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Roller Coaster
Old 10-13-2014, 02:52 PM   #1
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Roller Coaster

What do you think the market volatility means?

Though I watch, and read... Can't make much sense.

Is it Historical? Charts? World situation? War? Ebola? Oil Prices?
China? World Bank? Fed? Quantitative Easing? Cyber Security? Elections? Housing? Derivatives? Banking fears? Earnings? Profit taking? Depression fear?
Jobs?

All of the above, but really... why the roller coaster? Is that the way a correction begins? Worse than a correction? Buying opportunity?

Crystal ball? Where will the market be at the end of October?
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Old 10-13-2014, 03:31 PM   #2
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I am always amazed at the diametrically opposed opinions of market experts. For every one that says The End Is Near, and we will see even more dramatic falloffs of the market, there is one that says this is a momentary blip, and the DJIA will be at 20,000 in no time. Each of them has their stack of data, charts, followers and justification to support their hypothesis.

I believe that the day to day stock market volatility has as much to do with the underlying fundamentals of business as it does with the weather or US Ebola outbreak or wars in other countries.

That being said, it is difficult to watch day after day of triple digit decline. For once in about 3 years, I have stopped looking at my daily balances, knowing that eventually it will come back and all will be right with the world. Eventually just may be a few weeks or a few months. I'm staying the course; timing the market would mean that I would have to make two correct decisions - when to get out and when to get back in. Odds that I get both right are pretty small (25%).
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Old 10-13-2014, 04:14 PM   #3
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Alas, there are no crystal balls. I certainly don't have one.

That said, extreme market volatility usually accompanies a breakdown in confidence; and that, a breakdown in fundamentals. I personally don't like this market at all and am all in cash.

I know it's a belittled viewpoint here, but I honestly believe we'll look back from a little ways down the road and fervently wish we had a do-over. A lot of people will be crushed.

I wish it weren't so...
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Old 10-13-2014, 04:39 PM   #4
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Crystal ball? Where will the market be at the end of October?

I think it will be freaking out at whatever the latest "disaster" is.
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Old 10-13-2014, 04:49 PM   #5
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...

Where will the market be at the end of October?
Probably yelling trick or treat at us.
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Old 10-13-2014, 04:57 PM   #6
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I have never been able to figure out why certain things make the market react like it does.

One thing I seem to see as observation, the market is a bit of herd mentality and self-fulfilling prophecy. So if something happens that is generally viewed as good, then market result is a positive outcome as market follows perception of good news. Same for bad, if consensus is bad, the market result is down. Now figuring out what those perceived good and bad news items are is the hard part!

I just would like the exaggeration of the market reactions to be a bit more muted.

One final thought, it really does not matter much what the market does between your buying date and selling date. What does matter is the value difference between those two dates. Of course this is simplified and is disregarding dividends and inflation effects.

Also, for most of us with longer term money in the market, we are playing on house's money, to use a gambling analogy. Yes it is losing money, but it is giving up gains, not principal.
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Old 10-13-2014, 05:05 PM   #7
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I just would like the exaggeration of the market reactions to be a bit more muted.

Although I am not a Vanguard person (by circumstance), I think that is what the "stay the course"-ers are trying to do.
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Old 10-13-2014, 05:09 PM   #8
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Jim Cramer appears to be losing weight. I take that as an extended downturn in the market. About two weeks.
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Old 10-13-2014, 05:25 PM   #9
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I have never been able to figure out why certain things make the market react like it does.

One thing I seem to see as observation, the market is a bit of herd mentality and self-fulfilling prophecy. So if something happens that is generally viewed as good, then market result is a positive outcome as market follows perception of good news. Same for bad, if consensus is bad, the market result is down. Now figuring out what those perceived good and bad news items are is the hard part!

I just would like the exaggeration of the market reactions to be a bit more muted.

One final thought, it really does not matter much what the market does between your buying date and selling date. What does matter is the value difference between those two dates. Of course this is simplified and is disregarding dividends and inflation effects.

Also, for most of us with longer term money in the market, we are playing on house's money, to use a gambling analogy. Yes it is losing money, but it is giving up gains, not principal.

Embrace volatility. A large reason that stock provide higher returns over bonds is precisely because the market is a scary place like a roller coasters. Now I understand that people like roller coaster in real life but not at all when it comes to their money.

People are much more comfortable getting a steady 5% in a CD (the good old days sigh), that risking losing 5% in a week in the market. They don't invest in the market and let those of us who do reap the rewards.

A big +1 for the rest of the post.
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Old 10-13-2014, 05:28 PM   #10
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Cramer is a disaster that has and still is happening.

I see his mantras all the time. Dry powder. Sell the rips. Homework. Buy, buy, buy! Sell, sell, sell!

Maybe the best was "sell stocks!" In 2008.
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Old 10-13-2014, 05:37 PM   #11
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I have never been able to figure out why certain things make the market react like it does......
One final thought, it really does not matter much what the market does between your buying date and selling date. What does matter is the value difference between those two dates. Of course this is simplified and is disregarding dividends and inflation effects......
Also, for most of us with longer term money in the market, we are playing on house's money, to use a gambling analogy. Yes it is losing money, but it is giving up gains, not principal.
Exactly!
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Old 10-13-2014, 05:50 PM   #12
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Today's market is not the same animal that used to be. I just saw Home Depot at almost 90 which I think is crazy. This market went up because of the Fed just printing money. Either the Fed will have to keep printing until eternity in order for the market to keep going up or companies will start having to actually give raises in order to increase purchasing power. Do not forget that most companies are almost done with their financial engineering and after that not sure what is next!!!
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Old 10-13-2014, 06:01 PM   #13
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Clearly it is because I invested a large sum of money recently and that is my payback for waiting for ages to do that. Not being serious on that, by the way Not too happy about it but for now I am with team "stay the course" as well.
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Old 10-13-2014, 06:08 PM   #14
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Embrace volatility. A large reason that stock provide higher returns over bonds is precisely because the market is a scary place like a roller coasters. Now I understand that people like roller coaster in real life but not at all when it comes to their money.
Exactly. I am embarrassed to think about how long it took me to learn that.
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Old 10-13-2014, 06:13 PM   #15
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Alas, there are no crystal balls. I certainly don't have one.

That said, extreme market volatility usually accompanies a breakdown in confidence; and that, a breakdown in fundamentals. I personally don't like this market at all and am all in cash.

I know it's a belittled viewpoint here, but I honestly believe we'll look back from a little ways down the road and fervently wish we had a do-over. A lot of people will be crushed.

I wish it weren't so...
Well, I guess that means you will just go broke slowly.
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Old 10-13-2014, 06:44 PM   #16
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What do you think the market volatility means?

Though I watch, and read... Can't make much sense.

Is it Historical? Charts? World situation? War? Ebola? Oil Prices?
China? World Bank? Fed? Quantitative Easing? Cyber Security? Elections? Housing? Derivatives? Banking fears? Earnings? Profit taking? Depression fear?
Jobs?

All of the above,
Yes - all of the above. I am continually fascinated by the verbiage regarding the "market" as if it is a living breathing thing. The market is going to do this or the market is doing that, or the market is taking a breather, etc.

It is nothing more than the assembled reactions of millions upon millions of of individuals all with different viewpoints and concerns regarding everything we are bombarded with daily. It is a recipe for total chaos.

Unless you have taken Isaac Asimov's Foundation Series a little too seriously and think you are a present day Hari Seldon predicting the future with Psycohistory - just relax, you signed up for regular turbulence that no one can predict. The only thing that makes sense to me is that you believe that in our growth-based global economic system with ever increasing world population, companies in aggregate will be worth more in the future than they are today. Diversify, control expenses, and cover your eyes if it hurts sometimes.

Thats not to say that if your investment horizon is out far enough you can't take a little advantage of these downers to add a little extra to your monthly DCA while in the accumulation phase. It worked very well for me, and now I can RE. I am also recommending my kids do the same. It was hard to write those checks in '08 & '09 but am so very glad I did.
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Old 10-14-2014, 11:31 AM   #17
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This pattern reminds me of the pattern that preceded the last meltdown(2008). Up 100, down 200. Repeat, repeat... Talking heads saying all sorts of different things. More deflation talk than usual. Oil dropping. Oil plummeted in the last meltdown right? I'm starting to panic somewhat. Just guessing. I'm waiting for an "up" day to move a lot of my equity money back into warm cozy stable value zone.
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Old 10-14-2014, 01:24 PM   #18
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No idea what's causing the consternation in the market, but since I'm still in the accumulation phase, I welcome the opportunity to buy cheap(er) stocks. When the roller coaster goes down, that's when I yell "Wheeee!"

I might feel different if I was living off these funds, but if I were feeling really nervous, all that would tell me is that my asset allocation was incorrect. My risk tolerance is high, and as far as I can recall, I've never sold on a dip. I have tried to move extra cash into a dropping market (the extent of my market timing), and missed the bottom by a lot. C'est la vie. Still came out ahead in the end.

With a 12-14 year time horizon before ER, we're 90% equities. I'm sleeping just fine, so far.

Someone here noted that they couldn't really make out this latest dip on the 20 year chart. I think that's a wise way of looking at it.
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Old 10-14-2014, 01:28 PM   #19
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There is a nice volititity index VIX. It think the remarkable thing is how little there has been in the last 2 years.

https://www.google.com/finance?q=IND...INDEXSP%3A.INX
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Old 10-15-2014, 11:11 AM   #20
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You gotta have a tough stomach to handle this volatility. Markets will either try to "scare the weak ones out of the market" or "wear them out" with its volatility. Once all weak ones have thrown in the towel, the market will reward those who had the tough stomach to stay the course. I'm not selling even though I do not like the bleeding.
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