Should we stay in Crazytown because there's no where to run?

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2pedals
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Re: Should we stay in Crazytown because there's no where to run?

Post by 2pedals » Mon Oct 01, 2018 2:35 pm

CULater wrote:
Mon Oct 01, 2018 1:19 pm
I know what my answers are.
“Forty-two!" yelled Loonquawl. "Is that all you've got to show for seven and a half million years' work?"
"I checked it very thoroughly," said the computer, "and that quite definitely is the answer. I think the problem, to be quite honest with you, is that you've never actually known what the question is.”
― Douglas Adams, The Hitchhiker's Guide to the Galaxy

asif408
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Re: Should we stay in Crazytown because there's no where to run?

Post by asif408 » Mon Oct 01, 2018 2:40 pm

nedsaid wrote:
Mon Oct 01, 2018 11:11 am
goodenyou wrote:
Mon Oct 01, 2018 11:03 am


Some investors don’t sleep well at night when they put themselves in the position to sleep well at night. FOMO will keep them up.
Yes, Fear Of Missing Out (FOMO) is another issue. The thing is, if you want to cut risk it is pretty likely you are cutting return as well. Pretty much the whole reason I buy bonds, they are less risky and offer less return than stocks but allow me to sleep at night.

An investor could re-allocate his or her stocks, more International and less US, and less Growth and more Value. The hope is that you would keep returns the same while reducing risk but who knows what will happen in real life? Asset classes don't have to meet our expectations for performance.
FWIW, emerging markets value stocks were in a nearly 7 year bear market from 2011-2017 and fell 45%, which doesn't even include the 20% drop this year. So if you are looking for beaten down parts of the markets you can find plenty in EM value.

Since 2011, you've made no money in EM value. In that same time frame, you've more than doubled your money in the US stock market, and you've more than tripled your money if you invested in the technology sector of the US stock market: https://www.portfoliovisualizer.com/bac ... ion3_3=100.

Other than certain sectors (e.g., precious metals equities and energy), I don't think you'll find a part of the market universe that has been much worse than EM value over the last 7 years.

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Toons
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Re: Should we stay in Crazytown because there's no where to run?

Post by Toons » Mon Oct 01, 2018 2:51 pm

Pick an asset allocation.
Stick to it,adjust if necessary,
Ignore everything else.
Go fishing.
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

kacang
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Re: Should we stay in Crazytown because there's no where to run?

Post by kacang » Mon Oct 01, 2018 3:40 pm

Pinotage wrote:
Sat Sep 29, 2018 9:22 am
Maybe consider buying something expensive, but necessary*, with some of your gains or new contributions you aren't comfortable investing.

Replacement vehicle, new roof/water heater/HVAC, pay off mortgage etc... Deferrable expenses that will eventually come due.

So, if/when a downturn does hit, you aren't forced to sell equities to manage these same expenses.

You may pay a little more for some of these things now because the economy is doing well, but you will have the peace of mind of reducing future expenses.

*meaning something you will need to buy anyway, of a quality you would ordinarily purchase.
That's what we're doing. Roof due for replacement within the next few years, we're pulling this work forward and looking into solar.

Otherwise, it's follow the IPS.

Namashkar
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Re: Should we stay in Crazytown because there's no where to run?

Post by Namashkar » Mon Oct 01, 2018 3:42 pm

Toons wrote:
Mon Oct 01, 2018 2:51 pm
Pick an asset allocation.
Stick to it,adjust if necessary,
Ignore everything else.
Go fishing.
:mrgreen:
I love this. :happy

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munemaker
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Re: Should we stay in Crazytown because there's no where to run?

Post by munemaker » Mon Oct 01, 2018 5:57 pm

Namashkar wrote:
Mon Oct 01, 2018 3:42 pm
Toons wrote:
Mon Oct 01, 2018 2:51 pm
Pick an asset allocation.
Stick to it,adjust if necessary,
Ignore everything else.
Go fishing.
:mrgreen:
I love this. :happy
Me too. Says it all.

dknightd
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Re: Should we stay in Crazytown because there's no where to run?

Post by dknightd » Mon Oct 01, 2018 6:00 pm

When I was young, and had no intention of spending my retirement savings for many many years, I mostly just stayed the course. Now retirement is less than a year away I've become much more conservative. I have created two virtual buckets. One for the next 1-9 years. One for beyond that. I'll stay the course in my 9 years and beyond bucket. By then I'll hopefully be collecting SS so should be able to afford to be more aggressive again.
After a 9 year bull run, I think it is reasonable be to be more concerned than usual about sequence of return risks when I start withdrawing.
If I had enough money to not be concerned about future growth, I'd probably get out of the stock market. But I know I might need future growth, so am leaving some in. If it does "correct" I'll probably put more back in. If it keeps going up - Fine.
My 1-9 year virtual bucket is mostly in cash like things. My 9+ year bucket is about 60/40.
Frankly this is a horrible time to retire. Interest rates are below inflation rates. Stocks are almost certainly due for a hit at some point. It is crazy out there. But, probably it has always been crazy ;)

dknightd
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Re: Should we stay in Crazytown because there's no where to run?

Post by dknightd » Mon Oct 01, 2018 6:04 pm

Toons wrote:
Mon Oct 01, 2018 2:51 pm
Go fishing.
and grow vegetables ;)
Edit: You want a balanced diet, just like you want a balanced investment portfolio

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Kenkat
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Re: Should we stay in Crazytown because there's no where to run?

Post by Kenkat » Mon Oct 01, 2018 6:16 pm

Toons wrote:
Mon Oct 01, 2018 2:51 pm
Pick an asset allocation.
Stick to it,adjust if necessary,
Ignore everything else.
Go fishing.
:mrgreen:
I really have to strongly disagree with you here. I’ve really never been much of a fisherman. Oh, yeah...the other parts are good.

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FIREchief
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Re: Should we stay in Crazytown because there's no where to run?

Post by FIREchief » Mon Oct 01, 2018 7:03 pm

CAPEtown is the Crazytown. It's filled with folks who think that something that happened ten years ago is a firm foundation for predicting the future. The mayor appears to be a guy with a fancy trophy who was never really "in the game." Crazy indeed!! :oops:
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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SquawkIdent
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Re: Should we stay in Crazytown because there's no where to run?

Post by SquawkIdent » Mon Oct 01, 2018 7:11 pm

yohac wrote:
Sat Sep 29, 2018 11:15 am
I've been investing for over 30 years, and every single day some expert says it's a horrible time to invest and disaster is imminent.

Although I've never tried to calculate it, I have no doubt that my wife's long term investment returns beat mine. She couldn't tell you the difference between a Roth and a traditional IRA. Nor could she ballpark her balances within low 6 figures, because she never checks. Her only rule is that I put her money in a reasonable place and then don't EVER mess with it.
+1

Honestly your wife is the best type of investor because emotions don't run her portfolio.

kosomoto
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Re: Should we stay in Crazytown because there's no where to run?

Post by kosomoto » Mon Oct 01, 2018 7:27 pm

FIREchief wrote:
Mon Oct 01, 2018 7:03 pm
CAPEtown is the Crazytown. It's filled with folks who think that something that happened ten years ago is a firm foundation for predicting the future. The mayor appears to be a guy with a fancy trophy who was never really "in the game." Crazy indeed!! :oops:
I agree, earnings from 9 years ago aren’t telling me what next year’s earnings will be. It’s just silly, especially with the recent tax cuts.

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corn18
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Re: Should we stay in Crazytown because there's no where to run?

Post by corn18 » Mon Oct 01, 2018 7:37 pm

I was just reading through my IPS and could not find anything in it that said if the market is high to do something different than if the market is low. I do rebalance my 60/40 portfolio if it gets more than 5% out of whack or annually. Or if I'm bored. That's about as much excitement as I can find in it. Other than my wedding vows, my IPS is the single most important thing I have written in my lifetime. Ok, maybe my will and trust, too.

Fallible
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Re: Should we stay in Crazytown because there's no where to run?

Post by Fallible » Mon Oct 01, 2018 8:26 pm

CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. ... How do you manage this psychologically? ...
As others have posted here, and as all the best books, blogs, podcasts, and videos in the wiki and beyond will tell you, you manage it by first finding the asset allocation that is right for you. If you don't first do that, you will find yourself asking questions later on such as "How do you manage this psychologically?"

Go back to the beginning, revisit your allocation, change as needed, and get it down in an IPS.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

GoldenFinch
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Re: Should we stay in Crazytown because there's no where to run?

Post by GoldenFinch » Mon Oct 01, 2018 8:38 pm

KlangFool wrote:
Sat Sep 29, 2018 5:16 pm
CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
CULater,

My family member worked in the financial industry over 30+ years. His annual salary and bonus are in the 7 figures range. He has a master degree in economics from the University of Chicago. I lost 50% of my whole life savings during Telecom Bust. He lost 10 million during Telecom bust.

Are you smarter than my family member?

My AA is 60/40. I know that I know nothing. How about you?

KlangFool
KlangFool,

You obviously know a lot.

GoldenFinch

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nedsaid
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Re: Should we stay in Crazytown because there's no where to run?

Post by nedsaid » Tue Oct 02, 2018 12:09 am

asif408 wrote:
Mon Oct 01, 2018 2:40 pm
nedsaid wrote:
Mon Oct 01, 2018 11:11 am
goodenyou wrote:
Mon Oct 01, 2018 11:03 am


Some investors don’t sleep well at night when they put themselves in the position to sleep well at night. FOMO will keep them up.
Yes, Fear Of Missing Out (FOMO) is another issue. The thing is, if you want to cut risk it is pretty likely you are cutting return as well. Pretty much the whole reason I buy bonds, they are less risky and offer less return than stocks but allow me to sleep at night.

An investor could re-allocate his or her stocks, more International and less US, and less Growth and more Value. The hope is that you would keep returns the same while reducing risk but who knows what will happen in real life? Asset classes don't have to meet our expectations for performance.
FWIW, emerging markets value stocks were in a nearly 7 year bear market from 2011-2017 and fell 45%, which doesn't even include the 20% drop this year. So if you are looking for beaten down parts of the markets you can find plenty in EM value.

Since 2011, you've made no money in EM value. In that same time frame, you've more than doubled your money in the US stock market, and you've more than tripled your money if you invested in the technology sector of the US stock market: https://www.portfoliovisualizer.com/bac ... ion3_3=100.

Other than certain sectors (e.g., precious metals equities and energy), I don't think you'll find a part of the market universe that has been much worse than EM value over the last 7 years.
Thanks for the information. This shows the differences in performance among asset classes. When you are diversified, there are always sectors that disappoint. Someone once said that if all your investments are going up at the same time, you are not properly invested.
A fool and his money are good for business.

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oldcomputerguy
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Re: Should we stay in Crazytown because there's no where to run?

Post by oldcomputerguy » Tue Oct 02, 2018 5:15 am

CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries.
Yep. Isn't hindsight great? Unfortunately, I have none. So I'm sitting tight on my 50/50 allocation (I'm 63 years old) and following the Napoleon Battle Plan:
Casey: Technically, I have a plan.
Dan: What's the plan?
Casey: It's Napoleon's plan.
Dan: Who's Napoleon?
Casey: A 19th century French emperor.
Dan: You're cracking wise with me now?
Casey: Yes.
Dan: Thanks.
Casey: He had a two-part plan.
Dan: What was it?
Casey: First we show up, then we see what happens.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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CaliJim
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Re: Should we stay in Crazytown because there's no where to run?

Post by CaliJim » Tue Oct 02, 2018 10:16 am

There have been many previous posts about best places to retire. :twisted:

https://www.google.com/search?sitesearc ... +to+retire

BTW: Where is crazytown? Are you talking about the bar on Broadway in Nashville?
-calijim- | | For more info, click this Wiki

Engineer250
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Re: Should we stay in Crazytown because there's no where to run?

Post by Engineer250 » Tue Oct 02, 2018 12:12 pm

CaliJim wrote:
Tue Oct 02, 2018 10:16 am
There have been many previous posts about best places to retire. :twisted:

https://www.google.com/search?sitesearc ... +to+retire

BTW: Where is crazytown? Are you talking about the bar on Broadway in Nashville?
I prefer to retire in funkytown not crazytown (though I might be going off the rails on a crazy train). :sharebeer

Anyways, downturn isn’t happening until 2020, trust me :wink:
Where the tides of fortune take us, no man can know.

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dual
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Re: Should we stay in Crazytown because there's no where to run?

Post by dual » Tue Oct 02, 2018 12:22 pm

CaliJim wrote:
Tue Oct 02, 2018 10:16 am
BTW: Where is crazytown? Are you talking about the bar on Broadway in Nashville?
How about a place where Tesla has a market cap of over $52 billion while GM is about $48 billion, Ford is about $40 billion and Fiat-Chrysler $28 billion?

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CaliJim
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Re: Should we stay in Crazytown because there's no where to run?

Post by CaliJim » Mon Oct 08, 2018 11:16 pm

dual wrote:
Tue Oct 02, 2018 12:22 pm
CaliJim wrote:
Tue Oct 02, 2018 10:16 am
BTW: Where is crazytown? Are you talking about the bar on Broadway in Nashville?
How about a place where Tesla has a market cap of over $52 billion while GM is about $48 billion, Ford is about $40 billion and Fiat-Chrysler $28 billion?
I own all those tickers via an index. I've never had a problem with those prices.... never looked at them that way. I just buy the whole town, That way I don't have to look at the individual valuations.

It's not crazy if you don't pay attention.
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watchnerd
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Re: Should we stay in Crazytown because there's no where to run?

Post by watchnerd » Tue Oct 09, 2018 12:34 am

dual wrote:
Tue Oct 02, 2018 12:22 pm
CaliJim wrote:
Tue Oct 02, 2018 10:16 am
BTW: Where is crazytown? Are you talking about the bar on Broadway in Nashville?
How about a place where Tesla has a market cap of over $52 billion while GM is about $48 billion, Ford is about $40 billion and Fiat-Chrysler $28 billion?
Is the effcient market hypothesis wrong?
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

Ari
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Re: Should we stay in Crazytown because there's no where to run?

Post by Ari » Tue Oct 09, 2018 1:21 am

People worry so much about the crashes that they tend to forget about all the money you make leading up to them. Being in a market that goes crazy high and then crashes is likely to make you more money than staying out of it.

Personally, I just hakuna my matatas and hope for the best. It's ironic that people like me who just don't worry or care that much about their portfolio tend to make more money than people who obsess over them.
All in, all the time.

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corn18
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Re: Should we stay in Crazytown because there's no where to run?

Post by corn18 » Tue Oct 09, 2018 8:30 am

Ari wrote:
Tue Oct 09, 2018 1:21 am
People worry so much about the crashes that they tend to forget about all the money you make leading up to them. Being in a market that goes crazy high and then crashes is likely to make you more money than staying out of it.

Personally, I just hakuna my matatas and hope for the best. It's ironic that people like me who just don't worry or care that much about their portfolio tend to make more money than people who obsess over them.
I agree. I just did an analysis on my retirement savings to see how far it would have to drop to get back to my basis. I just started saving in 2013, so all I know is the bull running. My basis is $600k with gains (including 401k match) of $400k. Although losing that $400k would suck, it was interesting to see that it was not part of my basis.

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watchnerd
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Re: Should we stay in Crazytown because there's no where to run?

Post by watchnerd » Tue Oct 09, 2018 8:31 am

Ari wrote:
Tue Oct 09, 2018 1:21 am
People worry so much about the crashes that they tend to forget about all the money you make leading up to them. Being in a market that goes crazy high and then crashes is likely to make you more money than staying out of it.

Personally, I just hakuna my matatas and hope for the best. It's ironic that people like me who just don't worry or care that much about their portfolio tend to make more money than people who obsess over them.
If you got in at the beginning, yes.

If you got in at the end, you're probably going to wait several years to get back to your starting position.

Sequences matter.
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KlangFool
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Re: Should we stay in Crazytown because there's no where to run?

Post by KlangFool » Tue Oct 09, 2018 8:46 am

corn18 wrote:
Tue Oct 09, 2018 8:30 am
Ari wrote:
Tue Oct 09, 2018 1:21 am
People worry so much about the crashes that they tend to forget about all the money you make leading up to them. Being in a market that goes crazy high and then crashes is likely to make you more money than staying out of it.

Personally, I just hakuna my matatas and hope for the best. It's ironic that people like me who just don't worry or care that much about their portfolio tend to make more money than people who obsess over them.
I agree. I just did an analysis on my retirement savings to see how far it would have to drop to get back to my basis. I just started saving in 2013, so all I know is the bull running. My basis is $600k with gains (including 401k match) of $400k. Although losing that $400k would suck, it was interesting to see that it was not part of my basis.
corn18,

That is the wrong way to look at things. It is 2018 now. Whatever you have in 2013 is irrelevant.

That was anchoring cognitive bias.

https://en.wikipedia.org/wiki/Anchoring

The relevant thing that you should look at

A) 400K is equivalent to how many years of savings. Aka, it will take you how many years to recover that money.

B) 400K is equivalent to how many years of your annual expense. Aka, how far will it push you back in getting your number. If your number is 25 times your annual expense, how far will this push you back?

KlangFool

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corn18
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Re: Should we stay in Crazytown because there's no where to run?

Post by corn18 » Tue Oct 09, 2018 10:11 am

KlangFool wrote:
Tue Oct 09, 2018 8:46 am
corn18 wrote:
Tue Oct 09, 2018 8:30 am
Ari wrote:
Tue Oct 09, 2018 1:21 am
People worry so much about the crashes that they tend to forget about all the money you make leading up to them. Being in a market that goes crazy high and then crashes is likely to make you more money than staying out of it.

Personally, I just hakuna my matatas and hope for the best. It's ironic that people like me who just don't worry or care that much about their portfolio tend to make more money than people who obsess over them.
I agree. I just did an analysis on my retirement savings to see how far it would have to drop to get back to my basis. I just started saving in 2013, so all I know is the bull running. My basis is $600k with gains (including 401k match) of $400k. Although losing that $400k would suck, it was interesting to see that it was not part of my basis.
corn18,

That is the wrong way to look at things. It is 2018 now. Whatever you have in 2013 is irrelevant.

That was anchoring cognitive bias.

https://en.wikipedia.org/wiki/Anchoring

The relevant thing that you should look at

A) 400K is equivalent to how many years of savings. Aka, it will take you how many years to recover that money.

B) 400K is equivalent to how many years of your annual expense. Aka, how far will it push you back in getting your number. If your number is 25 times your annual expense, how far will this push you back?

KlangFool
Fair points. The answers are:

A) $400k is 1.5 years of savings
b) $400k is equivalent to 2.7 years of annual expenses

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dual
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Re: Should we stay in Crazytown because there's no where to run?

Post by dual » Tue Oct 09, 2018 11:18 am

CaliJim wrote:
Mon Oct 08, 2018 11:16 pm
dual wrote:
Tue Oct 02, 2018 12:22 pm
CaliJim wrote:
Tue Oct 02, 2018 10:16 am
BTW: Where is crazytown? Are you talking about the bar on Broadway in Nashville?
How about a place where Tesla has a market cap of over $52 billion while GM is about $48 billion, Ford is about $40 billion and Fiat-Chrysler $28 billion?
I own all those tickers via an index. I've never had a problem with those prices.... never looked at them that way. I just buy the whole town, That way I don't have to look at the individual valuations.

It's not crazy if you don't pay attention.
That does not make sense. It is like saying that you did not have to worry about mortgage backed securities in 2007 because you owned a complete basket of them.
watchnerd wrote:
Tue Oct 09, 2018 12:34 am
Is the effcient market hypothesis wrong?
Yes. Prove that I am wrong.

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HomerJ
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Re: Should we stay in Crazytown because there's no where to run?

Post by HomerJ » Tue Oct 09, 2018 11:42 am

KlangFool wrote:
Tue Oct 09, 2018 8:46 am
400K is equivalent to how many years of savings. Aka, it will take you how many years to recover that money.
Except... you still own the shares. You don't really have to save the money again, assuming the stock market bounces back in a few years.

That's a big assumption, but so far that's the pattern.
The J stands for Jay

smectym
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Re: Should we stay in Crazytown because there's no where to run?

Post by smectym » Tue Oct 09, 2018 10:22 pm

HomerJ wrote:
Tue Oct 09, 2018 11:42 am
KlangFool wrote:
Tue Oct 09, 2018 8:46 am
400K is equivalent to how many years of savings. Aka, it will take you how many years to recover that money.
Except... you still own the shares. You don't really have to save the money again, assuming the stock market bounces back in a few years.

That's a big assumption, but so far that's the pattern.
"assuming the stock market bounces back in a few years.
That's a big assumption, but so far that's the pattern."

I basically agree with HomerJ but would point out the potential recency bias in what he concedes is a "big assumption." By some measures, stocks peaked in 1966 and failed to break out of a funk--certainly in real terms--until 1982.

As many posters, including myself, have already noted above, we have no ability to predict the future direction of stock prices. That entails forswearing any ability to predict that stocks, were they to fall, will (or even "probably" will) bounce back in a few years. If you make that prediction, you're laying claim to the ability to predict the future direction of stock prices. As bogleheads never tire to point out, that ability does not exist.

Smectym

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