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Watch out for those warnings
Old 11-14-2019, 08:42 AM   #1
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Watch out for those warnings

Here’s an interesting chart that maps the outcome of shifting investment from S&P500 to a Bond Index, timed to specific warnings by well known investment professionals or economists.
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Michael Cembalest, the chairman of market and investment strategy for J.P. Morgan Asset Management, rounded up apocalyptic predictions from a range of commentators, including famed investor George Soros, bond-market giant Jeffrey Gundlach, activist Carl Icahn and New York Times columnist Paul Krugman.

He then calculated the consequences of shifting $1 from the S&P 500 SPX, -0.05% stock market index to the Barclays Aggregate Bond Index, from the time of those “Armaggedonist” predictions.
https://www.marketwatch.com/story/he...ons-2019-11-13
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Old 11-14-2019, 08:52 AM   #2
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I think this quote from the article sums up the chart very well:

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...a sustained, multi-year bear market with 35%-45% declines from peak levels would be needed to reverse many of the opportunity losses shown in the chart.
Of course someday one of these TEOTWAWKI predictions will turn out to be semi-accurate and no one will remember all the others that were totally wrong.
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Old 11-14-2019, 09:06 AM   #3
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We have a DF who retired in 2015. Talking financials is off the table when we get together. I am, however, very close to his wife. She shared with me, his entire portfolio is in bonds. He feels the stock market is gambling. It would be interesting to see a table like this that goes back 30 years.
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Old 11-14-2019, 09:13 AM   #4
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I just found a chart that says it all. I'm getting a sinking feeling for my DF's.


https://www.macrotrends.net/2016/10-...te-yield-chart
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Old 11-14-2019, 09:28 AM   #5
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Originally Posted by Rianne View Post
I just found a chart that says it all. I'm getting a sinking feeling for my DF's.


https://www.macrotrends.net/2016/10-...te-yield-chart
If this chart says it all, how about giving us a short summary of what it says, and how that relates to the thread topic.
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Old 11-14-2019, 09:40 AM   #6
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I have a picture of all those market forecasters at work:



Really, there are enough people making forecasts that someone has always predicted whatever market event occurs and will be recognized as the genius monkey for at least a brief period. The guys mentioned in the linked article are simply some unlucky monkeys who might get lucky some day. I suggest that anyone seriously interested in this kind of forecasting first read Nate Silver's "the signal and the noise," specifically the chapter on economic forecasting. Eight or ten bucks for a good used copy is one of the better investments available out there: https://www.amazon.com/gp/offer-list...dVeryGood=true

I tell students in my investing class to avoid reading or watching any of that market punditry stuff.
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Old 11-14-2019, 10:08 AM   #7
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Originally Posted by Rianne View Post
She shared with me, his entire portfolio is in bonds. He feels the stock market is gambling.
And not taking inflation into account isn't gambling? I think we all know the answer to that. But if he sleeps well at night, who am I to say he is wrong?
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Old 11-14-2019, 10:39 AM   #8
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Wonder what Elaine Garzarelli is doing these days (OMG, still shilling an investment letter)? And Jim Cramer has been wrong hundreds of times, yet he still has a show on CNBC and followers? Some things need change...
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Unfortunately for investors, there's a whole body of evidence demonstrating that market forecasts have no value (though they provide me with plenty of fodder for my blog) -- the accuracy of forecasts is no better than one would randomly expect. For investors who haven't learned that forecasts should only be considered as entertainment, or what Jane Bryant Quinn called investment porn, they actually have negative value because forecasts can cause them to stray from well-developed plans.
  • Across all forecasts, accuracy was worse than the proverbial flip of a coin -- just under 47 percent.
  • The average guru also had a forecasting accuracy of about 47 percent.
  • The distribution of forecasting accuracy by the gurus looks very much like the proverbial bell curve -- what you would expect from random outcomes. That makes it very difficult to tell if there is any skill present.
  • The highest accuracy score was 68 percent and the lowest was 22 percent.
There were many well-known forecasters among the "contestants." I've highlighted 10 of the more famous, most of whom I'm sure you'll recognize, along with their forecasting score.
  • James Dines, founder of The Dines Letter. According to his Website, "he is truly a living legend... one of the most-accurate and highly regarded Security Investment Analysts today." His forecasting accuracy score was 50 percent. Not quite the stuff of which legends are made.
  • Ben Zacks, a co-founder of well-known Zacks Investment Research and senior strategist and portfolio manager at Zacks Wealth Management Group. His score was 50 percent.
  • Bob Brinker, host of the widely syndicated MoneyTalk radio program and editor of the Marketimer newsletter. His score was 53 percent.
  • Jeremy Grantham, Chairman of GMO LLC, a global investment management firm. His score was 48 percent.
  • Dr. Mark Faber, publisher of the Gloom, Boom and Doom Report. His score was 47 percent.
  • Jim Cramer, CNBC superstar. His score was 47 percent.
  • John Mauldin, well-known author. According to his Website, "His individual investor-readers desperately need to know what his institutional money-manager clients and friends know about the specific investments available to help them succeed in challenging markets." His score was just 40 percent.
  • Gary Shilling, Forbes columnist and founder of A. Gary Shilling & Co. His score was 38 percent.
  • Abby Joseph Cohen, partner and chief U.S. investment strategist at Goldman Sachs. Her score was 35 percent.
  • Robert Prechter, president of Elliott Wave International, publisher of the Elliott Wave Theorist and author of multiple books. He brought up the rear with a score of 22 percent.
https://www.cbsnews.com/news/who-are...e-stock-gurus/
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Old 11-14-2019, 11:18 AM   #9
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... there's a whole body of evidence demonstrating that market forecasts have no value ... the accuracy of forecasts is no better than one would randomly expect. ...
Of course. The market is approximately random, just like the ripples and vortices in the flow of a trout stream. No one would expect that the detailed flow of the trout stream could be forecasted, so there's no reason to expect that the markets can be forecasted either. The foundation of Modern Portfolio Theory is a model where prices are random. Markowitz seems to have done quite well with this.

In Nate Silver's book he makes an interesting observatiion: The forecasts of the most prominent writers and talking heads tend to be worse than average. The reason, he theorizes, is that they have to be a little bombastic and extreme to retain their perches. Their market does not want nuance and tentativeness.
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Old 11-14-2019, 11:22 AM   #10
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I don't know about the other prognosticators, but I know about Icahn and Soros. I just checked, and they are still billionaires. Soros is still worth $8 billion, after donating $32 billion to philanthropic causes. Soros had more money than I thought.

I conclude that, if these two sold, then at some point they quietly bought back without making a fanfare about it. Sneaky, sneaky...

You would not think they just held cash after they sold, would you?
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Old 11-14-2019, 11:49 AM   #11
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...You would not think they just held cash after they sold, would you?
Did they sell? Do you know that?

More fundamentally, being able to forecast the market is not a prerequisite to getting rich. I am currently reading "Buffett: The Making of an American Capitalist" by Roger Lowenstein. In it, it's easy to see that Buffett's approach involves only evaluating specific companies stocks' current prices and the nature of the companies' businesses and management. Ben Graham with a few twists.
“I know what markets are going to do over a long period of time: They’re going to go up. But in terms of what’s going to happen in a day or a week or a month or a year even, I’ve never felt that I knew it and I’ve never felt that was important."
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Old 11-14-2019, 11:51 AM   #12
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^^^^ I feel Icahn has not done as well Buffet since I bought a small amount of Icahn

I checked and my gut was right, the last 10 years have not been great for Icahn. Still waiting for a pop.
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Old 11-14-2019, 12:04 PM   #13
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Did they sell? Do you know that?

More fundamentally, being able to forecast the market is not a prerequisite to getting rich...
No, I do not know if they sold, or what they sold. They just had a lot more money than I do, so they knew something I did not.

That does not mean that I would follow their "sell, sell, sell", because when they "buy, buy, buy" they would not tell me.

About getting rich, there are a lot of ways billionaires make money. It just is not easy to emulate them.
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Old 11-14-2019, 12:21 PM   #14
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I think these projections are bogus. Investing today is not what it was 10 years ago (or even 5 years ago)...so trying to GUESS what is going to happen...well, I have zero faith in any of it. Will it go down? Probably. Will it go back up? Probably. Will I still be retired? Yep.
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Old 11-14-2019, 12:30 PM   #15
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Quote:
Originally Posted by MichaelB View Post
Quote:
Originally Posted by Rianne View Post
I just found a chart that says it all. I'm getting a sinking feeling for my DF's.


https://www.macrotrends.net/2016/10-...te-yield-chart
If this chart says it all, how about giving us a short summary of what it says, and how that relates to the thread topic.
Yes, I don't think that chart means what you think it means.

It is not an investment/performance chart, it is a historical rate chart.

You can easily set a 100% bond allocation in FIRECalc - that will tell you much more as it takes inflation into account. It looks bad. But if your friend has a large enough portfolio relative to spending, it will survive.


-ERD50
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Old 11-14-2019, 12:31 PM   #16
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Didn't Buffet just make a huge loss on IBM?

I think he lost collectively more than all of us early retirees net worth.
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Old 11-14-2019, 12:39 PM   #17
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Originally Posted by ExFlyBoy5 View Post
I think these projections are bogus. Investing today is not what it was 10 years ago (or even 5 years ago)...so trying to GUESS what is going to happen...well, I have zero faith in any of it. Will it go down? Probably. Will it go back up? Probably. Will I still be retired? Yep.
Actually, Charles Ellis stated a similar belief in his book "Winning the Loser's Game." He basically said that the current hordes of analysts, computers, databases, and program trading were so effective at detecting and eliminating mispricing that they cancel each other out and all we are left with is random motion.

I mentioned reading the Lowenstein book. One striking thing is the difference between Buffett's early investing world and the world of today. In his early investing, value analysis was king. Not just the numerical analysis of Ben Graham but a broader analysis that took into consideration for example of Buffett's famous "moats."

I think, as you say, that we are now in a different world. Circumstantial evidence for this is Buffett's weak performance in recent times. I have read that he has not beat his own benchmark in the last decade.
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Old 11-14-2019, 12:55 PM   #18
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2008 Financial melt down started from inability to pay Debt, mostly from Real Estate but it quickly spread to all Bond and Stock Market. If we enter similar crises, according to Powell, the Feds have very limited resources to deal with it. I think no investment is safe during those bad downturns but the question is when it will end and what the outcome would be. Some economists predict that the Government may limit access to your own Bank accounts like $200 per day in cash.
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Old 11-14-2019, 01:00 PM   #19
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Some economists predict that the Government may limit access to your own Bank accounts like $200 per day in cash.
Great! Then they can only expect $200 when I file my taxes!
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Old 11-14-2019, 01:35 PM   #20
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Great! Then they can only expect $200 when I file my taxes!
Eh, you think that Uncle Sam is like the scammers who want you to pay taxes with Walmart gift cards or cash?

He may limit you to $200 each day from the ATM, but he can give himself the power to reach in your account to take whatever he needs.
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