U.S. stocks in freefall

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HomerJ
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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 12:31 pm

broadstone wrote:With Brexit looming and an election, it's going to b a volatile year.


I would suggest you read older threads on this site (including THIS one), and see people, just as confident as you are right now, post in 2010, and 2011, and 2012, and 2013, and 2014, and 2015, that a crash is coming very soon, because of X, Y, or Z.

Every year is a volatile year.

Being conservative is fine. Being 100% in cash is not conservative. It's also risky (Unless you are so wealthy that you don't need any growth on your money at all).

You will likely never get back in. If the market keeps going up, you're going to think it's more and more overvalued, and more and more "due" for a crash. If the market crashes, the news is going to be bad, real bad, and you will want to wait for it to crash "a little further" before getting back in.

Instead of swinging 100% cash, 100% stocks... why not just adopt a 50/50 (or 30/70) stocks/bonds-cash portfolio and just hold through all the bumps.

You seem to think that avoiding the crash is the most important thing. But just holding through a crash has worked out pretty well so far. You still get a decent returns, even if you don't avoid the crash.

Let me repeat that: You don't have to avoid the crash to get good returns. The 9%-10% historical stock market return INCLUDES all the crashes.

But trying to avoid a crash can mean you instead avoid the climbs, and you may end up getting less return than if you had just bought and held.

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Re: U.S. stocks in freefall

Post by Leeraar » Wed Apr 20, 2016 12:39 pm

It's time for a refresher on the Efficient Market Hypothesis.

You don't have any special information that no one else has, so everything you know is already priced into the market.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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HomerJ
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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 12:44 pm

broadstone wrote:I never wanted to be a market timer as I don't have the stomach for it and in my heart, I'm a true Boglehead. But there are so many warning sayings, proceed with extreme caution, that I can't ignore them anymore. The warning signs were there in 2007 and they're back now. History will repeat itself.


Buying and holding from 2007 to today has returned about 8% a year.

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Re: U.S. stocks in freefall

Post by lack_ey » Wed Apr 20, 2016 1:06 pm

Leeraar wrote:It's time for a refresher on the Efficient Market Hypothesis.

You don't have any special information that no one else has, so everything you know is already priced into the market.

L.

But history has shown us that the market may or may not use that information to price things in correctly for its own purposes or yours. (Also that nevertheless, most of us are dumber than the market.)

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Re: U.S. stocks in freefall

Post by azanon » Wed Apr 20, 2016 1:18 pm

Leeraar wrote:It's time for a refresher on the Efficient Market Hypothesis.

You don't have any special information that no one else has, so everything you know is already priced into the market.

L.


Let's not forget the refresher on what a hypotheis itself is, and how that compares to, say, a law, or a theory even!

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Re: U.S. stocks in freefall

Post by ColinFCodeChef » Wed Apr 20, 2016 1:21 pm

lack_ey wrote:But history has shown us that the market may or may not use that information to price things in correctly for its own purposes or yours. (Also that nevertheless, most of us are dumber than the market.)



Your statement is the opposite of the efficient market hypothesis...The bolded statement above makes no sense. What purpose should the market have?
Last edited by ColinFCodeChef on Wed Apr 20, 2016 1:24 pm, edited 1 time in total.

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Re: U.S. stocks in freefall

Post by ColinFCodeChef » Wed Apr 20, 2016 1:23 pm

azanon wrote:
Leeraar wrote:It's time for a refresher on the Efficient Market Hypothesis.

You don't have any special information that no one else has, so everything you know is already priced into the market.

L.


Let's not forget the refresher on what a hypotheis itself is, and how that compares to, say, a law, or a theory even!


Let's not forget the refresher on semantics, while we are at it.

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Re: U.S. stocks in freefall

Post by azanon » Wed Apr 20, 2016 1:23 pm

ColinFCodeChef wrote:
azanon wrote:
Leeraar wrote:It's time for a refresher on the Efficient Market Hypothesis.

You don't have any special information that no one else has, so everything you know is already priced into the market.

L.


Let's not forget the refresher on what a hypotheis itself is, and how that compares to, say, a law, or a theory even!


Let's not forget the refresher on semantics, while we are at it.


As much as that hypothesis was studied, let's hope that an error wasn't made on its actual name! But rest assured, it can only dream of meeting the standards of a scientific theory.

Those terms actually have real meaning, not open to debate or interpretation. If the hypothesis were much stronger, its findings were repeatible by others, and the mounds of evidence didn't exist to the contrary, they'd promptly start calling it the Efficient Market Theory, or higher, I'm quite sure.

Just an off the top of my head terms and concepts completely counter to EMH: trendfollowing, momentum investing, irrational exuberence, animal spirits, anything "valuations"; all investing concepts supported by a very large contingent of the investment community.
Last edited by azanon on Wed Apr 20, 2016 1:38 pm, edited 1 time in total.

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Re: U.S. stocks in freefall

Post by Leeraar » Wed Apr 20, 2016 1:37 pm

So, let me add the obvious lemma or corollary:

Leeraar wrote:It's time for a refresher on the Efficient Market Hypothesis.

You don't have any special information that no one else has, so everything you know is already priced into the market.

L.


If you don't believe that, you must believe you're smarter than everyone else.

Let's take Brexit as an example. It seems there is a 50/50 chance the vote may be to exit, and that then it will take at least two years for something to really happen.

What do you know about this (that I don't know) that causes you to sell (USA) stocks today?

L.
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Re: U.S. stocks in freefall

Post by azanon » Wed Apr 20, 2016 1:43 pm

Leeraar wrote:If you don't believe that, you must believe you're smarter than everyone else. L.


You say that like we're collectively all so brilliant, all the time. Take 1999 for example, a multitude of "internet stock" in some cases where the "company" only having just bought a URL, mainly a vague idea of what they'll do, and nothing else, and their stock getting bid up past $100/share after an IPO. If you think that was actually a fair price at the time, I have a collection of snake oils I'm selling right now, and we can maybe work out a deal if you're interested. But I'm only average intelligence though.

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Re: U.S. stocks in freefall

Post by lack_ey » Wed Apr 20, 2016 2:00 pm

ColinFCodeChef wrote:
lack_ey wrote:But history has shown us that the market may or may not use that information to price things in correctly for its own purposes or yours. (Also that nevertheless, most of us are dumber than the market.)



Your statement is the opposite of the efficient market hypothesis...The bolded statement above makes no sense. What purpose should the market have?

EMH is about informational efficiency, not directly how that information gets translated into securities pricing. Presumably, market participants want to make money, but it gets a little more complicated than that.

First of all, what the information means for future returns is up for debate. It is possible that even with all the information, because of emotions, mandates on money managers to pursue certain strategies or stay within certain boxes, trading costs and other market frictions, or any other forces, the market gets things wrong. If nothing else, market pricing reflects the transaction points of the most eager potential buyers and sellers, not necessarily the view of people overall.

But even if everyone knew all the probabilities of every possible outcome for every security and how everything might unfold, individual investor preferences still come into play. If enough investors value explosive growth potential (positive skewness in distribution), for example finding the next Google or what have you, these securities will be bid up even at the expense of expected return. If you care about diversification and want the best risk/return defined in some way, there's no guarantee even in the everybody-knows-all-the-distributions scenario that the market portfolio would deliver that.

Usually when EMH is invoked, people have in mind some kind of idealized pricing model (which reality may not really follow). On the other hand, even if the market were greatly exploitable you could claim EMH held by assuming that the market efficiently priced irrational investor desires. See the joint hypothesis problem.

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Re: U.S. stocks in freefall

Post by Leeraar » Wed Apr 20, 2016 2:12 pm

azanon wrote:
Leeraar wrote:If you don't believe that, you must believe you're smarter than everyone else. L.


You say that like we're collectively all so brilliant, all the time.


No, if we all have the same information and you make a different conclusion than the consensus that you then act on, you must believe that you are smarter than the rest of us.

The nice thing about EMH is that if you subscribe to it, it says you can tune out all the noise.

L.
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Re: U.S. stocks in freefall

Post by azanon » Wed Apr 20, 2016 2:24 pm

Leeraar wrote:
azanon wrote:
Leeraar wrote:If you don't believe that, you must believe you're smarter than everyone else. L.


You say that like we're collectively all so brilliant, all the time.


No, if we all have the same information and you make a different conclusion than the consensus that you act on, you must believe that you are smarter than the rest of us.

The nice thing about EMH is that if you subscribe to it, it says you can tune out all the noise.

L.


What I regret about that 1999 story I told you was that, at the time, i didn't know about or understand how to short stock. I just knew, with absolutely and complete certainty, that $100+/share was not a fair price for a URL and an idea. I don't think that makes me smarter than everyone. I just think for whatever reason, i wasn't having the same irrational exuberance as everyone else.

I dare that to happen again. I definitely know how to short stock now.

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Re: U.S. stocks in freefall

Post by minimalistmarc » Wed Apr 20, 2016 2:37 pm

This thread is amazing for the patient wisdom continuously being passed down by experienced bogleheaders and the unshakable arrogance of the market timers/speculators.

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Re: U.S. stocks in freefall

Post by triceratop » Wed Apr 20, 2016 2:40 pm

minimalistmarc wrote:This thread is amazing for the patient wisdom continuously being passed down by experienced bogleheaders and the unshakable arrogance of the market timers/speculators.


When the next crash happens (oh yes, it is assured), they will be here. I at least don't begrudge them that. I personally don't think I have any special insights, but it's a free country and they might (think they) know something we don't.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: U.S. stocks in freefall

Post by azanon » Wed Apr 20, 2016 3:02 pm

Some of the most highly regarded "bogleheads" talk about valuations and mispriced securities all of the time. I'm thinking of two right now that every boglehead would most certainly know, (one will be a panelist at the upcoming conference) but I am certain that neither of them are arrogant. As best I can tell, both are quite humble and pleasant, and anything but arrogant.

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Re: U.S. stocks in freefall

Post by ray.james » Wed Apr 20, 2016 3:04 pm

nisiprius wrote:
broadstone wrote:Sometimes there are so many warning flags waving that you have to pay attention, other times not so much. Now is a time where technical analysis, and economic logic are screaming, hey, it's June, the ice is melting but you're still standing in the middle of the lake like it's mid winter. I never wanted to be a market timer as I don't have the stomach for it and in my heart, I'm a true Boglehead. But there are so many warning sayings, proceed with extreme caution, that I can't ignore them anymore. The warning signs were there in 2007 and they're back now. History will repeat itself.

But hopefully I will be wrong, the naysayers will be right, I'll look foolish, you can say "we told you so", and I'll have lost out on some growth years. :oops:
I always get nervous, always, when "everyone" is saying something. I've been continuously nervous about my Vanguard Total Bond Fund since 2009, for example, when the forum got one of its earlier postings saying
I know people don't like to market time but interest rates are currently zero and whether rates rise in 2010 or 2011 or 2015, eventually they will rise and intermediate term bonds will get hit.

So isn't it wise to go short in this environment where rates can only go up?
Well, it's 2016 and I just stuck to Total Bond.

I also got nervous about Total Bond in 2011 when the headlines were screaming that bond genius Bill Gross had taken PIMCO Total Return entirely out of Treasuries altogether, and that turned out to be the year Total Bond beat PIMCO Total Return.

Heck, I got nervous about the Hindenburg Omen for stocks in 2010.

It's easy to say "tune out the noise." It's not easy to do.

Sometimes there are so many warning flags waving that you have to pay attention, other times not so much.
When were those "other times?" Please name one year when you think there were not many "warning flags." Then do a Google search on that year. You'll be surprised. In retrospect, when we know that a year was a good year, we forget all the warnings flags there seemed to be at the time.

Seriously, name a year and then let's go look.


I have no idea what you do in real life, but your posts just touch so many chords but still end with so much wisdom. Another great post.
ps: I think you should write a book
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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Re: U.S. stocks in freefall

Post by Starper » Wed Apr 20, 2016 3:04 pm

Not a market timer here. Most of my money is in the S&P500, some in international, and small portions in Reits, bonds and cash. I don't think I sold anything to time the market over the last few years.

Having said that, i am also have an odd feeling about the current S&P500 price which is 2100 and change as I type this.

-PE10 is 26.4. Not record high, but definitely in the 90+ percentile. Price to sales is the highest since early 2000s (I don't have the data prior to that). Price to book is the highest since the last recession.

-People talk about the mid 90s when the PE ratio was comparable to what it is now, but the stock prices still skyrocketed before the dotcom crash. Well, the interest rates at the time were much higher as well, so those investors who shifted their money from stocks to bonds or CDs also made pretty decent returns. Also, higher interest rates meant that there was an interest rate "buffer" that central banks used for monetary policy after the dotcom and subprime crashes to jump start the economy. The buffer is not there anymore, neither is the alternative to invest in fixed income and make decent returns (a small exception to this is p2p lending which is risky, not a passive investment, and unsecured).

So, while know that I can't predict the market, i'm still tempted to sell a big part of my s&p500 index fund and sit on cash for awhile, maybe invest it in p2p lending if nothing else. Haven't done anything yet, definitely not an easy decision for me.

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Re: U.S. stocks in freefall

Post by bertie wooster » Wed Apr 20, 2016 3:06 pm

Starper wrote:
So, while know that I can't predict the market, i'm still tempted to sell a big part of my s&p500 index fund and sit on cash for awhile, maybe invest it in p2p lending if nothing else. Haven't done anything yet, definitely not an easy decision for me.


This is a bad idea. If you're in cash you will never know when to get back in. P2P lending is pretty darn risky and not diversified.

Just leave your money in the index fund. You're not worried about using the money in the short term (and if you are, don't put it in stocks), it's for a long term goal (typically retirement)

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Re: U.S. stocks in freefall

Post by Independent George » Wed Apr 20, 2016 3:21 pm

I wish I was a market timer; during the only two times in my investing life I was absolutely convinced the markets were ripe for buying, I just didn't have the capital to invest.

On 9/11/2001, I was earning lousy pay while being over 20k in the hole on student loans. And before the great crash of 2008, I had put down a 50k deposit on my condo in 2007. I don't much care about what my home's value is (since I'm still living in it), but I really wish I had more cash to put into stocks around then.

I've still done pretty well for myself as I continued to DCA my 401k/Roth IRA through all of those ups and downs, and I know all the good reasons against market timing. Nevertheless, I can't help but feel like I missed two opportunities to get greedy. Oh, well; maybe we've got another great crash ahead of us for me to look forward to. In the meantime, I guess my retirement contributions will just have to remain on autopilot.

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Re: U.S. stocks in freefall

Post by broadstone » Wed Apr 20, 2016 3:28 pm

HomerJ wrote:
broadstone wrote:I never wanted to be a market timer as I don't have the stomach for it and in my heart, I'm a true Boglehead. But there are so many warning sayings, proceed with extreme caution, that I can't ignore them anymore. The warning signs were there in 2007 and they're back now. History will repeat itself.


Buying and holding from 2007 to today has returned about 8% a year.


I don't disagree with you. I'm probably wrong with everything I've posted. But I have to do what makes sense for me. I certainly don't think that's arrogant and I'm not handing out to advice to anyone else saying, do as I do. Seems like manny forumites are far more successful in life and investing than I am.

Problem for me is I don't have time on my side as I was late to the investment party. This means having to make some calculated decisions and risks that may or may not result in me eventually being able to retire. I've been able to successfully time and buy low-side corrections before; surely some luck involved but there are some consistencies within this market that have occurred in corrections in the past. For me that's hard to ignore and presents great opportunity.

Either outcome is good for the Bogleheads. If the markets continue to steamroll up, your IRA's will be worth more, my cash will be eaten away by inflation and you can tell me how wrong and foolish I am, and if the markets correct, it will present a great buying opportunity for you to buy more and become wealthier. :sharebeer

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Re: U.S. stocks in freefall

Post by TomatoTomahto » Wed Apr 20, 2016 3:40 pm

broadstone wrote:Problem for me is I don't have time on my side as I was late to the investment party.

When I'm late to a party, I go in and party hearty, not stand outside nervously smoking cigarettes wondering if the party won't be fun. Just sayin'.

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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 3:42 pm

azanon wrote:
Leeraar wrote:
azanon wrote:
Leeraar wrote:If you don't believe that, you must believe you're smarter than everyone else. L.


You say that like we're collectively all so brilliant, all the time.


No, if we all have the same information and you make a different conclusion than the consensus that you act on, you must believe that you are smarter than the rest of us.

The nice thing about EMH is that if you subscribe to it, it says you can tune out all the noise.

L.


What I regret about that 1999 story I told you was that, at the time, i didn't know about or understand how to short stock. I just knew, with absolutely and complete certainty, that $100+/share was not a fair price for a URL and an idea. I don't think that makes me smarter than everyone. I just think for whatever reason, i wasn't having the same irrational exuberance as everyone else.

I dare that to happen again. I definitely know how to short stock now.


The problem is, there were stocks in 1998 that were also $100/share for a URL and an idea. And if you had shorted them, you would have been broke as they rose to $200/share in 1999.

You can be right, but if your timing is wrong, you can still be destroyed. Do not think you can time the market. Looking back, it's easy to say "Oh 1999 was the obvious peak". At the time, plenty of people proclaimed (quite reasonably) that a crash was due in 1996. But the stock market DOUBLED from 1996 to 2000. So even though many people thought prices were crazy in 1996, shorting stocks at that point would have killed you.

The market can remain irrational longer than you can remain solvent.

I dare that to happen again. I definitely know how to short stock now.


Be careful what you wish for.
Last edited by HomerJ on Wed Apr 20, 2016 3:45 pm, edited 1 time in total.

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Re: U.S. stocks in freefall

Post by Leeraar » Wed Apr 20, 2016 3:44 pm

Somehow, I am reminded of my PhD advisor. A brilliant man, but with somewhat fractured English.

(Thinking of post-dicting the next downturn.)

He said, of some calamity: "With 20/20 hindsight, this should have been foreseen."

L.
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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 3:54 pm

broadstone wrote:Either outcome is good for the Bogleheads. If the markets continue to steamroll up, your IRA's will be worth more, my cash will be eaten away by inflation and you can tell me how wrong and foolish I am, and if the markets correct, it will present a great buying opportunity for you to buy more and become wealthier. :sharebeer


We're not telling you that you're wrong. We're not saying "Oh the market will keep going up". We're telling you that you just don't know (and we don't either).

If genius PhDs who study the markets all day long can't predict the next crash, why do you think you can?

There will be another crash. We just don't know when. And you have to know when if you're going to market-time successfully.
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Re: U.S. stocks in freefall

Post by azanon » Wed Apr 20, 2016 3:54 pm

HomerJ wrote:The problem is, there were stocks in 1998 that were also $100/share for a URL and an idea. And if you had shorted them, you would have been broke as they rose to $200/share in 1999.


Oh really? What makes you think a mere doubling of a share price would cause me to not be able to cover a short. Now you know how much I would have invested, and how much cash I would have. How do you know all of that?

Don't get me wrong, I'm plenty conservative. Even if I have short positions. Would I even be on this forum if I wasn't conservative in some respects?

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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 4:02 pm

broadstone wrote:Problem for me is I don't have time on my side as I was late to the investment party.


You're in your 40s... You have plenty of time.

Options:

(1) Invest 50/50, market drops 50%, then slowly heads back up... In 10-20 years, you still end up (very likely) with some decent average returns.
(2) Invest 50/50, market continues to go up before the next crash... In 10-20 years, you still end up (very likely) with some decent average returns.

Either way, you do okay.

(3) Invest 100% cash, market drops 50%, then you buy in, and make a killing.
(4) Invest 100% cash, market continues to up, and when the next crash finally does happen, you buy in higher than you could buy in today (or you never buy in). You make nothing over the years.

Which set of choices is more risky?

Top set of options is investing.
Bottom set of options is gambling.

Take the decent returns over the long-term, instead of gambling for a big score, which also gives you a chance of nothing.

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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 4:04 pm

azanon wrote:
HomerJ wrote:The problem is, there were stocks in 1998 that were also $100/share for a URL and an idea. And if you had shorted them, you would have been broke as they rose to $200/share in 1999.


Oh really? What makes you think a mere doubling of a share price would cause me to not be able to cover a short. Now you know how much I would have invested, and how much cash I would have. How do you know all of that?

Don't get me wrong, I'm plenty conservative. Even if I have short positions. Would I even be on this forum if I wasn't conservative in some respects?


Okay, I stand corrected.

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Re: U.S. stocks in freefall

Post by EyeYield » Wed Apr 20, 2016 4:18 pm

broadstone wrote: Either outcome is good for the Bogleheads. If the markets continue to steamroll up, your IRA's will be worth more, my cash will be eaten away by inflation and you can tell me how wrong and foolish I am, and if the markets correct, it will present a great buying opportunity for you to buy more and become wealthier. :sharebeer

You're presenting the possibilitiy of only two scenarios. With 20/20 hindsight, we can see that one of the greatest times to be in accumulation mode was during a time when the market went nowhere. Between 1966 and 1982 the DJIA basically started and ended around 1000, but look what happened afterward.

Within that time there was a couple of good dips, but if you jumped in and out of the market trying to time it, you regretted it long term.

Having a plan you can stick to through all kinds of markets is really important. Holding cash and waiting for a crash is not a workable plan. You're planning for the possibility of ONE event, ignoring everything else.

If the S&P 500 trades between 1700 and 2100 for the next ten years, you aren't going to be prepared with your current crash or no crash scenario.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: U.S. stocks in freefall

Post by broadstone » Wed Apr 20, 2016 4:52 pm

HomerJ wrote:
broadstone wrote:Problem for me is I don't have time on my side as I was late to the investment party.


You're in your 40s... You have plenty of time.

Options:

(1) Invest 50/50, market drops 50%, then slowly heads back up... In 10-20 years, you still end up (very likely) with some decent average returns.
(2) Invest 50/50, market continues to go up before the next crash... In 10-20 years, you still end up (very likely) with some decent average returns.

Either way, you do okay.

(3) Invest 100% cash, market drops 50%, then you buy in, and make a killing.
(4) Invest 100% cash, market continues to up, and when the next crash finally does happen, you buy in higher than you could buy in today (or you never buy in). You make nothing over the years.

Which set of choices is more risky?

Top set of options is investing.
Bottom set of options is gambling.

Take the decent returns over the long-term, instead of gambling for a big score, which also gives you a chance of nothing.


Fair points, to clarify when you say 50/50, you're talking 50% equity / 50% bond allocations correct?

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Re: U.S. stocks in freefall

Post by broadstone » Wed Apr 20, 2016 4:53 pm

EyeYield wrote:
broadstone wrote: Either outcome is good for the Bogleheads. If the markets continue to steamroll up, your IRA's will be worth more, my cash will be eaten away by inflation and you can tell me how wrong and foolish I am, and if the markets correct, it will present a great buying opportunity for you to buy more and become wealthier. :sharebeer

You're presenting the possibilitiy of only two scenarios. With 20/20 hindsight, we can see that one of the greatest times to be in accumulation mode was during a time when the market went nowhere. Between 1966 and 1982 the DJIA basically started and ended around 1000, but look what happened afterward.

Within that time there was a couple of good dips, but if you jumped in and out of the market trying to time it, you regretted it long term.

Having a plan you can stick to through all kinds of markets is really important. Holding cash and waiting for a crash is not a workable plan. You're planning for the possibility of ONE event, ignoring everything else.

If the S&P 500 trades between 1700 and 2100 for the next ten years, you aren't going to be prepared with your current crash or no crash scenario.


I don't disagree, you have very valid points.

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Re: U.S. stocks in freefall

Post by HomerJ » Wed Apr 20, 2016 5:28 pm

broadstone wrote:to clarify when you say 50/50, you're talking 50% equity / 50% bond allocations correct?


Yes, but it could be 30/70 or 70/30 or you could substitute CDs for some bonds, etc.

If the crash does happen like you think it will, you can still exchange cash or bonds for stocks, and if a crash doesn't happen, you'll get to participate in the rising stock market with at least some of your money.

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Re: U.S. stocks in freefall

Post by wesgreen » Wed Apr 20, 2016 7:57 pm

broadstone, I would suggest following Homer J's advice. If you're late to the party (I know the feeling) you really can't afford to play games. You have to be cold and effective, and go by the odds, not emotions or hunches. And stay the course. Not easy, but simple.
And then send him a birthday card every year.

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Re: U.S. stocks in freefall

Post by broadstone » Wed Apr 20, 2016 10:18 pm

HomerJ wrote:
Yes, but it could be 30/70 or 70/30 or you could substitute CDs for some bonds, etc.

If the crash does happen like you think it will, you can still exchange cash or bonds for stocks, and if a crash doesn't happen, you'll get to participate in the rising stock market with at least some of your money.


Ok HomerJ this makes sense to me. Thank you.

wesgreen wrote: broadstone, I would suggest following Homer J's advice. If you're late to the party (I know the feeling) you really can't afford to play games. You have to be cold and effective, and go by the odds, not emotions or hunches. And stay the course. Not easy, but simple.
And then send him a birthday card every year.


Thanks for the advice wesgreen, can't promise a card but we'll see.

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Re: U.S. stocks in freefall

Post by packet » Thu Apr 21, 2016 8:04 am

broadstone wrote:...Ok HomerJ this makes sense to me...

I can't remember if I've posted one of my favorite links in here or not... and I'm too lazy to search... so...

Please take 5 minutes and read this: Bob, the world’s worst market timer

:beerCheers,
packet
First round’s on me.

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Re: U.S. stocks in freefall

Post by broadstone » Thu Apr 21, 2016 8:09 am

packet wrote:
broadstone wrote:...Ok HomerJ this makes sense to me...

I can't remember if I've posted one of my favorite links in here or not... and I'm too lazy to search... so...

Please take 5 minutes and read this: Bob, the world’s worst market timer

:beerCheers,
packet


Thanks, that is a terrific article

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Re: U.S. stocks in freefall

Post by packet » Thu Apr 21, 2016 8:24 am

broadstone wrote:...But you're entitled to your opinion...

I can't resist putting my 2 cents in here.

Broadstone,

I commend you on keeping a pretty dang consistently civil discourse in this thread.

I also commend the majority of other posters expressing opinions directly apposed to yours. They have been quite strong, yet still civil.

I give you 52% of the credit in keeping the conversation worthwhile and not letting it go down the sh-ter. You are standing alone against a large group and are maintaining your composure. Is this regard, I believe you to be a true Boglehead poster.

Keep it up!

:beerCheers,
packet

PS,
Hmmm... perhaps you should consider a 52/48 equity/bond split ... :sharebeer
Last edited by packet on Thu Apr 21, 2016 11:34 am, edited 1 time in total.
First round’s on me.

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Re: U.S. stocks in freefall

Post by Leeraar » Thu Apr 21, 2016 10:56 am

The only real way to catch up is to direct as much income to retirement savings as possible.

Actually, there are three things aside from getting lucky:

1. Lower your expectations.
2. Save more.
3. Work longer, retire later.

Be aware that 3. is somewhat out of your control.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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Re: U.S. stocks in freefall

Post by LateStarter1975 » Thu Apr 21, 2016 11:06 am

packet wrote:
broadstone wrote:...But you're entitled to your opinion...

I can't resist putting my 2 cents in here.

Broadstone,

I commend you on keeping a pretty dang consistently civil discourse in this thread.

I also commend the majority of other posters expressing opinions directly apposed to yours. They have been quite strong, yet still civil.

I give you 52% of the credit in keeping the conversation worthwhile and not letting it go down the sh-ter. You are standing alone against a large group and are maintaining your composure. Is this regard, I believe you do be a true Boglehead poster.

Keep it up!

:beerCheers,
packet

PS,
Hmmm... perhaps you should consider a 52/48 equity/bond split ... :sharebeer


+1
Debt is dangerous...simple is beautiful

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Re: U.S. stocks in freefall

Post by broadstone » Thu Apr 21, 2016 11:09 am

packet wrote:
broadstone wrote:...But you're entitled to your opinion...

I can't resist putting my 2 cents in here.

Broadstone,

I commend you on keeping a pretty dang consistently civil discourse in this thread.

I also commend the majority of other posters expressing opinions directly apposed to yours. They have been quite strong, yet still civil.

I give you 52% of the credit in keeping the conversation worthwhile and not letting it go down the sh-ter. You are standing alone against a large group and are maintaining your composure. Is this regard, I believe you do be a true Boglehead poster.

Keep it up!

:beerCheers,
packet

PS,
Hmmm... perhaps you should consider a 52/48 equity/bond split ... :sharebeer


Appreciate your comments Packet. As I've gotten older I've realized arguments are unproductive (especially web arguments). Arguing to prove someone's wrong creates ill will and nothing good comes of it. One has to make one's own decisions and mistakes in life. I'm always open to constructive thoughts and better ways of doing things.

52% it is :D
Last edited by broadstone on Thu Apr 21, 2016 11:47 am, edited 1 time in total.

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Re: U.S. stocks in freefall

Post by ColinFCodeChef » Thu Apr 21, 2016 12:10 pm

lack_ey wrote:
ColinFCodeChef wrote:
lack_ey wrote:But history has shown us that the market may or may not use that information to price things in correctly for its own purposes or yours. (Also that nevertheless, most of us are dumber than the market.)



Your statement is the opposite of the efficient market hypothesis...The bolded statement above makes no sense. What purpose should the market have?

EMH is about informational efficiency, not directly how that information gets translated into securities pricing. Presumably, market participants want to make money, but it gets a little more complicated than that.

First of all, what the information means for future returns is up for debate. It is possible that even with all the information, because of emotions, mandates on money managers to pursue certain strategies or stay within certain boxes, trading costs and other market frictions, or any other forces, the market gets things wrong. If nothing else, market pricing reflects the transaction points of the most eager potential buyers and sellers, not necessarily the view of people overall.

But even if everyone knew all the probabilities of every possible outcome for every security and how everything might unfold, individual investor preferences still come into play. If enough investors value explosive growth potential (positive skewness in distribution), for example finding the next Google or what have you, these securities will be bid up even at the expense of expected return. If you care about diversification and want the best risk/return defined in some way, there's no guarantee even in the everybody-knows-all-the-distributions scenario that the market portfolio would deliver that.

Usually when EMH is invoked, people have in mind some kind of idealized pricing model (which reality may not really follow). On the other hand, even if the market were greatly exploitable you could claim EMH held by assuming that the market efficiently priced irrational investor desires. See the joint hypothesis problem.



Ah okay, thanks for putting that in context.

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Re: U.S. stocks in freefall

Post by ray.james » Thu Apr 21, 2016 12:36 pm

Broadstone,

I thought I would share my real feelings that I went through last 5 years. I started investing in 2008/09. Made some money, lost some in cycles. Turned to index funds in 2011. Then started tweaking things a lot. Factor loading, value, international, P/E etc., Things started changing last year when I have realized few things.

1) All the tinkering may possibly give me 0.5%- 1% extra gain if I got everything right.
2) In my early accumulation years, all that means is few K extra on 300K accumulation over 7-10 years.
3)My tinkering can go wrong and even in worse scenario its few K lost.

This led me to change things dramatically. I maintain roughly 25% bonds(10 year treasury), 30% USA, 20% -international, 15% EM, 10% for my factor loads/tinkering whatever gold mountain I want to buy. I started at 15% bonds and all my new contributions are going to make it to 25%(I am 19.2% now). My last year 10% speculation was in emerging market, sadly did not do that well. This year I switched to metals at right time and reaped 100% profit.

People here tend to denounce things a bit too strongly. The reality is people are not thinking about technical issues or correctness of theory. It is psychological. I read financial blogs voraciously and feel a lot of itch to change things. But I made peace with fact that few K is not a big thing in grand scheme of 100's of K. Funny that few years ago I lived on far less than a 1K as a student.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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Re: U.S. stocks in freefall

Post by LadyGeek » Thu Apr 21, 2016 3:48 pm

I removed some off-topic posts. As a reminder, see: General Etiquette

We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.
...
At all times we must conduct ourselves in a respectful manner to other posters.
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Re: U.S. stocks in freefall

Post by David Jay » Thu Apr 21, 2016 6:17 pm

EyeYield wrote:
broadstone wrote:a once in a lifetime buying opportunity is coming.

There's only one opportunity of a lifetime.

Start early, invest consistently and let compounding do it's thing over YOUR lifetime.

You're not alone. There isn't anyone who can totally escape their own psychology. Ignoring the noise industry, and it is an industry, is a discipline that takes practice.
Much like mastering a musical instrument, no matter how much you practice, you never fully master it.

When I have doubts and need reinforcement, I reread a Dr. Bernstein or Jack Bogle book which always seems to quiet the noise.

Try it.


+1

I read Bernstein's "Four Pillars" on the flights of my last overseas business trip. It's hard to believe I can beat the market after reading that tome!
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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Re: U.S. stocks in freefall

Post by QuietProsperity » Thu Apr 21, 2016 6:40 pm

This topic is such an awesome microcosm of why investing is so difficult over a lifetime...especially when you consider that most members of this forum are the above average ones.

Thank you for tip on re-reading Bogle/Berstein/Swedroe/Ferri again when things get hairy. I have only been at this for 3 years since I got my first real job so I have yet to see a real noisy/bad period that has caused me to question my AA, but I know it will come at some point. Going to remember this tip.

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Re: U.S. stocks in freefall

Post by Leeraar » Thu Apr 21, 2016 6:46 pm

QuietWealth wrote:This topic is such an awesome microcosm of why investing is so difficult over a lifetime...especially when you consider that most members of this forum are the above average ones.

Thank you for tip on re-reading Bogle/Berstein/Swedroe/Ferri again when things get hairy. I have only been at this for 3 years since I got my first real job so I have yet to see a real noisy/bad period that has caused me to question my AA, but I know it will come at some point. Going to remember this tip.

As others have said, distill it down so you do not have to read all the books again. You only have to read your Investment Policy Statement!

And, the time to re-visit your IPS is when times are calm, not when they are exciting.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Sat Apr 30, 2016 12:34 pm

With the wild swings in the market this YTD show why one should not look; just blindly follow the asset allocation one has set.

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Re: U.S. stocks in freefall

Post by selters » Sat Apr 30, 2016 1:58 pm

azanon wrote:
Those terms actually have real meaning, not open to debate or interpretation. If the hypothesis were much stronger, its findings were repeatible by others, and the mounds of evidence didn't exist to the contrary, they'd promptly start calling it the Efficient Market Theory, or higher, I'm quite sure.

Just an off the top of my head terms and concepts completely counter to EMH: trendfollowing, momentum investing, irrational exuberence, animal spirits, anything "valuations"; all investing concepts supported by a very large contingent of the investment community.


Hypothesis, theory, law, these words have their dictionary definitions, but they are used quite loosely among users of the English language nevertheless. I wouldn't say that the Efficient Market Hypothesis cannot withstand scrutiny to any lesser extent than Murphy's law ("what can go wrong will go wrong"), Moore's law (computing power doubles every two years) or Stein's law (If something cannot go on forever, it will stop).

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Re: U.S. stocks in freefall

Post by azanon » Sat Apr 30, 2016 9:09 pm

selters wrote:
azanon wrote:
Those terms actually have real meaning, not open to debate or interpretation. If the hypothesis were much stronger, its findings were repeatible by others, and the mounds of evidence didn't exist to the contrary, they'd promptly start calling it the Efficient Market Theory, or higher, I'm quite sure.

Just an off the top of my head terms and concepts completely counter to EMH: trendfollowing, momentum investing, irrational exuberence, animal spirits, anything "valuations"; all investing concepts supported by a very large contingent of the investment community.


Hypothesis, theory, law, these words have their dictionary definitions, but they are used quite loosely among users of the English language nevertheless. I wouldn't say that the Efficient Market Hypothesis cannot withstand scrutiny to any lesser extent than Murphy's law ("what can go wrong will go wrong"), Moore's law (computing power doubles every two years) or Stein's law (If something cannot go on forever, it will stop).


I have no objection to your downgrade. Murphy's law, for instance, is a epigram. You're right - Efficient Market Hypothesis isn't much better and belongs in that company.

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Re: U.S. stocks in freefall

Post by JonnyDVM » Sat Apr 30, 2016 9:26 pm

HomerJ wrote:
broadstone wrote:With Brexit looming and an election, it's going to b a volatile year.


I would suggest you read older threads on this site (including THIS one), and see people, just as confident as you are right now, post in 2010, and 2011, and 2012, and 2013, and 2014, and 2015, that a crash is coming very soon, because of X, Y, or Z.

Every year is a volatile year.

Being conservative is fine. Being 100% in cash is not conservative. It's also risky (Unless you are so wealthy that you don't need any growth on your money at all).

You will likely never get back in. If the market keeps going up, you're going to think it's more and more overvalued, and more and more "due" for a crash. If the market crashes, the news is going to be bad, real bad, and you will want to wait for it to crash "a little further" before getting back in.

Instead of swinging 100% cash, 100% stocks... why not just adopt a 50/50 (or 30/70) stocks/bonds-cash portfolio and just hold through all the bumps.

You seem to think that avoiding the crash is the most important thing. But just holding through a crash has worked out pretty well so far. You still get a decent returns, even if you don't avoid the crash.

Let me repeat that: You don't have to avoid the crash to get good returns. The 9%-10% historical stock market return INCLUDES all the crashes.

But trying to avoid a crash can mean you instead avoid the climbs, and you may end up getting less return than if you had just bought and held.


This guy knows what he's talking about. And he appreciates a good Simpsons reference. My kind of guy. :sharebeer
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