Go all in or easy does it?

[Cool Dood]

Quote:

Originally Posted by Cute n' Fuzzy Bunny I may have never have had a unique or creative thought in my life. Except that thing earlier about the huge underwater penis.

No, I think that may have been in an episode of Flipper

[cute fuzzy bunny]

DAMMMIT! FLIPPER! WHY DO YOU TORMENT ME SO!

[brewer12345]

Bear in mind this is a thread titled "go all in or easy does it".

[cute fuzzy bunny]

Theres a lubrication joke around here, but my lack of creativity and originality are inhibiting me from putting it together.

[Outtahere]

I keep expecting to open this thread to find some kind of joke, don't dissappoint me.

[cute fuzzy bunny]

Sorry, our joke department has been oursourced to India. "Bob" will be with you in live chat shortly to determine your joke requirements.

[Nords]

Quote:

Originally Posted by Cute n' Fuzzy Bunny Except that thing earlier about the huge underwater penis.

Quote:

Originally Posted by Outtahere I keep expecting to open this thread to find some kind of joke, don't dissappoint me.

Quote:

Originally Posted by Cute n' Fuzzy Bunny Sorry, our joke department has been oursourced to India.* "Bob" will be with you in live chat shortly to determine your joke requirements.

Hello, I am Rashid I mean "Bob", how may I be helping you today?

Ah, submarine jokes.* I see.* One moment please.

Uh, I am reading to you, "long and hard and full of seamen".* Does that answer your question?* You have the happy day now, good-bye.

(Edited to remove all subtlety.)

[Outtahere]

Humm some how I missed that part.

[haha]

Quote:

Originally Posted by Cool Dood 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. 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.......... 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?)

This post is the best sign I can point to as to why NYC Guy is probably right, and the US stock market as a whole is in for some tough sledding. I especially like the over-the-top sarcasm bordering on invective in the last section. I can only hope that Cool Dood has the courage of his convictions.


Ha

[Cool Dood]

Quote:

Originally Posted by HaHa This post is the best sign I can point to as to why NYC Guy is probably right, and the US stock market as a whole is in for some tough sledding. I especially like the over-the-top sarcasm bordering on invective in the last section. I can only hope that Cool Dood has the courage of his convictions. Ha

I saw a bunch of red flags -- unlikely speculation, quoting dumb-sounding "experts," far-fetched pattern recognition, etc. -- and maybe bit too early. After posting that I read a bunch of NYC Guy's other posts, and it turns out he's actually bright (I guess there aren't too many people who post here and who aren't bright), but really it's a safe bet in most cases where you see that to be a bit dismissive.........

At any rate, it's a toss-up as to whether or not the US markets are in for a very near-term drop -- and I don't think NYC Guy offered any evidence that it's actually more likely to drop than not -- and in a few years the markets will undoubtedly be at almost exactly the same place regardless of whether they first rise or fall.

As such, yes I do have the courage of my convictions......... 8)

[cute fuzzy bunny]

Quote:

Originally Posted by Nords Hello, I am Rashid I mean "Bob", how may I be helping you today? Ah, submarine jokes. I see. One moment please. Uh, I am reading to you, "long and hard and full of seamen". Does that answer your question? You have the happy day now, good-bye. (Edited to remove all subtlety.)

Swell. I had to explain why I was laughing again.

"well...you got some time...?"

[Nords]

Quote:

Originally Posted by Cool Dood -- and in a few years the markets will undoubtedly be at almost exactly the same place regardless of whether they first rise or fall.

Plus those reinvested dividends.

[haha]

Quote:

Originally Posted by Cool Dood IAt any rate, it's a toss-up as to whether or not the US markets are in for a very near-term drop -- and I don't think NYC Guy offered any evidence that it's actually more likely to drop than not -- and in a few years the markets will undoubtedly be at almost exactly the same place regardless of whether they first rise or fall.

You might well be correct here. But I can't see that as an argument for accepting the risk and volatility of equity aggregates. Furthermore, although you will get some dividends, you also forgo an even larger amount in interest.

Ha

[LOL!]

I thought I would give NYCGuy a break and link an article in a respected journal that makes some of the same points that he does.

Quote:

Originally Posted by NYCGuy ... Buy and hold is the advice of the generals fighting the last war.* It was very good advice for the bull market of the 90's, but not, in my opinion, for the current long term bear market.* [...] There is also a possibility that we will have a slowdown or recession in the next 18 months.* The average stock market decline during a recession is 43%.

http://www.fpanet.org/journal/articl...p0306-art7.cfm defines secular bear market and the cyclical markets within them.* The article also has some suggestions on what to do in these markets.

[Nords]

Quote:

Originally Posted by NYCGuy The average stock market decline during a recession is 43%.

I stand corrected on the existence of the data, but I still think the calculations & conclusions are invalid.

The article indeed does show some scary numbers in table 3. It does present the word "average" with numbers in the negative 40s.

I don't think that the arithmetic averages of a percentage is the same as claiming that the DOW is going to drop 43% during the next recession. But my speculation is as valid as NYC's claim.

I will agree that it's a very bad idea to sell out your portfolio after it's lost 43%. I would not use that as a reason to keep over $100K in cash. Instead I'd look at the studies that show a long-term market (at least a decade) rises three-quarters of the time, and another study's claim that DCA investors actually lag market returns of the lump-sum investors. The advantage of DCA is the disciplined savings that it imposes on its practitioners, not higher returns over lump-sum investors.

I wonder how much money Olav has lost by sitting on the sidelines. I doubt it's as bad as 43% but I'd bet that with reinvested dividends it's a number he regrets missing out on.

[NYCGuy]

Here's another example of market timing that has a track record and academic review (which gives the lie to the claim that "no studies have shown that market timing works.") See Mark Hulbert's article:

http://tinyurl.com/pofgw

This mid-term indicator has been evaluated since 1968 and has been shown to account for more thant 40% of differences in the (US equity) market's return over a four-year period.

Here are Hulbert's conclusions for the next four years based on the current reading of the VLMAP:

"The VLMAP currently stands at 35%, a relatively low number. Fewer than 5% of readings since the mid 1960s have been any lower.
What four-year return does a 35% VLMAP translate into? The econometric model that most closely fits past relationships between VLMAP and the Value Line Geometric Index suggests that this index will be 12% lower in four years' time.
To be sure, this result isn't quite as bad as it seems. The Value Line Geometric Index is constructed in such a way that it understates the return a portfolio would earn by investing in the 1,700 stocks that make up that index. So a 12% decline in the Value Line Geometric doesn't mean that the average investor must also lose that much.
Still, no matter how you slice it, a VLMAP of 35% does not hold out the prospect of very impressive overall returns between now and March 2010."

This agrees with low expectations for equity returns in the coming period (variously defined) put out by Mauldin, Stein & DeMuth, and John Hussman, among others. It concurs with my advice to the OP that stocks are still highly priced and now is a time to wait out the market, whether in short-term fixed or elsewhere.

[cute fuzzy bunny]

Its interesting stuff but...

Did this measurement system predict the bull market in the late 90's? Did it predict the bear market in the early 2000's?

Track records and academic review need to have that 'historic' thing throw in. Markets do not move in short term periods on the basis of rational metrics.

As far as the housing bubble, I note that in the newfangled chart of housing values, that the recent slope is quite alarming...but...it went almost nowhere for many years before that. Maybe rather than a bubble what we've seen is an upward correction.

Hard to say...all I know is the stuff is clear as glass in the rear view mirror and as clear as mud through the windshield.

I also know that people who are afraid of equities will read a lot of charts that confirms that fear, while people who dont fear them will look at lots of charts that confirm that attraction. No matter how many charts or impressive names you throw out will result in either 'clan' giving honest shrift to the others charts, or anyone changing their minds.

[NYCGuy]

Quote:

Originally Posted by Cute n' Fuzzy Bunny Did this measurement system predict the bull market in the late 90's? Did it predict the bear market in the early 2000's? Track records and academic review need to have that 'historic' thing throw in. Markets do not move in short term periods on the basis of rational metrics.

Here's an analysis of Hulbert's view that includes a pretty information graph to answer just your question. VLMAP has done pretty well:
http://tinyurl.com/zaye5

Quote:

Originally Posted by Cute n' Fuzzy Bunny As far as the housing bubble, I note that in the newfangled chart of housing values, that the recent slope is quite alarming...but...it went almost nowhere for many years before that. Maybe rather than a bubble what we've seen is an upward correction.

Here's my favorite graph on the housing bubble from Schiller at Yale, who apparently did the first national study of housing prices. His graph covers 1890 to 2005 and shows real prices, not nominal. The dramatic up spike after WWII is what we would expect from pentup demand and the expamsion of the home-owning class by veteran's benefits. The spike from 1995 cannot be explained by fundamentals, in my opinion, and is the precursor to a large bust. From 1890 until about 1995, in real terms, there is basically no change. This is reasonable when you consider that the price of a house should be roughly 30% of a family's income and will adjust only for inflation.

Quote:

Originally Posted by Cute n' Fuzzy Bunny I also know that people who are afraid of equities will read a lot of charts that confirms that fear, while people who dont fear them will look at lots of charts that confirm that attraction. No matter how many charts or impressive names you throw out will result in either 'clan' giving honest shrift to the others charts, or anyone changing their minds.

I think the challenge of investing is to keep as many contradictory viewpoints and facts in your head as you can while continuing to make choices. I like asset allocation very much and expect that eventually that is what I will do, but I expect to pay close attention to as many dissenting viewpoints as I can tolerate. I took large and not always well-considered risks when I had very little, but now I intend to have a bias toward avoiding risk to protect my little stack of nickels, without forgetting about inflation either. The alternative of latching onto a single viewpoint and sticking with it might be psycologically easier. I keep in mind Benoit Mandelstams' observation, "The markets are riskier than they look." Perhaps never more so than when volatility is low.

[cute fuzzy bunny]

Is it just me or does that 'projected price' vs 'actual price' graph show really no correlation between the 'projection' and the 'reality'? I read the text but honestly it looks to me like any perceived correlation has to be pretty inventive.

I saw Schillers chart and the commentary along with it, that spawned my above comment. Many decades of nearly flat price appreciation (in fact, static since 1940), then an upshoot. I'm finding it a little hard to comprehend since home prices have escalated during that time, yet that apparent reality isnt shown in this chart. Maybe I just dont understand what its trying to say. It certainly doesnt help that the associated commentary mentions about 7 times that they dont know if the chart says anything at all, let alone anything that can be interpreted or used.

As far as investing, if you cant afford to lose, then I guess you have to play that way. I've looked at the options, and except for portfolios with at least a good size chunk of equities...they're probably going to lose. Ones with equities, even at high valuations, are probably going to win. Hmm...probably going to lose but not big or all at once, or probably going to win, but maybe after experiencing a lot of volatility...?

Tough question.

[NYCGuy]

You're not paying attention. Shiller's graph is real housing prices, i.e. with inflation backed out. So the housing booms of the 70's and 80's reverted right back to historical norms, after you take out the effects of consumer inflation. The commentary on that page is not Schiller's, it's by some blogger. Schiller's graph indexes housing values at 100 in 1890. The prices go down, in real terms, during the Depression. Later they spike up big time in the late 40's as the soldiers start housholds with veterans' benefits. The net effect is by 1995, using Schiller's index, housing values are back at an index value of about 100! That means that all the apparent growth in prices from 1890 until 1995 is attributable to inflation. From 1995 until 2005 the index value suddenly shoots up to 185, an 85% increase in real value, not including inflation. This has never happened before and is not attributable to fundamentals, which he also graphs: construction costs, population growth or general money costs as represented by the real rate of return on the 10 year Treas. bond, all of which keep more or less to trend. That's the picture of this bubble--values break dramatically away from historical norms, not because of any fundamental change, but because an ocean of cheap mortgage money became available.

Not intuitive, is it? Schiller thinks people are unable to adjust for the effects of inflation when considering housing costs because they don't buy and hold anything else over such long periods of time.

As for stock investing, my point with the citations from John Husmman and Hulbert's piece on the VLMAP indicator, is that expected returns from the stock market in the next few years are lower than the historical average. But this doesn't mean however that the risks will be any lower. Therefore one should consider carefully whether that is a good bet to make. I think houses will revert to historical valuations and then grow again at the rate of inflation. That mean sthat they are not a good investment now. Of course there are voices saying it's always a good time to buy real estate just like the voices that say it is always a good time to buy stocks. Equities will eventually be a better bet. In the meantime some will buy and hold and wait and some will just wait. For those who can afford to lose, be my guest.