Expect years of pain?

[Chuckanut]

I just read the following article and have been thinking. What does it prove? In my mind, it proves that one must be diversified since we have no way of knowing which area will thrive at what time.

Expect Years of Pain before Market Gain

[73ss454]

It proves that it's the same now as it's always been. Who really knows what's going to happen, it's always something. I'm sitting with my port, rebalance when need be and hope for the best. No Crystal Ball in my plan.

[Birchwood]

I think there will be a lot of pain, years of pain or stagnation before the market turns around.
The whole equity market may take some time to turn around.
The US market may take time to turn around.
45% of Americans are struggling to make it.
The real estate market is flat or may still go down.
Other future world power are on the rise, China and India.
America's debt has no end.
Our politicians are so polarized and would rather fight it out rather than find solution for the common problems.
Joblessness is a 9% and has no rapid sign of improving.
Our education system is worse than most industrialized nations.
Our savings rate is worse than other competition countries.
Our jobs are going abroad.
Most of the stuff we buy are made in China
Our working kids have less benefits than us.
Our health care is the most expensive, but results are mix.
Our students math and science scores are worse than our competitors.
Medicare benefits may go down

So yes, there will be years of pain, not just because of the cyclical stock market, it's because something terrible wrong is going on with us, and it will take a cataclysmic change or event to change it. Hold on tight!

[FinanceDude]

Where's Wade cook when you need him? How about Charles Givens?

[ER Fireball]

Quote:

Originally Posted by Birchwood Our politicians are so polarized and would rather fight it out rather than find solution for the common problems.

I think it would be more accurate like this:

Our politicians would prefer to split it up amongst themselves rather than serve the common good.

[traineeinvestor]

As a general observation, there have only been relatively brief periods in history when conditions have been "easy" (insert definition of choice) for the populations of developed markets in general. The 1982-1999 period was one of the better ones (for many, not all) and is a pretty demanding benchmark.

Expecting times to be easy most of the time is, sadly, unrealistic.

Of course, I could be an optimist and take the article as another contrary indicator.

[Midpack]

The author of the linked article concludes with:

Quote:

First, risk takes time to pay off and waiting a decade or more is common. Manage your portfolio risk accordingly. Second, diversification takes advantage of low correlation among risk at times. This lowers the length of time it takes to earn an excess return. Third, in no case should your total risk be above your ability to handle losses, and that includes long periods of marginal underperformance. Making money in the markets takes time and patience. Don’t become discouraged if an asset class misbehaves for several years. That’s perfectly normal. Stay disciplined, use low-cost index funds and if you need help, seek a low-cost advisor. Give your portfolio time to work and you’ll earn your fair share of market returns.

Anything new?

[Ed_The_Gypsy]

The long periods of non-correlation of various asset classes with the S&P 500 tell us why a diversified portfolio with rebalancing is a good idea.

He talks about rebalancing every month. Wow. Considering the long periods of relative non-correlation, once every year or two (my slothful pattern) should do just as well. IIRC, Bernstein said as much once.

In the meantime, my dividends just keep rolling along, well above the SWR of 3.5% to 4%.

[ziggy29]

Quote:

Originally Posted by FinanceDude Where's Wade cook when you need him? How about Charles Givens?

LOL -- in jail and feeding the worms, respectively.

At least Givens occasionally had some good ideas, even if most of them were reckless and some were arguably outright fraud. One that stuck with me from very young adulthood, on the few times I caught a little of his radio show and books, was the idea that investments and insurance should be kept separate -- both are necessary in a solid financial plan but one shouldn't be used to achieve the other. That, if little else he peddled, was very good advice.

[Lsbcal]

Quote:

Originally Posted by traineeinvestor As a general observation, there have only been relatively brief periods in history when conditions have been "easy" (insert definition of choice) for the populations of developed markets in general. The 1982-1999 period was one of the better ones (for many, not all) and is a pretty demanding benchmark. Expecting times to be easy most of the time is, sadly, unrealistic. Of course, I could be an optimist and take the article as another contrary indicator.

Looking back that 1982-1999 period was pretty sweet. But while we were investing during those years, things were not clear. There was the 1987 crash, the Gulf War and plenty of worries. Bonds looked pretty scary in 1982 as we'd just come off a scary inflation and the purge of it by Volcker. In Aug 1982, the 12 month inflation was "only" 5.9%.

There is a lot of liquidity out there. My bet is -- stocks will give double digit returns over the coming years. You heard it here first .

[FinanceDude]

Quote:

Originally Posted by ziggy29 At least Givens occasionally had some good ideas, even if most of them were reckless and some were arguably outright fraud. One that stuck with me from very young adulthood, on the few times I caught a little of his radio show and books, was the idea that investments and insurance should be kept separate -- both are necessary in a solid financial plan but one shouldn't be used to achieve the other. That, if little else he peddled, was very good advice.

The only "nugget" I remember from Givens was: "When interest rates are low, stocks will grow. When interest rates are high, stocks will die"........wonder what old Charlie would think these days if he were still around peddling?

[traineeinvestor]

Quote:

Originally Posted by Lsbcal Looking back that 1982-1999 period was pretty sweet. But while we were investing during those years, things were not clear. There was the 1987 crash, the Gulf War and plenty of worries. Bonds looked pretty scary in 1982 as we'd just come off a scary inflation and the purge of it by Volcker. In Aug 1982, the 12 month inflation was "only" 5.9%. There is a lot of liquidity out there. My bet is -- stocks will give double digit returns over the coming years. You heard it here first .

Fair points - even during good times there are plenty of things to worry about.

I'd be happy to see double digit returns for the next forty or fifty few years - just so long as we don't see double digit inflation over the same period.

And if you want another bullish indicator: hedge funds reducing their exposure to stocks This was published just before the co-ordinated central bank move to add more liquidity to the markets.

[ripper1]

Quote:

Originally Posted by Birchwood I think there will be a lot of pain, years of pain or stagnation before the market turns around. The whole equity market may take some time to turn around. The US market may take time to turn around. 45% of Americans are struggling to make it. The real estate market is flat or may still go down. Other future world power are on the rise, China and India. America's debt has no end. Our politicians are so polarized and would rather fight it out rather than find solution for the common problems. Joblessness is a 9% and has no rapid sign of improving. Our education system is worse than most industrialized nations. Our savings rate is worse than other competition countries. Our jobs are going abroad. Most of the stuff we buy are made in China Our working kids have less benefits than us. Our health care is the most expensive, but results are mix. Our students math and science scores are worse than our competitors. Medicare benefits may go down So yes, there will be years of pain, not just because of the cyclical stock market, it's because something terrible wrong is going on with us, and it will take a cataclysmic change or event to change it. Hold on tight!

Now tell us what you really think.

[REWahoo]

Quote:

Originally Posted by Birchwood I think there will be a lot of pain, years of pain or stagnation before the market turns around. The whole equity market may take some time to turn around. The US market may take time to turn around. 45% of Americans are struggling to make it. The real estate market is flat or may still go down. Other future world power are on the rise, China and India. America's debt has no end. Our politicians are so polarized and would rather fight it out rather than find solution for the common problems. Joblessness is a 9% and has no rapid sign of improving. Our education system is worse than most industrialized nations. Our savings rate is worse than other competition countries. Our jobs are going abroad. Most of the stuff we buy are made in China Our working kids have less benefits than us. Our health care is the most expensive, but results are mix. Our students math and science scores are worse than our competitors. Medicare benefits may go down So yes, there will be years of pain, not just because of the cyclical stock market, it's because something terrible wrong is going on with us, and it will take a cataclysmic change or event to change it. Hold on tight!

Take heart, Birchwood. You'll be dead in a few years and you'll no longer have to be concerned.

[haha]

Quote:

Originally Posted by REWahoo Take heart, Birchwood. You'll be dead in a few years and you'll no longer have to be concerned.

Interesting, but this while a bit more emotional, is not all that different from Kyle Bass's analysis.

IMO the sun is shining today, and even when it is rainy it is romantically rainy, so let the good times roll, and aprés moi, le deluge. I hope and believe that my kids and grandchild have the wits to ride the wave, whatever it may be.

Anything can happen, but I tend to believe that the US has played out its string.

Ha

[REWahoo]

Quote:

Originally Posted by haha Anything can happen, but I tend to believe that the US has played out its string.

Ah, ye of little faith.

[bbbamI]

Frank says...'don't be sad...be happy'.

[unclemick]

Quote:

Originally Posted by bbbamI Frank says...'don't be sad...be happy'.

Dead ringer for Milo who pees on floor and chews furniture right in front of the house sitter if I take longer than a two week trip in ER.

And some silly folks think the World has problems.

heh heh heh - staying the course since 1976. All praise to Bogle's Folly and 'the traditional pension 60/40 portfolio.'

'God Looks After Dunkards, Fools, and The United States of America.'

As for Pugs named Milo

[bbbamI]

Quote:

Originally Posted by unclemick Dead ringer for Milo who pees on floor and chews furniture right in front of the house sitter if I take longer than a two week trip in ER. And some silly folks think the World has problems. heh heh heh - staying the course since 1976. All praise to Bogle's Folly and 'the traditional pension 60/40 portfolio.' 'God Looks After Dunkards, Fools, and The United States of America.' As for Pugs named Milo

I love your posts unclemick......

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I keep my eggs in different baskets. ...and not just for a fashion statement...

[urn2bfree]

Quote:

Originally Posted by haha Anything can happen, but I tend to believe that the US has played out its string. Ha

Mr Warren Buffet- who seems to have some experience being right about these things- disagrees.