End of 2nd QTR loss question

[OldShooter]

... Why is the 'loss' always from the market peaks?

Yeah. That's a funny thing. As the market is peaking, people start complaining that the prices are too high and all the magical references (CAPE, P/E, etc.) prove it. But then after the market takes a dump everyone starts rooting for a recovery to the high prices that they recently criticized as being too high.

 

[easysurfer]

I haven't lost anything. There can be no loss unless you sell, and I have no interest in selling anything now. I still have the same number of shares I started with.

See? My way of looking at it is just as valid as another.

+1

Same here. Nothing but paper losses.

 

[OldShooter]

... Administration policies certainly do and can impact gas prices, as we've seen over the last 5 years. ...

Recently gas prices are up quite a bit. Pls explain how the administration's actions have caused or affected that. I haven't see that but maybe I have not been watching carefully enough.

 

[Aerides]

Recently gas prices are up quite a bit. Pls explain how the administration's actions have caused or affected that. I haven't see that but maybe I have not been watching carefully enough.

Let's not get into "the administration" stuff - it's a fast track to political ranting and we need none of that.

 

[NW-Bound]

Yeah. That's a funny thing. As the market is peaking, people start complaining that the prices are too high and all the magical references (CAPE, P/E, etc.) prove it. But then after the market takes a dump everyone starts rooting for a recovery to the high prices that they recently criticized as being too high.

We want the CAPE to justify the high stock price. You want to have both. That's the definition of nirvana.

But if one can only have one of the two, then of course he prefers the high stock price. Screw the CAPE.

 

[madatrub]

Recently gas prices are up quite a bit. Pls explain how the administration's actions have caused or affected that. I haven't see that but maybe I have not been watching carefully enough.

We delayed KXL in 2015. We then cancelled it in 2021. That would have made a tangible difference in our reliance on OPEC+ oil, including russia and would have dampened the impact to shutting down their barrels.

We continue to slow roll restart permits associated with plant/unit startups, despite the current admin pointing the finger at the refining sector.

We changed Ethanol blending requirements from 10 to 15%, which has a significant MPG hit across fuel blends.

Conversely, the admin in 2016 pushed more production, worldwide, leading to Crude prices hitting $40-70 pre-pandemic. Some could argue we encouraged too much production, which exacerbated damage during covid, which, as seen, had a huge impact on the business, led to 5 refineries shutting down, and also contributed to the predicament we find ourselves in.

 

[marko]

I haven't lost anything. There can be no loss unless you sell, and I have no interest in selling anything now. I still have the same number of shares I started with.
.

+1. And yet this month’s dividends came in about 20% higher than last June.

 

[Dash man]

I only have to go back to 1/2020 to see we’re up over seven figures since then. Look at percentages and not dollars over time and you’ll realize this isn’t that big a drop. The higher the markets go, the bigger the swings will be.

 

[Chuckanut]

1974 - big BEAR market down over 40%. It takes over a decade for the market to break even in real terms adjusted for inflation.

10/19/1987 - Market drops 20+% in one day. (Yes, one day.) - It took two years for the market to return from that loss.

Black Monday 1987
Black Monday is used most often to refer to the second-largest one-day percentage drop in stock market history. It occurred on October 19, 1987, when the Dow Jones Industrial Average dropped by 22.61%, falling 508 points to 1,738.74. The S&P 500 fell by 20.4%, dropping 57.64 points to 225.06. It took two years for the Dow to regain this loss.1

The stock market had been in a bull market for five years. It had risen by 43% in 1987 alone, reaching a peak of 2,746.65 on August 25, 1987. It continued to stay in a slightly lower trading range until October 2. Then, it began falling dramatically. It lost 15% in the two weeks leading up to Black Monday.

 

[RobbieB]

I'm glad I only lost fake money and not the real stuff.

 

[SJhawkins]

Yeah it's not fun to watch your investments tank but it is what it is. Sanitize some cash for a few years of living expenses then have a family pizza and an adult beverage.

We were buying ibonds when they were not cool, we could live on them for 2-3 years if needed now. We have 'lost" in the market to buy our own home a couple times now! Yet life moves on, will all be fine, I hope anyway!

 

[Sunset]

OP - I just used some of that fake money of mine to buy some more stocks as they are on SALE at 25% off...

I also pulled one over on the gov't and lent them some fake money for 3 months, Fools will probably pay me back with real cash

 

[luckydude]

Okay, I'll be careful not to violate any forum rules pertaining to politics but I have to ask, now that we've started the 3rd quarter of 2022, How much in value have you lost from your stock investments?

After looking this morning, I'm at a 25% loss from my personal stock portfolio for 2022 and I don't see any end in sight. For me, this is real money I invested, not simply a 401k like many others might have. And yes, I realize a stock market correction is both normal and expected but how long are we going to watch it go down everyday before anyones willing to really say anything? It's almost like if we do, we're all of a sudden one of "those" people.

I'm also diversified in all my other investments thank goodness so I'll be fine in the long run but as I get older these huge hits certainly hit home harder then let's say the last recession. I'm just surprised that we don't hear more from the millions of other mainstream Americans in this same situation. It's almost like how dare you blame this on this person or that person. Personally I do.

Let me know when you've figured out who is to blame for the market nosediving this year. I will be sure to post a negative review on Yelp for this individual.

 

[ImThinkin2019]

Back when my hair was not grey, and I was about 25 lbs lighter, (translation 25 years ago), someone told me "if you invest in the stock market you have to be able to tolerate losing 30% of your money".

Smart guy.

Looking at historical market returns we see he was right. There are some periods when stocks retreat for one or even several years. Followed by increases that eventually wipe out the losses.

Maybe someone can time the market, but for us, we've learned that our ability to predict what the market will do is poor. So we just set our AA and live our lives.

This is a time in which the income portion of our portfolio gives us comfort. For the last 10 years that side of the portfolio seemed less interesting, and we were "not smart" to have it. Now the tables have turned!

 

[DrRoy]

I'm glad I only lost fake money and not the real stuff.

$1 in my 401K is still $1.
Yes I am down a lot of $. I noticed though, even after my withdrawals for 2020, 21, and 22, I have more that at the peak in 2019.

 

[FLSUnFIRE]

The only realized investment returns so far this year is positive, a couple thousand in dividend/cap gains distributions so I have more cash and the same number of shares I started the year with.


To answer your intent, my NW is down by about 20% from 12/31/2021; I spent about 1% of that so I can blame the market for 19% of paper "losses" in the last 6 months. If I go back a few years then the negative becomes positive.


A bit more interesting to me is my current NW is 124% of what it was when I decided to quit in 2020 before the COVID crash/OMY. My current NW is 86% of what it was when I turned in my notice and is 83% of what it was on my last day. Currently have a NW 41.5x my trailing 12 months expenses. If I was still working the market would bother me more as I'd be watching intently and viewing a drop as a delay in reaching FIRE (as I did in March of 2020). Now that I'm FIRED, I watch it but am somewhat detached... it's just interesting. Pretty much everything is filtered through the bliss of FI that it takes a lot to phase me. No, I don't "like it" and would love to have more BTD money but I've been investing in the market since 1996 when I bought my first DRIPs while in college. Volatility and risk is part of the cost of expected returns.

 

[Mark1]

Yup, I was a brilliant investor for most of the last 13 years, until those people screwed me up. It's their fault.

 

[Chuckanut]

OP - I just used some of that fake money of mine to buy some more stocks as they are on SALE at 25% off...

I also pulled one over on the gov't and lent them some fake money for 3 months, Fools will probably pay me back with real cash

The OP is going to regret comparing 'real' money to 401K money more than the actual losses.

Perhaps we should ease up. There are a lot of relative newbies out there who have never rode a real Bear market down to the depths of 20+% decline. It's happened several times in my life. As I posted earlier 1974 was close to a 50% decline. And 1987 was a 20% loss in one day after a few weeks of a losing streak. Not a good feeling.

 

[MichaelB]

Here’s a chart by Barry Ritholtz which gives a little more perspective to the current sell off. Lots of volatility over the years, and in comparison, this current decline doesn’t stand out as extreme. https://ritholtz.com/2022/07/nowhere-to-hide/

 

[savory]

As I think about these type of discussions during market losses, it leads me back to our discussions for responding to questions about taking a lump sum or the monthly pension. Knowing how a person might react in a market downturn would be a big driver for answering their question. The value of the pension vs lump sum does need to be considered but it is not the only consideration. There is comfort for many people when a stream of income continues even as investments are being reduced. Obviously, the income flow needs to be at a level that is significant as measured against expenses.

 

[OldShooter]

As I think about these type of discussions during market losses, it leads me back to our discussions for responding to questions about taking a lump sum or the monthly pension. Knowing how a person might react in a market downturn would be a big driver for answering their question. The value of the pension vs lump sum does need to be considered but it is not the only consideration. There is comfort for many people when a stream of income continues even as investments are being reduced. Obviously, the income flow needs to be at a level that is significant as measured against expenses.

You're talking about volatility tolerance here. I think you're largely right, but IMO fuzziness in distinguishing volatility and risk tends to confuse discussions on the ER forum.

First, when someone talks about "risk tolerance" they are often really talking about volatility tolerance. That's not at all unique to this site; it is common. The point where risk tolerance meets volatility tolerance is SORR. Absent SORR, though, there is no risk in volatility. In one's accumulation phase, volatility is actually desirable. A sensible AA is the easiest way to minimize SORR and buying when stocks are on sale is the way to exploit volatility to one's advantage..

Second, "risk" tolerance is discussed as if it was a fixed thing like a person's height. IMO, improving risk (aka volatility) tolerance is not only feasible, it is desirable. The easiest way to improve volatility tolerance, IMO, is to stay on the horse when it bucks. We did that in 1987 and have done it through every kerfluffle since. Now DW and I are to the point where Mr. Market's gyrations simply make us laugh.

So the prescription for the OP here is to understand that volatility is not risk and to work on increasing his volatility tolerance. A quick AA check for SORR insurance would be good too.

 

[Time2]

I'll give the exact same answer that I gave this morning to basically the same question to the other active thread that was asking the same general question. https://www.early-retirement.org/forums/f28/2022-investment-performance-thread-112573.html

My mom always told me if I can't say something "positive", just don't say anything at all. Soooooo,

So, there is nothing positive going forward?
Or is this avoiding politics?

 

[Qs Laptop]

A few thoughts:

The reality is that whoever occupies the WH has negligible impact on either stock prices or gas prices, so please grow up.

Generally speaking, I agree with you. However, when the corporate tax rate is cut from 35% to 21%, that definitely will increase earnings for corporations. When earnings are expected to increase for corporations the stock price can be expected to increase as well.

Its a little naive to think that any one single person can say or do anything that will impact stock prices.

Federal Reserve Chairman.

 

[pb4uski]

Generally speaking, I agree with you. However, when the corporate tax rate is cut from 35% to 21%, that definitely will increase earnings for corporations. When earnings are expected to increase for corporations the stock price can be expected to increase as well. ...

I see your point, but that required a joint effort by the House, Senate and the President to enact that legislative change to reduce corporate tax rates, so not one person, but perhaps one party in that specific case.

... Federal Reserve Chairman.

Another fair point, even though in reality the other members of the FOMC also need to vote on interest rate adjustments, so again, not one person.

And by the way, in both cases above, I think that is the way that it should be.

 

[Qs Laptop]

Not an individual person but when the Bureau of Economic Analysis releases the 2nd quarter GDP numbers on July 28th, indicating the second consecutive quarter of negative GDP, and thus officially placing the U.S. in a recession, I expect a market reaction.