tsohg wrote: ↑
Thu Mar 26, 2020 1:32 pm
fitterhappier wrote: ↑
Thu Mar 26, 2020 11:11 am
I will call out that someone earlier had a suggestion about making an options purchase in order to hedge against my concerns. This should have been the blindingly obvious primary option in the first place. If I had to redo the question it would be like "what hedging strategies would you use right now if you buy into my concerns about unaccounted-for downside risk". And of course options exist for just such situations.
Doesn't the fact that you missed a "blindingly obvious" option give you pause and cause you to reconsider whether you should be making moves and eschewing the dumb buy-and-hold strategy?
I'm about your age, and this crisis has taught me a lot about basic investing principles e.g., tax loss harvesting, what money market funds are available and their relative risks. These are also blindingly obvious concepts, but I'm experiencing some of them for the first time. To me, this is another piece of evidence that my strategy of "being dumb" (to quote an earlier post) is likely to be the least worst.
I was also in the camp of folks expecting a drop today on big unemployment numbers, and that turned out to be dead wrong (for today, anyway). Glad I didn't act on that prediction.
No, not at all. Bogle-ish buy and hold (and being dumb - all for it - dumb and lazy is even better) is an investing strategy based on a theory and (arguably) has a lot to show for it in terms of results. In order for it some be something approaching a science-like proposition (like, anything we should bother with), it should be falsifiable. Dumb investing (and, even better: dumb and lazy) is a great idea and all great ideas come with contextual assumptions and limits.
The basic idea of Bogleism is we're betting on world growth and not paying attention to the ups and downs in-between. Businesses are producing stuff, people and governments are buying the stuff, people are innovating, and we have a nice civilization that improves. Betting on a massive basket of companies is about the best one can do if one aims to get a return off civilization improving.
Viruses don't care about our civilization - or to the extent that they "care", civilization is making their mission easier, via jetplanes and such. Fortunately, really successful viruses are rare. But that's also the problem - they're so rare that except in a select few countries, nobody is really ready for a bad virus-exponential-growth problem now. We think linearly and that tends to work out. The story of the doubling of a single grain of rice on the checkerboard was surprising to the emperor because it's not how we usually think - it's counterintuitive.
Now we are dealing with empty cities and 3 million unemployed in the initial US job report and knock-on vicious cycles I can't predict and maybe political instability ahead of us, with decisions individual politicians can make being far more important economically than is typically the case. "The market", a human institution, has bipolar disorder - maybe not surprising.
If another pandemic comes along in 20 years, it'll be bad but I bet we'll handle it relatively well. But here in pandemic #1, everyone is learning on the job, very literally, at the highest reaches of govt, and I just don't have confidence that the downside risk of that is priced in. I don't trust that they will make the right calls in the runup to an election if "do the right thing scientifically and ethically" vs "win" are in opposition.
Long winded, but, your theories have to have contexts and limits, and they have to be falsifiable, or you're just fooling yourself and it's a dogma. I would have never believed it could happen, but I think this crisis is a great candidate for an experiment in which we even test buy-and-hold. I hope I'm wrong that it would be seriously tested - I'd bet I'm wrong, but for the first time I think it's like 60/40 odds.
I like the idea of buy-and-hold coupled with employing a small amount of insurance in world-historical crises (this thread has helped me realize that). In part it's appealing to me because it implies that buy-and-hold is a really good idea but isn't completely infallible.