Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Go all in or easy does it?
Old 02-25-2006, 02:35 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,625
Re: Go all in or easy does it?

If you had invested $100,000 in the Vanguard Total Stock Market Index fund on March 23, 2000 and sold on July 23, 2002 you would have had less than $55,000 left.
__________________

__________________
LOL! is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Go all in or easy does it?
Old 02-25-2006, 03:31 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,413
Re: Go all in or easy does it?

theres always one particualer time frame that yields untypical results..its like buying at the best possible time ..you always see the ole if you missed the best trading days of this or that time period cited as an example but they mean no more or less than missing the worst days to be in.....long term averages always play out for most of us and buy and hold in funds wins
__________________

__________________
mathjak107 is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-25-2006, 04:30 PM   #23
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Re: Go all in or easy does it?

Quote:
Originally Posted by NYCGuy
Olav,

Too much agreement here. Someone has got to speak up for market timing. I happen to think that you are right and everyone else is wrong. Yes, you can time the market and now is a good time to stay out.
Everyone's a trading genius. Just look at all the active fund managers that have beaten their benchmarks for 10 years or more.

Oh, wait, there's only 1 (LMVTX)....

How about 5 years? Not too sparkling a record either. (Check out the midcap index!)

http://www2.standardandpoor.com/spf/...the%20S&P'
__________________
eridanus is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-25-2006, 08:11 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

Quote:
Originally Posted by LOL!
If you had invested $100,000 in the Vanguard Total Stock Market Index fund on March 23, 2000 and sold on July 23, 2002 you would have had less than $55,000 left.
And then if you waited a few more years, you'd have it all back. Unless you sold, there was no loss.

The original comment was that recessions average a 40-something percent loss. There have only been a few 40-something percent losses in the history of the US economy, and many recessions. None of the 40-something percent losses were sustained with the exception of the great depression.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Crystal balls fuzzy
Old 02-25-2006, 09:36 PM   #25
Thinks s/he gets paid by the post
free4now's Avatar
 
Join Date: Dec 2005
Posts: 1,225
Crystal balls fuzzy

I recently subscribed to the Hulbert Financial Digest, which tracks the actual results of model portfolios based on the financial newsletters. I was hoping to find that there were newsletters that could reliably beat the indexes. But I'm afraid to say it seems not to be so... most fail to beat their indexes and the ones that do beat the indexes either don't do for long or only by a little bit and with more risk (beta).

So timing as a way to get above average returns is just not going to work in my mind.

But I do see a place for macroeconomic timing for peace of mind and for managing expectations. If you are the kind of person who would be devastated if your investment plummeted right after you lump summed into a market you predicted would be a bear market, then I think it's appropriate to abstain from investing. Even though on average you are giving up gains, the pain of losing it when you thought you might could be reason enough for you to stay out.

I also think it's useful to use macroeconomics for making some decisions... for instance if we were in a true bear market I would think twice about retiring or counting on a 4% SWR, and plan on adjusting my living expenses accordingly. But we are not currently in a bear market and even though there are good indications that one may be coming, we just don't know that is true. A couple of years ago there were good indications that the housing bubble was about to collapse but it kept up it's steam and I would not be surprised if it never falls down to even the levels of a couple of years ago.
__________________
free4now is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-27-2006, 08:16 PM   #26
Dryer sheet aficionado
 
Join Date: Dec 2005
Posts: 45
Re: Go all in or easy does it?

As for the 43% market decline in recessions, that is not my research. I was quoting from John Mauldin:

"My studies show that the stock market drops an average of 43% before and during a recession. I think the next big leg down in the stock market will be precipated by a recession. Could we see the market drop another 40%? The short answer is yes." The rest of his piece is here:
http://www.2000wave.com/article.asp?id=mwo022803

I haven't checked it. Would be interested to know the result if someone does check it.

>>Everyone's a trading genius.

Once again, market timing does not necessarily mean trading although we have all been conditioned to believe that. I am using market timing to mean staying out of the equity market while the P/E of the S&P remains above historical norms. I believe that it will regress to a point below historical norms in the next few years. Then it will be ok to buy and hold again.

>>Just look at all the active fund managers that have beaten their benchmarks for 10 years or more.

This is a befuddled comment. Active fund managers mostly means equity managers. They are not trying to time the market, but are trying to outperform by security selection. They can't try to time the equity market as a whole because they can't go out of equities or they will have no product to sell.

>>If all bear markets were like your "current long term bear market", I want lots more of them. I don't know if you have looked lately, but in the last 3 years, the S&P500 is up more than 60%, the EAFE index up 113%, and the Russell 2000 index up 109%

I don't know if you have looked lately, but in the last 6 years the S&P500 is down 13%. You would have made (a lot) more money in T-bills.

One of the basic assumptions of asset allocation is that market are usually mean-reverting. That's the basis for buying and holding: it will come back. So, if markets are mean-reverting why wouldn't it be possible to identify historically overvalued markets and get out of them and let someone else ride them down to the mean, or below?

And if the equity market is indeed overvalued we would expect some of the best investors to be sitting on the sidelines in cash waiting for a better opportunity. Like Buffet who is sitting on about $42 billion in cash, if I remember correctly, saying there is nothing to buy now.

In my opinion, the following markets are bubbles inflated by the liquidity and credit bubble that has been going on since 1996 and, more dramatically since 2001. I expect them to revert to historical valuation levels, possibly at the same, painful time:

1. US equities
2. US housing
3. gold
4. oil
5. bonds
6. USD

In this I agree with the OP whose reservation about investing now is that everything seems expensive. Well, it is.

__________________
NYCGuy is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-27-2006, 10:07 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

I've never read anything from John Mauldin, but if thats what he said, i can sure save some time.

Grab your favorite charting tool. Pull up the dow from "all dates". Several go back to prior to the depression. Look at the nice smooth line with a couple of short lived divots in it.

Invest accordingly.

As far as a "reversion" in housing, historically few areas have seen more than a single digit decline in a year, although a few have had a number of sequential single digit down years.

As far as equities go, according to many measures they're as cheap as they've been in years.

Gold, oil and bonds seem a little peaked.

Nobody knows whats going to happen with currency.

People sitting in cash or in short bonds are punting on first down. Best of luck to them...they already decided to lose the game, but hope to keep it close...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-27-2006, 10:17 PM   #28
Thinks s/he gets paid by the post
grumpy's Avatar
 
Join Date: Jul 2004
Posts: 1,321
Re: Go all in or easy does it?

Quote:
Originally Posted by NYCGuy
As for the 43% market decline in recessions, that is not my research. I was quoting from John Mauldin:

"My studies show that the stock market drops an average of 43% before and during a recession.
NYCGuy,

I've got to call you on this one. You did not quote John Mauldin, you misqouted him. Your initial post said: "The average stock market decline during a recession is 43%." Let's at least debate the right question. Even with the correct quote I still don't trust that statistic.

Grumpy
__________________
...you can check out any time you like, but you can never leave...
grumpy is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-27-2006, 10:21 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

Maybe for a 15 minute period "the market" (whatever that means...the dow? the s&p? TSM?) might have dropped a good solid double digit amount. But there were no sustained double digit down markets excepting a very few, some coinciding with recessions/depressions, some not. Many recessions without large sustained down markets of any kind.

I didnt like the markets from 1999-early 2005. Didnt mind them before that. Dont mind them now.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-27-2006, 11:00 PM   #30
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 784
Re: Go all in or easy does it?

Quote:
Originally Posted by NYCGuy
>>Everyone's a trading genius.

Once again, market timing does not necessarily mean trading although we have all been conditioned to believe that. I am using market timing to mean staying out of the equity market while the P/E of the S&P remains above historical norms. I believe that it will regress to a point below historical norms in the next few years. Then it will be ok to buy and hold again.
Yes, and if the rate at which the market is growing, is itself growing? Then you're suckering yourself out of many thousands of dollars. Even if it just continues to do its thing, which seems like a good baseline bet, you're suckering yourself out of many thousands of dollars.

Quote:
>>If all bear markets were like your "current long term bear market", I want lots more of them. I don't know if you have looked lately, but in the last 3 years, the S&P500 is up more than 60%, the EAFE index up 113%, and the Russell 2000 index up 109%

I don't know if you have looked lately, but in the last 6 years the S&P500 is down 13%. You would have made (a lot) more money in T-bills.
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my
http://finance.yahoo.com/q/bc?s=%5EDJI&t=my

Now tell me which side of the market you want to be on..........

Quote:
In this I agree with the OP whose reservation about investing now is that everything seems expensive. Well, it is.
Well, we all know you are spewing a crock of sh*t. But, whatever, do your thing.... good luck with that!

(Let us know how it goes..... I'm sure we'd all love to see your new way of making money by outsmarting the market... Who knows, maybe you could even show everybody up?)
__________________
Cool Dood is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 10:59 AM   #31
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Re: Go all in or easy does it?

Quote:
Originally Posted by Cute n' Fuzzy Bunny
I've never read anything from John Mauldin, but if thats what he said, i can sure save some time.
I think we've found the source of the problem-- reading John Mauldin.

Mauldin's column has more guest writers & quoted authors than it does Mauldin's original work. He claims to write an investment letter for accredited investors but apologizes in every third column for not sending them a letter that month. In between he'd tell us how far behind schedule his book is and how angry his publisher is with him, but then he'd tell us how he's going to spend the weekend enjoying quality family time. Great work-life balance, but where the @#$% is the financial, economic, & investing analysis? He's built an entire reputation in the last six years off the phrase "muddle through". If I'd told any of my working bosses, or my spouse the investments supervisor, that I planned to handle the current situation by "muddling through", how credible do you think they'd assess that?

You go right ahead & time that market, NYCGuy. But you don't time the market by getting out of it-- you time the market by putting your assets into the classes that are making more money. That's rarely a money market! Claiming that everything is overvalued, or that the world is about to go to end, is a sign that additional research is merited...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 12:17 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,278
Re: Go all in or easy does it?

Quote:
Originally Posted by NYCGuy

Once again, market timing does not necessarily mean trading although we have all been conditioned to believe that.* I am using market timing to mean staying out of the equity market while the P/E of the S&P remains above historical norms.* I believe that it will regress to a point below historical norms in the next few years.* Then it will be ok to buy and hold again.
One problem with your thinking on this.. with any ratio, you can change it by changing either variable... so, for P/E, you assume prices to drop... well, it could be that earnings go up. Then your timing example does not work.
__________________
Texas Proud is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 01:20 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

Isnt the historic PE of the S&P 500 around 16, and the current PE around 17? Doesnt sound too badly overvalued to me.

Especially if you consider that the "modern PE", that over just the last 3-4 decades, has been pretty well up there...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 05:12 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Go all in or easy does it?

PE is not high by historical standards, but yield is lower...
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 06:17 PM   #35
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Re: Go all in or easy does it?

Since we're talking about RTM + market timing, I thought I'd throw this beast out there:

Mean Reversion, Forecasting and Market Timing

I like the "Common Sense" and "Homework Problems" sections.

- Alec
__________________
ats5g is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 06:25 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

I stopped reading when I got to the part where they said "stock market investing is not the same as flipping a coin, but its similar".

No, it isnt.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 09:03 PM   #37
Dryer sheet aficionado
 
Join Date: Dec 2005
Posts: 45
Re: Go all in or easy does it?

Quote:
Originally Posted by Nords

But you don't time the market by getting out of it-- you time the market by putting your assets into the classes that are making more money. That's rarely a money market! Claiming that everything is overvalued, or that the world is about to go to end, is a sign that additional research is merited...
Additional research is going on. But I think avoiding losing money is just as important as making money, sometimes more so.

Quote:
Originally Posted by Texas Proud
One problem with your thinking on this.. with any ratio, you can change it by changing either variable... so, for P/E, you assume prices to drop... well, it could be that earnings go up. Then your timing example does not work.
You're right in principle, but I think it is more likely at this point that earnings will go down than up. Here's a quote from John Hussman's weekly commentary of 12/5/2005:

"The chart below updates S&P 500 earnings (net trailing) as of the most recent data. Notice that the latest data point takes earnings right up to the peak of that 6% growth line, an event that has historically been associated with a) roughly zero growth in S&P 500 earnings over the following 5 years and b) on average, a price/earnings ratio for the S&P 500 of about 12 the current multiple is 19."

The rest of his article is here: http://www.hussmanfunds.com/wmc/wmc051205.htm
It includes a good graph tracking S&P earnings against the long term trendline of 6% growth. The current P/E for the S&P is 18.70.

Quote:
Originally Posted by Cute n' Fuzzy Bunny
As far as a "reversion" in housing, historically few areas have seen more than a single digit decline in a year, although a few have had a number of sequential single digit down years.
I frequently read this real-estate-prices-never-went-down-across-the-country line, usually quoted from real estate agents. The answer is that we haven't had a national (indeed, international) real estate bubble before. I doubt whether Japan had had a national housing bubble prior to the 1980's, but they did, followed, as we know, by loss of 60% to 80% of value over fifteen years. The cause of the Japanese bubble of the 80's and the current bubble in the US is the same: credit expansion. Deflation in US housing may not be as severe as Japan, but who knows? Take a look at Robert Shiller's graph of the housing market in real terms from 1890 to 2005 and see if you find historical comparisons very comforting: (Only the graph is by Shiller. The commentary is the blogger's.)

http://bigpicture.typepad.com/commen...r_on_the_.html
__________________
NYCGuy is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 10:06 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

Huh. I'd tend to think that a broad based "bubble" would hold better than a regional one. If a region gets too expensive, people go to other regions. If most of the desirable regions are overpriced, then you cant. That logic therefore escapes me.

Ohyeah. We're also not Japan, where they have a multitude of economic issues including a stock market stagnant for decades, perpetual recession etc.

Like I've said before. You can add up all the scary reasons to avoid investing and make a nice case for it. Same could be said for any other period in history.

As far as losing money not being as important as making it, either you better be loaded, or you'll be meeting our friend, Inspector Inflation...sooner or later...

As unpleasant as it would be for many of us, a big downturn could happen. I wouldnt be betting my investing future or my ER on that happening, or standing around holding a lot of cash instruments waiting for it...

You're going to lose. You're just going to avoid a small chance of losing big.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 10:33 PM   #39
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 784
Re: Go all in or easy does it?

Quote:
Originally Posted by Cute n' Fuzzy Bunny
You're going to lose. You're just going to avoid a small chance of losing big.
Hey, did you steal that from my reasoning on health insurance?

__________________
Cool Dood is offline   Reply With Quote
Re: Go all in or easy does it?
Old 02-28-2006, 10:41 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Go all in or easy does it?

I may have never have had a unique or creative thought in my life.

Except that thing earlier about the huge underwater penis.

__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
"10 easy steps to FSBO your house" Nords FIRE and Money 4 06-01-2006 01:36 PM
It's not as easy as you think Gone4Good FIRE and Money 8 12-21-2005 06:21 PM
Covered calls made easy....too easy? laurence FIRE and Money 8 09-13-2005 10:13 AM
How to make Asset Allocation Easy RYD FIRE and Money 7 08-03-2003 11:35 AM

 

 
All times are GMT -6. The time now is 09:50 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.