That's enough for me in 2019

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market timer
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Re: That's enough for me in 2019

Post by market timer » Mon Apr 15, 2019 9:50 am

TheTimeLord wrote:
Mon Apr 15, 2019 8:43 am
What is the strike, what is the date, what did you pay for this privilege?
You are thinking of options. Futures have no strike or premium. The expiration date is mid-June, but I expect to roll this position for a few quarters. The return is the difference between LIBOR and the Nasdaq. If the Nasdaq returns more than ~2.7% annualized, I lose money. If it returns less than that, I make money.

marcopolo
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Re: That's enough for me in 2019

Post by marcopolo » Mon Apr 15, 2019 9:52 am

gmaynardkrebs wrote:
Mon Apr 15, 2019 9:37 am
marcopolo wrote:
Mon Apr 15, 2019 8:25 am

While our belief in how actionable are current valuations may be different, it seems to me we are splitting hairs when it comes to actual implementation.

You use "age in bonds", so at ~age 70, you have 30% equities. So, despite your worries about current valuations, you don't seem to have let that actually affect your glide path (that does seem curious given how strongly you seem to feel about valuations). I am in my early 50s, and am maintaining a 60/40 AA, so not that far off from what age in bonds would dictate. While I can see the argument that high valuations probably means lower expected returns going forward, I don't see how i can use that in any actionable way to time the market, other than to plan on lower growth of my portfolio, which I am doing anyway.
Yes, there is a degree of inconsistency between my "theory and praxis" as Karl Marx would say. Our implementation isn't that different. However, I think looking at valuation is a smarter way to invest than the way I did it. Nobody was talking about that when I set on my path many years ago. I would do things differently knowing what I know now. Saying this seems odd, because I would have less money today had I followed my present advice. However, over time I have developed a very negative view of Wall Street and the mutual fund industry. (Vanguard in the exception.) Their business model is built almost entirely on hiding tail risk from average investors like myself. The most obvious example of this is getting people to invest in stocks at much higher allocations than they should. Honestly, I think folks at my age (and yours) were very lucky to have been investing in the era we did.
We all learn and grow as we go. Thanks for sharing your perspective.
I am not sure how lucky or exceptional we have been. I went through the tech wreck and the great recession in my investing lifetime, you probably also endured Black Monday in addition. Does not seem like it has been a particularly lucky (or unlucky) ride. That is the nature of the equity markets, you take the good with the bad, and hopefully, over the long run you come out ahead. There are no guarantees. Maybe if you are lucky, you can avoid some of the excesses. Like i have said before, I don't think I am smart enough to do that, so i mostly just go along for the ride.

Appreciate your insights, always good to have healthy discussions to flesh out one's thoughts
Once in a while you get shown the light, in the strangest of places if you look at it right.

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Mon Apr 15, 2019 10:29 am

gmaynardkrebs wrote:
Mon Apr 15, 2019 9:37 am
marcopolo wrote:
Mon Apr 15, 2019 8:25 am

While our belief in how actionable are current valuations may be different, it seems to me we are splitting hairs when it comes to actual implementation.

You use "age in bonds", so at ~age 70, you have 30% equities. So, despite your worries about current valuations, you don't seem to have let that actually affect your glide path (that does seem curious given how strongly you seem to feel about valuations). I am in my early 50s, and am maintaining a 60/40 AA, so not that far off from what age in bonds would dictate. While I can see the argument that high valuations probably means lower expected returns going forward, I don't see how i can use that in any actionable way to time the market, other than to plan on lower growth of my portfolio, which I am doing anyway.
Yes, there is a degree of inconsistency between my "theory and praxis" as Karl Marx would say. Our implementation isn't that different. However, I think looking at valuation is a smarter way to invest than the way I did it.
gmaynardkrebs,

1) I know that I am not smart enough. So, my AA is based on the belief that the worst could happen anytime.

2) My AA of 60/40 is conservative. With my portfolio of 20 times my current annual expense, that 40% translates into 8 years of my current annual expense. With social security benefits, that number equal to 16 years of annual expense.

3) My IPS will stop my rebalancing at 5 years of current annual expense / 10 years of expense with social security.

4) I cannot predict the future. So, my AA is designed to survive the worst case. I am prepared. I do not need to think about valuation.

KlangFool

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Apr 15, 2019 11:14 am

KlangFool wrote:
Mon Apr 15, 2019 10:29 am
gmaynardkrebs wrote:
Mon Apr 15, 2019 9:37 am
marcopolo wrote:
Mon Apr 15, 2019 8:25 am

While our belief in how actionable are current valuations may be different, it seems to me we are splitting hairs when it comes to actual implementation.

You use "age in bonds", so at ~age 70, you have 30% equities. So, despite your worries about current valuations, you don't seem to have let that actually affect your glide path (that does seem curious given how strongly you seem to feel about valuations). I am in my early 50s, and am maintaining a 60/40 AA, so not that far off from what age in bonds would dictate. While I can see the argument that high valuations probably means lower expected returns going forward, I don't see how i can use that in any actionable way to time the market, other than to plan on lower growth of my portfolio, which I am doing anyway.
Yes, there is a degree of inconsistency between my "theory and praxis" as Karl Marx would say. Our implementation isn't that different. However, I think looking at valuation is a smarter way to invest than the way I did it.
gmaynardkrebs,

1) I know that I am not smart enough. So, my AA is based on the belief that the worst could happen anytime.

2) My AA of 60/40 is conservative. With my portfolio of 20 times my current annual expense, that 40% translates into 8 years of my current annual expense. With social security benefits, that number equal to 16 years of annual expense.

3) My IPS will stop my rebalancing at 5 years of current annual expense / 10 years of expense with social security.

4) I cannot predict the future. So, my AA is designed to survive the worst case. I am prepared. I do not need to think about valuation.

KlangFool
I hear you.
My comments about valuation are directed primarily at folks who think that stocks are minimally risky if you have a long enough time frame. That is simply not true. The only time stocks are not risky is when you have enough safe assets to never have to worry about what happens to stocks. You have enough safe assets not to worry.

Dudley
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Re: That's enough for me in 2019

Post by Dudley » Mon Apr 15, 2019 12:22 pm

market timer wrote:
Mon Apr 15, 2019 3:11 am
Dudley wrote:
Mon Apr 15, 2019 2:55 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
and how have you taken out this short position ?
Short futures on the Nasdaq 100
And what in mind do you have as exit criteria, both gain or loss ?

Chris42163
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Re: That's enough for me in 2019

Post by Chris42163 » Mon Apr 15, 2019 12:41 pm

market timer wrote:
Mon Apr 15, 2019 9:50 am
You are thinking of options. Futures have no strike or premium. The expiration date is mid-June, but I expect to roll this position for a few quarters. The return is the difference between LIBOR and the Nasdaq. If the Nasdaq returns more than ~2.7% annualized, I lose money. If it returns less than that, I make money.
So, you've sold a 20% portfolio size of Nasdaq 100 stock values, and you'll have to rebuy the stock at some point in the future (cover?)? I'm curious about how it works, but I don't have any interest in playing the game to learn, lol. I'm really curious as to why it's 2.7% annualized. If shorting is selling stock you don't own, then how do you get the spread between the LIBOR and the Nasdaq? Sorry if my terminology is wrong.

letsgobobby
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Re: That's enough for me in 2019

Post by letsgobobby » Mon Apr 15, 2019 12:49 pm

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Last edited by letsgobobby on Thu Apr 18, 2019 12:11 am, edited 1 time in total.

Chris42163
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Re: That's enough for me in 2019

Post by Chris42163 » Mon Apr 15, 2019 12:52 pm

Perhaps I should have said that I'm not worried about the price, I'm worried about the valuations. I'm not worried about the short term, I'm worried about the intermediate to long term (3-10 years). I'm timing on the scale of years. So, unless I'm exceptionally lucky, there will be fluctuations both higher and lower that I will not take action on. But, the expectation is that I am reducing my risk and exposure to a higher than normal probability of a steeply down market. At extreme valuations, there's not a lot of room for it to go to higher valuations, if you believe that investors care about what they expect to earn vs. their risk. We only have 1 instance of much higher valuations, the tech bubble, and it is not as likely to be repeated. This market does not look like that one.

I do believe big money and active investment cares about valuations, despite the boom of index funds. So, I expect to miss out on lesser gains, and miss out on higher probabilities of bigger losses. If the market stays flat while earnings grow, as is also likely IMO, then when valuations are no longer extreme, I'm back in. Meanwhile, I'm earning lower returns on safer assets.

Chris42163
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Re: That's enough for me in 2019

Post by Chris42163 » Mon Apr 15, 2019 1:04 pm

I think what's kinda funny is that I am not nervous at all riding out a recession if I'm 100% in. I was piling in money starting in 2008 and through the recession. I didn't mind riding it down. Now that the economy is kicking ass, I'm very concerned. It's not the economy, though. It's just that the markets are even farther out ahead of the economy.

DonIce
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Re: That's enough for me in 2019

Post by DonIce » Mon Apr 15, 2019 1:24 pm

Chris42163 wrote:
Mon Apr 15, 2019 12:41 pm
market timer wrote:
Mon Apr 15, 2019 9:50 am
You are thinking of options. Futures have no strike or premium. The expiration date is mid-June, but I expect to roll this position for a few quarters. The return is the difference between LIBOR and the Nasdaq. If the Nasdaq returns more than ~2.7% annualized, I lose money. If it returns less than that, I make money.
So, you've sold a 20% portfolio size of Nasdaq 100 stock values, and you'll have to rebuy the stock at some point in the future (cover?)?
That's right, with shorting you sell stock you don't own (you borrow it) and then you re-buy it later to close the position. You make money if you can buy it back for less than you sold it for.
I'm curious about how it works, but I don't have any interest in playing the game to learn, lol.

Easy enough to short 1 $50 share of some stable stock/ETF if you feel like experimenting! Not gonna lose much. I've experimented a few times just to have a feel for the process so that I can have a sense of what it really means to short something.
I'm really curious as to why it's 2.7% annualized. If shorting is selling stock you don't own, then how do you get the spread between the LIBOR and the Nasdaq? Sorry if my terminology is wrong.
When you short stock, you get the cash proceeds from the short sale. You can earn interest on these cash proceeds (depending on the broker). Meanwhile, you pay a borrow rate for the shares that you borrowed. The borrow rate for easy to borrow shares (i.e. most S&P500 stocks and big ETFs) is 0% at some brokers, while others are up to 1%. There are also hard to borrow shares, for which you get charged a much higher borrow interest rate, these are typically either for companies/ETFs with low liquidity, or ones where there are a lot of people shorting so shares to borrow are in high demand. The interest on short-sale cash proceeds can vary as well, but you can get as much as 2.16% at Interactive Brokers. The net result is that for easy to borrow shares, you can actually make money off the spread between the interest on the short sale cash proceeds and the share borrow rate that you are paying (not free money of course, since you are taking on the risk of a short position).

However, market timer is using a short position in index futures, not an actual stock or ETF. Index futures allow you a leverage of ~20x. So if you put up say $6000 of collateral, you get exposure to the price movement of $120k of nominal assets. The price of the leverage is where he is getting his ~2.7% annualized rate at. Typically, leveraging using futures costs about the risk free rate (~2.4% right now). Explaining how futures work is a whole thread in itself!

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Mon Apr 15, 2019 1:28 pm

Chris42163 wrote:
Mon Apr 15, 2019 1:04 pm
I think what's kinda funny is that I am not nervous at all riding out a recession if I'm 100% in. I was piling in money starting in 2008 and through the recession. I didn't mind riding it down. Now that the economy is kicking ass, I'm very concerned. It's not the economy, though. It's just that the markets are even farther out ahead of the economy.
Chris42163,

In my opinion, your problem has to do with your AA of 100/0. If your AA was 70/30 to 30/70, you would be diversified. Being 100/0, you can only buy stock and nothing else. Then, you have to worry about valuation. If your AA was 70/30 to 30/70, you would buy whatever that is low in asset allocation. Then, you would not be buying stock with a high valuation. Market timing would not be necessary.

KlangFool

DonIce
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Re: That's enough for me in 2019

Post by DonIce » Mon Apr 15, 2019 1:32 pm

KlangFool wrote:
Mon Apr 15, 2019 1:28 pm
Chris42163,

In my opinion, your problem has to do with your AA of 100/0. If your AA was 70/30 to 30/70, you would be diversified. Being 100/0, you can only buy stock and nothing else. Then, you have to worry about valuation. If your AA was 70/30 to 30/70, you would buy whatever that is low in asset allocation. Then, you would not be buying stock with a high valuation. Market timing would not be necessary.

KlangFool
It depends on the relative size of your portfolio compared to your saving rate. If your portfolio represents many years of savings, then yes, if stocks have gone up and its skewed to say 75/25 from a target of 70/30, then you'll just be buying bonds to try to get back up to 70/30. On the other hand, if you are earlier in accumulation, getting back to 70/30 might only take a fraction of your new contributions, after which you are still buying both stocks and bonds at that 70/30 split.

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Mon Apr 15, 2019 2:34 pm

DonIce wrote:
Mon Apr 15, 2019 1:32 pm
KlangFool wrote:
Mon Apr 15, 2019 1:28 pm
Chris42163,

In my opinion, your problem has to do with your AA of 100/0. If your AA was 70/30 to 30/70, you would be diversified. Being 100/0, you can only buy stock and nothing else. Then, you have to worry about valuation. If your AA was 70/30 to 30/70, you would buy whatever that is low in asset allocation. Then, you would not be buying stock with a high valuation. Market timing would not be necessary.

KlangFool
It depends on the relative size of your portfolio compared to your saving rate. If your portfolio represents many years of savings, then yes, if stocks have gone up and its skewed to say 75/25 from a target of 70/30, then you'll just be buying bonds to try to get back up to 70/30. On the other hand, if you are earlier in accumulation, getting back to 70/30 might only take a fraction of your new contributions, after which you are still buying both stocks and bonds at that 70/30 split.
DonIce,

How does that change my point about 100/0 means you can only buy stock?

KlangFool

ignition
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Re: That's enough for me in 2019

Post by ignition » Mon Apr 15, 2019 3:19 pm

gmaynardkrebs wrote:
Mon Apr 15, 2019 11:14 am
I hear you.
My comments about valuation are directed primarily at folks who think that stocks are minimally risky if you have a long enough time frame. That is simply not true. The only time stocks are not risky is when you have enough safe assets to never have to worry about what happens to stocks. You have enough safe assets not to worry.
If you mean cash and bonds with safe assets: they have been even riskier than stocks over the long term. I am more worried about cash/bonds preserving my purchasing power than stocks over the next 20 years.

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Mon Apr 15, 2019 3:22 pm

ignition wrote:
Mon Apr 15, 2019 3:19 pm
gmaynardkrebs wrote:
Mon Apr 15, 2019 11:14 am
I hear you.
My comments about valuation are directed primarily at folks who think that stocks are minimally risky if you have a long enough time frame. That is simply not true. The only time stocks are not risky is when you have enough safe assets to never have to worry about what happens to stocks. You have enough safe assets not to worry.
If you mean cash and bonds with safe assets: they have been even riskier than stocks over the long term. I am more worried about cash/bonds preserving my purchasing power than stocks over the next 20 years.
ignition,

You have to survive in order to succeed. You need to have enough to survive the next 5 to 10 years before the next 20 years is a problem.

KlangFool

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Apr 15, 2019 3:56 pm

ignition wrote:
Mon Apr 15, 2019 3:19 pm
gmaynardkrebs wrote:
Mon Apr 15, 2019 11:14 am
I hear you.
My comments about valuation are directed primarily at folks who think that stocks are minimally risky if you have a long enough time frame. That is simply not true. The only time stocks are not risky is when you have enough safe assets to never have to worry about what happens to stocks. You have enough safe assets not to worry.
If you mean cash and bonds with safe assets: they have been even riskier than stocks over the long term. I am more worried about cash/bonds preserving my purchasing power than stocks over the next 20 years.
Do you have a 401k or Roth that can hold TIPS? If so, you can guarantee purchasing power for 30 years with zero risk. I bonds are also tax advantaged. Unlike traditional bonds, which deservedly earned the nickname “certificates of confiscation” as unexpected inflation ate away their returns , TIPS are not subject to inflation risk.

Whenever I read a post like yours, I don’t think the person is actually talking about preserving purchasing power. What the person wants is to make money. I completely understand that – so do I! :) But, it can’t be done without taking on risk. Risk means risk of loss. Not volatility. Risk of a loss as in permanent loss. As in getting back less than you put in. As in possibly getting back a lot less than you put in. Stocks are not safe assets. They are risk assets. That risk does not decrease with time. It increases.

DonIce
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Re: That's enough for me in 2019

Post by DonIce » Mon Apr 15, 2019 7:20 pm

gmaynardkrebs wrote:
Mon Apr 15, 2019 3:56 pm
Stocks are not safe assets. They are risk assets. That risk does not decrease with time. It increases.
Disagree. The chance that you end up with less than you put in decreases over long time scales, as long as you agree that an equity risk premium exists at all. Think about what you're saying. If the risk increased with time, people would never hold equities for multiple decades, as that would be insanely risky. Instead, you can clearly see in all historical data that the longer the time period over which you measure, the fewer such time periods there are in which there were negative returns on stocks.

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Apr 15, 2019 11:34 pm

DonIce wrote:
Mon Apr 15, 2019 7:20 pm
gmaynardkrebs wrote:
Mon Apr 15, 2019 3:56 pm
Stocks are not safe assets. They are risk assets. That risk does not decrease with time. It increases.
Disagree. The chance that you end up with less than you put in decreases over long time scales, as long as you agree that an equity risk premium exists at all. Think about what you're saying. If the risk increased with time, people would never hold equities for multiple decades, as that would be insanely risky. Instead, you can clearly see in all historical data that the longer the time period over which you measure, the fewer such time periods there are in which there were negative returns on stocks.
People are misinformed on this point. They confuse the likelihood of stocks doing better than safe assets over time, which is high, with what happens to stocks on those few times when stocks do worse, which is exponentially worse over long time periods. Paul Samuelson wrote several papers on this point. He grew so tired of the inability of people to grasp this point, that he wrote one paper using all one syllable words. It’s in the math. The basic intuition, however, is that the magnitude of the left tail is much greater and/or shifted to the left over longer time horizons. If you are interested, Google the Paul Samuelson article “the long term case for equities, and how it can be oversold.” I would note also that ‘Jeremy Siegel, who is responsible for creating this misconception (unintentionally), admits that Samuelson is right on this point. Zvi Bodie proved it using Black-Scholes option pricing data. The historical record is just that, one of the many potential outcomes that the ordinary laws of probability could have produced. Other equally likely outcomes could have been extremely bad.
Last edited by gmaynardkrebs on Tue Apr 16, 2019 12:11 am, edited 2 times in total.

CarpeDiem22
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Re: That's enough for me in 2019

Post by CarpeDiem22 » Mon Apr 15, 2019 11:49 pm

gmaynardkrebs wrote:
Mon Apr 15, 2019 11:34 pm
DonIce wrote:
Mon Apr 15, 2019 7:20 pm
gmaynardkrebs wrote:
Mon Apr 15, 2019 3:56 pm
Stocks are not safe assets. They are risk assets. That risk does not decrease with time. It increases.
Disagree. The chance that you end up with less than you put in decreases over long time scales, as long as you agree that an equity risk premium exists at all. Think about what you're saying. If the risk increased with time, people would never hold equities for multiple decades, as that would be insanely risky. Instead, you can clearly see in all historical data that the longer the time period over which you measure, the fewer such time periods there are in which there were negative returns on stocks.
People are misinformed on this point. They confuse the likelihood of stocks doing better than safe assets over time, which is high, with what happens to stocks on those few times when stocks do worse, which is exponentially worse over long time periods. Paul Samuelson wrote several papers on this point. He grew so tired of the inability of people to grasp this point, that he wrote one paper using all one syllable words. It’s in the math. The basic intuition, however, is that the magnitude of the left tail is much greater over longer time horizons. If you are interested, Google the Paul Samuelson article “the long term case for equities, and how it can be oversold.” I would note also that ‘Jeremy Siegel, who is responsible for creating this misconception (unintentionally), admits that Samuelson is right on this point.The historical data, is just that, one of the many potential outcomes that the ordinary laws of probability could have produced.
Jason Zweig's The Little Book of Safe Money has a chapter titled Stocks for the Wrong Run. He argues that the book Stocks for the Long Run misquotes stock performance data and draws wrong conclusions.

DonIce
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Re: That's enough for me in 2019

Post by DonIce » Tue Apr 16, 2019 12:14 am

gmaynardkrebs wrote:
Mon Apr 15, 2019 11:34 pm
People are misinformed on this point. They confuse the likelihood of stocks doing better than safe assets over time, which is high, with what happens to stocks on those few times when stocks do worse, which is exponentially worse over long time periods. Paul Samuelson wrote several papers on this point. He grew so tired of the inability of people to grasp this point, that he wrote one paper using all one syllable words. It’s in the math. The basic intuition, however, is that the magnitude of the left tail is much greater over longer time horizons. If you are interested, Google the Paul Samuelson article “the long term case for equities, and how it can be oversold.” I would note also that ‘Jeremy Siegel, who is responsible for creating this misconception (unintentionally), admits that Samuelson is right on this point.The historical data, is just that, one of the many potential outcomes that the ordinary laws of probability could have produced.
Thanks for the reference. Unfortunately, can't find a freely accessible place to read the paper online.

My understanding is that if you assume a normal distribution of returns from year to year (i.e. each year, the expected change in value of stocks is x% with a standard deviation of y%, and that the shape of the distribution is well approximated by a normal distribution), then the risk of ending up with less than you started with goes down over time as long as x > 0. If you assume a distribution of returns with fatter tales than a normal distribution, such as a Cauchy distribution, it is true that risk can actually grow with time. Most simple mathematical models of the markets utilize the normal assumption and I'm fairly sure my statement is true under that assumption (I've done the math myself before out of curiosity, could always have messed up somewhere though I suppose).

I'm not sure if there is conclusive information as of yet as to what distribution best represents annual stock market returns, either from an empirical historical perspective (not enough years of data points) or from a theoretical perspective.

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Re: That's enough for me in 2019

Post by market timer » Tue Apr 16, 2019 12:59 am

Dudley wrote:
Mon Apr 15, 2019 12:22 pm
market timer wrote:
Mon Apr 15, 2019 3:11 am
Dudley wrote:
Mon Apr 15, 2019 2:55 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
and how have you taken out this short position ?
Short futures on the Nasdaq 100
And what in mind do you have as exit criteria, both gain or loss ?
I'd cover in either of the following scenarios:
1. Valuations move 5% lower (cover half the short) or 10% lower (cover the other half)
2. My retirement horizon is a year or less

ignition
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Re: That's enough for me in 2019

Post by ignition » Tue Apr 16, 2019 6:07 am

gmaynardkrebs wrote:
Mon Apr 15, 2019 3:56 pm
ignition wrote:
Mon Apr 15, 2019 3:19 pm
gmaynardkrebs wrote:
Mon Apr 15, 2019 11:14 am
I hear you.
My comments about valuation are directed primarily at folks who think that stocks are minimally risky if you have a long enough time frame. That is simply not true. The only time stocks are not risky is when you have enough safe assets to never have to worry about what happens to stocks. You have enough safe assets not to worry.
If you mean cash and bonds with safe assets: they have been even riskier than stocks over the long term. I am more worried about cash/bonds preserving my purchasing power than stocks over the next 20 years.
Do you have a 401k or Roth that can hold TIPS? If so, you can guarantee purchasing power for 30 years with zero risk. I bonds are also tax advantaged. Unlike traditional bonds, which deservedly earned the nickname “certificates of confiscation” as unexpected inflation ate away their returns , TIPS are not subject to inflation risk.
I don't have access to TIPS and 401K's myself as I live in Europe. As far as I'm aware no inflation linked bonds exist for my country but ok, that's a different story.
gmaynardkrebs wrote:
Mon Apr 15, 2019 3:56 pm
Whenever I read a post like yours, I don’t think the person is actually talking about preserving purchasing power. What the person wants is to make money. I completely understand that – so do I! :) But, it can’t be done without taking on risk. Risk means risk of loss. Not volatility. Risk of a loss as in permanent loss. As in getting back less than you put in. As in possibly getting back a lot less than you put in. Stocks are not safe assets. They are risk assets. That risk does not decrease with time. It increases.
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as world war III, confiscation by the government, hyperinflation or buying in at the peak of a massive stock market bubble. Not sure how likely these scenario's are or how well TIPS would protect you.

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 6:50 am

ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.

EnjoyIt
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Re: That's enough for me in 2019

Post by EnjoyIt » Tue Apr 16, 2019 9:23 am

gmaynardkrebs wrote:
Mon Apr 15, 2019 11:34 pm
DonIce wrote:
Mon Apr 15, 2019 7:20 pm
gmaynardkrebs wrote:
Mon Apr 15, 2019 3:56 pm
Stocks are not safe assets. They are risk assets. That risk does not decrease with time. It increases.
Disagree. The chance that you end up with less than you put in decreases over long time scales, as long as you agree that an equity risk premium exists at all. Think about what you're saying. If the risk increased with time, people would never hold equities for multiple decades, as that would be insanely risky. Instead, you can clearly see in all historical data that the longer the time period over which you measure, the fewer such time periods there are in which there were negative returns on stocks.
People are misinformed on this point. They confuse the likelihood of stocks doing better than safe assets over time, which is high, with what happens to stocks on those few times when stocks do worse, which is exponentially worse over long time periods. Paul Samuelson wrote several papers on this point. He grew so tired of the inability of people to grasp this point, that he wrote one paper using all one syllable words. It’s in the math. The basic intuition, however, is that the magnitude of the left tail is much greater and/or shifted to the left over longer time horizons. If you are interested, Google the Paul Samuelson article “the long term case for equities, and how it can be oversold.” I would note also that ‘Jeremy Siegel, who is responsible for creating this misconception (unintentionally), admits that Samuelson is right on this point. Zvi Bodie proved it using Black-Scholes option pricing data. The historical record is just that, one of the many potential outcomes that the ordinary laws of probability could have produced. Other equally likely outcomes could have been extremely bad.
I completely understand what your saying. Risk of the value of equites going down increases with time. But is it also not true that with this time the value of equities goes up where over long term even with multiple recessions the value of your equities continues to go up over a very long time. Isn’t that the point of investing?

The theory behind investing is that if I keep invested long enough even with the volatility of large market drops I will make money in the long run. Otherwise, why invest at all?

What am I missing?

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 10:25 am

gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 10:51 am

TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining stock price today? Other than fed policy, I’m not seeing it.

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 10:59 am

gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 11:37 am

TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
CNBC is an entertainment network posing as a financial network. As it is sponsored almost entirely by stock pushers and mutual fund companies, you will only get the rah-rah "information" they want you to hear. The BH board is pretty bearish generally (that's why I love it), but not representative of typical investors IMO.

KlangFool
Posts: 12297
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Re: That's enough for me in 2019

Post by KlangFool » Tue Apr 16, 2019 11:43 am

TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
TheTimeLord,

<<an increasing labor force participation rate>>

As far as I can tell, this is not true. May I know the source of your data?

https://tradingeconomics.com/united-sta ... ation-rate

KlangFool

marcopolo
Posts: 1971
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Re: That's enough for me in 2019

Post by marcopolo » Tue Apr 16, 2019 11:49 am

gmaynardkrebs wrote:
Tue Apr 16, 2019 11:37 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
CNBC is an entertainment network posing as a financial network. As it is sponsored almost entirely by stock pushers and mutual fund companies, you will only get the rah-rah "information" they want you to hear. The BH board is pretty bearish generally (that's why I love it), but not representative of typical investors IMO.
Having lived through the tech boom and the housing bubble, I am not seeing that kind of euphoria in any sector of the market or economy. Do you think that exists in the market currently?

I see quote opposite, a constant worry about the current bull running for so long (seemingly ignoring the several corrections and near bear markets we have had along the way). To me it feels like the kind of healthy skepticism that keeps the market climbing the wall of worry, with healthy corrections along the way.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 12:12 pm

marcopolo wrote:
Tue Apr 16, 2019 11:49 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 11:37 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am


I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
CNBC is an entertainment network posing as a financial network. As it is sponsored almost entirely by stock pushers and mutual fund companies, you will only get the rah-rah "information" they want you to hear. The BH board is pretty bearish generally (that's why I love it), but not representative of typical investors IMO.
Having lived through the tech boom and the housing bubble, I am not seeing that kind of euphoria in any sector of the market or economy. Do you think that exists in the market currently?

I see quote opposite, a constant worry about the current bull running for so long (seemingly ignoring the several corrections and near bear markets we have had along the way). To me it feels like the kind of healthy skepticism that keeps the market climbing the wall of worry, with healthy corrections along the way.
What I see is a severe mis-pricing of risk.

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 12:33 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 12:12 pm
marcopolo wrote:
Tue Apr 16, 2019 11:49 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 11:37 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
CNBC is an entertainment network posing as a financial network. As it is sponsored almost entirely by stock pushers and mutual fund companies, you will only get the rah-rah "information" they want you to hear. The BH board is pretty bearish generally (that's why I love it), but not representative of typical investors IMO.
Having lived through the tech boom and the housing bubble, I am not seeing that kind of euphoria in any sector of the market or economy. Do you think that exists in the market currently?

I see quote opposite, a constant worry about the current bull running for so long (seemingly ignoring the several corrections and near bear markets we have had along the way). To me it feels like the kind of healthy skepticism that keeps the market climbing the wall of worry, with healthy corrections along the way.
What I see is a severe mis-pricing of risk.
But you already admitted to self-selecting data so are you just expressing your bias?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 12:42 pm

KlangFool wrote:
Tue Apr 16, 2019 11:43 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
TheTimeLord,

<<an increasing labor force participation rate>>

As far as I can tell, this is not true. May I know the source of your data?

https://tradingeconomics.com/united-sta ... ation-rate

KlangFool
As you can see there is a rising trend since about 2015 even though baby boomers are retiring. You really need to look at longer term trends.


Image
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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 12:45 pm

TheTimeLord wrote:
Tue Apr 16, 2019 12:33 pm
But you already admitted to self-selecting data so are you just expressing your bias?
Where did I admit to self-selecting data? I don't recall saying that.

alfaspider
Posts: 1859
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Re: That's enough for me in 2019

Post by alfaspider » Tue Apr 16, 2019 12:48 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
Why? Are you in all-cash looking to get into equities in a lump sum? If you are buying in over a working career, the risk of this being a bit problem is considerably less.

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gmaynardkrebs
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Joined: Sun Feb 10, 2008 11:48 am

Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 12:55 pm

alfaspider wrote:
Tue Apr 16, 2019 12:48 pm
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
Why? Are you in all-cash looking to get into equities in a lump sum? If you are buying in over a working career, the risk of this being a bit problem is considerably less.
I'm 69 -- working days over. :happy I have about 30% equities now.
The risk is not less over a long term working career. However, you can mitigate the risk through diversification and rebalancing.

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 12:56 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 12:45 pm
TheTimeLord wrote:
Tue Apr 16, 2019 12:33 pm
But you already admitted to self-selecting data so are you just expressing your bias?
Where did I admit to self-selecting data? I don't recall saying that.
You basically said you blow off anything presented on CNBC. Well the Conference Board survey is the Conference Board survey your belief that it is somehow invalid because CNBC reports the results shows tendency to self select. You find this board more conservative in regards to investing as opposed to the general public when I would suggest there is zero evidence this is the case and probably should actually be the opposite if people are staying the course. Probably more conservative on spending which would likely make them more aggressive in investing. Also, there are few things presented on CNBC that don't get repeated on this board same day.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 12:57 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 12:55 pm
alfaspider wrote:
Tue Apr 16, 2019 12:48 pm
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
ignition wrote:
Tue Apr 16, 2019 6:07 am
There are a few scenario's where I could see the world stock market registering a significant loss over a long period such as...buying in at the peak of a massive stock market bubble.
This is the one I worry about.
Why? Are you in all-cash looking to get into equities in a lump sum? If you are buying in over a working career, the risk of this being a bit problem is considerably less.
I'm 69 -- working days over. :happy I have about 30% equities now.
The risk is not less over a long term working career. However, you can mitigate the risk through diversification and rebalancing.
Why wouldn't you just put 21x expenses into TIPS and invest the rest in equities?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 1:02 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 11:37 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 6:50 am
This is the one I worry about.
I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
CNBC is an entertainment network posing as a financial network. As it is sponsored almost entirely by stock pushers and mutual fund companies, you will only get the rah-rah "information" they want you to hear. The BH board is pretty bearish generally (that's why I love it), but not representative of typical investors IMO.
https://www.prnewswire.com/news-release ... 32636.html
NEW YORK, April 16, 2019 /PRNewswire/ -- The Conference Board® Global Consumer Confidence Index declined slightly in the first quarter of 2019 to 106, down one point from 107 in the fourth quarter of 2018, but still at historically high levels since the inception of the index in 2005. Consumers are likely to sustain spending, but more cautiously, amid a slowing global economy.

The softening in consumer confidence in many mature markets was offset by strengthening in many emerging markets. Half of the 36 mature economies in the survey had an increase in confidence; 15 of 28 emerging markets also saw an increase in confidence.

"Despite the high levels of confidence globally, consumers in different markets have different views about where the economy is heading in 2019," said Bart van Ark, Global Chief Economist of The Conference Board. "In more than half the countries surveyed, consumers expressing concerns about the current state of the economy outnumbered those who were not concerned. And, the majority of global consumers do not expect conditions to become more favorable over the next twelve months. Despite consumers' caution with regard to spending, a pullback does not appear imminent. However, the current results seem to indicate that global consumer confidence may be peaking, suggesting that global economic growth may gradually slow in the coming quarters."

Consumers Confident About Job Prospects, Personal Finances
Globally, consumers remain confident about job prospects, with 58 percent saying conditions will be "excellent" or "good" in the next 12 months. In particular, Asian and North American consumers had a positive outlook on jobs. In Europe, consumers in several countries expressed concern about job prospects, including France, Italy, Spain and the UK. Job prospects were also weaker in Latin America and the Middle East.
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 1:47 pm

TheTimeLord wrote:
Tue Apr 16, 2019 12:56 pm
gmaynardkrebs wrote:
Tue Apr 16, 2019 12:45 pm
TheTimeLord wrote:
Tue Apr 16, 2019 12:33 pm
But you already admitted to self-selecting data so are you just expressing your bias?
Where did I admit to self-selecting data? I don't recall saying that.
You basically said you blow off anything presented on CNBC. Well the Conference Board survey is the Conference Board survey your belief that it is somehow invalid because CNBC reports the results shows tendency to self select. You find this board more conservative in regards to investing as opposed to the general public when I would suggest there is zero evidence this is the case and probably should actually be the opposite if people are staying the course. Probably more conservative on spending which would likely make them more aggressive in investing. Also, there are few things presented on CNBC that don't get repeated on this board same day.
I blow of CNBC for the same reasons I used to blow off Pravda. Was that selection bias?
You may well be right about this board not being as bearish/conservative as I might have thought. What I actually think is that there is a relatively high appreciation of risk on BH. How that plays out on the bull/bear continuum depends on the individual.

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TheTimeLord
Posts: 6054
Joined: Fri Jul 26, 2013 2:05 pm

Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 1:49 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 1:47 pm
TheTimeLord wrote:
Tue Apr 16, 2019 12:56 pm
gmaynardkrebs wrote:
Tue Apr 16, 2019 12:45 pm
TheTimeLord wrote:
Tue Apr 16, 2019 12:33 pm
But you already admitted to self-selecting data so are you just expressing your bias?
Where did I admit to self-selecting data? I don't recall saying that.
You basically said you blow off anything presented on CNBC. Well the Conference Board survey is the Conference Board survey your belief that it is somehow invalid because CNBC reports the results shows tendency to self select. You find this board more conservative in regards to investing as opposed to the general public when I would suggest there is zero evidence this is the case and probably should actually be the opposite if people are staying the course. Probably more conservative on spending which would likely make them more aggressive in investing. Also, there are few things presented on CNBC that don't get repeated on this board same day.
I blow of CNBC for the same reasons I used to blow off Pravda. Was that selection bias?
You may well be right about this board not being as bearish/conservative as I might have thought. What I actually think is that there is a relatively high appreciation of risk on BH. How that plays out on the bull/bear continuum depends on the individual.
BTW, I have no issue with your AA of 30/70 if you feel it is appropriate for your situation.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

KlangFool
Posts: 12297
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Tue Apr 16, 2019 1:54 pm

TheTimeLord wrote:
Tue Apr 16, 2019 12:42 pm
KlangFool wrote:
Tue Apr 16, 2019 11:43 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:25 am


I am fascinated by all the bubble conversation seemingly generated by nothing beyond the longevity of the bull market. People want to worry about the level of market returns over the past 10 years while ignoring market returns over the past 20. Not seeing the factual basis for all the concern but I may be missing something.
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
TheTimeLord,

<<an increasing labor force participation rate>>

As far as I can tell, this is not true. May I know the source of your data?

https://tradingeconomics.com/united-sta ... ation-rate

KlangFool
As you can see there is a rising trend since about 2015 even though baby boomers are retiring. You really need to look at longer term trends.


Image
TheTimeLord,

<<You really need to look at longer term trends.>>

If you go back 10 years and start in 2008, you will see that it had dropped from 65.5+% to the current level. It had been oscillating around this level since 2013.

https://tradingeconomics.com/united-sta ... ation-rate

KlangFool

User avatar
TheTimeLord
Posts: 6054
Joined: Fri Jul 26, 2013 2:05 pm

Re: That's enough for me in 2019

Post by TheTimeLord » Tue Apr 16, 2019 2:00 pm

KlangFool wrote:
Tue Apr 16, 2019 1:54 pm
TheTimeLord wrote:
Tue Apr 16, 2019 12:42 pm
KlangFool wrote:
Tue Apr 16, 2019 11:43 am
TheTimeLord wrote:
Tue Apr 16, 2019 10:59 am
gmaynardkrebs wrote:
Tue Apr 16, 2019 10:51 am
What concerns me the most is the divergence between the stock market and the real economy. If you look at what happened after the 1929 crash, it becomes pretty obvious that the stock market recovered only after the economy recovered, iIncomes went up, and people had money to spend, to raise families , and to have the population grow.That growth sustained the continued profitability of corporations. What is sustaining it today? Other than fed policy, I’m not seeing it.
Just saw on CNBC Global Consumer optimism is near an all-time high, China and U.S. economies seem to be growing at or above trend. U.S. continues to have job growth and an increasing labor force participation rate with rising wages. Now I am sure there is also a laundry list of things to worry about but there is always a list of things to worry about, if there weren't then I would worry. At some point the economy will tip over due to excess, it always does, but I guess personally nothing about this feels like a bubble to me. I mean where are all the 100% equity threads, instead sentiment here seems incredibly muted given the returns YTD. Let me know if you agree or disagree, but it feels like to me most investors are waiting for the other shoe to drop not wild eyed optimists. Also Stock Market has been flat over the past 7 months and up just under 8% since the beginning of 2018.
TheTimeLord,

<<an increasing labor force participation rate>>

As far as I can tell, this is not true. May I know the source of your data?

https://tradingeconomics.com/united-sta ... ation-rate

KlangFool
As you can see there is a rising trend since about 2015 even though baby boomers are retiring. You really need to look at longer term trends.


Image
TheTimeLord,

<<You really need to look at longer term trends.>>

If you go back 10 years and start in 2008, you will see that it had dropped from 65.5+% to the current level. It had been oscillating around this level since 2013.

https://tradingeconomics.com/united-sta ... ation-rate

KlangFool
The oldest baby boomers started turning 65 back in 2011, and many of them have already retired. The aging of this massive generation born between 1946 and 1964 will have significant implications for the entire country, according to a series of recent Census Bureau reports.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

DonIce
Posts: 413
Joined: Thu Feb 21, 2019 6:44 pm

Re: That's enough for me in 2019

Post by DonIce » Tue Apr 16, 2019 2:03 pm

gmaynardkrebs wrote:
Tue Apr 16, 2019 1:47 pm
You may well be right about this board not being as bearish/conservative as I might have thought. What I actually think is that there is a relatively high appreciation of risk on BH. How that plays out on the bull/bear continuum depends on the individual.
This board is very "bullish" on stocks compared to the general population. It routinely advises people that have never been in the market to get in with fairly high allocations to stocks (40-80% are typical recommendations here). And it does this regardless of current economic conditions, market valuations, etc, based on the belief that market timing is not possible/productive. Bogleheads are "perma-bulls", by definition.

At the same time, the board is very conservative in terms of the amounts that it thinks people need to have saved (>30x worst case expenses by retirement), the amount of house that people can afford (<2 years income), future expected return rates people should plan around (~4%), and future employability (permanent loss of work by 50 years old). The average 30-something poster on here seems to have an income of ~$500k and the average 60-something poster here seems to have a net worth of over $5M, and people falling much below these numbers are seen as "barely scraping by".

Carol88888
Posts: 111
Joined: Wed Jan 24, 2018 2:24 am

Re: That's enough for me in 2019

Post by Carol88888 » Tue Apr 16, 2019 4:44 pm

Markettimer, if the market continues to grind upward for the next 2 or 3 years where will you stop yourself out?

If you are playing without a stop you are letting yourself in for unlimited losses on your 20% short since historically the market marches up.

At what level did you put on your short?

I admire your ability to be upfront at what you are doing but I would also caution you that in trading it is counterproductive to announce your moves since it makes it harder (loss of face) to reverse when you are wrong.

User avatar
gmaynardkrebs
Posts: 1523
Joined: Sun Feb 10, 2008 11:48 am

Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 5:11 pm

Carol88888 wrote:
Tue Apr 16, 2019 4:44 pm
I would also caution you that in trading it is counterproductive to announce your moves since it makes it harder (loss of face) to reverse when you are wrong.
I get the feeling that someone with a Don Quixote icon who starts a thread with this title on BH has minimal concern about being "wrong" or losing face. :happy
Last edited by gmaynardkrebs on Tue Apr 16, 2019 6:01 pm, edited 1 time in total.

LiterallyIronic
Posts: 1156
Joined: Sat Dec 05, 2015 10:36 am

Re: That's enough for me in 2019

Post by LiterallyIronic » Tue Apr 16, 2019 5:24 pm

DonIce wrote:
Tue Apr 16, 2019 2:03 pm
gmaynardkrebs wrote:
Tue Apr 16, 2019 1:47 pm
You may well be right about this board not being as bearish/conservative as I might have thought. What I actually think is that there is a relatively high appreciation of risk on BH. How that plays out on the bull/bear continuum depends on the individual.
This board is very "bullish" on stocks compared to the general population. It routinely advises people that have never been in the market to get in with fairly high allocations to stocks (40-80% are typical recommendations here). And it does this regardless of current economic conditions, market valuations, etc, based on the belief that market timing is not possible/productive. Bogleheads are "perma-bulls", by definition.

At the same time, the board is very conservative in terms of the amounts that it thinks people need to have saved (>30x worst case expenses by retirement), the amount of house that people can afford (<2 years income), future expected return rates people should plan around (~4%), and future employability (permanent loss of work by 50 years old). The average 30-something poster on here seems to have an income of ~$500k and the average 60-something poster here seems to have a net worth of over $5M, and people falling much below these numbers are seen as "barely scraping by".
Yep. Most people on this board are very well off indeed. I'm not one of them. I only make $75k and only have a net worth of $200k, including home equity in my mid-30s. :(

But I still subscribe to many of those philosophies. I only advocate 25x expenses, but I think a mortgage at 2x income is pushing it, I plan at 4% average return, invest at 90%+ stocks, and want to retire at 50 (and don't think I'd be employable beyond that age anyway).

There sure seems to be a strong correlation between these philosophies and wealth.

User avatar
dogagility
Posts: 407
Joined: Fri Feb 24, 2017 6:41 am

Re: That's enough for me in 2019

Post by dogagility » Tue Apr 16, 2019 7:46 pm

So much angst based upon speculation in this thread.
Taking "risk" since 1995.

KlangFool
Posts: 12297
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Tue Apr 16, 2019 8:08 pm

dogagility wrote:
Tue Apr 16, 2019 7:46 pm
So much angst based upon speculation in this thread.
dogagility,

What angst? The market will not just go up and not crash sometimes. And, when it crashes, we would not know how long the crash will last. This is the basic fact of the stock market investing.

And, normally, the market crashed in a recession when many folks are unemployed. So, if someone is unprepared for both market crash and unemployment at the same time, the person may be wiped out financially.

It is very simple.

Be prepared or hope to be lucky. You know my answer. I did not survive by hoping to be lucky.

KlangFool

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gmaynardkrebs
Posts: 1523
Joined: Sun Feb 10, 2008 11:48 am

Re: That's enough for me in 2019

Post by gmaynardkrebs » Tue Apr 16, 2019 10:55 pm

DonIce wrote:
Tue Apr 16, 2019 2:03 pm
gmaynardkrebs wrote:
Tue Apr 16, 2019 1:47 pm
You may well be right about this board not being as bearish/conservative as I might have thought. What I actually think is that there is a relatively high appreciation of risk on BH. How that plays out on the bull/bear continuum depends on the individual.
This board is very "bullish" on stocks compared to the general population. It routinely advises people that have never been in the market to get in with fairly high allocations to stocks (40-80% are typical recommendations here). And it does this regardless of current economic conditions, market valuations, etc, based on the belief that market timing is not possible/productive. Bogleheads are "perma-bulls", by definition.

At the same time, the board is very conservative in terms of the amounts that it thinks people need to have saved (>30x worst case expenses by retirement), the amount of house that people can afford (<2 years income), future expected return rates people should plan around (~4%), and future employability (permanent loss of work by 50 years old). The average 30-something poster on here seems to have an income of ~$500k and the average 60-something poster here seems to have a net worth of over $5M, and people falling much below these numbers are seen as "barely scraping by".
if folks here are actually as rich as all that, I would expect to see much less discussion of safe withdrawal rates.

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