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Various Investing Tricks to Maximize Pain
Old 12-12-2015, 12:34 AM   #1
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Various Investing Tricks to Maximize Pain

I know a few. Always be a bottom fisher. Prefer commodity companies. Oil and gas have worked really well lately, but mining gold, copper, uranium or just about anything in the ground can give pretty good pain. If it weren't for the exquisitely superior pain being inflicted by oil and gas in almost any guise, I'd say that mining stocks are actually very good pain givers. I used to think that agricultural commodities like fertilizer, and other stuff farmers inject with those fabulous tractors might give respite from the pummeling other stuff from the ground has been delivering. After all the world population is growing and people like to eat, right? But no, NPK also has been giving me a good kicking.

Worse is that none of these things seems to be bored by kicking, stomping and punching me, they aren't even looking tired of the game!

Ha
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Old 12-12-2015, 05:25 AM   #2
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That is indeed a painful list, Mr. Ha. You might want to include some high yield fixed income, especially the Third Ave Fund.
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Old 12-12-2015, 08:43 AM   #3
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There are two strategies when equities start to decline and inflict the pain: 1.sell asap and when you feel it is near a bottom buy in again (hard to predict where is the bottom and selling much lower is taking a loss). 2. hold through the storm and eventually it will go back again, sometimes with vengeance (risk of some companies may not survive the storm).
What is your way of dealing with it?
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Old 12-12-2015, 08:55 AM   #4
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I know a few. Always be a bottom fisher. Prefer commodity companies. Oil and gas have worked really well lately, but mining gold, copper, uranium or just about anything in the ground can give pretty good pain. If it weren't for the exquisitely superior pain being inflicted by oil and gas in almost any guise, I'd say that mining stocks are actually very good pain givers. I used to think that agricultural commodities like fertilizer, and other stuff farmers inject with those fabulous tractors might give respite from the pummeling other stuff from the ground has been delivering. After all the world population is growing and people like to eat, right? But no, NPK also has been giving me a good kicking.

Worse is that none of these things seems to be bored by kicking, stomping and punching me, they aren't even looking tired of the game!

Ha
How crummy! I think we all are feeling the pain right now, and your list takes the cake. But even though I mostly have just index funds, after yesterday I feel less than jolly, too.

On the other hand, having survived 2008-2009 (as we all did), it's also tempting tend to look back on that plummeting market and think that at least things aren't THAT bad right now.

VFK57, I survived 2008-2009 by just hanging on and doing nothing, and that is how I plan to survive any future market drops as well. But then, my investing strategy is different from Ha's, more of a semi-Bogleheads buy-and-hold index fund approach. I know my asset allocation is correct for me because I was not tempted to sell low, even in 2008, and I recovered from that drop pretty quickly. We heard many grim stories back then from those who sold at the bottom and consequently had to delay retirement.
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Old 12-12-2015, 09:15 AM   #5
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Do what I did in 2009. Had reached critical mass prior to 2008-9. Didn't know anything about investing. Had everything in all stock funds picked out by a relative years before. Saw the portfolio tank. Waited until what turned out to be rock bottom. Sold everything that wasn't an IRA and bought CDs. Missed most of the rebound.

So how did I get here? Eventually the CDs matured and I had to do SOMETHING with money. Meanwhile the IRA's grew. Got a series of high-paying jobs. Learned about asset allocation and staying the course.
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Old 12-12-2015, 09:33 AM   #6
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My bet on midstream oil pipelines has been painful... I'm not going to sell as I think what I own is valuable and necessary for the US economy. In the long term I think I will make money on this.

I'm going to keep reinvesting AMLP dividends as long as I have a capital loss. My excess w-2 income is being redirected to cash. So that if I needed money I would not have to sell any shares at a loss. My plan is to increase cash up to one year's living expenses. That should take me through 2016. I'll have to re-evaluate my strategy in 2017.
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Old 12-12-2015, 09:39 AM   #7
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.....So how did I get here? ....Got a series of high-paying jobs. ....
You left the bank and Mr. Drysdale? And after he treated you so nicely!
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Old 12-12-2015, 10:50 AM   #8
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It is interesting to look at the long time trend of commodity prices.


At present the CRB index is at 174.85, down over 60% from it's peak at 462 in 2008 when fears of QE causing runaway inflation were prominent. Commodity prices, unadjusted for inflation are now getting close to what were peak prices back in 1781, which is interesting enough just to think of that, peak prices seem to encourage long term production of commodities which then go into a prolonged leveling, historically speaking.
Looking at similar losses to what occurred historically back in the 1700-1900's you would expect an ultimate commodity decline of between 65-80 percent which from the peak of 462 means commodities as represented by the CRB index are likely to fall to 162-92, which in itself is a large range implying a further decline in commodities of between 7 percent if the fall is only to the top of the range to as much as 47 percent. Since the shortest time frame between peak and trough is 11 years for the commodity bear market it would appear there is a darn good chance there will not be a meaningful respite in prices until at least 2019.
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Old 12-12-2015, 12:00 PM   #9
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It is interesting to look at the long time trend of commodity prices.


At present the CRB index is at 174.85, down over 60% from it's peak at 462 in 2008 when fears of QE causing runaway inflation were prominent. Commodity prices, unadjusted for inflation are now getting close to what were peak prices back in 1781, which is interesting enough just to think of that, peak prices seem to encourage long term production of commodities which then go into a prolonged leveling, historically speaking.
Looking at similar losses to what occurred historically back in the 1700-1900's you would expect an ultimate commodity decline of between 65-80 percent which from the peak of 462 means commodities as represented by the CRB index are likely to fall to 162-92, which in itself is a large range implying a further decline in commodities of between 7 percent if the fall is only to the top of the range to as much as 47 percent. Since the shortest time frame between peak and trough is 11 years for the commodity bear market it would appear there is a darn good chance there will not be a meaningful respite in prices until at least 2019.

Once again Runningman, you think like me, except you support it with details, while my opinions come parroted from other voices. A few "experts" I have listened to reinforced what you were saying concerning cycles. Many commodity items such as iron and such were ramped up considerably to exploit long term China growth. This has dissipated somewhat apparently and overproduction could be a problem for several more years on the cycle.
Yes, like oil, the trend can and probably will reverse. But I am not smart enough to know which companies can/will survive the time and length needed.
Wealth destruction amounts just escapes my ability to comprehend. Who would have ever thought the Pittsburgh Steelers football team would be worth more than US Steel (market capitalization)? All they do is play with a football 10 times a year at home (including preseason) and produce nothing (Super Bowl championships, excluded).


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Old 12-12-2015, 12:06 PM   #10
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You left the bank and Mr. Drysdale? And after he treated you so nicely!
Now, was this before or after the Clampet family arrived from WV?
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Old 12-12-2015, 12:09 PM   #11
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People reaching for yield had been loading up on MLPs and high yield bonds. It's painful now for them too!

Every time I looked at commodities or real assets to add as an inflation hedge (I thought to use the Fidelity Strategic Real Return for exposure), I would think - well inflation isn't here yet, and that would stay my hand.

You're probably just too early.

And what about all those people loading up on gold in 2012? Ouch!
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Old 12-12-2015, 01:21 PM   #12
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People reaching for yield had been loading up on MLPs and high yield bonds. It's painful now for them too!

Every time I looked at commodities or real assets to add as an inflation hedge (I thought to use the Fidelity Strategic Real Return for exposure), I would think - well inflation isn't here yet, and that would stay my hand.

You're probably just too early.

And what about all those people loading up on gold in 2012? Ouch!
If dollar is strong (many factors and the Feds is not the last) Gold will be down as it is currently. Yet if dollar is weak (many factors including #1 Feds policies), Gold will go back to what it was, may be to 2012 level. Although I will agree that the Gold is very bad investment, it is just insurance against possibility of high inflation.
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Old 12-12-2015, 01:40 PM   #13
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I was looking at some of the High Yield ETF charts, yikes! That is pain.
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Old 12-12-2015, 02:04 PM   #14
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I was looking at some of the High Yield ETF charts, yikes! That is pain.
A good portion of that chart shows the years before the other nations of the world became industrial competitors (1750 - 1930). If there was "data" in the 1700's and 1800's it surely was not shared world-wide like it is today.
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Old 12-12-2015, 02:45 PM   #15
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II'd say that mining stocks are actually very good pain givers.

Ha
A co-w*rker of mine invested heavily in a Canadian Gold Mine, some low priced penny stock. He swore he would get rich once the mine took off.

By reading the "press releases" and other announcements, I presumed it was a couple of Russian college students in Toronto raising tuition money. The "company" existed for about 5 yrs then folded, so did my co-w*rker's pride.

No pain for me, just entertainment.

_B
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Old 12-16-2015, 12:23 AM   #16
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I also thought folks have to eat and the world population is increasing and increasingly rich, so can buy more food.

However my POT investment (fertilizer) certainly tanked, rather than blossomed !

I have dumped my short term corporate bond fund, might just replace it with BND.
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Old 12-17-2015, 12:03 PM   #17
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Great thread title Ha!

Maybe 2016 will be better. Unlikely to be worse.
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Old 12-17-2015, 12:33 PM   #18
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In my case, the pain maximizers I have been using were energy MLPs and Energy Bonds.

Now that the pain has permanently set back my IRA growth progress, it was time to come off the medication. Which I did 2 weeks ago. I feel better already.

Now, can only hope that the IRA balances regain some of their previous levels before RMD arrives in several more years.
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Old 12-17-2015, 02:01 PM   #19
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Pain is an element of investing. Some of us feel it at a very low threshold.

So for me it has been a journey to get to know myself and how I react to "negative tracking error". That is why I invest the way I do with a fair amount of market timing thrown in but at the same time a fair amount of buy and (almost) hold. Even if one gets the timing right on moving out of a negatively performing asset, there comes a time when that asset reverts to the mean i.e. it outperforms the alternative asset.

When it reverts it can be very quick or somewhat slow and there is no way to know ahead of time what will happen. So there may indeed be pain in trying to get back in. That is why one needs a plan and to realize that statistically one cannot avoid all losses.
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Old 12-18-2015, 05:55 PM   #20
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Experiencing pain is why I tend to only invest in the few investments I can best understand. Stock prices don't always move in ways that make sense. I tend to stick to value funds and , some real estate and the SP500 index. If I can't understand a particular asset class or investment I pass it up. You have to know what you don't know. There is a lot I don't know.
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