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Old 03-08-2011, 08:45 PM   #21
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I don't remember.


Let me refresh your memory !
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Old 03-08-2011, 08:58 PM   #22
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Heh. I made a little set of observations on March 7, 2009 and posted this on a private stock trading board.
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Musings on the S&P 500, financials, and Where We Are At.

If one took the value of all banks and other financials in the S&P 500 (SPX) to zero, (share value of zero) the SPX would be at about 620 today. (Close was at 683.38) Yes, there would probably be a panic associated with that, but it would have some trouble driving the price down much further. The financial sector of the S&P 500 has already dropped some 80%.

Currently healthcare is up to 17% of the SPX, and technology stocks are the second largest area at just under 17%. All financials make up just 9.2% of the SPX.

The Shiller 10 year averaged earnings figure (E10) is probably the best number to use in figuring P/E valuations during a recession, as earnings are unpredictable with recession effects like one-time writedowns. Call it about $58 a year over the last 10 years.

The current index 'price' to 10 year average earnings ratio (P/E10) is pretty well correlated to market bottoms and subsequent long term rates of return. (Today's P/E10 is about 11.8) Over at Bob's Files, Odds and Ends, Bob has put some neat charts together to show the value of P/E10 over time, and real returns in the market over subsequent periods.

[charts elided...]


P/E10 doesn't dip below 10 very often. The most notable case, where it reached 5, was during the Panic of 1917 and the Great Pandemic of 1918-1919, where city centers were abandoned, businesses went bankrupt, and life insurance claims skyrocketed.
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Old 03-08-2011, 09:22 PM   #23
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Given how I greatly benefited from the recovery, I am sure that my memories of the 2009 market crash have been tinted with a few shades of rose. However, reviewing some of my posts from early 2009 reveals how uneasy I felt at the time. Yet my Quicken records show that I kept buying equities throughout the crisis.
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Old 03-08-2011, 09:57 PM   #24
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Not retired but remember thinking this could be a HUGE buying opportunity. If not, better stockpile food, gold, even arms . I bought a few solid dividend-paying stocks but not nearly as much as I could have. Still- even with the recovery over past 2 yrs stocks have been flat for WAY too long.
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Old 03-08-2011, 10:05 PM   #25
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For the first time in a long time I had some cash to invest, so I was pleased to find the market so low. I started a new IRA for myself.
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Old 03-08-2011, 10:19 PM   #26
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I started getting a creepy feeling about our investments in September of that year. We had a choice at work of moving funds into a general savings account that paid 3.5%. I took everything out of indexed funds, equities, etc. and moved it over to that account for a few months. So I think I missed the worst of it.
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Old 03-08-2011, 10:27 PM   #27
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Either this group has selective memory, there's a selection bias in the responders, or we are the most brilliant group of investors the world has ever seen.

I'm guessing it's not #3.
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Old 03-08-2011, 10:33 PM   #28
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Most of our investments were still with Ameriprise at the time so we just watched as the dollar value of the account kept dropping.

And at work, my megacorp had been bought by a bigger megacorp and there was a mandatory 15% 'headcount reduction' going on (about 15,000 people in total)

I made it through with my job intact but it was quite a roller coaster of a year.
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Old 03-08-2011, 11:09 PM   #29
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Either this group has selective memory, there's a selection bias in the responders, or we are the most brilliant group of investors the world has ever seen.

I'm guessing it's not #3.
Well, I'm certainly not going to include myself in the group that was prescient when disaster hit. Not a brilliant investor at all, rather as I said I was caught dead in my tracks in '08.

I only had three things going for me in retrospect: one, I was and am still working (and therefore continuing to dollar-cost average in); two, I'd hit the 50-age mark which allowed larger contributions; three, my employer had opened up a Roth plan which meant that all those low-price purchases went to the tax-free option.

I guess I agree with ha's opinion that this movie is still playing. But next time it happens, I'll likely be in a different situation and hope I might act a bit more intelligently than I did last time. How to do that? I haven't a clue .
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Old 03-08-2011, 11:12 PM   #30
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I remember saying..."It's only a paper loss, it will bounce back..It's only a paper loss, it will bounce back...It's only a paper loss, I hope it will bounce back."
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Old 03-08-2011, 11:26 PM   #31
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Either this group has selective memory, there's a selection bias in the responders, or we are the most brilliant group of investors the world has ever seen.

I'm guessing it's not #3.
Selection bias. If we were to interview refugees at the end of a long, arduous journey, we might conclude that their people are the hardiest folks on earth, but that would be ignoring the huge population lost in that journey.

The same principle applies here, I think.
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Old 03-08-2011, 11:39 PM   #32
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No anxiety or changes in attitude. I retired in Oct 06 at 48 with a 100% individual equity portfolio, and while its market value dropped by about a third from its peak, its dividends (which I live on, no pension/ss) and earnings kept rising, 6-10%/year right through the market gyrations. Dividends and earnings are now about 45% higher than when I retired, with roughly the same stocks. Market value is about the same as when I retired.
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Old 03-09-2011, 12:04 AM   #33
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I can barely remember what happened last week....
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Old 03-09-2011, 02:54 AM   #34
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I remember 2008 Q4 and 2009 Q1 quite well.

In early 2009 I found myself with a lot of cash through of combination of high savings which had not been fully invested for some time and cashing out long service etc payments from my previous firm. Being an exceptionally talented market timer and believing that equity yields would be better than cash or bonds over the long term even if things continued to deteriorate, I put all of it in the markets over a period of several months and have felt like a genius ever since (conveniently ignoring the fact that I didn't anticipate the crisis). No doubt when I fail to anticipate the next downturn, it will be someone else's fault.
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Old 03-09-2011, 05:01 AM   #35
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That period changed my life. Up until then it appear I could never run out of money. Our spending and attitude reflected that. During the crisis, my option positions all went underwater and it looked like our portfolio would only be a fraction of what I expected. I retired in late 2006. I felt awful- couldn't sleep. Luckily I didn't do very much and it has all come back. Portfolio is at all time high and options looking great. Still my attitude is different and our spending is much more conservative. I hope I'm a better investor (indeed person) because of the crisis. Time will tell.
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Old 03-09-2011, 05:07 AM   #36
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So I went back and looked at some of my posts from those dark days.

They weren't too bad.
Oct 27, 2008 Dow -203 8,715

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James the only thing I can predict with confidence is that market will not be stable for quite sometime certainly for the next six months we will see huge daily swings as stocks go up and down by several percent. The stock market is trying to predict the future economy and as we all know, not only have all the crystal balls stop working, but the lights are off, and we ran out of candles a couple of months ago. A few people are yelling fire and people are starting to panic, the smart people realize the red people see isn't a fire but the emergency lighting system coming back.

Personally, I'd tell him to stick all the money back in the 2020 fund. Imagine a rich friend of his gave him an absurdly expensive bottle of wine, and total him do not open until 2020. Once a year he is allowed to look at the wine perhaps rotate it, but he can't open it.

When the market stops going down and starts going up it is not going to up at a nice steady pace. Rather it is most likely to go in the same crazy fashion it has gone down. But this time instead of big 4 down days and 1 big up day. We are likely to see 3 up days , 1 big down day, and 1 big down day each week. By the time your dad or frankly any of us realize the bear market is finished, we will be up 30-40%. I know this is coming I am just not sure which year.

If the thought of sticking him money back in balanced retirement fund scares him to death,than a reasonable approach would be to take 20% of the money and added back to the 2020 fund each month.
March 2, 2009 6736 Dow -320
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Every year Warren Buffett writes a much anticipated shareholder letter. Since his company Berkshire Hathaway (BRKA) is my largest stock position I (along with every stock market pundit and wanta be pundit) read it with great interest. I won't comment much on the letter, but I will try to analysis the stock compared to historical levels based on the annual report.

On Feb 28, 1999 BRKA stock closed at $71,100 a share, ten years latter it closed at $78,600 a 10% gain over 10 years. Hardly a way to get rich, albeit a much better than an investment in the S&P 500 over the same period. The obvious question is BRKA a good buy now. The answer is I don't know for sure.


In fact, I should warn any FB friends that while in theory I know a fair amount about investment, my track record for the last year or two has been as bad as anybody else's down 28% in 2008 and 2009 is starting off horrible. Or to put it another way doing the opposite of what I did last year would be a pretty great way of become rich ....
[Lengthy analysis of Berkshire arguing it was severely undervalued]
...
Still I can state that Berkshire Hathaway is a heck of a lot better investment today than 10 years ago, and I think that is true of most stocks. Now this is pretty much a duh, but as the late Paul Harvey said here is the rest of the story...

I am perfectly happy to take the risk that an investment in company like Berkshire will pay off in the long run, better than loaning my money to Uncle Sam or a bank at couple of percent. I wouldn't be surprised to see another 25% drop in the market, and I am mindful that market can remain irrational longer than you can remain insolvent, but eventually sanity will prevail
March 10,2009 Dow +379 6,926.49

from the Call the bottom thread. Dow 12,200 looks brilliant even if it is 1 year late
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Running man what is the second number after our predictions? For example I am listed at 5500 [My bottom call]

FWIW, I really hope I am wrong in this poll, and right in the one I started a few months ago. Dow 12,200 at the end of the year.

I hope today puts some fear into the bears. If you try and time the market, and somehow we string two or three days like today in the week you could miss a 20% move.
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Old 03-09-2011, 05:22 AM   #37
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Selection bias. If we were to interview refugees at the end of a long, arduous journey, we might conclude that their people are the hardiest folks on earth, but that would be ignoring the huge population lost in that journey.
+1. Or why members of a chess club are better at chess than the general population.
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Old 03-09-2011, 05:29 AM   #38
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Either this group has selective memory, there's a selection bias in the responders, or we are the most brilliant group of investors the world has ever seen.

I'm guessing it's not #3.

Well you joined in July 2009.
I went back and looked at all of my posts from 9/2008 to 3/2009 with the word market. Pretty much without exception. I said things will probably get worse before they get better, but in a few years they will be a lot better.

There were many others in the stock and FIRE and Money forums saying basically the same thing. Then you add a couple of smart poster warning about the coming bank/real estate problems in late 2007, early 2008, and I am voting #4,and group who is uncommonly wise about money.
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Old 03-09-2011, 07:18 AM   #39
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I followed my investment plan and did nothing.

Since I retired in early 2007 and as part of my plan set up tax deferred MM accounts to equal 3-4 years in gross income for retirement. I simply drew from those accounts during the downturn.

When things started getting better, I harvested gains to add back into my MM accounts.

Tracking my/DW's IRA returns since 1982 and including YTD 2011, we show three negative return years. That's a 10% failure rate over a 30-year period (including YTD as a full year ).

Nothing was sold or repositioned, as was also the case in the 1987 or 2001-02 dowturns. Of course, during those years I was still wo*king and had another primary income source - not like today, which is done by my investments.

I hate to use the term "stay the course" as used in another forum, but that's what we did, and continue to do...
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Old 03-09-2011, 07:28 AM   #40
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I just sat tight all the way down and sat tight all the way up. If I learned anything in 2000/2002 and 2008/2009 it was that I can tolerate a fair amount of volatility. I worry that HaHa may be right and the next time may be different (negatively). But I don't see any sensible alternatives to what I am doing as the future approaches.
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