Worst investing year ever....

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aspirit
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Re: Worst investing year ever....

Post by aspirit » Tue Nov 27, 2018 6:08 am

Valuethinker wrote:
Tue Nov 27, 2018 4:22 am
willthrill81 wrote:
Mon Nov 26, 2018 11:20 pm
oldzey wrote:
Mon Nov 26, 2018 11:17 pm
aristotelian wrote:
Mon Nov 26, 2018 2:09 pm
I think anyone who went through the Great Depression or 2008 would beg to differ.
+1 - 2008-2009 were the worst investing years for me.
They were probably the worst investing years for almost everyone since 1973-1974.
We are taught to think in real return terms.

That thinking was not common in 1973-74. What happened was you had quite negative returns e.g. on bank accounts *but* you still had your money (in nominal terms). Stock market plunged but 401ks in US were a new thing (I believe) and not many people had exposure to stocks - it was still a rich person's game.

UK had a horrendous stock market crash (70%+ in real terms). But there was also a housing crash - house prices didn't move for 2 years when retail prices rose by 40%. It was a "crash" but, by and large, people did not notice -- they had lost 40% of the value of their main asset in real terms, but life went on.

2008-09 the impact was directly on the portfolio - the real loss and the nominal loss were quite close.

What 2008-09 taught was the importance of having safe bonds in the portfolio - credit risk free fixed income instruments. The only thing that went up. That was basically the only form of diversification that worked.
To top it off for most Americans their house fell by 20-50% in value?

I doubt people were really paying attention or that people who have come into the markets since then have absorbed that lesson. Each generation gets to relearn the hard-learned lessons of the previous.
VT your input & participation always articulates great learning points. I'm sure many on this side of the pond (IIRC your UK ), and particularly bh.org participants recall 08-09's huge >50% drop. It certainly woke me up having been 100% equites.

I agree a worst investing return ever thread is certainly short sighted at the least, unless ones only considering market returns since March 2009.
Time & tides wait for no one. A man has to know his limitations.

dcabler
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Re: Worst investing year ever....

Post by dcabler » Tue Nov 27, 2018 6:45 am

JBTX wrote:
Mon Nov 26, 2018 2:05 pm
In terms of number asset classes that lost money.

If you get past the exaggerated headline, it actually is interesting. Would lend credence to the notion asset classes are more highly correlated.

https://www.marketwatch.com/story/how-b ... 2018-11-26


Image
Not a very useful graph, in my opinion. As an investor, I expect years with losses. What would be more interesting to me isn't the number of assets which experienced losses, but their magnitude. Harder to graph vs. time, though...

JBTX
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Re: Worst investing year ever....

Post by JBTX » Tue Nov 27, 2018 1:07 pm

aspirit wrote:
Tue Nov 27, 2018 6:08 am
Valuethinker wrote:
Tue Nov 27, 2018 4:22 am
willthrill81 wrote:
Mon Nov 26, 2018 11:20 pm
oldzey wrote:
Mon Nov 26, 2018 11:17 pm
aristotelian wrote:
Mon Nov 26, 2018 2:09 pm
I think anyone who went through the Great Depression or 2008 would beg to differ.
+1 - 2008-2009 were the worst investing years for me.
They were probably the worst investing years for almost everyone since 1973-1974.
We are taught to think in real return terms.

That thinking was not common in 1973-74. What happened was you had quite negative returns e.g. on bank accounts *but* you still had your money (in nominal terms). Stock market plunged but 401ks in US were a new thing (I believe) and not many people had exposure to stocks - it was still a rich person's game.

UK had a horrendous stock market crash (70%+ in real terms). But there was also a housing crash - house prices didn't move for 2 years when retail prices rose by 40%. It was a "crash" but, by and large, people did not notice -- they had lost 40% of the value of their main asset in real terms, but life went on.

2008-09 the impact was directly on the portfolio - the real loss and the nominal loss were quite close.

What 2008-09 taught was the importance of having safe bonds in the portfolio - credit risk free fixed income instruments. The only thing that went up. That was basically the only form of diversification that worked.
To top it off for most Americans their house fell by 20-50% in value?

I doubt people were really paying attention or that people who have come into the markets since then have absorbed that lesson. Each generation gets to relearn the hard-learned lessons of the previous.
VT your input & participation always articulates great learning points. I'm sure many on this side of the pond (IIRC your UK ), and particularly bh.org participants recall 08-09's huge >50% drop. It certainly woke me up having been 100% equites.

I agree a worst investing return ever thread is certainly short sighted at the least, unless ones only considering market returns since March 2009.
It didn't say that, and that isn't the point, but please, create a straw man and knock it down.

Valuethinker
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Re: Worst investing year ever....

Post by Valuethinker » Tue Nov 27, 2018 2:24 pm

aspirit wrote:
Tue Nov 27, 2018 6:08 am

VT your input & participation always articulates great learning points. I'm sure many on this side of the pond (IIRC your UK ), and particularly bh.org participants recall 08-09's huge >50% drop. It certainly woke me up having been 100% equites.

I agree a worst investing return ever thread is certainly short sighted at the least, unless ones only considering market returns since March 2009.
Cheers ;-). Yes, UK.

The 1970s was worse for UK investors than American (and that's saying something). However the equity culture was not as prevalent - very few people had Defined Contribution pension schemes (in either country AFAIK). Similarly with housing prices people didn't worry about their real housing price, they worried about the nominal one (but mortgage rates got to 12-13% at least - the monthly payment was the bigger worry).

I don't remember people thinking much about real returns at the time - my father tracked his stock prices ie nominal returns. High inflation was such a new phenomenon it took a long time for people to adjust.

2008-09 was kind of a wakeup for most of us. I remember Oct 19, 1987 and the 25% drop. I remembered the Mexico Crash, and the Asia Crash of 1997-98. Japan pretty much any time I was paying attention -- the bottom and the recovery and new bull market was always "just around the corner". The dot com crash was actually personally more painful (employer stock dropped 90%+) and it was a long, grinding bear market.

2008-09 I just stopped looking at the portfolio valuations - it got too depressing. It did make me too cautious on the rebound however (UK stocks have not performed anything like as well as American post crash).

What I did learn from 2008-09 (and 2000) was that "all that is solid, melts into air". You are "worth" a certain amount in your portfolio, and then you are not. At 40 you have time (we hope) to recover - you buckle down, keep working, keep saving. In your 50s, you do not - health & age and the pressures of organizations on the over 50s are always at your back.

I have a distinct feel of a "party like it's 1999" out there - that there are people who have forgotten (or were not investing then) what 2008-09 was like.

And also that have absorbed "the lesson" that markets rebound very quickly. When, in fact, 2000-03 tells you that they don't (let alone 1968-1981).

MJW
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Re: Worst investing year ever....

Post by MJW » Tue Nov 27, 2018 2:45 pm

Valuethinker wrote:
Tue Nov 27, 2018 2:24 pm
I have a distinct feel of a "party like it's 1999" out there - that there are people who have forgotten (or were not investing then) what 2008-09 was like.
People in general are terrible at learning from history. It is almost as if we possess a sort of inherent mechanism that prevents it.

robertmcd
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Re: Worst investing year ever....

Post by robertmcd » Tue Nov 27, 2018 2:46 pm

Live by QE and you will die by QT. It is that simple. Fed started QE for the wealth effect and made it almost impossible to lose money in any financial asset, and Fed hikes and QT are having the opposite effect.

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JasonF
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Re: Worst investing year ever....

Post by JasonF » Tue Nov 27, 2018 4:04 pm

aristotelian wrote:
Mon Nov 26, 2018 2:09 pm
I think anyone who went through the Great Depression or 2008 would beg to differ.
Agreed. Like many here, I've lived through really bad periods like '00-'02, and 2008 and even "bad-ish" periods like '94, '98, 2011 and many others and this year doesn't even register as a blip. At the moment equity markets are flat and bonds are down. Rare for both to post poor performance in the same year but it happens.

JoeRetire
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Re: Worst investing year ever....

Post by JoeRetire » Wed Nov 28, 2018 5:24 pm

JBTX wrote:
Mon Nov 26, 2018 9:05 pm
It is true that high correlation provides diversification than exact correlation, but isn't it also true that no correlation is better than high positive correlation?
Can we agree that there are more than 2 asset classes?
Can we agree that there cannot be perfect negative correlation among all the asset classes?
Can we agree that there is no evidence of a long term increase in correlation just because of one year's data point?

I agree that no correlation is better than high positive correlation.

Can we agree that one must still choose among asset classes, and that even if some but not all appear to have high positive correlation today, that doesn't mean the same "correlation" in future years?

Seems to me there is little choice but to diversify among asset classes. That's all I'm trying to say.

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DaftInvestor
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Re: Worst investing year ever....

Post by DaftInvestor » Thu Nov 29, 2018 11:24 am

aristotelian wrote:
Mon Nov 26, 2018 2:09 pm
I think anyone who went through the Great Depression or 2008 would beg to differ.
Agreed - the title of this thread is very misleading.
"Worse investing year ever" is measured, by nearly everyone else on the planet, as the year they lost the most on their investments. 2018 is not even in the top 10.

Valuethinker
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Re: Worst investing year ever....

Post by Valuethinker » Thu Nov 29, 2018 1:32 pm

MJW wrote:
Tue Nov 27, 2018 2:45 pm
Valuethinker wrote:
Tue Nov 27, 2018 2:24 pm
I have a distinct feel of a "party like it's 1999" out there - that there are people who have forgotten (or were not investing then) what 2008-09 was like.
People in general are terrible at learning from history. It is almost as if we possess a sort of inherent mechanism that prevents it.
I am not sure if this is Kahneman & Tversky, or Thaler, or Laibson (Hyperbolic discounting) but it seems pretty clear humans are hardwired to over rely on short term stimuli and evidence - makes it hard for them to plan & act long term.

Sugary foods and drinks are like that - very much like that. Our bodies are hardwired to short term gratification from sugar.

Institutionally I think it's because there's never anyone in senior positions around more than 20 years in their careers in the organization. There's no organizational memory.

Elephants (herds are made up of female elephants and immature elephants, not males) live in nature into their 50s if not longer. Why does this work, evolutionarily?

One obviously because an elephant pregnancy is a huge effort (the longest of any land mammal?). And so they have few children. And the elder matrons, past child-bearing age, play a role in looking after baby elephants. Shepherding them across fast running water, showing them what to eat, etc.

But there's another. A 45 year old matriarch will lead her herd in a drought to a watering hole they last used 30, 40 years ago, when she was a young female. Elephants are one of the few species for which we have that kind of long observational record of individuals.

Memory counts. The old tribal elders squatting around the campfires? In a pre literate age they carried the knowledge that allowed the tribe to survive.

In the speed of the modern era, we've lost our memory. Come to actively disrespect it.

beth65
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Re: Worst investing year ever....

Post by beth65 » Thu Nov 29, 2018 10:44 pm

Great response VT. We are so focused on instant gratification and quick fixes that we completely lose focus on the cyclical nature of history, and of learning from our mistakes.

OkieIndexer
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Re: Worst investing year ever....

Post by OkieIndexer » Mon Dec 03, 2018 3:07 pm

Valuethinker wrote:
Tue Nov 27, 2018 4:22 am

What 2008-09 taught was the importance of having safe bonds in the portfolio - credit risk free fixed income instruments. The only thing that went up. That was basically the only form of diversification that worked.
To top it off for most Americans their house fell by 20-50% in value?

I doubt people were really paying attention or that people who have come into the markets since then have absorbed that lesson. Each generation gets to relearn the hard-learned lessons of the previous.
Absolutely. In 2008 I was 27 and had been investing for 2 years. From Nov. 2008-July 2009, I felt like the ONLY reasonably safe place to park money was in 1-month T-Bills. Not a bank savings account (ANY bank). It seemed like a 1930s deflationary Depression Part
2 was absolutely a possibility, even likely. Even months after the market bottom in the summer of 2009, it wasn't at all obvious the bottom was in or that Depression 2.0 was off the table. I didn't even trust FDIC protection (how could FDIC bail out thousands of banks at the same time, potentially?). I was thinking any morning I could wake up to a Citi or Bank of America failure, or govt. nationalizing all of the big banks. "Tanks in the streets" was tossed around by at least one high level govt. official during the crisis...

I think a lot of people have forgotten how scary it was in late 2008-mid 2009, if they were paying attention to what was going on...

And even then, I felt like the actual T-Bills were safer than a Treasury Money Market Fund.
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital

pdavi21
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Re: Worst investing year ever....

Post by pdavi21 » Mon Dec 03, 2018 3:56 pm

1. For every asset class that fell in "value", there is an asset class used for valuation that ROSE in value.
For example, did oil prices fall in 2014-15? Not if you were buying and selling with Russian Rubles...

2. The number of classes that fell in not as important as HOW MUCH they fell.

Otherwise, is it interesting that stocks fell a few percent and bonds got hammered?
Not really, considering they both rose the majority of years.

EDIT: US stocks are positive, as are short term bonds. Long term bonds and INTL stocks took about a 5-10% hit. YTD

OkieIndexer
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Re: Worst investing year ever....

Post by OkieIndexer » Wed Dec 05, 2018 8:41 pm

Yeah, this year doesn't seem much different to me than 2015 which also had flat stock and bond returns. Also 1994 and 1987.
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital

averagedude
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Re: Worst investing year ever....

Post by averagedude » Wed Dec 05, 2018 8:55 pm

Anyone that would even suggest that this is the worst year ever for investing, obviously hasn't followed the market very long. Every year you could point out an oddity if you are looking for it. 2017 was more odd due to the lack of volatility. Markets always have their own way of surprising you and hardly no one can predict what will happen next.

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Re: Worst investing year ever....

Post by AlphaLess » Wed Dec 05, 2018 8:58 pm

JBTX wrote:
Mon Nov 26, 2018 2:05 pm
In terms of number asset classes that lost money.

If you get past the exaggerated headline, it actually is interesting. Would lend credence to the notion asset classes are more highly correlated.

https://www.marketwatch.com/story/how-b ... 2018-11-26
This result is kind of susceptible to the definition of an asset class.
"You can get more with a kind word and a gun than with just a kind word." George Washington

OkieIndexer
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Re: Worst investing year ever....

Post by OkieIndexer » Thu Dec 06, 2018 1:27 pm

averagedude wrote:
Wed Dec 05, 2018 8:55 pm
2017 was more odd due to the lack of volatility.
Yeah, I think 2017 was actually the least volatile year in the history of the Dow and S&P 500. 1995 came close, but even that year was slightly more squiggly on the chart.
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital

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willthrill81
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Re: Worst investing year ever....

Post by willthrill81 » Thu Dec 06, 2018 2:12 pm

OkieIndexer wrote:
Thu Dec 06, 2018 1:27 pm
averagedude wrote:
Wed Dec 05, 2018 8:55 pm
2017 was more odd due to the lack of volatility.
Yeah, I think 2017 was actually the least volatile year in the history of the Dow and S&P 500. 1995 came close, but even that year was slightly more squiggly on the chart.
I believe that 2017 was the only calendar year in history where stocks finished every month higher than the prior month.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

OkieIndexer
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Re: Worst investing year ever....

Post by OkieIndexer » Fri Dec 07, 2018 1:01 pm

willthrill81 wrote:
Thu Dec 06, 2018 2:12 pm
OkieIndexer wrote:
Thu Dec 06, 2018 1:27 pm
averagedude wrote:
Wed Dec 05, 2018 8:55 pm
2017 was more odd due to the lack of volatility.
Yeah, I think 2017 was actually the least volatile year in the history of the Dow and S&P 500. 1995 came close, but even that year was slightly more squiggly on the chart.
I believe that 2017 was the only calendar year in history where stocks finished every month higher than the prior month.
Yeah, it was a strange year but much appreciated for my "ulcer index."
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital

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willthrill81
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Re: Worst investing year ever....

Post by willthrill81 » Fri Dec 07, 2018 3:14 pm

OkieIndexer wrote:
Fri Dec 07, 2018 1:01 pm
willthrill81 wrote:
Thu Dec 06, 2018 2:12 pm
OkieIndexer wrote:
Thu Dec 06, 2018 1:27 pm
averagedude wrote:
Wed Dec 05, 2018 8:55 pm
2017 was more odd due to the lack of volatility.
Yeah, I think 2017 was actually the least volatile year in the history of the Dow and S&P 500. 1995 came close, but even that year was slightly more squiggly on the chart.
I believe that 2017 was the only calendar year in history where stocks finished every month higher than the prior month.
Yeah, it was a strange year but much appreciated for my "ulcer index."
Everyone else's too. This year has probably been good for the makers of Tums and Rolaids. Come to think of it, antacids (maybe alcohol too?) would probably be a good hedge against poor markets. I wonder if there's an ETF for that? 8-)
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

mariezzz
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Re: Worst investing year ever....

Post by mariezzz » Sat Dec 08, 2018 3:28 am

The market this year was more volatile than it has been for the last few. It seemed ridiculously overly exuberant early in the year. I'm not all that surprised - it's anyone's guess where the year is going to end, but in this volatility, it could easily be 4% higher if the year end a week or two sooner or later. In that regard, given the ongoing volatility, where it ends up on Dec 31 isn't all that relevant.
Most of the market's day-to-day fluctuations are driven more by emotion than by fundamentals. The way I've interpreted the increased volatility is that there are a lot of factors making investors (especially large institutional ones which hold lots of money) more jittery. I have my guesses as to what some of the major factors are, and those have additional (but complex) effects further downstream.

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Re: Worst investing year ever....

Post by Call_Me_Op » Sat Dec 08, 2018 7:46 am

bottlecap wrote:
Mon Nov 26, 2018 11:25 pm
Perhaps it's not that asset prices that are highly correlated, but that overall price inflation has shown up in assets across the board.

Something to think about.
I don't think those are two different things. Correlations change over time, and there are always factors that explain asset class behavior, and thus correlations.

For example, fears of inflation cause interest rates to increase, driving both stocks and bond lower. So over a short time period, stocks and bonds are correlated. Over a longer time period, there are multiple factors affecting markets, and longer-term correlations will be smaller.

By the way, talking about 70 asset classes without defining the term "asset class" is not particularly meaningful. By my definition of asset class, there are only a few of them.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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tadamsmar
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Re: Worst investing year ever....

Post by tadamsmar » Sat Dec 08, 2018 8:01 am

Bloomberg indicates that T-bills have been a good asset this year:

https://www.bloomberg.com/news/articles ... mps-to-end

Also the US dollar was good. They show the sp500 in positive territory YTD on 11/22. Maybe with dividends added?

Note that, in the OP chart, last year was the best year ever, so maybe a bit of smoothing would make it even less interesting.

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sperry8
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Re: Worst investing year ever....

Post by sperry8 » Sat Dec 08, 2018 8:12 am

fennewaldaj wrote:
Tue Nov 27, 2018 2:57 am
While it may be true that everything is going down at once the magnitude is not exactly scary. I think I can deal with my bonds being down 2% while my US stock is down 1-2% and my ex US equity is down a bit more. Even if it was like say -5% for bonds and -15-20% for stocks that is really not all that bad.
Foreign is down oodles. Most of my foreign funds are down ~15% YTD. That's surely more scary than US only.
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