turning point economy

[runnerr]

this is getting pretty boring seeing the market slowly take two steps back for every one forward. Does anyone see a light at the end of the tunnel?

Bob

[Notmuchlonger]

Nope sorry I don't. Id like to think it will get better down the road

[audreyh1]

Seems like its been taking two steps forward lately. Oil prices dropping is really nice. It's starting to make a big difference at the pump.

Audrey

[MichaelB]

Originally Posted by runnerr

this is getting pretty boring seeing the market slowly take two steps back for every one forward. Does anyone see a light at the end of the tunnel?

Bob

Due to recent budget cuts and the rising cost of electricity, gas and oil, the light at the end of the tunnel has been turned off.

We apologize for the inconvenience.

Have a nice day. The Management

[CitricAcid]

What makes you think that we won't be able to have companies continue to post solid earnings? As the slight downturn makes its effects, people will budget better and when the spell passes, it just means more spending, credit, expansions and earnings. When will this be? Oh, not in our lifetime...

[ziggy29]

Originally Posted by CitricAcid

What makes you think that we won't be able to have companies continue to post solid earnings?

The media make a rather potent doom-and-gloom Kool-Aid that many are freely drinking from.

[HFWR]

Originally Posted by ziggy29

The media make a rather potent doom-and-gloom Kool-Aid that many are freely drinking from.

As opposed to the "pie-in-the-sky" Kool-Aid that helped blow the Nasdaq and housing bubbles...

Kool-Aid, Kool-Aid, tastes great
Wish we had some, can't wait!

[tomintucson]

Please don't spam us. We're nice people, really...

[d]

light at the end of the tunnel? we'll see it in the rear view mirror

[bssc]

I am drinking grape Koolaid now, does that mean this is the top?

[explanade]

There's a WSJ interview with Greenspan who says economy won't recover until housing prices stabilize -- stop falling.

He says too much supply now and the excess inventory won't be sold off until first half of 2009.

Others have also said real estate prices have to stop falling and grow again before banks can recover, which is necessary for a bull market in equities -- before this one step forward two steps back action in the markets.

Sounds like if you have new money -- say a big inheritance -- now is not the time to put it in the market?

Or when "safe" or "conservative" investments like Wellington or Wellsley are down only a few percent, is it safe to assume they can't go down further?

[Want2retire]

Originally Posted by explanade

There's a WSJ interview with Greenspan who says economy won't recover until housing prices stabilize -- stop falling.

He says too much supply now and the excess inventory won't be sold off until first half of 2009.

A whole six months, huh? If they're selling THAT fast, it sounds like a good time to become a real estate agent. I just don't believe Greenspan on this one.

Originally Posted by explanade

Sounds like if you have new money -- say a big inheritance -- now is not the time to put it in the market?

Too late! I have been DCA'ing my recent windfall, and I am already 82% in (as far as that portion that is destined for the market). Should be 100% in by November. Seems to be doing just fine so far, though.

Originally Posted by explanade

Or when "safe" or "conservative" investments like Wellington or Wellsley are down only a few percent, is it safe to assume they can't go down further?

They can always move either up or down. They are just not very volatile so they tend to make less exaggerated moves in either direction. Also Wellesley, which I have, sheds some nice dividends which cut back the sting when share price drops a few percent.

[haha]

Originally Posted by Want2retire

Too late! I have been DCA'ing my recent windfall, and I am already 82% in (as far as that portion that is destined for the market). Should be 100% in by November. Seems to be doing just fine so far, though.

I remember back when the Dow was still making new highs we had several threads about how to handle a lump sum: market time, DCA, or get in all in pronto.

Most of the experts recommended getting it all in pronto, as all the academic experts (could that be an oxymoron?) "proved" that anything else was stupid.

Hindsight is always fun, but to me the great advantage of DCA, if you do not believe in market timing, is that while you might be slightly p*ssed at yourself or your spouse might be slightly p*ssed at you for not being optimal, you also are not going to be goat of the year.

Since we have to manage our confidence along with our money, I think this is a reasonable constraint to include.

Ha

[Want2retire]

Originally Posted by haha

Hindsight is always fun, but to me the great advantage of DCA, if you do not believe in market timing, is that while you might be slightly p*ssed at yourself or your spouse might be slightly p*ssed at you for not being optimal, you also are not going to be goat of the year.

Since we have to manage our confidence along with our money, I think this is a reasonable constraint to include.

Ha

I read that thread and thought about it, but it made more sense to me (for me) to DCA. It gives me more of an average price, which isn't going to be the best or worst price. Less reason to beat myself up about it, as you point out. And, it seems to be working out just fine, for me.

[haha]

Originally Posted by Want2retire

I read that thread and thought about it, but it made more sense to me (for me) to DCA. It gives me more of an average price, which isn't going to be the best or worst price. Less reason to beat myself up about it. And, it seems to be working out just fine, for me.

Yes, this is exactly what I was trying to say.

Ha

[NW-Bound]

I second Ha's post. I never feel lucky in my life. So, my chance of calling the bottom of market is fairly low. So, I have given up trying to be 100% right.

By DCA'ing, I ensure that I will not be 100% wrong. However it turned out, I can console myself with the fact that it could have been a lot worse. Managing your own confidence is important, if you are to stay in this game.

P.S. I was composing my post at the same time as the above 2 posts. Great minds think alike, no?

[Want2retire]

Originally Posted by haha

Yes, this is exactly what I was trying to say.

Ha

Yes, I suddenly realized that and changed my post, and then saw yours in which you had quoted the first version. Oh well! But anyway, I think you are quite right.

I think that if you take 100 people who are DCA'ing (or one person who has the opportunity to DCA or not on each of 100 instances), their average would be better with a lump sum because the money would be in the market longer, on average.

But for one 60-year-old, timid person such as myself with one windfall to handle, well, I just can't take that chance. If I want to gamble, I go to the casinos with $20 (even if the odds are more in my favor by investing large amounts in lump sums).

[explanade]

Originally Posted by Want2retire

A whole six months, huh? If they're selling THAT fast, it sounds like a good time to become a real estate agent. I just don't believe Greenspan on this one.



Too late! I have been DCA'ing my recent windfall, and I am already 82% in (as far as that portion that is destined for the market). Should be 100% in by November. Seems to be doing just fine so far, though.



They can always move either up or down. They are just not very volatile so they tend to make less exaggerated moves in either direction. Also Wellesley, which I have, sheds some nice dividends which cut back the sting when share price drops a few percent.

But you pay taxes on the dividends and cap gains distributions even if the value of your holdings decline?

Admiral share require $100k to start and how much to add?

Are you DCA-ing each month or quarterly? Into the same investments or rotating into different investments? Or maybe different investments wouldn't be considered dollar cost averaging.

[CitricAcid]

Originally Posted by Want2retire

Yes, I suddenly realized that and changed my post, and then saw yours in which you had quoted the first version. Oh well! But anyway, I think you are quite right.

I think that if you take 100 people who are DCA'ing (or one person who has the opportunity to DCA or not on each of 100 instances), their average would be better with a lump sum because the money would be in the market longer, on average.

But for one 60-year-old, timid person such as myself with one windfall to handle, well, I just can't take that chance. If I want to gamble, I go to the casinos with $20 (even if the odds are more in my favor by investing large amounts in lump sums).

It is kind of interesting to note this as you mention, that in the long run the lump sum tends to beat out the DCA, but for a one-time thing for people with lower risk tolerance or tolerance to volatility, the DCA is probably a better choice.

Is this just another manifestation of the reward following risk mantra? (instead of the stock return following stock risk, it is lump sum return following lump sum risk)