Rocky start of 2016

Don't want to invoke Porky, so I'll just say that having several potential candidates bringing up all the doom and gloom they can likely isn't "helpful", but I'm not sure "the market" pays much attention to that. Granted, smaller investors and/or traders do indeed affect the markets on the margin, but a lot of the market is held by pension funds and index funds, who I'd guess don't flash trade much.

Looks like several things are creating a headwind, like valuations, oil, China, war/terrorism, Fed tightening, strong dollar... Market needed a pause/correction. I'd not yet tripped any rebalance bands until after a recent withdrawal; my intermediate-term bond fund is close to 5% high after that, but it's price also went up as equities have gone down, thus performing its intended function.
 
I'm pretty certain that Democrats or Republicans will win 95% or more of the elections. So there really is no uncertainty. :D

I think the market goes up and down due to herd mentality, and if you are in the wrong place you get trampled.
 
W2R said:
As always, I have an opinion and this time it doesn't match that of many of the talking heads. So here goes...

I don't believe any of the reasons that are proposed for market swings, ever. I think the writers desperately want to believe that they can control and/or predict the market so that they can keep their phony-baloney jobs working for the mass media (job description: "prophets"), and that is why they write such foolish things.

But really, when does an investor sit back and think, "Gosh, the elections are coming up, the Chinese are doing weird things, and the Iranians are acting rash again, so I think I'll get out of the market or change my AA?" Well, maybe some, but to me, it seems more likely that the investor would think, "Gosh, I'm retiring next month and I'm getting old so I'll change my AA and also invest my bonus this year instead of spending it on booze and women". In other words, personal issues and events in one's personal life trump political issues every time, IMO.

And even more importantly, I think the market has its own life and cycles and really does not respond much at all to the type of things proposed by the talking heads. This is not very appealing to most people because it means that they can't predict or control the market, but I think it is the cold hard truth.

We are fed what to think by the media and I refuse to swallow it whole. If the hired prophets of mass media really could predict the market, they'd all be retired billionaires. Instead they are scrabbling desperately to come up with headlines, so they can keep their stupid jobs.


I think about it too, and laugh. Anyone who could figure out cause and effect could therefore predict the markets. Such a person would be a billionaire recluse and would be insane to share his/her insights. I don't think that anybody fits into that category.
Click to expand...

+1
From Alan Roth:

Investing is radically simple.
Long-term focus requires little monitoring.
Radical simplicity rules.
Doing nothing is key.
Click to expand...

and

Below is a Brief Summary of Behavioral Finance:

Economists view the goal of investing as maximizing economic wealth. Yet behavioral finance shows investors are maximizing their feelings and achieving sub-optimal economic gains.

Heuristic biases are mental shortcuts that cause us to make systematic mistakes. Even after we make these mistakes, we are usually not aware of them and continue to systematically make them.

Examples of these biases include:

Overconfidence and Optimism
In ourselves or expert advisors.
Data Mining
Finding patterns out of randomness to predict the future.
Anchoring
Mentally locking in a price even though it is now irrelevant.
Hindsight Bias
Predicting the past as if one knew what would happen.
Fear and Greed
Running from a down market and toward a bull market.
Mental Accounting
Believing we are doing better than we are.
Status Quo
Aversion to change.
Click to expand...

Emphasis added

And see also this:

http://www.cbsnews.com/news/dare-to-be-dull-investing/
 
Last edited:
Seems like just a few months ago the big worry was how long the market had run without a technical correction and now we have it and the bull run can resume (or not).


Sent from my iPhone using Early Retirement Forum
 
Here's my theory...

Most of the trading is done by professionals now - some 90% of trades. They have come to realize that they don't understand all the hidden connections in the global economy. ie. how does a slowdown in China affect the US. Our exports to them aren't that high, but who knows who has lent them gazillion $s and at what leverage? Or where the next AIG or Long Term Capital Management is hiding.
So, with the slightest issue, all the active money managers bail, which causes the automated trading computers to sell, which causes the more nervous among the individual investors to sell and that probably feeds back into the active money managers in a positive feedback loop.

Based on that theory, here's my 100 step plan. Step 1 to 100 - do nothing until my AA goes beyond the balance bands I've set.
 
Some candidates are promising tariffs on Chinese goods, so the market in China is discounting this, which in turn is hurting us. I am sure this has some impact on stock prices.
 
I wonder if volatility would subside dramatically if we doubled or tripled the tax rate on short-term capital gains so we would have more investors and less traders.
 
I look at the market as my “business”. Some years, business is good and some years business is bad. History tells me that I can expect a certain return over time so the important thing is to properly budget for the lean times that I know I must endure. I get paid to accept the risk associated with investing. The only thing that I know for sure is that nobody knows what will happen to the market in the short term so trying to guess is bad business. I think it was Jack Bogle that said about 70-80% of all equity trading is short term. This means every idiot is trying to pick the pocket of another idiot. This is a zero sum game. The only one that wins this is the brokerage. In the short term the market is a voting machine. In the long term it is a weighing machine.
 
Last edited by a moderator:
Theory or not. Look at it this way. We are already 2 weeks into the correction and that means 2 weeks closer to the beginning of the next up leg.

I wake up and think 1. I have my health. 2. The sun rose ...in the east no less. 3. I live in the most prosperous nation of the world and regardless if the market tanks 80 percent I still will wind up being a one percenter by world standards. 4. I have food and shelter. 5. It could always be worse.

Conclusion: correction or bear market ..... Regardless, life is good.

It's that very optimism that makes markets rise and fall and rise again.
 
Seems like the last three times a two term prez was in his last year of office, markets tumbled. In each case they'd gotten pretty over valued, and perhaps uncertainty about future political agendas had something to do with the drops. My attitude: when stocks get inexpensive by historical measures, do some buying. Otherwise hang tight.


Sent from my iPhone using Early Retirement Forum
 
papadad111 said:
I wake up and think 1. I have my health. 2. The sun rose ...in the east no less. 3. I live in the most prosperous nation of the world and regardless if the market tanks 80 percent I still will wind up being a one percenter by world standards. 4. I have food and shelter. 5. It could always be worse.

Conclusion: correction or bear market ..... Regardless, life is good.
Click to expand...

This.

I can get as wrapped up as anyone in the moves of markets, career, etc. but the simple reality is that our lives are so far and away better than most of the world's current population and 99.99% of the people who've ever walked the earth that it's hard to imagine. Right now, at this very second, there are people starving and killing one another in multiple places in the world. Blessed doesn't begin to define it.

A good friend of mine remarked not long ago that our families don't just live in a bubble...they live "in a bubble inside of a bubble inside of a bubble."
 
so far, isn't this the worst January for the "market" ever?
 
Last edited:
I think there's a couple of problems:
1) data that is easy to visualize and compare (price of S&P etc) gets much more attention than things that are hard to visualize compare.

2) people like telling stories after things happen as if they are telling them before they happen.

Because of that we think that the market is a universal measure of a series of things that lead it there and we can understand it.

I think its not and we can't.

Sent from my HTC One_M8 using Early Retirement Forum mobile app
 
You must log in or register to reply here.

Similar threads

J
Tax Filing Sale of House
Replies
4
Views
331
joesxm3
J
R
ESOP sale Tax implications
Replies
7
Views
268
Raymond01
R
ShokWaveRider
What is the best way to pay estimated Federal Taxes in Retirement?
5 6 7
Replies
159
Views
8K
RetiredHappy
R
S
Problems with Fidelity Bond depth of book
Replies
3
Views
484
foxfirev5
foxfirev5
S
Reconciling micro observations with macro trends? (is the economy really doing well?)
2
Replies
26
Views
2K
Koolau
Koolau

Latest posts

Back
Top Bottom