What would you buy if another 2008 happened?

[trouthog]

Yes for us do what we did in 2008. Rebalance and turn noise off so I can sleep. 20 months retired. Great forum thanks


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[Running_Man]

There are also many other structural reasons to think a historical CAPE value is not directly comparable to today:

Swedroe: Key Market Value Metric Outdated | ETF.com

The author (Swedroe) thinks that the cumulative effect of all these changes might make the historical CAPE of 16 roughly equivalent to a CAPE of 20 today. I've seen other experts also talk about these same issues but don't recall seeing anyone else put a real number on the size of the effect (e.g. 20/16 = 25% inflation in CAPE).

SWEDROE is a very strong advocate of always investing in the market, while he likes index funds he wants you to pay him 1% to manage your index funds while criticizing managed funds as not worthy. Now to his main argument - The Federal Reserve and the SEC and the excellent work they do have restricted large volatility resulting in a 25% increase in the value of the stock market because company earnings are now more sure. Now this is stated as we have the largest drop to start a year in the history of the stock market - ever. 8 of the largest single day percentage drops, including the largest ever have happened in the last 30 years.

His argument is also that real growth in the economy is much more assured and as such we should have an increased PE ratio for that, yet this recovery is the slowest growth in GDP in history, shouldn't slower real growth mean a lower PE not higher PE. In 2007 GDP was 15 Trillion 8 years later it is 16.4 Trillion a nine percent gain. In 1929 GDP was 1 trillion 8 years later it was 5 percent higher at 1.11 trillion. The truth is our economy is recovering no better than it did during the greatest depression of all time. Commodities are in an all time slide in price, none of what he is saying makes any sense but sounds good and believable. It is what a manager says to keep his client herd in the pen.

The worst start to a year in the stock market must mean something after a historic collapse in commodity prices, which were presaged by historic collapses in shipping rates which has led to lower shipping costs and leading to overcapacity in China now ready to sell goods at ever lower prices in the United States. On the top of all this is a population that is aging in the United States and less able every year to do as Johnathan Clements feels they should be able to do: cheer declining stock prices as they need 4 percent of their portfolio every year.

If there is another 2008, it will not be 2008 it will be an S&P 500 at 670 with the federal reserve holding 4 trillion in useless debt and the government bankrupt and the percentage of the population working coming into untenable percentage of the population. This will be an interesting year.

 

[OrcasIslandBound]

Seems like even more doom and gloom then even I was thinking.

I think I'll review my books on Preppers, and figure out how to preserve gasoline.

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[Moneygrubber]

GE APPLE


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[photoguy]

SWEDROE is a very strong advocate of always investing in the market, while he likes index funds he wants you to pay him 1% to manage your index funds while criticizing managed funds as not worthy. Now to his main argument - The Federal Reserve and the SEC and the excellent work they do have restricted large volatility resulting in a 25% increase in the value of the stock market because company earnings are now more sure. Now this is stated as we have the largest drop to start a year in the history of the stock market - ever. 8 of the largest single day percentage drops, including the largest ever have happened in the last 30 years.

His argument is also that real growth in the economy is much more assured and as such we should have an increased PE ratio for that, yet this recovery is the slowest growth in GDP in history, shouldn't slower real growth mean a lower PE not higher PE. In 2007 GDP was 15 Trillion 8 years later it is 16.4 Trillion a nine percent gain. In 1929 GDP was 1 trillion 8 years later it was 5 percent higher at 1.11 trillion. The truth is our economy is recovering no better than it did during the greatest depression of all time. Commodities are in an all time slide in price, none of what he is saying makes any sense but sounds good and believable. It is what a manager says to keep his client herd in the pen.

And yet this whole thread is filled with posts about what people would buy if a drop like 2008 repeated. Almost everyone would pile into equities it seems. This attitude toward market bears is everywhere on this board and the standard advice here is just to rebalance, carry on, nothing to see, life is normal, the market will recover. How could this be so unless we were supremely confident in our financial systems?

As for Swedroe, he is fairly predictable and typically follows academic research -- if he advocates for something, generally there's good evidence for it and multiple independent studies that back it. I personally find this very helpful because I don't have the time or inclination to read everything myself AND I think he has a good head for identifying potential issues like publication bias, survivor bias, multiple-testing bias, modeling gotchas, etc. I know some people aren't fans of academic research in finance, but I think even though a ton of crap gets published (Sturgeon's law applies), the process as a whole is pretty robust.

The worst start to a year in the stock market must mean something after a historic collapse in commodity prices, which were presaged by historic collapses in shipping rates which has led to lower shipping costs and leading to overcapacity in China now ready to sell goods at ever lower prices in the United States. On the top of all this is a population that is aging in the United States and less able every year to do as Johnathan Clements feels they should be able to do: cheer declining stock prices as they need 4 percent of their portfolio every year.

Perhaps this is true. But sometimes a bad run of luck is just that.

If there is another 2008, it will not be 2008 it will be an S&P 500 at 670 with the federal reserve holding 4 trillion in useless debt and the government bankrupt and the percentage of the population working coming into untenable percentage of the population. This will be an interesting year.

FWIW Swedroe is actually forecasting low expected returns for US equities. A deep bear would be consistent with that.

 

[Papa bear]

I'm buying a lot of rental real estate. Leverage everything to the max! For us still in accumulation, come on correction!!