"experienced" investors: is this time different?

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ApeAttack
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Re: "experienced" investors: is this time different?

Post by ApeAttack »

Leesbro63 wrote: Fri May 27, 2022 5:38 am
m@ver1ck wrote: Thu May 26, 2022 11:09 pm

I’ll go 80/20 once the market ‘recovers’.
What if it’s 1929 or 1966 and it takes a generation for equities to “recover” to new (real) all time highs.
For folks like me in accumulation mode with a couple decades until retirement, I get to buy equities cheap.
Just another lazy index investor.
Marseille07
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Re: "experienced" investors: is this time different?

Post by Marseille07 »

HomerJ wrote: Sat Jun 18, 2022 5:56 pm The 9%-10% nominal average return INCLUDES the crashes... The people who stayed the course the 70s and early 1980s made HUGE gains on all that money they kept invested in the 80s and 90s.
2022 is different in that the yield curve got so low. During the 70s, the Ten was already 5~6% and went up to 15% or something like that.

Here, we're essentially starting from 0.5% and it's only 3.30%.

Equities might still do fine, but the bonds side is indeed "different" in many ways.
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mrspock
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Re: "experienced" investors: is this time different?

Post by mrspock »

burritoLover wrote: Sun May 22, 2022 6:42 am
HomerJ wrote: Sun May 22, 2022 12:19 am And then it does work out again.

So far, every single crash, has been followed by new historic highs where someone who just stayed the course, still gets rich.
Except Japan but of course that couldn't happen here cause 'Merica.
Japan… never mention this without mentioning along with it the PEs of 95. Any Boglehead with a sane portfolio who rebalanced would be sitting on a gigantic pile of bonds after such an event. With that you can survive the ensuing decades of 0 growth. It would mean the S&P would be around 20k, and those with a $4m 60/40 portfolio would be sitting on some $8m in bonds after such an event.

I’ll take Japan any day of the month. Bring it.

Given PEs are a paltry 18 and falling, I like my odds that it won’t happen.

This time is likely the same as the others, in the sense it will reward those who stay the course (as Japan did!). It will have its own twists, such as inflation, but my guess is it will be a lighter/faster version of the 70s. Faster because information flows much faster these days, and lighter because the fed has learned from the 70s experience. In fact an entire generation of bankers grew up studying Volcker and to a degree idolizing him.

So, I’m not worried at all. And if something terrible happens, there is little I can do which is meaningful — that if wrong — wouldn’t financially ruin me (if it doesn’t end up happening).
fisher0815
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Re: "experienced" investors: is this time different?

Post by fisher0815 »

Logan Roy wrote: Wed Jun 08, 2022 9:45 pm
LFS1234 wrote: Wed Jun 08, 2022 7:48 pm
Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
Against which value is gold measured in this chart from 1265 till 1970?
If I go to the source from the chart and download the data since 1257, I've got an upward line without volatility. That makes sence because all currencies were bound to gold or silver till 1970.
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

fisher0815 wrote: Sat Jun 18, 2022 11:53 pm
Logan Roy wrote: Wed Jun 08, 2022 9:45 pm
LFS1234 wrote: Wed Jun 08, 2022 7:48 pm
Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
Against which value is gold measured in this chart from 1265 till 1970?
If I go to the source from the chart and download the data since 1257, I've got an upward line without volatility. That makes sence because all currencies were bound to gold or silver till 1970.
I presume they've measured against the dollar, then adjusted for inflation.
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HomerJ
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Re: "experienced" investors: is this time different?

Post by HomerJ »

Marseille07 wrote: Sat Jun 18, 2022 11:21 pm
HomerJ wrote: Sat Jun 18, 2022 5:56 pm The 9%-10% nominal average return INCLUDES the crashes... The people who stayed the course the 70s and early 1980s made HUGE gains on all that money they kept invested in the 80s and 90s.
2022 is different in that the yield curve got so low. During the 70s, the Ten was already 5~6% and went up to 15% or something like that.

Here, we're essentially starting from 0.5% and it's only 3.30%.

Equities might still do fine, but the bonds side is indeed "different" in many ways.
The bond side is not different. Bonds have been this low before.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
fisher0815
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Re: "experienced" investors: is this time different?

Post by fisher0815 »

Logan Roy wrote: Sun Jun 19, 2022 12:09 am
fisher0815 wrote: Sat Jun 18, 2022 11:53 pm
Logan Roy wrote: Wed Jun 08, 2022 9:45 pm
LFS1234 wrote: Wed Jun 08, 2022 7:48 pm
Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
Against which value is gold measured in this chart from 1265 till 1970?
If I go to the source from the chart and download the data since 1257, I've got an upward line without volatility. That makes sence because all currencies were bound to gold or silver till 1970.
I presume they've measured against the dollar, then adjusted for inflation.
The dollar doesn't exist that long.
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

fisher0815 wrote: Sun Jun 19, 2022 5:16 am
Logan Roy wrote: Sun Jun 19, 2022 12:09 am
fisher0815 wrote: Sat Jun 18, 2022 11:53 pm
Logan Roy wrote: Wed Jun 08, 2022 9:45 pm
LFS1234 wrote: Wed Jun 08, 2022 7:48 pm

Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
Against which value is gold measured in this chart from 1265 till 1970?
If I go to the source from the chart and download the data since 1257, I've got an upward line without volatility. That makes sence because all currencies were bound to gold or silver till 1970.
I presume they've measured against the dollar, then adjusted for inflation.
The dollar doesn't exist that long.
The danger of me answering questions in the early hours (not registering how far back that chart went). I imagine there are plenty of trading records for gold going back that far.
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burritoLover
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Re: "experienced" investors: is this time different?

Post by burritoLover »

mrspock wrote: Sat Jun 18, 2022 11:26 pm
burritoLover wrote: Sun May 22, 2022 6:42 am
HomerJ wrote: Sun May 22, 2022 12:19 am And then it does work out again.

So far, every single crash, has been followed by new historic highs where someone who just stayed the course, still gets rich.
Except Japan but of course that couldn't happen here cause 'Merica.
Japan… never mention this without mentioning along with it the PEs of 95. Any Boglehead with a sane portfolio who rebalanced would be sitting on a gigantic pile of bonds after such an event. With that you can survive the ensuing decades of 0 growth. It would mean the S&P would be around 20k, and those with a $4m 60/40 portfolio would be sitting on some $8m in bonds after such an event.

I’ll take Japan any day of the month. Bring it.

Given PEs are a paltry 18 and falling, I like my odds that it won’t happen.

This time is likely the same as the others, in the sense it will reward those who stay the course (as Japan did!). It will have its own twists, such as inflation, but my guess is it will be a lighter/faster version of the 70s. Faster because information flows much faster these days, and lighter because the fed has learned from the 70s experience. In fact an entire generation of bankers grew up studying Volcker and to a degree idolizing him.

So, I’m not worried at all. And if something terrible happens, there is little I can do which is meaningful — that if wrong — wouldn’t financially ruin me (if it doesn’t end up happening).
The peak CAPE10 in the US as of late was 38.58 achieved last December (you know right before the bear market started). P/Es are too noisy to consider but hit about as high in late 2020. So lol on $20k S&P 500 and the $4mil portfolio start.

That's the thing about bear markets - they don't have just one cause. You can't take one metric from a prior bear market and if that metric is not hit, the same level of pain can't happen. The point about Japan is that a 30-year drought can happen in a developed market. If it were as simple as looking past bear markets to determine the likelihood of a future bear market happening, then you could just simply avoid bear markets altogether.
Leesbro63
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

mrspock wrote: Sat Jun 18, 2022 11:26 pm

Given PEs are a paltry 18 and falling, I like my odds that it won’t happen.

But what's falling faster, the P or the E?
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HanSolo
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Re: "experienced" investors: is this time different?

Post by HanSolo »

burritoLover wrote: Sun Jun 19, 2022 6:34 am The peak CAPE10 in the US as of late was 38.58 achieved last December (you know right before the bear market started).
Not to be picky, but CAPE10 did hit 40 (as displayed on Multpl after market close on 11/5/2021; slightly higher figures on Multpl were captured on the Wayback machine around Dec/Jan).

viewtopic.php?p=6314107#p6314107

In any case, the OP seems to have gotten their answer, and the consensus of the thread seems to be "stay the course" (as usual).
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Leesbro63
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

mrspock wrote: Sat Jun 18, 2022 11:26 pm This time is likely the same as the others, in the sense it will reward those who stay the course (as Japan did!). It will have its own twists, such as inflation, but my guess is it will be a lighter/faster version of the 70s. Faster because information flows much faster these days, and lighter because the fed has learned from the 70s experience. In fact an entire generation of bankers grew up studying Volcker and to a degree idolizing him.
I'm no economist and just some random internet guy, but this is my best guess too, although I worry about a 1966-1981 thing. It does seem like things happen faster today. We lurch from one event (usually "crisis", but sometimes good stuff) to another. Covid? What's that? Few are very focused on that. Now it's $5 gas.
Marseille07
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Re: "experienced" investors: is this time different?

Post by Marseille07 »

HomerJ wrote: Sun Jun 19, 2022 2:54 am
Marseille07 wrote: Sat Jun 18, 2022 11:21 pm
HomerJ wrote: Sat Jun 18, 2022 5:56 pm The 9%-10% nominal average return INCLUDES the crashes... The people who stayed the course the 70s and early 1980s made HUGE gains on all that money they kept invested in the 80s and 90s.
2022 is different in that the yield curve got so low. During the 70s, the Ten was already 5~6% and went up to 15% or something like that.

Here, we're essentially starting from 0.5% and it's only 3.30%.

Equities might still do fine, but the bonds side is indeed "different" in many ways.
The bond side is not different. Bonds have been this low before.
I was comparing vs the 70s, which was what you were talking about originally. The bond yields were much higher then.

It is true bonds have been this low before, but not the 70s - we need to analyze that era (1940s?) and draw a different conclusion.
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seychellois_lib
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Re: "experienced" investors: is this time different?

Post by seychellois_lib »

traderjoe55 wrote: Sat Jun 18, 2022 3:04 pm I am not old but I do read a lot.

Imo this time is different. Pretend you are in 2008/9 or 2020 with the fed against you instead of supporting you.

Read some stuff about the 1970s/80.

Best of luck.
I lived through the 70/80s, I was a young man back then and I can not tell you how i wish I had known then what I know now. My strategy would have been precisely the same as it is today : diversify, continue routine saving and investment, closely monitor fees, allocate such that you sleep and stay the course. The only difference is, as a young man, I would have had a far larger equity allocation. My equity portfolio is very broadly diversified US and International.

The net result if I had done this? I would be very wealthy today. We are comfortable due to my investment epiphany (around late 40s). But, my goodness, I COULD have been living in a beach house in Malibu with my 50 foot sailboat moored in Marina Del Ray :D .

Instead I did the 70s/80s version of what I see many young people doing: crypto, day trading, nonsensical online echo chamber investing and so on. For the vast majority of such investors...this will not work.
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Re: "experienced" investors: is this time different?

Post by seychellois_lib »

Leesbro63 wrote: Sun Jun 19, 2022 7:24 am
mrspock wrote: Sat Jun 18, 2022 11:26 pm This time is likely the same as the others, in the sense it will reward those who stay the course (as Japan did!). It will have its own twists, such as inflation, but my guess is it will be a lighter/faster version of the 70s. Faster because information flows much faster these days, and lighter because the fed has learned from the 70s experience. In fact an entire generation of bankers grew up studying Volcker and to a degree idolizing him.
I'm no economist and just some random internet guy, but this is my best guess too, although I worry about a 1966-1981 thing. It does seem like things happen faster today. We lurch from one event (usually "crisis", but sometimes good stuff) to another. Covid? What's that? Few are very focused on that. Now it's $5 gas.
I am also a random internet guy and I totally agree. The Fed well knows we are doomed if inflation is not brought under control. Get broadly diversified, appropriately allocated for your age and stop. Go out and enjoy the beautiful sunny day. Sunshine is free and it won't cost you any more tomorrow than it does today.
seychellois_lib
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Re: "experienced" investors: is this time different?

Post by seychellois_lib »

Goldwater85 wrote: Sat Jun 11, 2022 2:02 pm
trirunner wrote: Sat Jun 11, 2022 1:00 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:45 pm
trirunner wrote: Sat Jun 11, 2022 12:14 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:11 pm

The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
China’s industrial revolution, the ‘90s tech sector, even Walmart’s expansion. But those are all examples of ‘good’ deflation fueled by productivity growth, not demand destruction.
Aging population doesn't have demand destruction, shrinking one does, and I don't see that any time soon.
In aggregate, a typical 40 year old consumes more goods and services than a typical 80 year old. By increasing the ratio of 80 year olds to 40 year olds, you are reducing economic demand without necessarily shrinking the population.

US demographics are not Japan’s or even Europe’s, so maybe this doesn’t pressure prices into outright decreases. But expect this trend to at least reduce the rate of demand growth vs historical experience. This would reduce the need for additional capacity, which is at the core of business activity. In turn expect the need for equity and debt capital to expand capacity to be reduced, which lowers interest rates and expected returns on equity.

Not that countercurrents can’t push us the other way. Maybe AI leads to an explosion in productivity. Who knows?

But if long term interest rates do push substantially higher, I do intend to increase the duration of my portfolio. Mainly by adding equities. Lost COVID capacity gets built back out eventually. Maybe it takes 5 years to train up a bunch more pilots, but fairly certain we’ll see a 3.0% long bond again.
Not sure I completely agree with your assertion re 80 year olds. I do agree they are spending differently but they may not be spending that much less. What I see as I age are increasing medical and travel expenditures which will morph into larger expenditures on med, assistance, insurance and so on with less money spent of stuff. But those medical expenditures, even as a relatively healthy person, are eye watering.

Another example is, as an upper middle income retiree and homeowner, i do much of my home maintenance work myself and enjoy doing so (mostly) but when i place a value on my work i realize this will become a new $10 to $15K (today dollars) expense when I age out of my handyman phase. For those who age in place, this type of "maintenance/assistance" expenditure will almost certainly increase.

With regard to "Not that countercurrents can’t push us the other way. Maybe AI leads to an explosion in productivity. Who knows?" this is precisely why broad diversification is critical IMO. Who knows? answer: nobody. Therefore we have to own a little bit of everything such that when "who knows" turns into "man, I never even thought of that" (think the internet), you have a piece of the action, and usually enough of a piece to crank out a decent, not spectacular, return. Definitely NOT a get rich quick scheme, it's a get rich slow scheme and requires a decades long runway.
seychellois_lib
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Re: "experienced" investors: is this time different?

Post by seychellois_lib »

DSBH wrote: Sat Jun 18, 2022 11:02 am
seychellois_lib wrote: Sat Jun 18, 2022 10:15 am
cp73 wrote: Sat Jun 11, 2022 7:16 pm Were not through with this one....but the closer you are to retirement the worse it effects you. Ive been retied since 2016. 2008 was bad especially knowing I was retiring within 10 years or so. In 2008 I thought I would work for a long time but things turned out fine. The one thing I have learned through them all to the 70s was the best thing you can do is nothing. When it tears at your stomach don't give in. Gut feelings are useless and usually wrong. Just stay the course. Any selling should have been done a year ago. It will come back. The question is when? The thing that is different is bonds are having their worse year every. My ballast portion of my portfolio is down 9%....Overall I am down 13% with a 45/55 (stock/bond) portfolio.
Hear hear. Retired same year as you ...

Today, six years later, my portfolio is worth $150K more than it was when I retired. Like you, I am down about 11% in the current market (if you look at my allocation it is interesting how well our performance matches) but still well above where I was when I retired. I am extremely happy with the way things have gone so far. I never realized spectacular returns nor did I endure spectacular losses, it has been slow but steady growth interrupted by several downturns, the worst of which - so far - was Covid.
I did not think about it this way until I read your post. Very good perspective applicable to our situation with both of us retiring in 2017. Thanks!

FWIW at the end of last year our portfolio value was 37% more than when we retired, and as of today we're still 13% ahead, after almost 5 years of expenses including paying taxes for multiple large Roth conversions. And yes we'll stay the course.
Yes, the same, and it is rather amazing the similarity of outcomes WRT returns. I track my IRA withdrawals like a hawk. I had a decent after tax stash and middling pension at retirement in mid 16 and took a large IRA withdraw EOY 19 so I could reduce taxable in 20 and 21 to take advantage of med subsidy. My SO is 10 years younger, also retired, and her med insurance is nuts!

I waited to 70 EOY 21 for SS to maximize inflation protected income (boy, did that work out!) and have the equivalent but fixed (no cola) pension income. The pension is scary because it is losing value by the day. I manage the fear by reminding myself my 2.7% mortgage is fixed rate, RE taxes in my state can not increase more that 2% per annum and my pension covers all of that so, in a way, the fixed pension is hedged by nearly fixed basic housing costs and the house itself. NO, I do not consider my home as an investment, but the reality is iI bought the house 8 year ago, before this wild home price inflation and some poor sap is on the other end of that 2.7% mortgage which I ain't paying it off anytime soon. If inflation comes down to zero one day I'll feel just great with this mortgage (and so will the lender, I imagine).

To accomplish all of this I needed to withdraw a total of $74k from the IRA over the six years since retirement. That is an avg annual withdraw of about .5% of the IRA value. And I am still to the good despite these withdraws and the market sell off (which I don't believe is over - plan for another -30%-40% but hope I am wrong).

Now I am past the ACA subsidy eligibility with the SS kick in so plan to make larger IRA withdrawals going forward to travel, remodel and maybe replace my embarrassing "only vehicle" which is a 2005 toy corolla with 210K miles (typical old Bogglehead...I will not pay for a shiny object sitting in my driveway 95% of the time depreciating grievously). Will be facing RMDs in two years. I have not done any Roth conversions but perhaps I should think harder about this. I stated the move to bonds would be the last tweak before i set the autopilot, now you have presented me with another research topic.
Irish Moss
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Re: "experienced" investors: is this time different?

Post by Irish Moss »

Lived through the past bad recessions including 2000 and 2008. The thing to remember is the market did turn around. Keep your wits about you is good advice I got. Make sure you have money to pay for expenses in case you lose a job or the bear market goes on for 2 or 3 years. Buy shares when the market is down.
Ivygirl
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Re: "experienced" investors: is this time different?

Post by Ivygirl »

This is something different about now. Money is going to be perceived very differently soon.

The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday

Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.

Having to "sell" keeping the US dollar as the primary international currency and a store of value has not been necessary before. It just was. Now it has competition, and competition within 5 years at that. Objects in mirror are closer than they appear.

https://www.msn.com/en-us/money/markets ... uxbndlbing
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HomerJ
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Re: "experienced" investors: is this time different?

Post by HomerJ »

Ivygirl wrote: Sun Jun 19, 2022 4:56 pm This is something different about now. Money is going to be perceived very differently soon.

The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday

Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.

Having to "sell" keeping the US dollar as the primary international currency and a store of value has not been necessary before. It just was. Now it has competition, and competition within 5 years at that. Objects in mirror are closer than they appear.

https://www.msn.com/en-us/money/markets ... uxbndlbing
Meh. All money is already digital. It still has to be backed by something and the U.S. is still the best backer.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Ivygirl
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Re: "experienced" investors: is this time different?

Post by Ivygirl »

HomerJ wrote: Mon Jun 20, 2022 1:35 am
Ivygirl wrote: Sun Jun 19, 2022 4:56 pm This is something different about now. Money is going to be perceived very differently soon.

The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday

Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.

Having to "sell" keeping the US dollar as the primary international currency and a store of value has not been necessary before. It just was. Now it has competition, and competition within 5 years at that. Objects in mirror are closer than they appear.

https://www.msn.com/en-us/money/markets ... uxbndlbing
Meh. All money is already digital. It still has to be backed by something and the U.S. is still the best backer.
"All money is already digital" is false. I hope you knew this?

The first way to look at it might be, "How much cash is there in U.S. currency?" If you took all the bills and coins floating around today in the world and added them all up, how much money would you have? All that hard and easily liquidated currency is known as the M0 money supply or monetary base. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $5.8 trillion in the M0 supply stream as of March 2021, the most recent data available.

That sounds like an incredible amount, but think about it this way: According to the U.S. Census, there were 332,290,964 people alive in the U.S. in May 2021. If you took all the cash and divided it up equally, each person should have about $17,454 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas.


https://money.howstuffworks.com/how-muc ... -world.htm

As far as the US being still the best backer - well that is what Mr. Powell needs to sell. It's new that the idea has to be sold. Objects in mirror are closer than they appear.
cbs2002
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Re: "experienced" investors: is this time different?

Post by cbs2002 »

I was 100% equities in 2007 and bought a condo to boot. Bought more and sold nothing.

Today I'm 5 times wealthier than I was in 2007, including the recent downturn. I could retire if I had to.

I sold some equities in 2019-20 to start a bond allocation.

Still own the condo.

If returns are 2-3% real over the next decade, I'll be fine.

If they're negative, it'll stink but what else can I do?

I think the U.S. stock market is most likely to outperform any other investment for the next 10 years. I could be wrong. But I don't know and neither does anyone else. It's not worth stressing over because I don't control the other stuff, and I don't make enough to stockpile many millions in cash in the next 10 years just from my income. So what can you do but enjoy the ride?
Fallible
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Re: "experienced" investors: is this time different?

Post by Fallible »

latesaver wrote: Sat May 21, 2022 8:39 pm ...
For those that have actually lived and invested during these time periods (70s, 2000s, 2008/2009), i am curious to hear how you see the current investing landscape. ... I am more interested in hearing from experienced investors why they are staying the course.
I've been investing since the '87 Crash and how I see the current investing landscape is that I don't know how I see it, I can't tell anything for certain yet and probably not until much more of it plays out, and even then... What's important is that my experience taught me to take this uncertainty into account when I decided on an asset allocation that most closely reflected my ability to handle risk in market downturns. In this sense, things are always the same - how well we understand risk in general and our own personal tolerance for it so we can stay the right course.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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HomerJ
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Re: "experienced" investors: is this time different?

Post by HomerJ »

Ivygirl wrote: Mon Jun 20, 2022 6:33 pm
HomerJ wrote: Mon Jun 20, 2022 1:35 am
Ivygirl wrote: Sun Jun 19, 2022 4:56 pm This is something different about now. Money is going to be perceived very differently soon.

The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday

Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.

Having to "sell" keeping the US dollar as the primary international currency and a store of value has not been necessary before. It just was. Now it has competition, and competition within 5 years at that. Objects in mirror are closer than they appear.

https://www.msn.com/en-us/money/markets ... uxbndlbing
Meh. All money is already digital. It still has to be backed by something and the U.S. is still the best backer.
"All money is already digital" is false. I hope you knew this?

The first way to look at it might be, "How much cash is there in U.S. currency?" If you took all the bills and coins floating around today in the world and added them all up, how much money would you have? All that hard and easily liquidated currency is known as the M0 money supply or monetary base. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $5.8 trillion in the M0 supply stream as of March 2021, the most recent data available.

That sounds like an incredible amount, but think about it this way: According to the U.S. Census, there were 332,290,964 people alive in the U.S. in May 2021. If you took all the cash and divided it up equally, each person should have about $17,454 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas.


https://money.howstuffworks.com/how-muc ... -world.htm

As far as the US being still the best backer - well that is what Mr. Powell needs to sell. It's new that the idea has to be sold. Objects in mirror are closer than they appear.
Meh, it's mostly digital. It's numbers on a screen. All the Federal Reserve action was purely digital. The Fed added trillions to the money supply, but didn't (because they can't) print a single dollar bill.

I see few advantages to a "digital" dollar...

But yeah, you're probably right they will try it, and probably make things worse.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: "experienced" investors: is this time different?

Post by Ivygirl »

HomerJ wrote: Mon Jun 20, 2022 11:03 pm
Ivygirl wrote: Mon Jun 20, 2022 6:33 pm
HomerJ wrote: Mon Jun 20, 2022 1:35 am
Ivygirl wrote: Sun Jun 19, 2022 4:56 pm This is something different about now. Money is going to be perceived very differently soon.

The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday

Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.

Having to "sell" keeping the US dollar as the primary international currency and a store of value has not been necessary before. It just was. Now it has competition, and competition within 5 years at that. Objects in mirror are closer than they appear.

https://www.msn.com/en-us/money/markets ... uxbndlbing
Meh. All money is already digital. It still has to be backed by something and the U.S. is still the best backer.
"All money is already digital" is false. I hope you knew this?

The first way to look at it might be, "How much cash is there in U.S. currency?" If you took all the bills and coins floating around today in the world and added them all up, how much money would you have? All that hard and easily liquidated currency is known as the M0 money supply or monetary base. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $5.8 trillion in the M0 supply stream as of March 2021, the most recent data available.

That sounds like an incredible amount, but think about it this way: According to the U.S. Census, there were 332,290,964 people alive in the U.S. in May 2021. If you took all the cash and divided it up equally, each person should have about $17,454 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas.


https://money.howstuffworks.com/how-muc ... -world.htm

As far as the US being still the best backer - well that is what Mr. Powell needs to sell. It's new that the idea has to be sold. Objects in mirror are closer than they appear.
Meh, it's mostly digital. It's numbers on a screen. All the Federal Reserve action was purely digital. The Fed added trillions to the money supply, but didn't (because they can't) print a single dollar bill.

I see few advantages to a "digital" dollar...

But yeah, you're probably right they will try it, and probably make things worse.
You said "meh" again. I don't think you have grasped the implications yet, that other countries (oil-producing countries) want to get out from under the dollar and are making moves to do so. These moves will include changing political alliances and also military actions, just like Russia has done. The European Union especially is in a very tight place regarding energy; if starved of energy they get poorer and poorer and less able to resist additional moves. And we can't help them all.

Money is going to look very different pretty soon.
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Re: "experienced" investors: is this time different?

Post by Valuethinker »

seychellois_lib wrote: Sun Jun 19, 2022 9:01 am
traderjoe55 wrote: Sat Jun 18, 2022 3:04 pm I am not old but I do read a lot.

Imo this time is different. Pretend you are in 2008/9 or 2020 with the fed against you instead of supporting you.

Read some stuff about the 1970s/80.

Best of luck.
I lived through the 70/80s, I was a young man back then and I can not tell you how i wish I had known then what I know now. My strategy would have been precisely the same as it is today : diversify, continue routine saving and investment, closely monitor fees, allocate such that you sleep and stay the course. The only difference is, as a young man, I would have had a far larger equity allocation. My equity portfolio is very broadly diversified US and International.

The net result if I had done this? I would be very wealthy today. We are comfortable due to my investment epiphany (around late 40s). But, my goodness, I COULD have been living in a beach house in Malibu with my 50 foot sailboat moored in Marina Del Ray :D .

Instead I did the 70s/80s version of what I see many young people doing: crypto, day trading, nonsensical online echo chamber investing and so on. For the vast majority of such investors...this will not work.
To be fair:

- in the 1970s you really couldn't do this. Most mutual funds had loads, expense ratios were high, there were no ETFs etc. And equities did not do well

- in the 1980s if you had read Burton Malkiel and were familiar with the retail S&P 500 index fund that John Bogle had launched, you could have done it. But of course the stellar fund was Peter Lynch's Magellan, a load fund at Fidelity. That became the largest mutual fund, ever, by the time Lynch stopped managing it in 1990 (?).

It's really only in the 1990s that the retail market started to get efficient - wide offerings of low cost index funds. There was a lot of uncertainty (such as the Crash of 1987 reflected) including recurrent Emerging Market Crises, and concerns re inflation. There was also Alan Greenspan crashing the bond market in 1994 - I think the 30 year Treasury dropped c 30%?

Then of course in 2000 you had another absurd runup, which was pretty painful to unwind.

So one has to let one's past self off the hook, to some extent.
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Re: "experienced" investors: is this time different?

Post by LadyGeek »

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NerdJock
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Re: "experienced" investors: is this time different?

Post by NerdJock »

It always appears different.
In the past stupid things wee outlawed.
Some of these outlawed things were repealed because we were stupider then and now we are smarter.

All in all it will be breath taking.
You can't really depend on people on you tube who are getting paid by the number of hits they have.
I mean really.
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Re: "experienced" investors: is this time different?

Post by phantom0308 »

You can look at 2011, 2015, and 2018 as well where the market was down close to 20% in each case. I recall people being nervous back then just like they are now, and the market recovered quickly thereafter. That doesn't mean it'll be the same, but it's important to keep in mind that every 20% drawdown doesn't lead to a 50% drawdown. The longer markets stay down, the more these types of threads pop up. I feel like the forum tends to get more active when markets are down. I guess it's better people are here than in their account fiddling with their AA.
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Re: "experienced" investors: is this time different?

Post by CloseEnough »

And you could add to that March 2020 when it recovered so fast people barely even had time to get nervous.
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

CloseEnough wrote: Tue Jun 21, 2022 9:44 am And you could add to that March 2020 when it recovered so fast people barely even had time to get nervous.
And the quicker the recovery, the quicker people forget that bear. 2008 everyone remembers. 2020 not so much.
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Re: "experienced" investors: is this time different?

Post by joejoe_joejoe »

Having read most of the replies, my conclusion to how different it feels this time, is this:

1. Most have not endured a long, no-appreciable-return market in stocks.

2. And most have not seen their bond "ballast" not work as they expected.

This gives great psychological support to the believers.

For those who have decades of work and wages ahead, the "stay the course" mantra is not easily challenged. For those in or nearing retirement, the story is different. Those retirees who started their investment career early, fear is low because they know they could handle substantial losses and still pay the bills.

Those who started investing later in life typically have less paper wealth and will have a much harder time. For people that were not actively investing in the 70's the prospect of persistent high inflation (with real negative returns on bond yields) may present a new psychological challenge.

My most general of observation is that somebody has to pay the bill for all the CB largesse. It will arrive in some form at some time and most will be poorer as a result; some will be a lot poorer. Personally, I value being mortgage free in a home I could happily live in for the rest of my life above all else.
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Re: "experienced" investors: is this time different?

Post by GAAP »

MarketWatch article today: https://www.marketwatch.com/story/meet- ... 1655830851.
If you’re thinking of pulling your 401(k) out of the stock market, or you’re too terrified to invest more, you need to meet my friend Betty Badluck.

Poor old Betty has had the worst luck of any stock market investor you’ve ever met. In the last 40 years she has invested in the stock market just six times. And on each occasion her timing was an absolute disaster.
TL;DR: Betty bought at the peak of the markets in 1987, 1990, 1998, 2000, 2001, 2008 -- which leads to:
Her timing literally could not have been any worse.

But Betty did two other things.

The first is, she didn’t try to pick stocks, funds, or even markets. She invested in a global stock market portfolio that matched the MSCI World index, including U.S. and foreign stocks.

And after investing her money, and watching it plunge…she left it there.

What happened to Betty?

Well, thereby hangs a tale.

She did just fine.

Even though she picked the worst six moments since the 1980s in which to invest, she made an average profit over the next five years of 20% and an average profit over 10 years of 100%. She doubled her money. Despite her disastrous, terrible timing, she was in the black after five years on four occasions out of six, and in the black after 10 years 10 times out of 10.
So, is it really different now? Ask me again in 20 years.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
Nathan Drake
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Re: "experienced" investors: is this time different?

Post by Nathan Drake »

mrspock wrote: Sat Jun 18, 2022 11:26 pm
burritoLover wrote: Sun May 22, 2022 6:42 am
HomerJ wrote: Sun May 22, 2022 12:19 am And then it does work out again.

So far, every single crash, has been followed by new historic highs where someone who just stayed the course, still gets rich.
Except Japan but of course that couldn't happen here cause 'Merica.
Japan… never mention this without mentioning along with it the PEs of 95. Any Boglehead with a sane portfolio who rebalanced would be sitting on a gigantic pile of bonds after such an event. With that you can survive the ensuing decades of 0 growth. It would mean the S&P would be around 20k, and those with a $4m 60/40 portfolio would be sitting on some $8m in bonds after such an event.

I’ll take Japan any day of the month. Bring it.

Given PEs are a paltry 18 and falling, I like my odds that it won’t happen.

This time is likely the same as the others, in the sense it will reward those who stay the course (as Japan did!). It will have its own twists, such as inflation, but my guess is it will be a lighter/faster version of the 70s. Faster because information flows much faster these days, and lighter because the fed has learned from the 70s experience. In fact an entire generation of bankers grew up studying Volcker and to a degree idolizing him.

So, I’m not worried at all. And if something terrible happens, there is little I can do which is meaningful — that if wrong — wouldn’t financially ruin me (if it doesn’t end up happening).
You’re conflating Japanese CAPE with US forward P/E, not an apples to apples comparison

US CAPE is still 2X historical norms
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dertere
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Re: "experienced" investors: is this time different?

Post by dertere »

Ivygirl wrote: Tue Jun 21, 2022 6:29 am
HomerJ wrote: Mon Jun 20, 2022 11:03 pm
Ivygirl wrote: Mon Jun 20, 2022 6:33 pm
HomerJ wrote: Mon Jun 20, 2022 1:35 am
Ivygirl wrote: Sun Jun 19, 2022 4:56 pm This is something different about now. Money is going to be perceived very differently soon.

The development of an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Fed Chair Jerome Powell said on Friday

Ten countries have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, leading to fears the dollar could lose some of its dominance to China.

Having to "sell" keeping the US dollar as the primary international currency and a store of value has not been necessary before. It just was. Now it has competition, and competition within 5 years at that. Objects in mirror are closer than they appear.

https://www.msn.com/en-us/money/markets ... uxbndlbing
Meh. All money is already digital. It still has to be backed by something and the U.S. is still the best backer.
"All money is already digital" is false. I hope you knew this?

The first way to look at it might be, "How much cash is there in U.S. currency?" If you took all the bills and coins floating around today in the world and added them all up, how much money would you have? All that hard and easily liquidated currency is known as the M0 money supply or monetary base. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $5.8 trillion in the M0 supply stream as of March 2021, the most recent data available.

That sounds like an incredible amount, but think about it this way: According to the U.S. Census, there were 332,290,964 people alive in the U.S. in May 2021. If you took all the cash and divided it up equally, each person should have about $17,454 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas.


https://money.howstuffworks.com/how-muc ... -world.htm

As far as the US being still the best backer - well that is what Mr. Powell needs to sell. It's new that the idea has to be sold. Objects in mirror are closer than they appear.
Meh, it's mostly digital. It's numbers on a screen. All the Federal Reserve action was purely digital. The Fed added trillions to the money supply, but didn't (because they can't) print a single dollar bill.

I see few advantages to a "digital" dollar...

But yeah, you're probably right they will try it, and probably make things worse.
You said "meh" again. I don't think you have grasped the implications yet, that other countries (oil-producing countries) want to get out from under the dollar and are making moves to do so. These moves will include changing political alliances and also military actions, just like Russia has done. The European Union especially is in a very tight place regarding energy; if starved of energy they get poorer and poorer and less able to resist additional moves. And we can't help them all.

Money is going to look very different pretty soon.
I won't speculate on the future of the dollar's status as the most popular reserve currency, or potential repercussions. I will note that in 1920, the pound sterling represented ~57% of the global currency reserve, a comparable percentage to the dollar's current share. History does not repeat itself, but it often rhymes.

As far as I'm aware, an investor (UK or otherwise) would have been well served by a diversified, low-cost portfolio held over the long term, despite an upheaval in currency reserves, and the general chaos of the 20th century. Of course, there are no guarantees for the returns we will see in the 21st century, but I believe long term historical trends remain our best point of reference.
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Re: "experienced" investors: is this time different?

Post by technovelist »

I was an adult in the 1970's (and obviously since then).

Yes, I believe this time is different.

We are starting out at generationally low interest rates, so bonds are very unlikely to serve as ballast as they have for the past 40 years of declining interest rates from 1980 to 2020. We've already seen the beginning of this phenomenon but I can't imagine we are near the end.

And of course while there was a lot of inflation in the 1970's, since debt was much lower then as a percentage of GDP, it was feasible (although very unpleasant) for the Fed to raise interest rates high enough to stop runaway inflation. That is no longer possible without causing tremendous increases in the burden of debt service for borrowers in general, with potentially catastrophic economic consequences including a very severe stock market decline.

So if I did not have significant assets uncorrelated to stocks and bonds, I would be extremely concerned.
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Re: "experienced" investors: is this time different?

Post by hvaclorax »

Artful Dodger wrote: Sat May 21, 2022 9:27 pm I remember 2000-2001 and 2008-2009 well. I also remember back Friday from October 1987. Investing in the eighties and nineties was different because you didn’t have the immediate feedback that you get now from checking your accounts online, the 24 hour cable news cycle, and all the online news and resources. Most of my investments were in my work 401k and we got quarterly statements. That’s it. For me, I don’t remember much drama in 2000-2001. The people who really got killed were the ones overweight in tech. Probably similar to the people holding crypto now. By 2008, I had some real money, was close to a 100% AA, had some soon to be bankrupt mortgage lenders in my portfolio, and saw more than a 50% decline. It was gut wrenching. But the thing that precipitated the 08/09 crisis was breakdown in the world banking and risk assessment system. That spawned high unemployment, underemployment, and the effects were being felt years later. I think (of course, who really knows) the most likely outcome this time will be a slow recovery with higher than normal inflation, a bear market, and then mediocre market returns for a few years.
+1
I started my investment career in 1982. I agree with all of the above. Not certain about the predictions but neither is artful dodger. If he is correct, I can live with that. Actually I hope not worse. Who doesn’t?
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Re: "experienced" investors: is this time different?

Post by BogleFan510 »

No one knows the future, so asking the question about the future and hoping for some level comfort is not a positive action to take IMHO. We may all live in a poorer world, especially if we elect and support leaders who buy into the idea that conflict and aggressive opposition to others instead of peace, is the way to feather their own nests. Global expansion is based on compromise and acceptance of a plurality of cultural philosophies. Global expansion and growth helped built the wealth we have, created by open trade, respect for borders and established law. This also depends on openness to accept other cultures rather than fighting with them or by ignoring investments in shared assets, like global law, governance etc, and instead trying to force ones own views on others. We seem to be sliding back from that post WW2 shared view.

I am hopeful, but recent politics suggest to me that we can easily destroy the social good and wealth we have built with careless management.
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Re: "experienced" investors: is this time different?

Post by av111 »

technovelist wrote: Wed Jun 22, 2022 2:29 pm We are starting out at generationally low interest rates, so bonds are very unlikely to serve as ballast as they have for the past 40 years of declining interest rates from 1980 to 2020. We've already seen the beginning of this phenomenon but I can't imagine we are near the end.

And of course while there was a lot of inflation in the 1970's, since debt was much lower then as a percentage of GDP, it was feasible (although very unpleasant) for the Fed to raise interest rates high enough to stop runaway inflation.

So if I did not have significant assets uncorrelated to stocks and bonds, I would be extremely concerned.
I find your analysis very astute. How can it be actionable for most people? No bonds okay. Declining stocks okay. But what uncorrelated assets are you pointing to
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Re: "experienced" investors: is this time different?

Post by av111 »

av111 wrote: Wed Jun 22, 2022 8:00 pm
technovelist wrote: Wed Jun 22, 2022 2:29 pm We are starting out at generationally low interest rates, so bonds are very unlikely to serve as ballast as they have for the past 40 years of declining interest rates from 1980 to 2020. We've already seen the beginning of this phenomenon but I can't imagine we are near the end.

And of course while there was a lot of inflation in the 1970's, since debt was much lower then as a percentage of GDP, it was feasible (although very unpleasant) for the Fed to raise interest rates high enough to stop runaway inflation.

So if I did not have significant assets uncorrelated to stocks and bonds, I would be extremely concerned.
I find your analysis very astute. How can it be actionable for most people? No bonds okay. Declining stocks okay. But what uncorrelated assets are you pointing to
technovelist

I saw your portfolio from the other thread

70% gold, 20% CHF, 10% cash.

Isnt this a very defensive portfolio. What is the performance of 1m in this over last 10 years
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Re: "experienced" investors: is this time different?

Post by 4nursebee »

latesaver wrote: Sat May 21, 2022 8:39 pm Myself included (I am 42 years old), many forum members didn't live through the emotional investing "tolls" brought on by the 2000 dot com bust or the great recession of 2008/2009.

Some older BH's even saw the challenges presented by earlier time periods in the 60s and 70s.

For what it is worth, I don't consider those that survived the "crash" of March 2020 as battle tested.

For those that have actually lived and invested during these time periods (70s, 2000s, 2008/2009), i am curious to hear how you see the current investing landscape. There is no shortage of "wisdom" from younger (hindsight) professionals throwing out CAPE figures, soft new-economy stats, etc., but in this case I am more interested in hearing from experienced investors why they are staying the course.
Staying the course for all the normal reasons and the same reason this course was taken.
Stickin to the plan.

How do I see the landscape? It is greener up ahead!
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HomerJ
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Re: "experienced" investors: is this time different?

Post by HomerJ »

av111 wrote: Wed Jun 22, 2022 8:05 pm
av111 wrote: Wed Jun 22, 2022 8:00 pm
technovelist wrote: Wed Jun 22, 2022 2:29 pm We are starting out at generationally low interest rates, so bonds are very unlikely to serve as ballast as they have for the past 40 years of declining interest rates from 1980 to 2020. We've already seen the beginning of this phenomenon but I can't imagine we are near the end.

And of course while there was a lot of inflation in the 1970's, since debt was much lower then as a percentage of GDP, it was feasible (although very unpleasant) for the Fed to raise interest rates high enough to stop runaway inflation.

So if I did not have significant assets uncorrelated to stocks and bonds, I would be extremely concerned.
I find your analysis very astute. How can it be actionable for most people? No bonds okay. Declining stocks okay. But what uncorrelated assets are you pointing to
technovelist

I saw your portfolio from the other thread

70% gold, 20% CHF, 10% cash.

Isnt this a very defensive portfolio. What is the performance of 1m in this over last 10 years
LOL. Gold and swiss francs?
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
technovelist
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Re: "experienced" investors: is this time different?

Post by technovelist »

av111 wrote: Wed Jun 22, 2022 8:05 pm
av111 wrote: Wed Jun 22, 2022 8:00 pm
technovelist wrote: Wed Jun 22, 2022 2:29 pm We are starting out at generationally low interest rates, so bonds are very unlikely to serve as ballast as they have for the past 40 years of declining interest rates from 1980 to 2020. We've already seen the beginning of this phenomenon but I can't imagine we are near the end.

And of course while there was a lot of inflation in the 1970's, since debt was much lower then as a percentage of GDP, it was feasible (although very unpleasant) for the Fed to raise interest rates high enough to stop runaway inflation.

So if I did not have significant assets uncorrelated to stocks and bonds, I would be extremely concerned.
I find your analysis very astute. How can it be actionable for most people? No bonds okay. Declining stocks okay. But what uncorrelated assets are you pointing to
technovelist

I saw your portfolio from the other thread

70% gold, 20% CHF, 10% cash.

Isnt this a very defensive portfolio. What is the performance of 1m in this over last 10 years
It is extremely defensive because I've always felt that my earning capability was my greatest asset, which would be impaired the most in economic situations where this portfolio would do the best.

Also I'm not counting my paid-off house, which has gone up in price by at least double in the past 10 years.

As for performance, the last 10 years turns out to be one of the worst periods for this portfolio because in 2012 gold was just off its ATH.

Let's look at 20 years instead. (Note: I've held a portfolio similar to this longer than that so this isn't just theoretical.)

I can't do an exact analysis on portfoliovisualizer.com because they don't have CHF, so I substituted another 10% gold, making it 80% gold and 20% short-term Treasurys.

In that case, the 20 year results come out as follows, with portfolio 1 being 80/20 gold and cash and portfolio 2 being 60/40 US stocks and total bond market, whereas portfolio 3 is the Harry Browne Permanent Portfolio (see below):

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio Market Correlation
Portfolio 1 $10,000 $48,499 8.04% 13.56% 25.94% -22.68% -35.43% 0.55 0.91 0.06
Portfolio 2 $10,000 $40,605 7.10% 9.01% 21.83% -20.20% -30.72% 0.67 1.00 0.99
Portfolio 3 $10,000 $40,160 7.05% 6.65% 16.98% -9.12% -13.38% 0.88 1.50 0.45

Not too bad, I would say.

Please note: I'm not saying anyone should adopt my portfolio. The Harry Browne Permanent Portfolio (25% in each of gold, t-bills, long t-bonds, and stocks) is much more suitable for most people, and even that is "too weird" for most people to keep it even though it has pretty good long-term results.

--------------------------------
Here's the link to that comparison if anyone wants to look at it themselves:

https://www.portfoliovisualizer.com/bac ... tion5_3=25
In theory, theory and practice are identical. In practice, they often differ.
Goldwater85
Posts: 188
Joined: Fri Nov 22, 2019 7:00 pm

Re: "experienced" investors: is this time different?

Post by Goldwater85 »

seychellois_lib wrote: Sun Jun 19, 2022 9:43 am
Goldwater85 wrote: Sat Jun 11, 2022 2:02 pm
trirunner wrote: Sat Jun 11, 2022 1:00 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:45 pm
trirunner wrote: Sat Jun 11, 2022 12:14 pm

I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
China’s industrial revolution, the ‘90s tech sector, even Walmart’s expansion. But those are all examples of ‘good’ deflation fueled by productivity growth, not demand destruction.
Aging population doesn't have demand destruction, shrinking one does, and I don't see that any time soon.
In aggregate, a typical 40 year old consumes more goods and services than a typical 80 year old. By increasing the ratio of 80 year olds to 40 year olds, you are reducing economic demand without necessarily shrinking the population.

US demographics are not Japan’s or even Europe’s, so maybe this doesn’t pressure prices into outright decreases. But expect this trend to at least reduce the rate of demand growth vs historical experience. This would reduce the need for additional capacity, which is at the core of business activity. In turn expect the need for equity and debt capital to expand capacity to be reduced, which lowers interest rates and expected returns on equity.

Not that countercurrents can’t push us the other way. Maybe AI leads to an explosion in productivity. Who knows?

But if long term interest rates do push substantially higher, I do intend to increase the duration of my portfolio. Mainly by adding equities. Lost COVID capacity gets built back out eventually. Maybe it takes 5 years to train up a bunch more pilots, but fairly certain we’ll see a 3.0% long bond again.
Not sure I completely agree with your assertion re 80 year olds. I do agree they are spending differently but they may not be spending that much less. What I see as I age are increasing medical and travel expenditures which will morph into larger expenditures on med, assistance, insurance and so on with less money spent of stuff. But those medical expenditures, even as a relatively healthy person, are eye watering.

Another example is, as an upper middle income retiree and homeowner, i do much of my home maintenance work myself and enjoy doing so (mostly) but when i place a value on my work i realize this will become a new $10 to $15K (today dollars) expense when I age out of my handyman phase. For those who age in place, this type of "maintenance/assistance" expenditure will almost certainly increase.

With regard to "Not that countercurrents can’t push us the other way. Maybe AI leads to an explosion in productivity. Who knows?" this is precisely why broad diversification is critical IMO. Who knows? answer: nobody. Therefore we have to own a little bit of everything such that when "who knows" turns into "man, I never even thought of that" (think the internet), you have a piece of the action, and usually enough of a piece to crank out a decent, not spectacular, return. Definitely NOT a get rich quick scheme, it's a get rich slow scheme and requires a decades long runway.
It's just not debatable. Yes, a bumper crop of 80 year olds is a huge boon if you own a hospital or a nursing home. But in aggregate an older population engages in less economic activity. See, e.g., this Federal Reserve study capturing 36 years of U.S. data: https://www.kansascityfed.org/Economic% ... eholds.pdf

And my point concerning countercurrents is that, yes, productivity gains can push GDP forward in an otherwise stagnant environment. But it is much easier to swim with the tide than against it. And betting on significant, annual future productivity gains is highly speculative. Measured annually, productivity gains globally were barely perceptible for 10,000 years.
HootingSloth
Posts: 900
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Re: "experienced" investors: is this time different?

Post by HootingSloth »

technovelist wrote: Thu Jun 23, 2022 8:48 am I can't do an exact analysis on portfoliovisualizer.com because they don't have CHF . . . .
For what it's worth, PortfolioVisualizer does have FXF (Invesco CurrencyShares Swiss Franc Trust) starting from July 2006 if you use the "Backtest Portfolio" option instead of the "Backtest Asset Allocation" option.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
technovelist
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Re: "experienced" investors: is this time different?

Post by technovelist »

HootingSloth wrote: Thu Jun 23, 2022 3:12 pm
technovelist wrote: Thu Jun 23, 2022 8:48 am I can't do an exact analysis on portfoliovisualizer.com because they don't have CHF . . . .
For what it's worth, PortfolioVisualizer does have FXF (Invesco CurrencyShares Swiss Franc Trust) starting from July 2006 if you use the "Backtest Portfolio" option instead of the "Backtest Asset Allocation" option.
That should work but of course 2006 is not 20 years ago. Thanks for the tip!
In theory, theory and practice are identical. In practice, they often differ.
Da5id
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Joined: Fri Feb 26, 2016 8:20 am

Re: "experienced" investors: is this time different?

Post by Da5id »

technovelist wrote: Thu Jun 23, 2022 5:13 pm
HootingSloth wrote: Thu Jun 23, 2022 3:12 pm
technovelist wrote: Thu Jun 23, 2022 8:48 am I can't do an exact analysis on portfoliovisualizer.com because they don't have CHF . . . .
For what it's worth, PortfolioVisualizer does have FXF (Invesco CurrencyShares Swiss Franc Trust) starting from July 2006 if you use the "Backtest Portfolio" option instead of the "Backtest Asset Allocation" option.
That should work but of course 2006 is not 20 years ago. Thanks for the tip!
I'm always concerned when people think a specific start/end date is important to make their point. Do you feel like the 20 year numbers specifically are important to validate the idea that 70% gold/20% Swiss Francs/10% cash is in some way a reasonable asset allocation? I appreciate that you said you weren't arguing for anyone else to adopt it though.
av111
Posts: 435
Joined: Mon Jan 26, 2015 1:27 pm

Re: "experienced" investors: is this time different?

Post by av111 »

technovelist wrote: Thu Jun 23, 2022 8:48 am
av111 wrote: Wed Jun 22, 2022 8:05 pm
av111 wrote: Wed Jun 22, 2022 8:00 pm
technovelist wrote: Wed Jun 22, 2022 2:29 pm We are starting out at generationally low interest rates, so bonds are very unlikely to serve as ballast as they have for the past 40 years of declining interest rates from 1980 to 2020. We've already seen the beginning of this phenomenon but I can't imagine we are near the end.

And of course while there was a lot of inflation in the 1970's, since debt was much lower then as a percentage of GDP, it was feasible (although very unpleasant) for the Fed to raise interest rates high enough to stop runaway inflation.

So if I did not have significant assets uncorrelated to stocks and bonds, I would be extremely concerned.
I find your analysis very astute. How can it be actionable for most people? No bonds okay. Declining stocks okay. But what uncorrelated assets are you pointing to
technovelist

I saw your portfolio from the other thread

70% gold, 20% CHF, 10% cash.

Isnt this a very defensive portfolio. What is the performance of 1m in this over last 10 years
It is extremely defensive because I've always felt that my earning capability was my greatest asset, which would be impaired the most in economic situations where this portfolio would do the best.

Also I'm not counting my paid-off house, which has gone up in price by at least double in the past 10 years.

As for performance, the last 10 years turns out to be one of the worst periods for this portfolio because in 2012 gold was just off its ATH.

Let's look at 20 years instead. (Note: I've held a portfolio similar to this longer than that so this isn't just theoretical.)

I can't do an exact analysis on portfoliovisualizer.com because they don't have CHF, so I substituted another 10% gold, making it 80% gold and 20% short-term Treasurys.

In that case, the 20 year results come out as follows, with portfolio 1 being 80/20 gold and cash and portfolio 2 being 60/40 US stocks and total bond market, whereas portfolio 3 is the Harry Browne Permanent Portfolio (see below):

Portfolio Initial Balance Final Balance CAGR Stdev Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio Market Correlation
Portfolio 1 $10,000 $48,499 8.04% 13.56% 25.94% -22.68% -35.43% 0.55 0.91 0.06
Portfolio 2 $10,000 $40,605 7.10% 9.01% 21.83% -20.20% -30.72% 0.67 1.00 0.99
Portfolio 3 $10,000 $40,160 7.05% 6.65% 16.98% -9.12% -13.38% 0.88 1.50 0.45

Not too bad, I would say.

Please note: I'm not saying anyone should adopt my portfolio. The Harry Browne Permanent Portfolio (25% in each of gold, t-bills, long t-bonds, and stocks) is much more suitable for most people, and even that is "too weird" for most people to keep it even though it has pretty good long-term results.

--------------------------------
Here's the link to that comparison if anyone wants to look at it themselves:

https://www.portfoliovisualizer.com/bac ... tion5_3=25
Thanks for posting. Difficult to imagine that 70% gold, 20% CHF, 10% cash can beat 60/40 over a 20 year period but CHF and gold were very low in 2000 and are ATH now.
AV111
technovelist
Posts: 3346
Joined: Wed Dec 30, 2009 9:02 pm

Re: "experienced" investors: is this time different?

Post by technovelist »

Da5id wrote: Thu Jun 23, 2022 5:22 pm
technovelist wrote: Thu Jun 23, 2022 5:13 pm
HootingSloth wrote: Thu Jun 23, 2022 3:12 pm
technovelist wrote: Thu Jun 23, 2022 8:48 am I can't do an exact analysis on portfoliovisualizer.com because they don't have CHF . . . .
For what it's worth, PortfolioVisualizer does have FXF (Invesco CurrencyShares Swiss Franc Trust) starting from July 2006 if you use the "Backtest Portfolio" option instead of the "Backtest Asset Allocation" option.
That should work but of course 2006 is not 20 years ago. Thanks for the tip!
I'm always concerned when people think a specific start/end date is important to make their point. Do you feel like the 20 year numbers specifically are important to validate the idea that 70% gold/20% Swiss Francs/10% cash is in some way a reasonable asset allocation? I appreciate that you said you weren't arguing for anyone else to adopt it though.
Of course you don't have to pick a specific date to validate an asset allocation. But if the date that someone mentions just happens to start at the ATH of the volatile asset, then obviously the results aren't going to be very good and won't be representative of most time periods.

For anyone who wants low volatility with pretty good CAGR, the previously mentioned HBPP is a reasonable choice, similar in overall CAGR to 60/40 over many time periods of reasonable length (10 years or more) but with lower drawdowns and lower stds.

If someone told me I had to pick an allocation for someone else, the HBPP would be it. I have used it in the past but stopped because I no longer trust the US dollar and feel the stock market is way overvalued. That doesn't leave a lot of options.

By the way, 50-50 gold and stocks has been discussed somewhere recently and it is way better for the past 20 years than any of the others, with a 9.77% CAGR for that time period:

Portfolio 2 $10,000 $67,013 9.77% 11.58% 26.36% -16.06% -26.02% 0.76 1.24 0.68

https://www.portfoliovisualizer.com/bac ... tion5_3=25
In theory, theory and practice are identical. In practice, they often differ.
Da5id
Posts: 4698
Joined: Fri Feb 26, 2016 8:20 am

Re: "experienced" investors: is this time different?

Post by Da5id »

technovelist wrote: Thu Jun 23, 2022 5:56 pm By the way, 50-50 gold and stocks has been discussed somewhere recently and it is way better for the past 20 years than any of the others, with a 9.77% CAGR for that time period:
Again, a very specific focus on a start date is highly suspect to me. I guess you feel it proves something?
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