Jack Bogle's dour forecast

[Beer-man]

Bogle did not talk about the ongoing correction.

People keep confusing short-term corrections with longer-term returns. The difference between them is like that between climate and weather.

It is not possible to predict when the next hurricane will hit Miami. But it is possible to track the average temperature, and see that it is creeping up from one decade to the next.

Brilliant analogy!

 

[NYEXPAT]

What data? I'm looking at Yardeni's nice report and by eyeball it looks like common corrections last maybe 60 to 90 days, and 100+ days is not uncommon.

He updates this daily: https://www.yardeni.com/pub/sp500corrbear.pdf

A proper correction averages 4 months with a decline of 13.8%. If you go back to late September that would bring you to mid Jan or about 45 days from here.

 

[DEC-1982]

I have a great deal of respect for Mr Bogle. Ditto for Professor Shiller. The question worth asking is "Is this forecast actionable"?

The issue is that markets can be irrational for a very long time, and can make forecasters look foolish in-spite of the very logical reasoning of the forecaster.

 

[DEC-1982]

I was just reading an article (bonds side) from realclearmarkets.com, well, it's actually a pointer to an article in forbes.com

"Against Predictions Of Biggest Names In Finance, Bonds Rally"

Names Jamie Dimon, Jeffrey Gundlach, Ray Dalio, Bill Gross, Paul Tudor. All these people are very very smart people.

From the article:
"The point is not to pounce on the predictions of prominent money managers, but to illustrate how prevalent the idea was on Wall Street that yields were set to rise. "

https://www.forbes.com/sites/nathanvardi/2018/12/07/surprise-the-late-year-bond-rally/#347667c32a95

 

[street]

Bogle did not talk about the ongoing correction.

People keep confusing short-term corrections with longer-term returns. The difference between them is like that between climate and weather.

It is not possible to predict when the next hurricane will hit Miami. But it is possible to track the average temperature, and see that it is creeping up from one decade to the next.

Very well explained once again. Thank you.

 

[NW-Bound]

I have a great deal of respect for Mr Bogle. Ditto for Professor Shiller. The question worth asking is "Is this forecast actionable"?

I think so.

It's not actionable in the sense that it helps you "buy low/sell high". But it helps you plan for the long term.

Many of us talk about going below 4% WR to be safe. Perhaps 4% WR is still OK, but one has to be prepared to see his stash going down and down as the years go by.

After all, historically, a 4% WR could deplete one's stash in 30 years, and the next 30 years may be a repeat of that.

The issue is that markets can be irrational for a very long time, and can make forecasters look foolish in-spite of the very logical reasoning of the forecaster.

Very true. But can we count on the irrationality to go on forever? When it reverts, it reverts in a violent manner.

To repeat my weather analogy, if you live in Florida and have had no hurricanes for 2 years, do you say it is all safe now, and build a flimsy house on the beach?

 

[Cut-Throat]

I have a great deal of respect for Mr Bogle. Ditto for Professor Shiller. The question worth asking is "Is this forecast actionable"?

If you think it is, you're not investing correctly.

 

[ERD50]

I have a great deal of respect for Mr Bogle. Ditto for Professor Shiller. The question worth asking is "Is this forecast actionable"?

...

That's my view. I can't argue that markets are not highly valued. I can't argue Bogle's estimate of 4% returns over the next decade (which I don't consider 'dour', more of a return to mean, no problem for a conservative WR).

But what should/could I do about it? Seems to me, same as it always was, just ride my AA through it all.

If he had forecast a 30~40% drop in the next 3 years, and you trusted that prediction, sure, keep some dry powder to avoid, and then jump in after that drop. But I'm not hearing that from Bogle, and I don't think he ever makes those sorts of predictions.

Like the earlier analogy, I hear Bogle saying, it's winter, it will get cold, not "it will drop below -20F the 3rd week of January in Northern IL".

-ERD50

 

[NW-Bound]

Yes. It's actionable in the sense that you should put away your summer clothes, and check that your snowblower is working.

 

[NW-Bound]

Ah, all this talk about weather makes me recall the song "Summer of 42". Perhaps a bit of soothing music will help calm us down.

The summer knows, the summer's wise
She sees the doubts within your eyes
And so she takes her summertime

Tells the moon to wait and the sun to linger
Twists the world round her summer finger
Lets you see the wonder of it all

And if you've learned your lesson well
There's little more for her to tell
One last caress, it's time to dress, for fall

 

[CDRE]

I'll bet someone in this ER community has dual formal education in both Finance and Meteorology and might just have what it takes to prognosticate the Market for us.

 

[NW-Bound]

Nah. Anyone out of diaper quickly learns that the sun sets and rises, that the seasons alternate between the heat of summer and the dreary cold of winter.

But he may have to be reminded of it, once in a while.

 

[ggbutcher]

To me, it's just a further reinforcement of the cyclic pattern.