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Re: Market Bubble
Old 02-14-2007, 10:06 AM   #21
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Re: Market Bubble

During the 90's I was busily accumulating substantial holdings in blue chip large cap dividend paying stocks through DRIP plans and maxing out contributions into TSP and IRA accounts weighted toward large cap value funds. Many of my NASA coworkers were touting the big profits they were making trading tech stocks and pink sheet stocks. We had quite a few debates about the reality of reported profits vs. paying out of dividends. These guys dissed me for being so conservative in my investment approach. A few said something like "if the market continues like this another two years I can retire." Well, I retired in 2002 at age 55 and most of them are still working. The net effect of the market bubble for me was that for a few years my net worth stayed about level - the market loses were offset by the new investments I made. I'm not sure why I was able to resist the siren song of the runaway tech market but I am glad I did.

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Re: Market Bubble
Old 02-14-2007, 10:10 AM   #22
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Re: Market Bubble

I got caught up in the Y2K hype, convinced that even if Y2K wasn't a big problem, that people would take money out of the market just before 1/1/2000. So during 1999 I DCA'd a lot of stock money into bond mutual funds.

Although Y2K didn't crash the market, and I was DCA'ing back into stocks starting in Jan 2000, I still had a good bit more than usual in bonds when the bubble burst.

Stupid but lucky.

That was also my last attempt at market timing.
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Re: Market Bubble
Old 02-14-2007, 10:18 AM   #23
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Re: Market Bubble

Quote:
Originally Posted by runchman
My wife's rollover 401k, which I of course had in tech stocks, sank from ~ 100k to around 30k. Ouuuch ! Fortunately this was an event that happened relatively early in my investing career.
Your investing career? What did your wife think about this? How did it make her feel about you? Has she now taken the reins of her own investments?
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Re: Market Bubble
Old 02-14-2007, 10:26 AM   #24
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Re: Market Bubble

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Originally Posted by Meadbh
Your investing career? What did your wife think about this? How did it make her feel about you? Has she now taken the reins of her own investments?


Must have been an interesting conversation when he showed her the $30K...........

I remember my wife's rollover IRA was in funds, but a lot in growth stocks. For NO OTHER REASON than gut instinct, in December of 1999, I allocated a large part of her growth funds to value, and put 20% of the portoflio in bonds. She of course was quite upset with me at the time.............. :P

A YEAR LATER, she began asking "why didn't you put MORE into bonds"..........what a great moment of getting her to understand.........
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Re: Market Bubble
Old 02-14-2007, 11:08 AM   #25
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Re: Market Bubble

Its kinda fun watching this stuff through a 'buffer'. My wife regularly starts up a brief discussion during one of our walks thats something like "so...everyone at work is buying gold...do we have any?" In this case, we did until about two weeks before she asked.

Seems a good barometer so far. Almost everything she brings up is what I just sold, and thats not long before it drops like a rock. So far the only exception is REITS, which I sold a year ago.

But like Bill Gross waiting for the dow to finally hit 5000, I think reits day is soon to end
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Re: Market Bubble
Old 02-14-2007, 11:14 AM   #26
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Re: Market Bubble

I find it interesting to see how many saved their bacon by reducing their stock exposure in 1999, and then go on to apologize for market timing.

My theory is that the more bacon you saved, the more likely you are to either be a conservative investor or a die-hard market timer.

I saved a *lot* of bacon.
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Re: Market Bubble
Old 02-14-2007, 11:22 AM   #27
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Re: Market Bubble

Again...I think theres a gross difference between traditional "market timing" of trying to employ some hair brained scheme to measure valuations along with associated "buy/sell" limits and the 1999/2000 "market timing" of looking at things so frickin far out of whack that theres no way to attribute the valuations to ANYTHING within an order of magnitude or more.

When I see people bidding up stocks en masse in companies that have no obvious future while jabbering "Its all about the eyeballs...the profits come later!"...I get the hell out. Another measure is that when the everyday novice investor feels like they've somehow become experts and should probably be advising other people on their investment strategies...its time to go.

(spent a little time reading some of the finance threads over on fatwallet this morning. its amazing how grossly misinformed many average people are about investing...)
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Re: Market Bubble
Old 02-14-2007, 11:43 AM   #28
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Re: Market Bubble

Back in the '90s (when everyone was a brilliant investor) a coworker's husband had her cash in $50,000 worth of savings bonds so he could give the money to his brother the day-trader so they could all become millionaires.
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Re: Market Bubble
Old 02-14-2007, 12:49 PM   #29
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Re: Market Bubble

We lost a lot of money in the tech crash. A lot. So, I'm not going to act like we have some great investing prowess.

But - money that we had cashed out (stock option money) had been diversified enough to protect those gains.

So now, I'm probably a bit more conservative than I should be. Don't get me wrong, we still have stocks/mutual funds, etc. and know the nefarious effects of inflation, etc. But a pile of cash just makes me happy.
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Re: Market Bubble
Old 02-14-2007, 01:00 PM   #30
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Re: Market Bubble

Quote:
Originally Posted by Cute Fuzzy Bunny
When I see people bidding up stocks en masse in companies that have no obvious future while jabbering "Its all about the eyeballs...the profits come later!"...I get the hell out. Another measure is that when the everyday novice investor feels like they've somehow become experts and should probably be advising other people on their investment strategies...its time to go.

(spent a little time reading some of the finance threads over on fatwallet this morning. its amazing how grossly misinformed many average people are about investing...)
In the late 90's, I had a few more "realistic" clients, who said things like: "Scott, I don't need you to make me 50% a year, I got other guys for that, if you can just make me an average of 25% a year, year over year, I'll give you a shot"...............

However, I made huge use of stop loss orders and other "unconventional" things to mitigate risk..............
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Re: Market Bubble
Old 02-14-2007, 01:02 PM   #31
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Re: Market Bubble

Quote:
Originally Posted by audreyh1
It was really only the folks who held mostly S&P500 Index or aggressive growth funds who never recovered. So the period clearly demonstrated the value of being diversified.

Audrey
What I wonder is, if you created a 100% stock portfolio in January 2000 and an equal size 60/40 stock/bond portfolio at the same time, then in, say, 2015, which is going to be higher?
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Re: Market Bubble
Old 02-14-2007, 01:54 PM   #32
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Re: Market Bubble

Quote:
Originally Posted by FinanceDude
However, I made huge use of stop loss orders
If I had to do it all over again, I'd invest in the companies that produce stop-loss orders!
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Re: Market Bubble
Old 02-14-2007, 04:30 PM   #33
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Re: Market Bubble

I also lost a lot of money in the tech bust..... Not entirely my fault (I knew better), but I was widowed in the fall of 2000 and didn't really ficus on my investments again 6-12 months later. By then, there'd been some dramatic losses (e.g., SUNW down 95%; ORCL down 90%t, etc.). Then again, I didn't do that much better when I focused.... While my wife was living I took 50k she'd made in Novell options and put it in 5 "safer" alternatives (T, Time Warner, Lucent, etc..... ) Was worth 15k when I finally sold it.

That said...my portfolio (which had dropped about 40%) finally passed its 2000 peak last year and is now up 15-20%. I''ve become a bit more conservative, much more balanced, and always attentive!
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Re: Market Bubble
Old 02-14-2007, 07:42 PM   #34
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Re: Market Bubble

I retired in March 2000. I rolled my 401K into an IRA in Jan. 2000. Brinker had made a call to go 65% cash, I went 100% on my rollover and outside bridge money. Remained in cash until Brinker's March 2003 call and put in half of what he suggested. Since then I have DCA'd up to my present allocation of 50/50.

Looking back, a decent balanced fund would have weathered the storm just fine for a B&H strategy.

Going forward I'll remain in a balanced portfolio of 60/40 to 40/60 depending upon how I view the market, my results and my age.
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Re: Market Bubble
Old 02-14-2007, 07:45 PM   #35
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Re: Market Bubble

Quote:
A few of them looked like they aged ten years overnight.
I remember this -- it was so sad. Folks came to work looking like they'd just lost their best friend... or their dinner. Pasty and sweaty, and they couldn't focus on anything you said to them.

This last effect didn't matter much, as they were all laid off pretty quickly anyway.

Because I was working at a high-tech startup, I considered my JOB to be my investment in the bubble. And sure enough, I lost it to the crash. (Got another one with a BIG, stable company the next week, however.)

The rest of my money went to my "couch potato" portfolio and I bought a couple of houses so as to diversify into real estate.

I can't complain. I think the lesson is "slow and steady wins the race."
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Re: Market Bubble
Old 02-14-2007, 08:11 PM   #36
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Re: Market Bubble

Quote:
Originally Posted by Caroline

... I think the lesson is "slow and steady wins the race."
That's what I am thinking. I certainly am not cut out for the 'wheeler-dealer' style myself.
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Re: Market Bubble
Old 02-14-2007, 09:51 PM   #37
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Re: Market Bubble

Quote:
Originally Posted by Cute Fuzzy Bunny
Again...I think there's a gross difference between traditional "market timing" of trying to employ some hair brained scheme to measure valuations along with associated "buy/sell" limits and the 1999/2000 "market timing" of looking at things so frickin far out of whack that theres no way to attribute the valuations to ANYTHING within an order of magnitude or more.
Ding ding right answer.

My story is pretty similar to CFB's, partly cause we worked for the same company Intel. I was really really early with the net, meaning that I've been posting on Internet discussion board for more than 25 years. (And still can't managed to make a post without a grammar mistake ) I talked to, worked with, bought stuff from most of the Internet pioneers.

But the three things that convinced me that bubble was near bursting were when:
1. My friends and I use to enjoy making up crazy internet business, like selling $100 bills for $95. When companies with even more ridiculous business plans. were getting VC funding, and going public. E.g. the search engine which offered chance a winning prizes (IRRC $10 million was the top one) just for using their free software.
2. My friend, a brilliant engineer, who had perfect record in going from one cool technology company to another and never making a dime on his options, finally found a company that went public. As VP of engineering, he gave all of his poker buddies friends and family shares, for the IPO of his company. A Business 2 Business E-commerce software provider with a 2 year history, almost no revenues and 30 odd employees. The IPO was 13, first trade at 40 I sold at 45 a couple of days later. At $4,000 the most profitable poker session ever for me. Keeping with tradition my friend as VP had to keep his shares for a year, at which point they were down to $3-4.

But my lucky with flipping isn' t the point. Since I was selling my house, and I was amazed to find that the market cap of my friends company exceeded the purchase price of every single house sold in Silicon Valley in the last year . Lets think about this which would you rather own a 30 person start-up or 600+ houses in one of the most expensive areas in the country.

3. Another friend Mike was the technical assistant to Intel's legendary CEO Andy Grove, so on my last day at Intel Mike, Andy, and I had lunch. Mike was a true Internet believer (as was I) and he still thought that the stock prices were reasonable. Andy on the other hand, explained that he just gotten the payout from a Venture Capital fund he had invested in several years and while it made him a boatload of money, he couldn't get his money out fast enough. I figured that betting Mike was smarter than Andy Grove, about making money wasn't a good bet.

By Jan 2000, I sold much of my Intel stocks, and all of my other tech stocks. I bought bonds, (because as a I retiree I knew I need them, especially TIPs with an real return of 3.92%) and REITs. Of course even my good timing was far from perfect. I also closed out of my short positions on Amazon, and AOL, (1 year too early) and if I had managed to sell all of my Intel I'd probably have another $750K.

Under normal circumstance a yearly re balancing to keep your assets properly allocated is the best way to avoid buying last years hot asset, but extraordinary times call for more drastic action.

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Re: Market Bubble
Old 02-14-2007, 10:00 PM   #38
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Re: Market Bubble

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Originally Posted by clifp

...I figured that betting Mike was smarter than Andy Grove, about making money wasn't a good bet...
"...only the paranoid..."
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Re: Market Bubble
Old 02-15-2007, 01:15 AM   #39
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Re: Market Bubble

Quote:
Originally Posted by clifp
I was really really early with the net, meaning that I've been posting on Internet discussion board for more than 25 years.
Same here. Don't you hate it when you google your name and some inane usenet post from 1985 pops up?

What I don't get about the dot-com bubble is how quickly people stopped licking their wounds and got right back on the same momentum ride. GOOG has a market cap of $142B. Boeing has a market cap of $70B. How could this happen again so soon after a major crash? What ever happened to fear?
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Re: Market Bubble
Old 02-15-2007, 02:35 AM   #40
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Re: Market Bubble

I was learning about investing in 2000 and trying to get my finances in order. I had about $60k in 401(k)/IRA. I don't recall if I rebalanced to a diversified portfolio before or after the crash, but before 2000 I was over-heavy in stock funds like Vanguard 500.

Before the crash I was reading The Fool heavily and wanting to try some stock picking. I'm glad I never got around to it as I was thinking in terms of Intel, Nortel and Cisco. At the time I thought they built the hardware that everything else was based on and therefore were less likely to see trouble than the no-revenue dotcoms.

As for my diversified portfolio, I'm was pleased to learn I could ride a > 40% drop in NAV without panicking or reallocating. It took until 2004 or 2005 for the original amount to recover, but I continued contributing and in plain dollar amounts my port recovered fairly quickly due to contributions.

So I guess I've learned I have no business trying to pick stocks and that I can calmly ride out a dip in a balanced portfolio. I'm not sure I learned enough to identify a similar future bubble, but with a balanced port I shouldn't need to.

I was also rather heavily in debt in 2000 and resisted the temptation to empty the 401(k) to pay it off. Over the next 5 years I paid off the debt "the hard way" and I'm in a terrific position now for doing it while maintaining my investments.
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