Doom and gloom

[target2019]

Doom and Gloom. Must be a cocktail named that? If not, there should be one.

 

[Christine]

Doom and Gloom. Must be a cocktail named that? If not, there should be one.

I got a glass of juiced greens once from someone on one of the latest fads. It tasted like Doom and Gloom. Just add some vodka and there you go!

 

[easysurfer]

A good opinion piece in Marketwatch as to why we aren't smart enough to spot a market crash:

The psychology of money and investing is infuriating. Economists assume we’re rational beings, that we constantly evaluate cost and value to maximize utility. But too often we realize too late that the sort of thinking that once helped us survive a prehistoric moment of danger — when we were prey as much as hunter — doesn’t do much good when the danger is modern and longer term.

One problem investors face is the concept of the “anchor” price, first described by Daniel Kahneman and Amos Tversky. Regardless of the value of a share of stock, we tend to believe that value must be close to the only bit of information many of us have — the current price. This anchoring effect makes it easier to justify paying a wildly inflated price for a company that is operating at a loss or for a market that is hugely overvalued by any objective measure.

Another common fallacy investors face is herding, or the tendency to use the actions of others as a measure of sensible behavior. Fads, fashion, and stock-market bubbles are three examples of this mindset. When investors lose the sort of hard-nosed skepticism and difference of opinion that marks a healthy market, it becomes fashionable, and nearly unavoidable, for too many investors to buy too many stocks that have too little going for them.

If it were just psychological quirks that lead to runaway stock market rallies, the bubble might deflate itself slowly as the anchor price is gradually lowered and as financial fads and fashions change.

But the stock market isn’t a purely psychology exercise; too often the real world intrudes. Each modern stock-market crash has been precipitated by a catalyst that has little to do with finance and that catches us off guard. These catalysts push a system barely able to maintain equilibrium into chaos.

We’re not smart enough to spot a coming stock-market crash - MarketWatch

 

[audreyh1]

A good opinion piece in Marketwatch as to why we aren't smart enough to spot a market crash:

We’re not smart enough to spot a coming stock-market crash - MarketWatch

Having been through the dot.com and housing busts, and associated nasty bear markets, it's clear that most investors, include a horde of professional investors, don't see these coming. It's like mass hysteria - they are too busy partying. A few folks can point out metrics that no longer make sense, but most investors keep running with the pack while the going is good. Markets are very emotional, not rational. So, the party ends up continuing for far longer than the "rational" folks imagined, and if you make big moves based on your convictions, or what is logical you are often left behind or caught leaning the wrong way. "Markets can stay irrational longer than you can remain solvent" - something like that. It's true!

So instead of trying to predict anything, I stay broadly diversified and rebalance after a major market move instead of trying to anticipate one. At most I'm may make small shifts in AA if I think things have gotten out of whack, but never jump all out or all in.

 

[easysurfer]

Same here. I don't try to predict anything stay diversified and rebalance. Trying to out guess the ups and downs is a fool's game. My gut may say one thing, but I rebalance not according to my gut but according to unemotional percentage allocations.

 

[Clone]

My gut tells me that I am way overloaded in equities. My rational brain tells me that I have other income sources that mitigate the risk of being so heavy in equities.



My quarterly reports tell me that I'm a frickin' genius!

 

[YVRRocketSurgery]

Predicting the next correction/crash/bear market is a mug's game. One of the national Canadian newspapers had an article yesterday that discussed the increase in expert (like Bill Gross and Jim Rogers) forecasts of an impending market disaster. The counterpoint was that "major corrections seldom occur when people are looking for them and everyone’s anxiously hovering a finger over the sell button on their keyboard."

I'm not so concerned about regular gyrations of market corrections, crashes, and bear markets. However, I think we dodged a bullet in 2008. Hindsight is 20/20 but there were so many improper things going on in the background with complex linkages that even the Fed didn't seem to have a handle on. As retail investors, we're pretty much only along for the ride. We've benefited from loose monetary policy since the Great Recession but on the flip side, I do wonder if there's a piper to be paid.

 

[haha]

My quarterly reports tell me that I'm a frickin' genius!

Go with this one for sure.

Ha

 

[audreyh1]

Predicting the next correction/crash/bear market is a mug's game. One of the national Canadian newspapers had an article yesterday that discussed the increase in expert (like Bill Gross and Jim Rogers) forecasts of an impending market disaster. The counterpoint was that "major corrections seldom occur when people are looking for them and everyone’s anxiously hovering a finger over the sell button on their keyboard."

I'm not so concerned about regular gyrations of market corrections, crashes, and bear markets. However, I think we dodged a bullet in 2008. Hindsight is 20/20 but there were so many improper things going on in the background with complex linkages that even the Fed didn't seem to have a handle on. As retail investors, we're pretty much only along for the ride. We've benefited from loose monetary policy since the Great Recession but on the flip side, I do wonder if there's a piper to be paid.

Yes - no question about the bullet, it could have been much, much worse.

About paying the piper - well, I think that the loose monetary policy has not had the potential nasty repercussions for several reasons: slowing global growth, changing demographics reducing economic demand, requirements for banks to hold much higher "safe" assets, continued tight lending standards, companies holding much more cash on balance sheets, etc., etc. Also, the US does not exist in a vacuum - the international economy has a huge effect.

I can however see stocks deflating precipitously once US interest rates get high enough - maybe that's the piper that will need to be paid: asset inflation from extended low interest rates. The only good thing perhaps, is that would be normal and wouldn't necessarily cause a recession, even though one is overdue.

 

[Blue Collar Guy]

Tell the piper i already paid, and to go away.

 

[HFWR]

A glance at CNBC on any random day: guest "A" predicts a doubling of the market in five years, while guest "B" suggests the greatest depression is nigh. Luckily, I chose guest "C", and split my portfolio into 50% MREs and 50% Beaver-cheese futures...

In other DMT news, my BIV fund has been just outside my rebalance band for a while, but I was waiting for today's rate increase to buy. The fund went UP, not down, after the announcement...

 

[LOL!]

In other DMT news, my BIV fund has been just outside my rebalance band for a while, but I was waiting for today's rate increase to buy. The fund went UP, not down, after the announcement...

BIV went DOWN after the announcement. It did go UP before the announcement on inflation news. Here is the chart:

and the press release:
https://www.federalreserve.gov/newsevents/pressreleases/monetary20170614a.htm

 

[HFWR]

BIV went DOWN after the announcement. It did go UP before the announcement on inflation news. Here is the chart:

and the press release:
https://www.federalreserve.gov/newsevents/pressreleases/monetary20170614a.htm

Wasn't looking at intraday, just noted that the close was higher than the open.