Missing the days of Dow 7000?

[FUEGO]

This thread may be more appropriate in the Young Dreamers forum, but is anyone missing the times earlier this year when the Dow was hovering around in the range between 7000 to 8000? Those were scary times for sure, and I figured there was a small chance the world just might end soon. But what good times for buying in, DCA'ing, and rebalancing.

In the face of fear, I also knew that those days would probably be some of the best investing opportunities of my lifetime. I was sort of hoping we would see the Dow (and the broader US and international markets) float along in a malaise in the 7000-8000-9000 range for a number of years before staging any kind of real rally. A prolonged period of buying in cheap would quickly reduce my projected FIRE date. Maybe we still are floating along in Dow 7000-9000 territory, just experiencing a brief breakout before a renewed crash (as some have suggested here).

I know this will probably send me to FIRE hell for saying such blasphemous things, especially since many of you already FIRE'ds are waiting for your portfolios to rebound. But I'm sitting here with the highest portfolio values I have ever seen and wishing I could buy more investments at 30-50% less than today's valuations that we saw in November 2008 and Feb-Apr 2009.

However I still think I will be looking back on Dow 9400 after a number of years and thinking how cheap the market is at this point.

 

[Sarah in SC]

Ditto what he said.
I'd also like to say that times like these remind us young dreamers of the importance of a regular investing program (like DCA and salary deferrals).
Go Team! FIRE hell, I like it.

 

[tuixiu]

Ditto again.

I figured as long as I could stay employed in the recession (and thus maintain the income stream for heavy investing) it would be just dandy if we bounced along at Dow 7k for at least another four years.

 

[haha]

I think you guys may have just rung a bell.

Ha

 

[NW-Bound]

Yeah! I was thinking about mortgaging my houses again and to go on margin to boot, and was too slow to pull the trigger.

Sure, I would have done it but I was too busy being scared.

Be patient. We will have plenty of chances, I am afraid. If you think the market can only go up from here, you can look for sectors that have not participated in the recent rally, and have underperformed the indices.

There is always a way to make money no matter what the market. I wish I knew, and if I did I wouldn't tell.

 

[Dawg52]

Yeah, I don't use my head banging smiley nearly as much anymore.

 

[FIREd]

When the DOW dipped below 7,000 I had mixed feelings of fear and exhilaration. In other words, it was kinda exciting! I had fun watching my average cost basis go lower while boosting my dividend income. Of course, nowadays it's also fun to watch my portfolio reach higher highs almost each week...

Perhaps the days of DOW 7,000 are not quite behind us yet. I am building my cash reserves back up just in case we give it another go in the fall...

 

[Poundkey]

Both my kids are VG investors, but don't follow the markets closely. I remember sending many e-mails over a several month period suggesting they move cash from MM to particular funds. These were small but frequent transactions. So far they're pretty happy with the way things have worked out. Other than that "flurry" of buying, they mostly just DCA when their MM starts getting top heavy. Both are saving pretty high percentages of income so they may be members here someday.

 

[FUEGO]

I think you guys may have just rung a bell.

Eerie. 3:35, the time of my OP, the market seemed to start diving. Maybe all it will take is a few more threads like this and I can have my Dow 7000 back!

 

[NW-Bound]

Look who is shorting now.

No, you aren't? Gosh, I thought you were a bona fide DMT.

 

[unclemick]

I think you guys may have just rung a bell.

Ha

Hmmm - I have mixed feelings. 1973-1982 and the death of equities I was still working/accumulating but not thinking 'what a bargin I was getting'.

This time around - I'm semi ?? grateful I'm full auto(Target Retirement 2015 as of jan 2006) except for a few stocks to keep the hormones happy.

I wasn't required to think brilliantly/act/rebalance/etc.

At least that's my thinking right now.

heh heh heh - still frozen in the headlights on those Norwegian widow financials - and happier about the utes, oils, telephone and foods. .

 

[W2R]

Yeah, I don't use my head banging smiley nearly as much anymore.

I don't miss the days of Dow 7000 AT ALL.

 

[FUEGO]

Ditto what he said.
I'd also like to say that times like these remind us young dreamers of the importance of a regular investing program (like DCA and salary deferrals).
Go Team! FIRE hell, I like it.

All of my close friends in their 20's and 30's that view their portfolios as retirement funds "kept the faith" and continued DCA'ing in. Some older associates in their 40's-60's panicked and stopped contributing or sold most/all their equities. The latter group apparently were not comfortable with their asset allocation (but then again I haven't preached to them).

Yeah, I don't think I would have done as well if I tried to time things with a bunch of money. I don't think I would have had the cojones to plop a big chunk of cash in at Dow 6,500. Or to keep from plunking it in at 10k, 9k, 8k on the way down...

Luckily we invested a bunch in March what with the tax refunds, a big bonus, a big profit sharing match, lump sum 401k match, and an unexpected early repayment on a loan we made. It was just going along with our policy of "invest small lump sums immediately" plus the market seemed stupid cheap.

When the DOW dipped below 7,000 I had mixed feelings of fear and exhilaration. In other words, it was kinda exciting! I had fun watching my average cost basis go lower while boosting my dividend income. Of course, nowadays it's also fun to watch my portfolio reach higher highs almost each week...

Perhaps the days of DOW 7,000 are not quite behind us yet. I am building my cash reserves back up just in case we give it another go in the fall...

It definitely feels good to not see half your portfolio vaporize, and watch 3-5-10% drops in one day. Those dow 7000 days may not have left us for good. Time will tell. The economy certainly seems to be rebounding or at least getting worse at a much slower rate. But there remains a lot of hurdles to overcome on the road to recovery. That explains why the markets are still off significantly from highs of a couple years ago.

 

[FUEGO]

Look who is shorting now.

No, you aren't? Gosh, I thought you were a bona fide DMT.

If recognizing that buying stuff when the dow is at 7000 is a better value proposition than buying stuff when the dow is at 14,000 makes me a DMT, then call me a DMT!

 

[NW-Bound]

But Dow at 7000 would not be as good as Dow at 3000 or whatever low some people said it was headed, so I was still waiting, clutching my hoard of cash.

Heh heh heh... It only works in hindsight. That's why I like the stock market so much compared to going to Las Vegas. Why fool around with these video games if one has a portfolio at stakes? Heh heh heh...

Still "hold hold hold"...

 

[CCdaCE]

Yes. Still wishing the market stayed low while the economy recovered. If that's even possible. Er, maybe that's what it's doing. Still?

I pushed "all-in", with our tax return as well, into a new Roth for the wife. I wish I had had a bigger stack, but, gotta maintain that emergency fund, too, as tempting as it would be to "double down" using that money too. Gambling? Investing? Pffft. Such a fine line when despair is saturating the air around you in a free fall market like March.

-CC

 

[Westernskies]

I might have actually been lucky this time. January-March I deferred 100% of my salary to my 401K, until I maxed it out at 22K- that got my 22K in the market at the very bottom- not nearly enough to offset the 200K I lost when the Dow went from 14000 to 7000, but, it was probably the best I could do under the circumstances with a defective crystal ball.

 

[FUEGO]

But Dow at 7000 would not be as good as Dow at 3000 or whatever low some people said it was headed, so I was still waiting, clutching my hoard of cash.

Heh heh heh... It only works in hindsight. That's why I like the stock market so much compared to going to Las Vegas. Why fool around with these video games if one has a portfolio at stakes? Heh heh heh...

Oh, I thought I sent you a PM back in March saying anything under 7000 was golden? Guess I never hit "send"? Ooops, my bad!

It is sorta like vegas. But I think of investing with Dow at 7000 like playing at the tables with a matchplay coupon or getting comped promo chips where you get $50 in chips for $30 cash buy in. Not a guaranteed win (as I determined on the last trip to Vegas ), but the odds are stacked heavy in your favor on average.

I personally place my bets on the market since I think the edge is in favor of the buy and hold investors instead of the house.

 

[FIREd]

Luckily we invested a bunch in March what with the tax refunds, a big bonus, a big profit sharing match, lump sum 401k match, and an unexpected early repayment on a loan we made. It was just going along with our policy of "invest small lump sums immediately" plus the market seemed stupid cheap.

We did the same. Between 03/01 and 03/20, we got a big bonus, a tax refund and a big raise (lucky timing). It all went to equities as did almost all other regular contributions between October 2008 and June 2009 (I have turned more cautious in the past month and rebalanced into bonds last week).

 

[NW-Bound]

I personally place my bets on the market since I think the edge is in favor of the buy and hold investors instead of the house.

Seriously, the last 10 years weren't kind to "buy and hold" investors. Even at this point, the Dow is still below its average over the last 10 years. So, if a newcomer DCA'ed into the market in the last 10 years, he would still be underwater unless he sold some, er balanced some out of equity at Dow 14000.

In my view, the people who made out are the ones who "goosed" their rebalancing strategy with a bit of fundamental analysis of the economy. I did go down from 80% equity to around 40%, else would get hurt even worse. Of course my timing was not perfect, and I did not get out all at once. I owned many individual stocks, and optimistically thought that my babies would be so strong to prevail against the global meltdown. Nope, it was a tsunami that sunk all ships. Hence I sold them late. I shudder to think what would happen if I rode them all the way down. I was able to buy them back much cheaper, even if I missed the bottom. My babies are climbing out of their holes. Climb, baby, climb.

Anyway, stock AA is at 65% now. Still holding. I am not "rebalancing" yet. Still 17% below my high in Oct 07, but it is improving.

 

[Meadbh]

Yeah, it was fun living dangerously when it was "how low can you go?"
The Joy of Stress was thrilling for a couple of days, and that was enough!

 

[Lusitan]

I was sort of hoping we would see the Dow (and the broader US and international markets) float along in a malaise in the 7000-8000-9000 range for a number of years before staging any kind of real rally.

Well, buckle your seatbelt and hang on; we may see this yet. I have no idea what's in store, and I'm continuing to invest, but I wouldn't be surprised if the market tanks again. My asset allocation is fine, and I hope everyone take advantage of this somewhat-recovery to get their asset allocation in line.

I don't want to hear any more media stories about 65 year olds who were 100% stocks when the next market crash hits ...

 

[FUEGO]

Seriously, the last 10 years weren't kind to "buy and hold" investors. Even at this point, the Dow is still below its average over the last 10 years. So, if a newcomer DCA'ed into the market in the last 10 years, he would still be underwater unless he sold some, er balanced some out of equity at Dow 14000.

I guess that "buy and hold" is superior to trying but failing to time the market correctly. Clearly a successful market timing approach is superior to a "buy and hold" approach, if it proves successful in hindsight. However, lacking a crystal ball, I personally think it is like searching for El Dorado or the Holy Grail. It may exist, but I haven't seen any evidence of it by and large.

I also meant to say Buy and Hold as in passive mutual funds, not actively managed funds (generally speaking). Lower costs, lower expenses sucking on your investment returns.

I'm not sure the Dow is the best metric to look at for 10 year returns. I was using here as a simple yardstick and a common point of reference. I for one have around 13% of my equities allocation in domestic large cap or total market equities, so the other 87% did something else. Also interesting is that the SP500 and Total market index funds have some of the worst 10 year returns of all equity asset classes (versus international, value, small, REIT, etc). So assuming you bought something besides SP500 or total US market, you would almost be guaranteed to have outperformed the SP500 or total US market funds.

This blog posts the 10 year investment performance of different slice and dice or lazy portfolios that I'm sure are similar to many portfolios of those on this board. This was as of 12/31/2008, a point in the market lower than today. All rebalanced lazy portfolios were well into positive territory (from 25-75% total returns), leaving the SP500 in the dust comparatively. Now some of those portfolios weren't in existence 10 years ago, so there may be some hindsight guiding the construction of the model portfolios. But the point is that there are at least a number of reasonable portfolios that did relatively well with a buy and hold approach in what you might think of as a dead decade for investments.

I'd be interested to see some analysis of what DCA'ing into the market over the last 10 years produces versus a lump sum invested 10 years ago, since that is what you are asserting would leave a buy and hold investor under water. It may be true. But we are also just in the beginning stages of what was touted as the worst economic times since the great depression, so in light of that, the 10 year lump sum investment returns don't look too bad. Start the measuring period in 1994 instead of 1999 and you get a much rosier picture for B and H.

If you have found a good market timing strategy based on economic fundamentals, go for it. I kind of feel like I can forecast the future a tiny amount, but I'm not going "all in" on those feelings. Maybe a $5 chip here or there to keep things interesting though (hormones as one poster might say ).

 

[FIREd]

Seriously, the last 10 years weren't kind to "buy and hold" investors. Even at this point, the Dow is still below its average over the last 10 years. So, if a newcomer DCA'ed into the market in the last 10 years, he would still be underwater unless he sold some, er balanced some out of equity at Dow 14000.

In my view, the people who made out are the ones who "goosed" their rebalancing strategy with a bit of fundamental analysis of the economy. I did go down from 80% equity to around 40%, else would get hurt even worse. Of course my timing was not perfect, and I did not get out all at once. I owned many individual stocks, and optimistically thought that my babies would be so strong to prevail against the global meltdown. Nope, it was a tsunami that sunk all ships. Hence I sold them late. I shudder to think what would happen if I rode them all the way down. I was able to buy them back much cheaper, even if I missed the bottom. My babies are climbing out of their holes. Climb, baby, climb.

Anyway, stock AA is at 65% now. Still holding. I am not "rebalancing" yet. Still 17% below my high in Oct 07, but it is improving.

I started investing on 01/27/2000, 9.5 years ago. My annualized return is 3.2%. And I have made plenty of mistakes along the way too! Like hiring a financial advisor (my self-managed portfolio has returned 4.6% -annualized- since 2000 but the FA's performance has really hurt my overall returns, probably because of high fees), investing a large sum of money in REITs and Commodities on 9/26/2007 (performance chasing, oops), and dipping into my emergency funds to invest in stocks when people started talking about DOW 20,000. Maybe I was lucky.

 

[NW-Bound]

I kind of feel like I can forecast the future a tiny amount, but I'm not going "all in" on those feelings. Maybe a $5 chip here or there to keep things interesting though (hormones as one poster might say ).

Who is going "all in"? I do not have those tungsten carbide cojones!

And you left out a bit of my post, which is essentially many of us have been doing.

In my view, the people who made out are the ones who "goosed" their rebalancing strategy with a bit of fundamental analysis of the economy.

I suspect very few execute their AA rebalancing with no regards to the economic backdrop. To do that, one must turn off all external info sources, and look only at the portfolio numbers. Then, in a way, he is just like one who relies on technical analysis for individual stocks. Head and shoulders. What goes up must come down, and vice versa, or something like that (sorry that I am not versed in their terminology as I am not in their camp).

Anyway, I think most people are doing the same thing, i.e. "goosing" their rebalancing with some economic news. Only one person in this forum is doing it not even by an AA out-of-balance criteria, but on Jan 2, in order to completely remove all personal judgement. It may turn out OK too, but why Jan 2? Why not Aug 14 or whatever?

In a sense, when forced to make a decision where we do not have complete information (when is the last time that we do?), some toss a coin. Most try to "guesstimate". After all, nearly all decisions we make in life are speculations. Some people think fixed-income investment are safe, but they are speculating that inflation will be low. There is nothing for sure. In fact, I would say that too much reliance on any hard-fast rule is also a speculation on the repetition of history. But will it?

The problem with "taking matters" into your own hand is that you have nothing else to blame. On the other hand, history may not repeat but simply rhymes, as they say. So, I take the conventional wisdom and tweak it a bit to my liking. We all do.