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Re: Mr. Negativity: all my investment options stin
Old 09-25-2004, 11:44 AM   #41
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Re: Mr. Negativity: all my investment options stin

Jarhead...I'm still interested in adoption...either way...I'll adopt you, you adopt me...both good. Ready made grandson is even on the way.

It almost doesnt matter what you do, even if you only had 1/10th the stash.

I've thought over the past year about a 100% (or nearly so) REIT holding and living off the dividend. If prices drop by the 1/3 or so I think they will, I may push in that direction.

Wab...you know that old saw about a frog thrown into boiling water jumps out, but one put into a cold pan of water thats heated slowly wont notice?

We're a lot of slow boiled frogs. This market is over priced, over mean, and has strong potential for lousy, if any, earnings. From almost any sector. After that topless run-up in the late 90's, the "bear" that didnt even bring us back down to the mean, and the recent run-up...people still feel they're invulnerable in the stock market. Nobody was punished enough to correct the 'problem'.

But like I said, we'll get back to this in about a year and see if my gut had the right idea. Its not like I didnt use to make billions for my company by gauging and manipulating the way people feel...
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Re: Mr. Negativity: all my investment options stin
Old 09-25-2004, 12:31 PM   #42
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Re: Mr. Negativity: all my investment options stin

Wab, Chuck-Lynn, ShockwaveRider, TH:

Just having some fun. Anybody that has read my posts in the past, I'm sure would figure that out. (I'm not nearly as lucky, or as bright, to have pulled that off.)
Only part that was true was my wife and I on soc. sec., and need about $25,000 annually not to be in the poor house.

I got what I expected, some pretty funny comments from you guys. Wab with his comment about following his newsletter. Very creative. Chuck-Lynn commenting about buying a rest-home, with the understanding that it would be a place for the veterans to swap lies, and not confuse the children. TH with adoption possibilities.
TH, if you adopted me, we might be able to set a record for the oldest big brother on record. Shockwaverider, probably hadn't read any of my previous posts, and actually thought it wasn't bull----.
Giants and Dodgers are being televised today, so got to go.
Regards, Jarhead
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Old 09-25-2004, 12:51 PM   #43
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"topless runup".

I'm glad no photos were posted.
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Re: Mr. Negativity: all my investment options stin
Old 09-25-2004, 01:00 PM   #44
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Re: Mr. Negativity: all my investment options stin

I certainly intended that to have a double meaning...
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Re: Mr. Negativity: all my investment options stin
Old 09-25-2004, 06:00 PM   #45
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Re: Mr. Negativity: all my investment options stin

Sorry that my post kicked off such a "vigorous" discussion, but I think Mr. Brewer had it right early on - my hesitation to invest is mainly due to fear. Not so much fear of volatility, but fear that things could continue on in the doldrums for quite a while (or fear that prices would drop and THEN we'd languish in the doldrums). Since I'm sitting on a large (to me) amount of cash, DCA will be my best bet...if for no reason other than it lets me sleep easier at night.
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Re: Mr. Negativity: all my investment options stin
Old 09-25-2004, 09:42 PM   #46
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Re: Mr. Negativity: all my investment options stin

Soup,if i may,if your gonna DCA,do it across all your asset classes,so at least some part of your plan will show instant or near instant gratification.Its good for your head to see forward progress.LOL,even if another part of the plan is sinking,but thats the way it is unless you have extreme patience.Keep in mind also ,some personnality types have to be "IN"the game,so if you want to thro X $'s arbitrarily at a position perhaps only buy 30%,and wait a bit(how long is up to you,hours,days weeks)then pair in with more.Hopefully youve done some homework,and have a nice basket of assets on your watchlist.goodluck hope this helps--ak
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Re: Mr. Negativity: all my investment options stin
Old 09-26-2004, 11:11 PM   #47
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Re: Mr. Negativity: all my investment options stin

Quote:
This market is over priced, over mean, and has strong potential for lousy, if any, earnings. *From almost any sector.
As I was riding my bike today, I was thinking about the absurdity of trying to predict the direction of this market in the near-term.

First, as far as being "over priced," this market looks pretty much like the market of 1996 to me. * Pricey, but not (yet) crazy. * Estimates of the total market P/E range from about 17 to 20, which is certainly more sane than we've seen in several years.

I agree with you on the potential for poor forward earnings, but that's not a problem of current valuation. *That's more a question of recent earnings quality and sustainability, and if growth rates can't be sustained (which is my guess), then you're right, the market will correct to reflect the slower earnings growth.

But my main problem with your prediction is that this market has been going sideways for the entire year due to uncertainty. * *Depending on how that uncertainty is resolved, the market will either rally like mad or retreat.

So to make an unconditional prediction as you have, I think you have to implicitly have decided:

1) Who will win the election in November
2) Where interest rates will be by the end of the year
3) Where inflation will be by the end of the year
4) How the economy will fare
5) The probability of a terrorist event in the coming months

My prediction is that if Bush wins, short-term interest rates stay below 3%, inflation stays below 3%, there's no major terrorist event, and the economy keeps going sideways, stocks will rally, we'll have a bull market for the next 4-5 years, and that will be followed by a *long* bear market as the chickens come home to roost.

If Kerry wins, stocks will immediately crater before he even takes office as *everybody* takes advantage of low cap gains taxes before he raises them.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 08:44 AM   #48
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Re: Mr. Negativity: all my investment options stin

'Value' is strickly a matter of perception.

I do not agree. When you buy a share of stock, you are buying a portial ownership interest in a business. The business is worth something--it has value. Your partial ownership interest has value too.

Andrew Smithers makes the point that it is a good thing that long-term stock returns can be predicted within a reasonable range of error by looking at valuations. Imagine what it would mean if this were not so, if stock prices were just random numbers that popped up with no connection to real values. In that event, stock investing would be the equivalent of gambling.

The reason why stock investing is not gambling is that the returns you obtain from your investment are tied to the value of the enterprise underlying the investment. It logically follows that the probability of getting a satisfactory return is greater when you purchase at a price lower than the real value and lower when you purchase at a price higher than the real value.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 10:04 AM   #49
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Re: Mr. Negativity: all my investment options stin

Quote:
Part of the perception of current stock value is alot of negativity in the press.
That's right. In the short-term, value is completely subjective and the only way to predict moves is to predict both the world events and human behavior (which TH believes he has pegged).

In the long run, it's true that stock value is more reflective of economic growth. Unfortunately, a lot of things point to slower long-term economic growth, so I expect "stocks for the long run" will become a quaint outmoded notion, and predicting short-term human behavior will become a growth industry.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 10:08 AM   #50
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Re: Mr. Negativity: all my investment options stin

More of that damn honking!!!

Quote:
So to make an unconditional prediction as you have, I think you have to implicitly have decided:

1) Who will win the election in November
2) Where interest rates will be by the end of the year
3) Where inflation will be by the end of the year
4) How the economy will fare
5) The probability of a terrorist event in the coming months
Actually I dont have to have implicitly decided any of those things. Once again, an example of someone trying to apply science and logic to short term market movements, when the short term market moves on psychology and emotion.

With regards to these items, I dont believe who wins in november will make any difference, either way we'll get a post election rally. Wanna know why? Because "everybody" says we "always do", so the herd will follow suit to be "in the market before the rally".

Besides, Kerry has about as much chance of winning as I do. I predict he'll be making a long speech about how his experience in vietnam helped prepare him for his concession speech.

Interest rates dont matter either. So far they're almost doubled from last year this time and the upticks havent really affected stocks OR bonds substantially. Everybody knows the fed was going to raise them, the fed did, and everybody knows they're going to raise them another quarter to half point. Its already baked in. Its not a surprise.

Inflation isnt going to go substantially higher or lower for the next year or two, at least as measured by CPI, and it wont go higher because the people who calculate CPI dont want it to. I am bemused that we let the same people calculate the CPI who also look better if its low and further dont have to pay out more money in cost of living adjustments. Further, I believe "real" inflation nationwide to be in the 5-6% range, and I think that most people buy into CPI and think its 2-3. Therefore to most people it isnt a problem that needs fixing, and to folks who benefit from a little extra inflation, its making them happy too. We simply have a bunch of people wondering why things cost so much more now than they did ten years ago, and not making the connection...

Economy wise, many leading economic indicators that have proven fairly accurate in the past say that by the start of the new year we'll be on an economic downtrend that will persist until we reach a recessionary level (again), around september of next year. That wont make investors very happy and they'll accellerate taking money off the table.

As far as a terrorist event goes, I cant believe we havent had another one yet.

But the bottom line is my primary basis for believing tough times are ahead is the fact that this is not a true economic recovery, its a credit card economic recovery. And a lot of the credit used has been drawn from inflated home equity built on a bubble. There are ten different ways the air can be let out of this one, but no way it can continue indefinitely. We're not living on top of a healthy economy, we just went into debt to make it look good. Both as individuals and our government.

The only question is, does the air come out all at once, a little at a time, or do we just wait 10 years until the balloon gets bigger.

I'm hoping beyond hope it comes out all at once so we can get back to normal quicker and move on.

But like I said, all this dialog is meaningless. Lets come back to it next year and see what happened.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 02:08 PM   #51
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Re: Mr. Negativity: all my investment options stin

Hi, I'm new to this forum so maybe my remarks will be
old hat to you regulars.

I remember quite clearly the poor performance of all classes
of investments in the early 1970 and for the five to seven
years following.

It seems to me that we are in danger of entering into a similar period of poor investment climate.

The deficit and trade imbalances would seem to indicate that
a strong rise in inflation and/or a sharp drop in the value of
the dollar is in the cards.

So the question remains, if you assume the above is a real possibility, what is a defensive position to take. Assume that
all these bad events will take place over a three to five year span, then it would be prudent to move out of asset classes which will do poorly and wait for a better day.
The obvious losers should be common stocks and long term bonds. At least that is what happened last time.

So what are the good choices?
One that I have tried over the past few years is preferred stocks. Medium term stocks (call dates of five to seven years) seem to be averaging about 6%.
Any coments from you gurus?

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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 02:22 PM   #52
 
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Re: Mr. Negativity: all my investment options stin

Quote:
Hi, I'm new to this forum so maybe my remarks will be
old hat to you regulars.

I remember quite clearly the poor performance of all classes
of investments in the early 1970 and for the five to seven
years following.

It seems to me that we are in danger of entering into a similar period of poor investment climate.

The deficit and trade imbalances would seem to indicate that
a strong rise in inflation and/or a sharp drop in the value of
the dollar is in the cards.

So the question remains, if you assume the above is a real possibility, what is a defensive position to take. Assume that
all these bad events will take place over a three to five year span, then it would be prudent to move out of asset classes which will do poorly and wait for a better day.
The obvious losers should be common stocks and long term bonds. At least that is what happened last time.

So what are the good choices?
One that I have tried over the past few years is preferred stocks. Medium term stocks (call dates of five to seven years) seem to be averaging about 6%.
Any coments from you gurus?
I am not a guru, but here is my 2 cents.


What you are describing is called 'Market timing' -

There are a lot of really smart people on this forum, however I am one of the dumb ones.

I have looked myself in the mirror and said 'You are your own worst enemy'. 'You have not a chance in hell in predicting the future markets, especially since most (80-90%) of Professionals cannot do it either'.

Therefore I have decided on a Stock/Bond Allocation among various asset classes, rebalancing yearly for the next 40 to 50 years. Mostly investing in Index Funds and Short term Bond Funds.

I then can spend my free time Fishing and enjoying life and not worrying too much about market movement
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 03:12 PM   #53
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Re: Mr. Negativity: all my investment options stin

I think of market timing as trying to make trades in the short term. However, there are sometimes macro economic conditions which are sufficiently out of the ordinary that general trends can be predicted. The "timing" of the event
may not be accurate but the direction should be farily clear.

For example, in Germany during the early 1930s it was obvious that the local economy was going to the dogs. Many people with adequate resources therefore moved their assets to Switzerland and survived the financial chaos better than those without such options.

During the runaway inflation of the 1970s people started to invest in "things". This is a rational idea since things tend to rise in price with inflation. Thus there was a trend towards buying paintings, jewels, antiques, etc.
The trouble with this approach is that your particular choices may not be optimal. There are no art funds or antique funds to allow one to spread the risk. In addition the transaction costs are high.

If you are young enough and disciplined enough you can ride through moderate term downturn, but if you are older or retired the length of the reversal becomes a factor.
Avoiding the risk by switching to another class of investments may not produce as high a yield, but may
still produce a postive yield with much less risk.

One of my best performing investments is the TIAA-CREF
(Teachers Insurance Co) real estate fund. This has averaged about 7-8% per year since its founding in the mid 1990s and has never declined in value.

Unfortunately it is only available to those eligible to join the TIAA retirement plan, so I don't what could be recommended to others.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 03:15 PM   #54
 
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Re: Mr. Negativity: all my investment options stin

Quote:
The "timing" of the event
may not be accurate but the direction should be farily clear.
Only in hind sight! - The stock market has predicted 10 of the last 4 recessions.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 03:22 PM   #55
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Re: Mr. Negativity: all my investment options stin

I am not a guru, but here is my 2 cents.

I much appreciate the tone of your post, Cut-Throat. It's clear that the majority here does not share my views on investing, and it's of course important that the majority viewpoint be given expression. It's of course also important that new ideas be given expression. It should be possible for both viewpoints to be given an airing on the same forum so that those who are in the middle get to hear both sides of the story before making up their minds.

What you are describing is called 'Market timing'

It's fair to say that I believe that most aspiring early retirees should consider engaging in a limited amount of market timing. It's important to add, however, that I do not favor timing for short-term gains. I am saying that it is possible to engage profitably in long-term timing, timing that may not pay off until after 20 or 30 years of buy-and-hold investing.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 05:35 PM   #56
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Re: Mr. Negativity: all my investment options stin

I don't want to engage in the timing vs. fixed allocation debate. I think there are pros and cons, that will cut differently for different investors. But I ran across an interesting viewpoint from a guy named Hussman, who runs a mutual fund of the same name. He is a PhD economist as well as a fund manager. I talked to him a few years ago, about options, and he was very impressive in his knowledge and understanding of this somewhat arcane area.

Basically, he admits that a pure valuation based approach, where one leaves the market when a certain threshold is reached, is vulnerable to severe underperformance in the short to medium term. And that medium term can be quite long, in his view maybe close to 20 years before you can feel quite confident that value will out.

Since he has to retain investors in his fund, he adds some kind of market analysis to show him when the market is overvalued, but "OK to buy", and when it is overvalued and one should head for the hills. His short term record is good, but I personally can't give much credence to these bastard child approaches.

However, one has to ask oneself how >10 years of underperformance would feel? If you are young, it could severely set back your program. Maybe you could stay in till things go bad, and then get out? Who knows. I don't have that kind of confidence in myself.

Even if you are older, you might still get antsy, and pile it at the exact wrong moment, when valuation will finally come home to roost.

Since I am older, and I have enough money to last a very long time the way I live, I am more worried about capital loss than I am about underperformance. I can handle a long period of low but positive returns. Losses are what might do me in.

Also, since I buy individual stocks and sector ETFs, I usually have some irons in the fire, and I don't start to get concerned about all the money I am not making while others are getting rich. *Right now, oils and oil service are really performing for me, and I have had them so long that I have low basis. I am comfortable that this will be a multiyear move, with plenty of volatility, but plenty of reward for patient money.

But I can easily see how others would rationally take the view so well expressed in the post above by Cutthroat.

Here is Hussman's full article.

http://www.hussmanfunds.com/wmc/wmc040927.htm

Mikey
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 06:28 PM   #57
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Re: Mr. Negativity: all my investment options stin

Quote:

Only in hind sight! - The stock market has predicted 10 of the last 4 recessions.

And there are three kinds of people.

Those who can count and those who cant!



Anyone hear that honking again?

I dont consider myself to be a "market timer" really. I dont have some kind of hokey 'system' where i'm trying to measure market valuations or buy and sell 'signals'.

I agree with the 'macroscopic events' comment made above. I dont know why I'd decide to sit on my hands when things are over priced, and a day or two after a significant crash or downward move, I'd be buying.
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Re: Mr. Negativity: all my investment options stin
Old 09-27-2004, 08:33 PM   #58
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Re: Mr. Negativity: all my investment options stin

How about this:
Put 20% of my gross income into my 401k, split evenly between vanguard s&p500 (27%), vanguard small cap (27%), and vanguard emerging markets (27%). This will allow for constant DCA so I won't have to worry as much about buying in at the top of another bubble. Then, do the max per year in a Roth split between the vanguard REIT and a precious metals index fund (each would be about 9% of total equity portfolio). DCA into the REIT/metals funds over the next year to avoid hitting a high point - of particular concern for the REIT. Use the rest of my leftover savings dollars to buy a combination of savings bonds (I or EE) and TIPS. At some point down the road when my income rises and I hit the annual 401k contribution ceiling, open a taxable trading account and keep the portfolio weights the same. Is this too conservative for someone my age? I don't know why capital preservation concerns me so much...but it does.
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Re: Mr. Negativity: all my investment options stin
Old 09-28-2004, 02:16 AM   #59
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Re: Mr. Negativity: all my investment options stin

I don't want to engage in the timing vs. fixed allocation debate. I think there are pros and cons, that will cut differently for different investors

I think you are right about this, Mikey. You may recall that there was a post a little ways back by JWR1945 in which he showed that the historical data indicates that for the average investor the best stratagy today is to be out of stocks altogether (or at least out of the S&P index). I don't think that is necessarily a good idea for many investors. As your post points out, it might take some time for the valuation effect to assert itself. During that time, the investor's assets might be underperforming and he might feel pressure to make changes, which he might end up making at the worst possible time.

My personal view is that for many it makes sense to go with about 30 percent stocks at times of high valuation, to shift to 50 percent stocks at times of moderate valuation, and then to perhaps 70 percent stocks at times of low valuation. But investing is not a one-size-fits-all thing. Investors need to take into account their particular life goals and financial circumstances in making a decision.

I can easily see how others would rationally take the view so well expressed in the post above by Cutthroat.

There are all sorts of legitimate viewpoints on the "What to Do" question. Cutthroat is expressing one, and that is of course fine.

Where we get into trouble is not over questions of "What to Do" but over questions of "What Is." When we talk about SWR analysis, we are no longer talking about subjective opinions as to What to Do. The SWR is a defined concept and a mathematical construct. When you are calculating a number, there are right answers and wrong answers.
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Re: Mr. Negativity: all my investment options stin
Old 09-28-2004, 02:49 AM   #60
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Re: Mr. Negativity: all my investment options stin

I don't know why capital preservation concerns me so much...but it does.

You shouldn't be defensive re your capital preservation concerns, soupcxan. Some of the greatest investors of all time stress the importance of capital preservation.

The reason why your views seem out of step with those of many others is that we are living in the wake of one of the greatest bull markets in the history of the world. Investing is an emotional business. When stocks go up as much as they recently have and for as long as they recently have, people develop all sorts of funny ideas about what is possible and what is practical and what is realistic.

Views that are today expressed with seemingly great confidence will fade into the mist when the long-term realities of stock investing reassert themselves. The long-term realities have in the past always reasserted themselves and so it is reasonable to believe that they will do so once again. When that happens, all of the magazines and TV shows will be focusing on the importance of capital preservation. You won't be seeing too many articles claiming that stocks are always the best investment class for the long run when that happens.

These things go in cycles. People become overly enthusiastic about stocks and develop "studies" tilting in one direction. People become disillusioned about stocks, and develop "studies" tiling the other way. The smart investor keeps his head as he sees one of the extreme viewpoints and then the other become dominant. He knows that the fundamental rules apply as time goes by.

The fundamental rule is that stocks are a wonderful asset class, but there is no magic to them. What goes up must come down. It's so with everything else and it's so with stocks too. That's common sense, and common sense is often an aspiring early retiree's best friend.
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