
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Re: Very confused with the current market

Post by Pajamas » Mon Jun 18, 2018 2:23 pm

David Jay wrote:
Mon Jun 18, 2018 8:29 am
How about if Jack Bogle tells you:

“The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly 50 years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently."
In all fairness, he is very biased towards index funds. :D

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Re: Very confused with the current market

Post by international001 » Mon Jun 18, 2018 3:40 pm

alex_686 wrote:
Mon Jun 18, 2018 9:09 am
international001 wrote:
Mon Jun 18, 2018 3:20 am
Nothing is black and white
Now CAPE is high and the curve yield is flattened

Doesn't it means the probability of a recession is higher than 5 years ago? Wouldn't this (just probability) hold by backtesting?
CAPE does not indicate if the market is overvalued, nor is it designed to. Back-testing shows no statistical power.

A inverted yield curve is a valid signal. Do we have a inverted yield curve? Sure, it is flat. Anyways, we could have a recession but that does not mean that the market will go down. Then you have to time the whole thing.
Don't you think that high CAPE makes a recession more likely than a low CAPE. At all? Did you look at the last 2 recessions?

Inverted yield curve starts by becoming flat

I'm not saying we are going to have a recession, just that the likelihood has increased

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Re: Very confused with the current market

Post by alex_686 » Mon Jun 18, 2018 3:51 pm

international001 wrote:
Mon Jun 18, 2018 3:40 pm
Don't you think that high CAPE makes a recession more likely than a low CAPE. At all? Did you look at the last 2 recessions?
What about the dozen times when CAPE hit new highs and nothing happened? Also, this does touch on reverse causality. Often the economy dips, then the stock market. It is rare that the stock market dips then the economy. No statistical explanatory power. CAPE does have statistical power in predicting the Equity Risk Premium and future returns.

On the flat yield curve, I don't think it means what you think it means. There are few historical periods or economic theories on what happens when you exit a period when real rates where around zero. My opinion is more benign but I do think it is a legitimate area for discussion.

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Re: Very confused with the current market

Post by CyclingDuo » Mon Jun 18, 2018 4:46 pm

capcase wrote:
Sun Jun 17, 2018 2:49 pm
show me the 80 years bull?

1990-2000-2008 all most every ten years
Real returns since 1802....

Image

:beer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: Very confused with the current market

Post by CyclingDuo » Mon Jun 18, 2018 5:00 pm

chevca wrote:
Mon Jun 18, 2018 12:11 pm
Interesting thread the OP started 5 years ago...

viewtopic.php?f=1&t=115916&p=1687411#p1687411

I have to wonder when the OP was ever certain about the market?
Sadly, it is why too many fall into the "average investor" returns that the orange column shows below in the JPMorgan report (available on an annual basis):

Image

https://am.jpmorgan.com/us/en/asset-man ... AQodabELoA
"Everywhere is within walking distance if you have the time." ~ Steven Wright

alex_686
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Re: Very confused with the current market

Post by alex_686 » Mon Jun 18, 2018 6:21 pm

international001 wrote:
Mon Jun 18, 2018 3:40 pm
Don't you think that high CAPE makes a recession more likely than a low CAPE. At all? Did you look at the last 2 recessions?
Let me soften and deepen my response to this.

Why would a high PE ratio - either backwards, forwards, or CAPE 10 - signal a upcoming recession? What is the casual link. I can note correlations between the stock market and hemlines or with NFC/AFC Superbowl wins. The PE ratio packs in 4 different indicators - expected return, risk, etc. If we have stable low real rates then P/E should be high. Or maybe we are in a safer period. or maybe we are irrational.

The point being that a PE ratio by itself does not indicate if the market is high or low. It is a relative measure. For it to be high it needs to high in relationship to something else. The Fed Model and the Yardeni model are 2.

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Re: Very confused with the current market

Post by MotoTrojan » Mon Jun 18, 2018 6:29 pm

CyclingDuo wrote:
Mon Jun 18, 2018 5:00 pm
chevca wrote:
Mon Jun 18, 2018 12:11 pm
Interesting thread the OP started 5 years ago...

viewtopic.php?f=1&t=115916&p=1687411#p1687411

I have to wonder when the OP was ever certain about the market?
Sadly, it is why too many fall into the "average investor" returns that the orange column shows below in the JPMorgan report (available on an annual basis):

Image

https://am.jpmorgan.com/us/en/asset-man ... AQodabELoA
Maybe the key is the annual basis but I’m struggling to make sense of this. People using poor strategy can clearly under perform but that means someone else is outperforming. Fees are a factor but shouldn’t be this big of course. How can the average investor do so poorly?

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Re: Very confused with the current market

Post by david1082b » Mon Jun 18, 2018 7:07 pm

MotoTrojan wrote:
Mon Jun 18, 2018 6:29 pm
Maybe the key is the annual basis but I’m struggling to make sense of this. People using poor strategy can clearly under perform but that means someone else is outperforming. Fees are a factor but shouldn’t be this big of course. How can the average investor do so poorly?
I imagine it's a combination of most non-index funds underperforming most of the time, with high investment fees and poor timing choices - buy high sell low, chase the next hot fund or "style" and buy it just at the wrong time, then ditch it after it does badly. Loads of funds also get closed down due to poor performance, necessitating moving to a new sets of "high flyers" on a regular basis for some people who are captured by questionable advisors.

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Re: Very confused with the current market

Post by CyclingDuo » Mon Jun 18, 2018 7:53 pm

MotoTrojan wrote:
Mon Jun 18, 2018 6:29 pm
Maybe the key is the annual basis but I’m struggling to make sense of this. People using poor strategy can clearly under perform but that means someone else is outperforming. Fees are a factor but shouldn’t be this big of course. How can the average investor do so poorly?
For all the reasons we hear about on these forums all the time - failure to stay the course! Selling out of fear. Buying high and selling low. Too many are in and out of the market based on emotion, panic, fear and when you are not invested on the big days when the market goes up - returns drop significantly. An investor may think they are better than average, and they may say they are long term investors who are doing well. However, if we were really able to take a peek at their brokerage statement history, we might find the honest truth as to why their returns were so horrible compared to the market. Far too many trade in and out trying to "guess" the direction of the market, when the next recession is coming, when the top "is in" and on and on. One cannot even begin to count how many posts we've all read here at BH to that effect. It all leads to returns that show why the average investor does so poorly. The loss aversion recency bias from both the 2000-02 period and the 2008-09 period will continue to impact many investors and perhaps lower their returns for the remainder of their investing days as a result.

Page 68 of the latest JPM guide...

Image

"Plan to stay invested," recommends JPM. "Trying to time the market is extremely difficult to do consistently. Market lows often result in emotional decision making. Investing for the long-term while managing volatility can result in a better retirement outcome."

Standard Jack Bogle stuff with regard to the ups and downs of the market for those that are invested: "Stay the course." "Do nothing." "Nobody knows nothing." And on and on. How many thousands and thousands of times has Jack uttered these types of comments when he wears his financial educator's hat(s)?

Missing out on just the 10 best days can dramatically lower your returns. How do people end up in the "average investor" orange column from the graphic in my previous post that JPM Morgan includes in their report? Good chance their fear, panic, or emotion has them selling and not only missing the best 10 days, but also the 20, or best 30, or best 50 days sitting on the sidelines.

I love Sam Ro's title of this article he wrote for Business Insider back in 2014:

CHART OF THE DAY: How A Few Poorly-Timed Trades Can Torpedo Two Decades Of Healthy Returns

Image
http://www.businessinsider.com/cost-of- ... 500-2014-3

Think about that implication? Torpedo two decades of healthy returns...

If anything, during the wealth accumulation years we should all have a huge dose of fear of missing out (FOMO) as our guiding force as we contribute to our retirement plans, IRA's, taxable accounts. Fear of missing the top 10 days. Fear of missing the top 20 days. Fear of missing the top 30 days. Fear of missing the top 50 days.

Loss aversion leads to being one of the orange investors below...

Image
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Re: Very confused with the current market

Post by bottlecap » Mon Jun 18, 2018 8:34 pm

MotoTrojan wrote:
Mon Jun 18, 2018 6:29 pm
CyclingDuo wrote:
Mon Jun 18, 2018 5:00 pm
chevca wrote:
Mon Jun 18, 2018 12:11 pm
Interesting thread the OP started 5 years ago...

viewtopic.php?f=1&t=115916&p=1687411#p1687411

I have to wonder when the OP was ever certain about the market?
Sadly, it is why too many fall into the "average investor" returns that the orange column shows below in the JPMorgan report (available on an annual basis):

Image

https://am.jpmorgan.com/us/en/asset-man ... AQodabELoA
Maybe the key is the annual basis but I’m struggling to make sense of this. People using poor strategy can clearly under perform but that means someone else is outperforming. Fees are a factor but shouldn’t be this big of course. How can the average investor do so poorly?
Everything else on the chart is "outperforming" from the average investor that sells low and buys high.

Thanks average investor!

JT

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Re: Very confused with the current market

Post by WhiteMaxima » Mon Jun 18, 2018 10:08 pm

Treat buying stock like buying a business but gambling chips.

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onthecusp
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Re: Very confused with the current market

Post by onthecusp » Mon Jun 18, 2018 10:51 pm

corn18 wrote:
Mon Jun 18, 2018 11:08 am
I'm betting the market will go down and up.

Image
If you average the last 4 bull market lengths in that chart you get 9.9 years! Going back to the 70s! Brilliant! I guess that means that if I sell after a 10 year run on average I would be right. Poorer, but right ...... in a way ...... on average. I think I'll go back to my beer. :sharebeer

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Re: Very confused with the current market

Post by TX_Drew » Mon Jun 18, 2018 11:17 pm

Drawbacks of market timing: 1) need to sell at right time, 2) need to buy at right time, and 3) REALIZED capital gains taxes! So you have to be right twice, and make more to offset the taxes. I guess some people can do this, but it’s a tall order.

If you are accumulating wealth, then you look forward to a correction to buy more. If you are retired, then you control your risk via asset allocation.

Final point, a lot of people on here expecting a correction. Maybe this means we still aren’t in the irrational exuberance phase of a prolonged bull market. But I really have no idea about next month or next years prices; but I’m buying twice a month for quite a while longer.

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Re: Very confused with the current market

Post by wrongfunds » Tue Jun 19, 2018 10:09 am

oldcomputerguy wrote:
Mon Jun 18, 2018 7:24 am
capcase wrote:
Sun Jun 17, 2018 2:49 pm
1990-2000-2008 all most every ten years
You're depending on a twenty-year time period to extrapolate a general law.

Take a look at this graph from macrotrends.net. It shows the history of the S&P 500 back to 1927. It's pretty obvious that there is no ten-year cycle (or any other regular pattern) in the data.

Here's another presentation of the same timeframe, showing bull and bear market durations in the annotations. It shows durations of bull markets of 3.7, 13.9, 15.1, 6.4, 2.5, 12.9, 12.8, 5.1, and (the current) 9.1 years.

Ample evidence that there is no "fundamental law" calling for markets to crash every ten years.
Those are great charts! Now all I have to do is to use them and predict the next recession using fancy mathematics. I am sure I am smart enough to do that :-)

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corn18
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Re: Very confused with the current market

Post by corn18 » Tue Jun 19, 2018 10:12 am

Another cool chart for the 60/40 crowd:

Image

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Re: Very confused with the current market

Post by livesoft » Tue Jun 19, 2018 10:40 am

TX_Drew wrote:
Mon Jun 18, 2018 11:17 pm
Drawbacks of market timing: 1) need to sell at right time, 2) need to buy at right time, ...
These statements are commonly made about market timing, but they are completely bogus and don't really help in any discussion dissing market timing.

To wit, market timing doesn't need to be perfect, so one doesn't need to sell at the right time, nor does one need to buy at the right time. One can do a little bit of either, or one can simply buy at an OK time sometimes, or sell at an OK time sometimes.

Indeed, the premise of doing absolutely no market timing at any time shows that one can simply buy any time and sell any time and get what one gets. Clearly, somebody not trying to do any market timing doesn't shoot themselves in the foot and destroy their portfolio even though they have many chances of buying at the wrong time and many chances of selling at the wrong time.
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Re: Very confused with the current market

Post by MossySF » Tue Jun 19, 2018 11:31 am

There's a lot of psychology here. It's easy to say ride it out when your portfolio is mostly from regular monthly/quarterly contributions over the years.

But if we ignore tax consequences (e.g. tax deferred accounts), not selling is the same decision as buying. Hence if we flip the scenario around -- let's say you just sold your small business for an amount equal to your existing portfolio. (Example, 1M portfolio and now you have 1M cash.) Now what? Do you have the guts to put it all in at once after a 9 year bull market?

Not me. What I'd probably do any holding that I would not incur tax on (tax deferred, tax free, positions with losses), I'd sell stock to buy bonds. Perhaps what used to be a 75/25 portfolio would then become 60/40 or 50/50. And then the 1M, I'd put on an automatic 3-5 year DCA schedule so at the end of the period, I might be back at my original 75/25 -- hopefully with many chunks of it buying with lower valuations.

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Re: Very confused with the current market

Post by hap_ca » Tue Jun 19, 2018 11:37 am

MossySF wrote:
Tue Jun 19, 2018 11:31 am
There's a lot of psychology here. It's easy to say ride it out when your portfolio is mostly from regular monthly/quarterly contributions over the years.

But if we ignore tax consequences (e.g. tax deferred accounts), not selling is the same decision as buying. Hence if we flip the scenario around -- let's say you just sold your small business for an amount equal to your existing portfolio. (Example, 1M portfolio and now you have 1M cash.) Now what? Do you have the guts to put it all in at once after a 9 year bull market?

Not me. What I'd probably do any holding that I would not incur tax on (tax deferred, tax free, positions with losses), I'd sell stock to buy bonds. Perhaps what used to be a 75/25 portfolio would then become 60/40 or 50/50. And then the 1M, I'd put on an automatic 3-5 year DCA schedule so at the end of the period, I might be back at my original 75/25 -- hopefully with many chunks of it buying with lower valuations.
Why not execute that strategy now? If you think the markets are overvalued and will crash or at least be cheaper in the future you can sell 50% of your stock allocations in your tax deferred accounts today. Hold that in a money market and set up automatic exchanges to DCA over the course of 3-5 years.

kaeltor
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Re: Very confused with the current market

Post by kaeltor » Tue Jun 19, 2018 11:38 am

corn18 wrote:
Mon Jun 18, 2018 11:08 am
I'm betting the market will go down and up.

Image
Very good picture, how can I see a bigger size of it?

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MossySF
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Re: Very confused with the current market

Post by MossySF » Tue Jun 19, 2018 11:56 am

hap_ca wrote:
Tue Jun 19, 2018 11:37 am
Why not execute that strategy now? If you think the markets are overvalued and will crash or at least be cheaper in the future you can sell 50% of your stock allocations in your tax deferred accounts today. Hold that in a money market and set up automatic exchanges to DCA over the course of 3-5 years.
Sometimes, discussions are hypothetical to avoid giving out too much information. I have mentioned in the past about using tactical AA strategies ... e.g. over-rebalancing to the worse performing sectors ... and this would be a variant on that idea.

I'm just saying skeptics are pretty hard to convince -- especially if they have a big lumpsum sitting in cash. You might get them off the sidelines with a combo of starting at higher bond percentages plus a DCA schedule.

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corn18
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Re: Very confused with the current market

Post by corn18 » Tue Jun 19, 2018 11:58 am

kaeltor wrote:
Tue Jun 19, 2018 11:38 am
corn18 wrote:
Mon Jun 18, 2018 11:08 am
I'm betting the market will go down and up.

Image
Very good picture, how can I see a bigger size of it?
This is a link to the .pdf version:

https://www.ftportfolios.com/Common/Con ... 8ff9bfe12d

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CyclingDuo
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Re: Very confused with the current market

Post by CyclingDuo » Tue Jun 19, 2018 12:14 pm

MossySF wrote:
Tue Jun 19, 2018 11:31 am
There's a lot of psychology here. It's easy to say ride it out when your portfolio is mostly from regular monthly/quarterly contributions over the years.

But if we ignore tax consequences (e.g. tax deferred accounts), not selling is the same decision as buying. Hence if we flip the scenario around -- let's say you just sold your small business for an amount equal to your existing portfolio. (Example, 1M portfolio and now you have 1M cash.) Now what? Do you have the guts to put it all in at once after a 9 year bull market?

Not me. What I'd probably do any holding that I would not incur tax on (tax deferred, tax free, positions with losses), I'd sell stock to buy bonds. Perhaps what used to be a 75/25 portfolio would then become 60/40 or 50/50. And then the 1M, I'd put on an automatic 3-5 year DCA schedule so at the end of the period, I might be back at my original 75/25 -- hopefully with many chunks of it buying with lower valuations.
What if You Only Invested at Market Peaks? - by Ben Carlson

http://awealthofcommonsense.com/2014/02 ... ket-timer/

You Just Doubled Your Money If You Invested at the 2007 Market Peak by Lu Wang

https://www.bloomberg.com/news/articles ... ull-market

The big mistake investors make once they hit that first $1 million - by Mitch Tuchman

https://www.marketwatch.com/story/the-b ... 2018-01-30

Quote: Burt Malkiel, author of “A Random Walk Down Wall Street” and a member of the Investment Committee of my firm, Rebalance IRA, begs to differ.

“I think one of the cardinal rules of investing is don’t try to time the market,” Malkiel says.

“And the reason is that you’ll never get it right. I’ve been around this business for 50 years and I’ve never known anyone who could time the market and I’ve never known anyone who knows anyone who could time the market. You can’t do it. It’s very dangerous.”


Market Timing is Dangerous - Professor Burton Malkiel

https://www.rebalance-ira.com/cri/marke ... content=mt
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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MossySF
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Re: Very confused with the current market

Post by MossySF » Tue Jun 19, 2018 9:47 pm

CyclingDuo wrote:
Tue Jun 19, 2018 12:14 pm
What if You Only Invested at Market Peaks? - by Ben Carlson

http://awealthofcommonsense.com/2014/02 ... ket-timer/
Here's more detailed analysis. I compared every 10 year period from 1871 to 2009:

Code: Select all

10 year end average balance -- lumpsum vs DCA
* lumpsum +160%
* 2yr dca +148%
* 3yr dca +138%
* 4yr dca +127%
* 5yr dca +118%

Number of times strategy is the best option
* lumpsum 87
* 2yr dca 23
* 3yr dca 12
* 4yr dca 7
* 5yr dca 5

5 worse lumpsum comparative performances

1931
* lumpsum +34%
* 2yr dca +85%
* 3yr dca +107%
* 4yr dca +95%
* 5yr dca +87%

2008
* lumpsum +128%
* 2yr dca +195%
* 3yr dca +191%
* 4yr dca +178%
* 5yr dca +170%

1930
* lumpsum +6%
* 2yr dca +26%
* 3yr dca +69%
* 4yr dca +95%
* 5yr dca +91%

1973
* lumpsum +102%
* 2yr dca +125%
* 3yr dca +163%
* 4yr dca +159%
* 5yr dca +146%

1974
* lumpsum +201%
* 2yr dca +257%
* 3yr dca +238%
* 4yr dca +212%
* 5yr dca +199%

5 best lumpsum comparative performances

1949
* lumpsum +337%
* 2yr dca +264%
* 3yr dca +219%
* 4yr dca +193%
* 5yr dca +191%

1950
* lumpsum +462%
* 2yr dca +397%
* 3yr dca +349%
* 4yr dca +314%
* 5yr dca +293%

1954
* lumpsum +337%
* 2yr dca +264%
* 3yr dca +219%
* 4yr dca +193%
* 5yr dca +181%

1943
* lumpsum +374%
* 2yr dca +323%
* 3yr dca +283%
* 4yr dca +242%
* 5yr dca +220%

1989
* lumpsum +442%
* 2yr dca +364%
* 3yr dca +353%
* 4yr dca +320%
* 5yr dca +295%
From the cold hard numbers, lumpsum is the best strategy but you will have a hard time convincing somebody with what they think is a large amount of money to overcome the mental barrier. We've got people who've been on this forum FOR MONTHS/YEARS still waiting for the next major bear market even though they've been constantly told/given data that it's not a good strategy.

Remember that 80% of investing returns is behavior driven -- "perfect" is the enemy of "good". Just get people on an autopilot plan where they stop thinking about is a way better option then making them put $1M in immediately -- then they can't sleep at night and then next tiny drop will have them back into cash. If it means their possible return ceilings are lower -- average +160% vs +148%/+138% -- so what? We use the same strategy for stock/bonds also.

capcase
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Re: Very confused with the current market

Post by capcase » Tue Aug 14, 2018 12:36 am

chevca wrote:
Mon Jun 18, 2018 12:11 pm
Interesting thread the OP started 5 years ago...

viewtopic.php?f=1&t=115916&p=1687411#p1687411

I have to wonder when the OP was ever certain about the market?

you are right, I missed some good opportunities.

an interest post from vanguard:

https://www.nytimes.com/2018/08/10/busi ... onomy.html

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k66
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Re: Very confused with the current market

Post by k66 » Tue Aug 14, 2018 8:54 am

capcase wrote:
Tue Aug 14, 2018 12:36 am
chevca wrote:
Mon Jun 18, 2018 12:11 pm
Interesting thread the OP started 5 years ago...

viewtopic.php?f=1&t=115916&p=1687411#p1687411

I have to wonder when the OP was ever certain about the market?

you are right, I missed some good opportunities.

an interest post from vanguard:

https://www.nytimes.com/2018/08/10/busi ... onomy.html
OP: Did you read the article or just the "scary" headline?
Vanguard wrote: If the facts change — with, say, the Federal Reserve delaying anticipated interest-rate hikes in response to a weaker economy — the recession forecast will change, too, Mr. Davis said. To be clear, Vanguard isn’t predicting a recession; it is merely saying that the odds of one have risen.

You could also say the chance of a recession not occurring by the end of 2020 are 60 to 70 percent,” said Fran Kinniry, a principal in Vanguard’s investment strategy group. “You want to be prepared for a downturn,” he said, without becoming so risk-averse that you fail to benefit if investments rise.
All they are saying is, "the longer we go without a recession, the greater the odds of one occurring in the future". When is that not true?
LOSER of the Boglehead Contest 2015 | lang may yer lum reek

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Re: Very confused with the current market

Post by livesoft » Tue Aug 14, 2018 9:00 am

I would like to be able to predict the future.

I can't do that, so I guess the future instead.

Generally, I don't whine if I guess wrong.
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tennisplyr
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Re: Very confused with the current market

Post by tennisplyr » Wed Aug 15, 2018 7:26 am

Investing has been shown to be the best wealth builder. Get in, don't overthink it!
Those who move forward with a happy spirit will find that things always work out.

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Re: Very confused with the current market

Post by gmaynardkrebs » Wed Aug 15, 2018 8:14 am

tennisplyr wrote:
Wed Aug 15, 2018 7:26 am
Investing has been shown to be the best wealth builder. Get in, don't overthink it!
Saving more and spending less should go ahead of "investing," if by that you mean stock market exposure. There are people who always chime in with "but without stocks, there is a risk you won't be able to achieve your goals." Baloney. If you save more and spend less, you're going to be fine no matter what you do. Put the money into FDIC insured bank CDs or I-bonds. I know lots of people who were not rich, who did not have big DB pensions, who simply in saved as much as they could in CDs, who now have very comfortable retirements. You won't get rich, but you'll have peace of mind, which is what I think most people want. If you enjoy "investing," as I think most people on this forum do, that's another story. But most people: (1) find investing a chore, and (2) don't like risking their savings. The OP sounds like most people. Why is he being told that a 60/40 or even a 50/50 portfolio is "conservative." It isn't conservative for him. It's risky.

MJS
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Re: Very confused with the current market

Post by MJS » Wed Aug 15, 2018 7:15 pm

CyclingDuo wrote:
Mon Jun 18, 2018 4:46 pm

Real returns since 1802....

Image
Admission of ignorance: what are "Bills?" Federal Treasury bills? Any federal or state or muni note/bond/bill? Something obvious to everyone else? Thanks!

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