More Worried About Markets Now Than Any Time Since 2009

[34rlsa]

What Does the Market Know?

IMO... this quote sums it up best:

"Even in the best of times, when investors are driven by fundamentals rather than psychology, markets show what the participants think value is, rather than what value really is."

 

[Totoro]

IMO... this quote sums it up best:

"Even in the best of times, when investors are driven by fundamentals rather than psychology, markets show what the participants think value is, rather than what value really is."

In addition, value is a relative concept that differs between individuals, even in stock markets. Not to mention policies (e.g. don't buy evil companies, have to rebalance) and events (e.g. death of family member or oneself).

And prices are set at the margin: the most pessimistic owner sells to the most optimistic buyer.

Whoever dreamt up that EMH must have been on serious mind-altering substances.

 

[Gone4Good]

I don't agree, because I don't accept the premise that the professional money managers have a higher IQ than the average investor. I suspect that the average buy and holder has at least as high an IQ as a person who convinces himself he/she can beat the market regularly.

I'm not sure we disagree as the author is clearly making the argument that smarter than average people (presumably him and, of course, you dear reader) can beat the market if they avoid becoming emotional.

 

[ERD50]

I don't agree, because I don't accept the premise that the professional money managers have a higher IQ than the average investor. I suspect that the average buy and holder has at least as high an IQ as a person who convinces himself he/she can beat the market regularly.

The pro money managers don't need to convince themselves they can beat the market, they only need to convince their potential customers!

-ERD50

 

[jim584672]

I have been watching the markets minute by minute lately. I can't help feeling like a huge crash is coming very soon, maybe next week. Why? Unexplained European bank weakness, China is collapsing, non-oil junk bonds VERY weak, gold exploding, NIRP end game for central banks shows no more bullets in the chamber, markets moving in ways not explained by the current news. When Fisher made his four hikes statement this was a signal that the Fed will collapse it.

 

[NYEXPAT]

I hope you are right, I just started shorting the S&P late Friday.

 

[W2R]

I have been watching the markets minute by minute lately. I can't help feeling like a huge crash is coming very soon, maybe next week.

It's going to happen some day. And when it does, we really aren't going to know it's coming (especially since the doom'n'gloomers have been predicting it consistently and incorrectly for so long).

But it will happen. It will slam us hard.

And then, if we are smart enough to not sell low, when it recovers we will too, and we'll be better off than ever.

 

[audreyh1]

I have been watching the markets minute by minute lately. I can't help feeling like a huge crash is coming very soon, maybe next week. Why? Unexplained European bank weakness, China is collapsing, non-oil junk bonds VERY weak, gold exploding, NIRP end game for central banks shows no more bullets in the chamber, markets moving in ways not explained by the current news. When Fisher made his four hikes statement this was a signal that the Fed will collapse it.

You can't explain short-term market movements - and certainly not from the news. Expecting markets to be "logical" is an exercise in total frustration.

 

[jim584672]

I really don't go by news, but price only. The price movements alone are what is worrisome.

 

[Marc]

I have been through 1987, 2000, and 2008 without any panic or really worrying much; for some reason, the news of the death of Justice Scalia yesterday sent financial shivers through my spine. For the first time, I actually fear that 35 years of living smartly and saving for retirement could be for naught if the government runs amok.

Marc

 

[jim584672]

On a grand scale, Scalia wouldn't have much impact on containing a government run amok.

 

[Marc]

On a grand scale, Scalia wouldn't have much impact on containing a government run amok.

Not on his own, but an unfettered federal government can make life real bad.

 

[M Paquette]

Let's just worry about the markets here, and avoid the whole what-if fantasy world of worrying about what might or might not have happened, or will happen, in the event certain judicial or political concepts are reified.

We all like bacon, but perhaps not here.


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[Mulligan]

I have been watching the markets minute by minute lately. I can't help feeling like a huge crash is coming very soon, maybe next week. Why? Unexplained European bank weakness, China is collapsing, non-oil junk bonds VERY weak, gold exploding, NIRP end game for central banks shows no more bullets in the chamber, markets moving in ways not explained by the current news. When Fisher made his four hikes statement this was a signal that the Fed will collapse it.

I may not feel quite the angst you do, Jim, but with 6% of my money in Total Stock Index I am not far behind. Outside of decent side bet on a beaten down still profitable ag company that has dropped 50% already, most of my money is in illiquid utility preferreds. History has shown them to be considerably more immune to the overall stock market. They don't even mirror the movement of their common stock sister issues.


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[ejman]

Good heavens. And we are supposed to be the sane ones at this board? Don't just stand there. Panic! Lets see, Tokyo is up over 6% - Run for the hills!

 

[34rlsa]

Good heavens. And we are supposed to be the sane ones at this board? Don't just stand there. Panic! Lets see, Tokyo is up over 6% - Run for the hills!

You can't explain short-term market movements - and certainly not from the news. Expecting markets to be "logical" is an exercise in total frustration.

Case in point from tonights Bloomberg headlines:

Japan’s economy contracted in the final three months of 2015 as the nation struggles to break free of a cycle of expansion and contraction despite more than three years of the Abenomics program.

Japan's Economy Contracted Again in Final Quarter of 2015 - Bloomberg Business

 

[unclemick]

Good heavens. And we are supposed to be the sane ones at this board? Don't just stand there. Panic! Lets see, Tokyo is up over 6% - Run for the hills!

Of Course. Football is over til next season. Will Peyton really retire? Should I switch to the Chiefs as 'my team' now that I'm pretty much settle/married in KC? Should I buy/sell 'a few good stocks' or is that just shifting deck chairs on the Titanic?



heh heh heh - meanwhile the big dog on the porch is Target Retirement with those Vanguard computers automatically re-balancing their little electronic hearts out while I ponder these great questions. . It only took 40 years of investing to figure out maybe I should go full auto lifecycle index fund.

 

[marko]

Good heavens. And we are supposed to be the sane ones at this board? Don't just stand there. Panic! Lets see, Tokyo is up over 6% - Run for the hills!

+1
Panic? We don' need no stinkin' panic!

The way I look at it 2008 was an odd blessing. It showed me that even if the (almost) worst happens, things [-]straighten themselves out[/-] come back to an equilibrium pretty quickly.

As far as the current news cycle, things never turn out as dire as they're supposed to be and, as always, those with resources (financial or intellectual) find a way to prosper.

I'm always reminded of my notorious granddad who went out in the midst of the 1930 Depression and bought up foreclosed property.

 

[karen1972]

I feel like people are in the 7 year cycle panic.. ie because it "should be due any minute now" which in itself could be self-fulfilling. To me this is 100% based on oil.. So until Opec figures out how to slow the oil production and get oil prices back above $40/barrel, there will be a continuous selling of investment by these countries to raise cash for day-to-day expenses.. they have a serious cash flow issue right now and their trillions in profit are sitting in the various markets having to be liquidated.

So I don't think that will cause a "crash" but a continuous slow bleed. Obviously this will put pressure on banks and US Oil which there will be bankruptcies and defaults; however, many banks can re-cover by just a simple minor increase in interest rates as they are poised to really profit from ANY upward movement in interest.

Given the serious nature of OPECs bleed..they will figure out a way to stop it, I'm assuming sometime in the next few months and then things will return to normal.

 

[audreyh1]

+1
Panic? We don' need no stinkin' panic!

The way I look at it 2008 was an odd blessing. It showed me that even if the (almost) worst happens, things [-]straighten themselves out[/-] come back to an equilibrium pretty quickly.

There were extraordinary measures taken to bring things back into "equilibrium" quickly. Don't discount that. Wouldn't have happened on its own.

 

[nun]

+1
Panic? We don' need no stinkin' panic!

The way I look at it 2008 was an odd blessing. It showed me that even if the (almost) worst happens, things [-]straighten themselves out[/-] come back to an equilibrium pretty quickly.

As far as the current news cycle, things never turn out as dire as they're supposed to be and, as always, those with resources (financial or intellectual) find a way to prosper.

I'm always reminded of my notorious granddad who went out in the midst of the 1930 Depression and bought up foreclosed property.

For anyone planning to finance retirement with a 60/40 portfolio, and requiring a 4% WR, a basic belief that future markets will perform at least as well as historical markets is required. So if you are relying on a 60/40ish portfolio you should not be bothered by a bear market because you know that the long term return of equities and bonds will provide your income. If you are worried maybe a 60/40 approach isn't right for you.

 

[nun]

I'm not familiar with how correlation is measured, but isn't it a statistical formula, rather than a chart?

Comparing the gradients of the two charts might be instructive.

 

[Mulligan]

Good heavens. And we are supposed to be the sane ones at this board? Don't just stand there. Panic! Lets see, Tokyo is up over 6% - Run for the hills!

Well, I should have mentioned, I just didn't do this. I have been all in on preferreds stocks for last 2 years. And before that mostly CDs and IBonds. So technically I am more aggressive now.


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[ERD50]

emph mine...

For anyone planning to finance retirement with a 60/40 portfolio, and requiring a 4% WR, a basic belief that future markets will perform at least as well as historical markets is required. ....

No, it is based on an outlook that future markets will perform no worse than the worst of the historical markets. Of course, there is no guarantee of that, so one should have some sort of plan to adapt if we do have a worst than historical worst case scenario.

If markets perform 'as well', on average, a 4% WR will end with a large pile for heirs or extra spending.

-ERD50

 

[nun]

emph mine...

No, it is based on an outlook that future markets will perform no worse than the worst of the historical markets. Of course, there is no guarantee of that, so one should have some sort of plan to adapt if we do have a worst than historical worst case scenario.

If markets perform 'as well', on average, a 4% WR will end with a large pile for heirs or extra spending.

-ERD50

"no worse than the worst" vs "at least as well", maybe the use of one phrase over the other is the difference between the pessimist and the optimist. But the point is well taken it's the bad years that matter, not the good. I think we agree that with the performance of past markets a 4% indexed WR and a 60/40 portfolio has a very high probability of not entirely depleting the portfolio after 30 years. So I don't understand why people have any worries at all about a short term bear market.......maybe that's a little disingenuous. The people that are not worried will probably be just fine, but it's the worriers that don't understand the statistics that go into the Trinity study and make bad decisions in bear markets that will claim a that 4% and stock markets don't work for retirement income.