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Re: Where on earth is the value investor to go ?
Old 04-13-2005, 11:47 AM   #21
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Re: Where on earth is the value investor to go ?

This value investor is sticking with cash for the time being.

The proceeds from the wifes house sale went ~half to the vanguard prime money market fund, ~half to the short term investment grade fund and a smidge into the GNMA fund because I've wanted to own a little bit for a while now for no particular reason...
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Re: Where on earth is the value investor to go ?
Old 04-13-2005, 11:55 AM   #22
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Re: Where on earth is the value investor to go ?

Delawaredave,

Funny how different people are!

I have experienced high volatility because of my high risk tolerance, once losing over half my portfolio value for a while. (EM/Asian crisis late 90s.)
Someday, I may really get creamed.

50/30/20 seems like could be sensible for a low-risk person, I don't know. But if you're still very nervous, maybe you could change something? Either changing the portfolio, or gaining more education. Or both. Have you read the books people here suggest, like the Four Pillars?

Too little equities can be risky in the long run too, so I'm not sure if more fixed income would be smart or not. But, depending how serious you are about can't sleep at night, I think you should do something to fix your worries.
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Re: Where on earth is the value investor to go ?
Old 04-13-2005, 08:38 PM   #23
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Re: Where on earth is the value investor to go ?

TH,
Congrats on selling the house. Hope the rehabbing work was worth it? That sold quickly, it seems -- just a month or so?

Delaware Dave, I agree with Lazy Day -- get thee to Four Pillars --

What I think you'll find there is that a well-diversified portfolio of asset classes which tend not to be highly correlated with each other can work to dampen volatility without sacrificing yield or expected return.

That helps you sleep, without paying any penalty.

It aint perfect -- nothing is -- but it's been pretty good.

Even fixed income doesn't buy you peace of mind, especially if the maturities are over 5 years or so -- think rising interest rates, and failure to keep up with inflation while still providing a safe withdrawal rate.

There is no place to hide. Unless you know when the cataclysm is coming, you need to educate yourself about risk, asset allocation, modern portfolio theory, then buy a bunch of low-cost index funds and sort of squint at your portfolio while you focus your life on other less-stress-inducing pursuits. Re-read Ronin's post earlier in this thread -- there is a lot of hard-won wisdom in it-- you can chase your tail around trying to find the perfect investment for as much time as you have to spend. THen even if you do own it, you've got to spend more time worrying when it's time to sell it, or whether you should be buying something else.

Bull markets climb a wall of worry. Once a few more people are worried that everything is too expensive, things might start going up again. Or they might not. Who knows?
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 11:25 AM   #24
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Re: Where on earth is the value investor to go ?

Three weeks from listing to offer! Its not hard to sell a house that looks like new construction on a large lot at a very competitive price to actual new homes on postage stamp lots. We did a really nice job on the place.

What surprised me was the speed that the loan came in. I figured we'd have at least 4-6 weeks from offer to close...less than 2...for a 99% financing, two mortgage deal lent to a young unmarried couple in their 20's...

50/30/20 is a conservative #?

Wow, right now I'm 47/25/28...

Waiting for the correction...wait for it.........
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 02:51 PM   #25
 
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Re: Where on earth is the value investor to go ?

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Waiting for the correction...wait for it.........
TH,

This is interesting. The Dow Jones was at 11,000 about 4 years ago I believe. Today the Dow is at about 10,200 give or take. If history is any judge, I think we hit the correction back in 2003.

If you look at past Dow History the real corrections have come after big bubbles. We have been at basically a four year plateau. I don't think we've had any major correction in U.S. Stock History after a four year plateau. Unless you are thinking that This time it's Different. It would truly have to be different this time to get a major correction after 4 years at the current levels. And stocks have been at much higher valuations than they are today.



What you may get is that stocks stay flat for 10-15 years or so like 1966-1980. Then you won't get a correction but a sideways motion. Then you'll have to figure out when to buy.

Also, I can't seem to get the saying out of my head More money has been lost waiting for the correction, than the actual correction itself
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 03:01 PM   #26
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Re: Where on earth is the value investor to go ?

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This time it's Different. It would truly have to be different this time to get a major correction after 4 years at the current levels.
Well, that's true, but not too different.

The S&P500 had huge runup 1962-66, then a couple nice peaks & dips between 66-72, but it basically slid sideways near the 90s for those four years. It was a timer's dancing delight but a killer if you missed a step.

Then came the '73 oil shock. The S&P500's low point was 65... just before Labor Day 1974.

After that I remember BW's infamous "Are Stocks Dead?" issue-- from 1979. And we were still three years away from the start of the next great bull market!

So I suspect that $75 oil could make things really interesting.

When that happens, we'll be living off our two-year cash stash and keeping an eye on the calendar!
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 03:07 PM   #27
 
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Re: Where on earth is the value investor to go ?

Nords, don't get me wrong. I'm certainly not saying that we are the heels of a Bull Market. What I'm saying is that Major Corrections come close to major bubbles.

We've been flat for 4 years. We could be flat for 15 more years, or 5 years. You just have to guess to right. And I know I can't time the market!
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 03:40 PM   #28
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Re: Where on earth is the value investor to go ?

In looking at the numbers, it appears to me that after the big 94-00 runup we dropped back down to what appears to be the 'mean' or 'reasonable value level'...according to a variety of measurements like 'morningstar fair value' we did see some value back in 02-03.

But then the recent run-up appears to have brought us right back to the brink of high valuations...by almost any metric.

Its possible that is IS 'all different now' and we'll proceed at nosebleed valuations with the usual 8%+ return on equities.

As such, I have my pitiful 46%-whatever in stocks, but I'm waiting to see a value proposition before I commit my cash. So's Buffett, so I dont feel too dumb.

I read the four pillars, I know the data. Indexing is the way to go. But its gone nowhere for investors in the last 5 years, and I'm betting it goes nowhere for 5 more.

Guess we'll find out!
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 03:45 PM   #29
 
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Re: Where on earth is the value investor to go ?

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I read the four pillars, I know the data. Indexing is the way to go. But its gone nowhere for investors in the last 5 years, and I'm betting it goes nowhere for 5 more.
Me too! - But, you do reacall the chapter on recency. 5 years does not make a portfolio.
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 03:49 PM   #30
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Re: Where on earth is the value investor to go ?

Yep I know that. But so far I've made a couple of hundred thousand in the last 5 years. S&P500 is negative for the same period.

When I kept dumping my company stock every year to diversify, I was a moron for 6 years, then when the stock dropped 80% I was a genius all of a sudden without changing strategies. Maybe the same thing will happen in reverse now...the S&P500 will take off and gain 30-40% over the next 5 years and make my crappy 4-5% non-stock investments pale by comparison.

I'm sort of doubting it...but I guess whatever happens will make for some interesting discussion fodder between now and then!
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 03:59 PM   #31
 
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Re: Where on earth is the value investor to go ?

Don't listen to me. I've already admitted that I'm an Investing idiot. That's why I've gone the Indexing route.
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 04:00 PM   #32
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Re: Where on earth is the value investor to go ?

I would like to think that the correction was in 2003.

But I do not think we have "seen the bottom yet" of the 2000 bubble.

I think the last advancement was a "sucker's rally".

We really have to get to low teens PE's before we call the correction complete.

And earnings are peaking.

Fasten your safety belt. I am not a "market timer" but this one has been a "no brainer" for me for awhile. Fortunately I've bailed on a lot of of positions and moved portions internationally.

Sleepless in Delaware........
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 04:19 PM   #33
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Re: Where on earth is the value investor to go ?

I have no idea what the market will do, but wanted to pass along Jeremy Grantham's opinion:

http://www.gmo.com/siteservercontent...1107189819.pdf
Quote:
Great Bear Markets Take Their Time
Yes, it already seems like we’ve been waiting a long time
for the market low, but actually this wait is far from
remarkable on a historical basis. In fact, a low in these
next 24 months would be the most typical timing we
could expect from history. But this market cycle has been
interestingly different from earlier bubbles and probably
we should not expect a typical experience.
The first difference is that the market in 2000 went far
higher than ever before: 34 times trailing earnings versus
21 times at the market tops of 1965 and 1929. Even
Japan, adjusted for cross holdings, was not materially
higher. Second, the sustained phase of declining interest
rates and easy money has no historical US parallel, either
in extent or duration. Third, stock ownership was far
broader than ever before, so that the great majority of the
readers of large circulation magazines, for example,
owned stocks this time, while they did not in the other
bull markets....
The normal tendency is for the length of the market
decline following a bubble to take about the same time or
a little less to get back to trend as the market increase took
from trend line to peak. For this down cycle from March
2000, that would lead us to expect a market low this year
or next. And admittedly there is quite a bit of noise
around this average, although less than you’d probably think.
A low in 2009 and 2010 would be just within the
normal range at the longer end and 2002 would equally
have been just within the short end of the normal range.
Indeed, in September 2002 when the S&P tumbled to
775, which was half its peak price, the market looked for
a couple of weeks like it might just make the real break
and slice through the then fair value of 700+/- and
establish a real low, say in the low 600s, and get this
whole unpleasantness out of the way.
My opinion is that over the next 30 years, stocks will significantly outperform cash or bonds. Since I don't know the timing and think I can tolerate extreme volatility, I don't want to hold much more cash today than I'd be willing to hold for the long run.
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 04:28 PM   #34
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Re: Where on earth is the value investor to go ?

I am no Abby J Cohen (hahahaha) but I think C-T made some valid points. *We are not in a bubble in my opinion and I don't think we will have a major correction. *Flat is more realistic in my very humble & meaningless opinion.

Funny thing today I got to listen to Dr. Jensen, a highly acclaimed academic professor from Harvard. *He became famous when he wrote about how corporations should return all of the money they make backk to shareholders as dividends b/c the people running the corporations pissed the money away on wasteful projects. *He is considered by many in the academic world to be the father of modern corporate finance. *Anyway he admitted that he pulled all of his money out of the equity markets in 2000 and hasn't been back since.

My opinion - it never pays to be a perpetual bull and it never pays to be a perpetual bear. * *
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 06:32 PM   #35
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Re: Where on earth is the value investor to go ?

C-T- great chart of the Dow for a century +. One thing really jumps out- volatility has taken a vacation over the last 18 years or so. Other than the 1987 crash, very few drops stick out on that chart, including the drop before Desert Storm and the drop of several years ago. They are just lost in the noise.

Other than this period, the only relentlessly uncorrected advance was from the trough early in WW2. The only segment that shows a slope even in the ballpark of 1994 to present is the blast off in the 20s leading up to crash of 29.

I am frustrated like everyone else, but I can't bring myself to believe that a meaningful advance can come from here. In '42, the tide of war had turned on both fronts. We had a never before seen manufacturing base. We had hard working people with little or no debt. Corporate liquidity was high. The long period of expansion of the American oil industry was just beginning.

Today, most of these things are a the opposite end. Consumers are up to their eyeballs in debt. We have to send troops across the world to grab oil, at great cost in treasure and life. Most manufacturing is outsourced to China or Bangladesh or Africa. If we ever get into a war with China, it had better be over fast, 'cause we can't sustain it.

It looks like a fool's paradise to me, and although so far nothing has happened the potential is sure there. Once something starts, I don't know where the floor might be, because the background could be seen as very negative.

IMO, it is like one of those perceptual puzzles where one second you are looking at a beautiful young woman wearing a headscarf. The next minute she has been transformed into an old crone. Bang, you can't control the flip.

I paid tax on $100,000 of CGs this year, and I've booked another $60,000 this year- and I still have a lot of stock. I may end up feeling foolish for taking these gains; but I also may end up feeling relieved that I am not having trouble controlling my bowels because the stock market just underwent a 50% drop.

Mike
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 07:33 PM   #36
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Re: Where on earth is the value investor to go ?

Quote:

I read the four pillars, I know the data. Indexing is the way to go. But its gone nowhere for investors in the last 5 years, and I'm betting it goes nowhere for 5 more.
All depends on what you're indexing -- I've been indexing other things like small international value and small US value, developing country bonds, REITS and commodities and the portfolio is up about 57% over the last 5 years.
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Re: Where on earth is the value investor to go ?
Old 04-14-2005, 10:30 PM   #37
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Re: Where on earth is the value investor to go ?

Does anyone else find it funny to see a bunch early retired, financially independent people who enjoy every day just the way they want to call themselves idiots, etc. on this board? You guys, the idiots sit all around me all day long, trust me, you guys aren't among them!
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Re: Where on earth is the value investor to go ?
Old 04-15-2005, 03:36 AM   #38
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Re: Where on earth is the value investor to go ?

Well, C-T and I don't usually call ourselves "idiots". We normally reserve that for others Anyway, we're justing
killing time and amusing ourselves. I think that one reason I can enjoy retirement so much is that I am self
entertaining. I love my own writing/pontificating.
DW agrees. Unfortunately, she doesn't find this trait endearing

JG
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Re: Where on earth is the value investor to go ?
Old 04-15-2005, 05:40 AM   #39
 
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Re: Where on earth is the value investor to go ?

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I am frustrated like everyone else, but I can't bring myself to believe that a meaningful advance can come from here
Mikey,

I certainly agree with you here. In fact I don't see a meaningful advance in any investment right now. Hence the gist of this thread!

My only point is that I don't think we'll see a major correction in stocks, because these usually follow the euphoria of a bubble. No one is euphoric over stocks.

The only euphoria that I see is real estate.
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Re: Where on earth is the value investor to go ?
Old 04-15-2005, 06:29 AM   #40
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Re: Where on earth is the value investor to go ?

What with indexing, Vanguard, and some cash and bonds, my big consolation is, if I go down, everybody else will, too. Well, most everybody!
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