Should I have seen this coming?

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Portfolio7
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Re: Should I have seen this coming?

Post by Portfolio7 » Wed Mar 25, 2020 9:52 pm

In all seriousness, I mean, we all saw this coming. It was in the news, we assessed the risk, most of us accurately decided that risk was low (and when I say that, I mean that every prior potential pandemic had resulted in virtually no market disruption, so, risk was low.)

This time, despite being risk being low, our number got rolled. That will happen sometimes. Unlikely things happen fairly frequently. That's why we have emergency funds and portfolios with AAs that we can carry through the dark times.

When the tide rolls out, you gotta hold your cards until it rolls back in, if you can. Cross your fingers that your luck holds, you stay employed, you can manage financially, and take advantage of the market when the resurgence comes.
"An investment in knowledge pays the best interest" - Benjamin Franklin

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nps
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Re: Should I have seen this coming?

Post by nps » Thu Mar 26, 2020 5:54 am

Portfolio7 wrote:
Wed Mar 25, 2020 9:52 pm
In all seriousness, I mean, we all saw this coming. It was in the news, we assessed the risk, most of us accurately decided that risk was low
I think you mean inaccurately

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firebirdparts
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Re: Should I have seen this coming?

Post by firebirdparts » Thu Mar 26, 2020 8:45 am

nps wrote:
Thu Mar 26, 2020 5:54 am
Portfolio7 wrote:
Wed Mar 25, 2020 9:52 pm
In all seriousness, I mean, we all saw this coming. It was in the news, we assessed the risk, most of us accurately decided that risk was low
I think you mean inaccurately
No, he means that taken in isolation, the fact that a new disease has broken out is unlikely to have much impact on the economy. Unlikely means unlikely. Unlikely things happen all the time, but they can still be unlikely.
A fool and your money are soon partners

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Portfolio7
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Re: Should I have seen this coming?

Post by Portfolio7 » Thu Mar 26, 2020 9:18 am

firebirdparts wrote:
Thu Mar 26, 2020 8:45 am
nps wrote:
Thu Mar 26, 2020 5:54 am
Portfolio7 wrote:
Wed Mar 25, 2020 9:52 pm
In all seriousness, I mean, we all saw this coming. It was in the news, we assessed the risk, most of us accurately decided that risk was low
I think you mean inaccurately
No, he means that taken in isolation, the fact that a new disease has broken out is unlikely to have much impact on the economy. Unlikely means unlikely. Unlikely things happen all the time, but they can still be unlikely.
Thanks, Firebird, that's exactly what I meant.

You get this. People confuse process with outcome. If your process determined that risk was low, that doesn't mean your process was bad, or that your assessment was incorrect.

In a sense, that is the foundation of Bogleheads. We put money into risk assets, basically stocks, so that we can grow our wealth over time. We believe, based both on the historical record but also the logic of value creation, that long run results will usually be positive.

We know that along the way, markets will suffer big declines from time to time. We don't know how much or when. When markets do decline, we have learned not to sell our risk assets.

Someone might come along at that point and claim our decision/assessment was a poor one, that it was innacurate. If one judges based on market valuations at that point in time, it's an understandable assertion - but it's almost always incorrect. We have learned that patience is virtually always rewarded. Our approach has worked for millions of people over time, and has sound theory behind it, which suggests it will continue to work going forward. Hence, 'stay the course'.
"An investment in knowledge pays the best interest" - Benjamin Franklin

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nps
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Re: Should I have seen this coming?

Post by nps » Thu Mar 26, 2020 10:13 am

Portfolio7 wrote:
Thu Mar 26, 2020 9:18 am
firebirdparts wrote:
Thu Mar 26, 2020 8:45 am
nps wrote:
Thu Mar 26, 2020 5:54 am
Portfolio7 wrote:
Wed Mar 25, 2020 9:52 pm
In all seriousness, I mean, we all saw this coming. It was in the news, we assessed the risk, most of us accurately decided that risk was low
I think you mean inaccurately
No, he means that taken in isolation, the fact that a new disease has broken out is unlikely to have much impact on the economy. Unlikely means unlikely. Unlikely things happen all the time, but they can still be unlikely.
Thanks, Firebird, that's exactly what I meant.

You get this. People confuse process with outcome. If your process determined that risk was low, that doesn't mean your process was bad, or that your assessment was incorrect.

In a sense, that is the foundation of bogleheads. We put money into risk assets, basically stocks, so that we can grow our wealth over time. We believe, based both on the historical record but also the logic of value creation, that long run results will usually be positive.

We know that along the way, markets will suffer big declines from time to time. We don't know how much or when. When markets do decline, we have learned not to sell our risk assets.

Someone might come along at that point and claim our decision/assessment was a poor one, that it was innacurate. If one judges based on market valuations at that point in time, it's an understandable assertion - but it's almost always incorrect. We have learned that patience is virtually always rewarded. Our approach has worked for millions of people over time, and has sound theory behind it, which suggests it will continue to work going forward. Hence, 'stay the course'.
I agree with the overall lesson you're describing. I think it would have been reasonable for an investor to assume that the course of this outbreak would take a path similar to previous ones over the last several decades, especially if one was not paying close attention, or an epidemiologist. And since we are working with imperfect risk models, we can choose the most sensible strategy for ourselves and even if the outcome is unexpected that doesn't necessarily mean we did anything wrong.

But it's not accurate that the risk was low. We now know that the risk was high much earlier than markets reflected, based on indicators we either weren't paying attention to or didn't know how to interpret at the time.

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Portfolio7
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Re: Should I have seen this coming?

Post by Portfolio7 » Thu Mar 26, 2020 1:15 pm

nps wrote:
Thu Mar 26, 2020 10:13 am
But it's not accurate that the risk was low. We now know that the risk was high much earlier than markets reflected, based on indicators we either weren't paying attention to or didn't know how to interpret at the time.
I'm doubt it's reasonable for almost any investor to have any of that risk reflected in his assessment, however. Of course the value of a process depends in part on the validity of information incorporated into it. In that vein I'm actually interested in whether you think there is a better model than what most people have been using?

I suspect that most people simply note that there is a new illness, and are aware of several past such situations that all ended with relatively benign consequences, from an investor's perspective (overlooking the human cost.) None of us being epidemiological experts we're probably mostly using poor heuristics to make some sort of very high level assessment (...or not.)

I'm curious if you think there are measures or combinations of contagion and mortality/injury that would serve investors well to know?
"An investment in knowledge pays the best interest" - Benjamin Franklin

GCD
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Re: Should I have seen this coming?

Post by GCD » Thu Mar 26, 2020 3:22 pm

GCD wrote:
Tue Mar 24, 2020 4:40 pm
For the market timers or those tempted to market time...

Did you get back in for this?

"The Dow soared 2,112 points to close 11.3% higher, notching its biggest one-day percentage gain since 1933"

https://www.msn.com/en-us/money/markets ... spartanntp
Well, if you missed the biggest one-day gain, did you at least get in for the biggest 3 day gain?

https://www.msn.com/en-us/money/markets ... spartandhp

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masonstone
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Re: Should I have seen this coming?

Post by masonstone » Wed Apr 01, 2020 3:29 pm

GCD wrote:
Thu Mar 26, 2020 3:22 pm
GCD wrote:
Tue Mar 24, 2020 4:40 pm
For the market timers or those tempted to market time...

Did you get back in for this?

"The Dow soared 2,112 points to close 11.3% higher, notching its biggest one-day percentage gain since 1933"

https://www.msn.com/en-us/money/markets ... spartanntp
Well, if you missed the biggest one-day gain, did you at least get in for the biggest 3 day gain?

https://www.msn.com/en-us/money/markets ... spartandhp
Luckily I didn't sell when it was down.

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