it's the crash of October 2014 all over again

[NW-Bound]

Did something happen in October?

It's OK if you missed it. There's a replay going on right now, and perhaps more exciting. Sit back and enjoy the show.

 

[HFWR]

Back up the truck!


Sent from my iCouch using Early Retirement Forum

 

[aja8888]

Looks like I'm going to have to change my avatar....

 

[mathjak107]

Back up the truck!


Sent from my iCouch using Early Retirement Forum

no one knows what these plunging oil prices mean anymore than when the news first hit back in 2008 about the potential defaults on some mortgages.

with energy companies issuing 30% of the debt in the high yield market, falling oil prices can trigger massive defaults setting the stage for 2008-2009 all over again.

much of our recovery was tied to the surge in our oil producing industry so this may not be a fire sale on energy stocks, this may be adjusting to the new norm and in reality they are no bargain.

if they fall badly they will take the rest of the market with them.

our problem is we get so used to things recovering that we lose sight of the fact that recovery to existing money can take 10-15 years and it is only new money that grows while the old money dies on the vine.

basically the last 15 years all the sp 500 saw is a real return of 1.30% a year as a return with dividends reinvested..


if you looked at your balance in 2000 in inflation adjusted dollars you hardly moved.


so i would be careful with any thinking that any drops will be a fire sale.

that may be true only if you have little money invested at this point and can just buy .

but adding a little bit of money to already sizeable portfolios can be like peeing in the ocean and the downturn hurts you more in lost time and lost return on the bigger pile of money you already have..

 

[frayne]

Screw it, I'm going all in on Argentine pork belly futures and bitcoins.

 

[Senator]

no one knows what these plunging oil prices mean anymore than when the news first hit back in 2008 about the potential defaults on some mortgages.

Absolutely true, but we do know a few things.

The lower gas prices will be a boon for consumers, farmers, businesses, some airlines, etc. It's only companies that have purchased oil/gas far in advance that it will not help, but even then it is an anticipated and budgeted for expense.

Some traders will lose big. Of course, some will gain big. Oil companies will do OK, but profits will suffer.

Companies have a lot more money than they had in 2008. Construction is booming. Governments can add gas taxes, even large ones, without fear of anyone rebelling.

So while this may be the beginning of a long correction, I feel the positives of the economy will greatly outweigh any negatives.

Now if crude added $40 per barrel, instead of dropped, it would be different.

 

[mathjak107]

bond markets seem to be a lot better at calling things than stock markets are.

the inverse yield curve we had before the downturn proved right.

the sell off in the high yield markets seems to be forecasting something alot more severe potentially playing out than some reduced oil profits.

i hope it is wrong.

 

[zedd]

A market correction!? Oh goodie. Perfect opportunity to TLH, offsetting this years capital gains, thusly locking in my ACA subsidy.
Whew! That was a close call

 

[mathjak107]

i will gladely pay the taxes and give up any subsidy and let me keep those gains.

i dropped enough in 1 week to pay for health insurance for years.

 

[Spanky]

Did someone say buying opportunity?

not yet.

 

[2B]

i will gladely pay the taxes and give up any subsidy and let me keep those gains.

i dropped enough in 1 week to pay for health insurance for years.

I lost enough last week to buy a brand new, high end luxury car that I wouldn't dream of buying.

 

[Spanky]

I lost enough last week to buy a brand new, high end luxury car that I wouldn't dream of buying.

don't worry - it's only paper loss. may be you should consider buying one now.

 

[mathjak107]

I lost enough last week to buy a brand new, high end luxury car that I wouldn't dream of buying.

as my assets grew it was no longer a case of the perecentage we fell , it became all about the dollars you fell back.
.

while a 5% drop sounds like a small amount today the represents 6 years of maxing out my 401k contributions.


that is why my retirement strategy is only to take on enough volatility to meet my income goals (about 35-40% equities).

while i was a super aggressive investor my whole life today it is the dollar amounts and not the percentages that are insane amounts that look like phone numbers..

 

[NW-Bound]

I lost enough last week to buy a brand new, high end luxury car that I wouldn't dream of buying.

Same here. But counting from personal top, it's $178K gone!

Well, it's still the money that the market god [-]gave[/-] loaned. It still hurts though.

 

[aja8888]

I lost enough last week to buy a brand new, high end luxury car that I wouldn't dream of buying.

I bought one in early October.... But I did dream of buying it a few nights.

 

[tuixiu]

basically the last 15 years all the sp 500 saw is a real return of 1.30% a year as a return with dividends reinvested..

When I run Dec 1999 -> Dec 2014 here: S&P 500 Return Calculator - Don't Quit Your Day Job...

I get annualized real returns of slightly over 2%, not 1.3%.

Sure that doesn't seem like much of a difference but over 15 years it isn't insignificant, especially if one is pulling out 3-4% annually.

Also interesting is if you go two years in either direction (17 or 13 years) you get real returns over 4% which would support the classic 4% rule, granted in an simplistic view without actually digging into the actual year over year return and it's impact early versus late on total balance. When you start getting into the early 90s real returns are usually over 6 or 7%.

 

[mathjak107]

i show from the peak in march 2000 a 1.74% real return over just about 15 years. . 1000 bucks is now 1288.00 .

while it would take 15 years at less than a 2% real return for the 4% rule to fail the returns the last 15 years have been well below average going up or down a few years. .

in fact the 18 years from 1987 to 2004 saw incredible growth averaging 14% a year for 18 years and that untypical run influenced quite a few shorter time frames making them look better with residual gains then they really were as time went on...

it is no different than all of us here looking at our balances when we peaked a few weeks ago.

in all our minds i doubt anyone ever imagining that balance omly growing 1.74% in real return 15 years from now assuming you weren't spending down.

basically it was only newer money that saw much growth, our old equity balances grew quite poorly.

includes reinvested dividends

 

[jerome len]

Great news! I just heard stocks are going on sale again.....guess I better go out and buy some.....but there may be even better sale prices next week.....so I'll save some cash, just in case! Barron's Mag financial panel predicted this week that stocks will go up in 2015.....I'd better buy now so I don't have to pay increased prices next year!

if only we really knew the future......but......looking at the past gives us a good indication of the future. Good Luck to all.

 

[Options]

It's OK if you missed it. There's a replay going on right now, and perhaps more exciting. Sit back and enjoy the show.

'

Thanks. Think I'll break out the popcorn and lite beer and put on Cramer.

 

[NW-Bound]

When I run Dec 1999 -> Dec 2014 here: S&P 500 Return Calculator - Don't Quit Your Day Job...

I get annualized real returns of slightly over 2%, not 1.3%.

Sure that doesn't seem like much of a difference but over 15 years it isn't insignificant, especially if one is pulling out 3-4% annually.

Also interesting is if you go two years in either direction (17 or 13 years) you get real returns over 4% which would support the classic 4% rule, granted in an simplistic view without actually digging into the actual year over year return and it's impact early versus late on total balance. When you start getting into the early 90s real returns are usually over 6 or 7%.

i show from the peak in march 2000 a 1.74% real return over just about 15 years. . 1000 bucks is now 1288.00 .

while it would take 15 years at less than a 2% real return for the 4% rule to fail the returns the last 15 years have been well below average going up or down a few years. .

in fact the 18 years from 1987 to 2004 saw incredible growth averaging 14% a year for 18 years and that untypical run influenced quite a few shorter time frames making them look better with residual gains then they really were as time went on...

it is no different than all of us here looking at our balances when we peaked a few weeks ago.

in all our minds i doubt anyone ever imagining that balance omly growing 1.74% in real return 15 years from now assuming you weren't spending down.

basically it was only newer money that saw much growth, our old equity balances grew quite poorly.

includes reinvested dividends

In a cyclical market like what we have had since 2000, the stock returns counting from peak to trough, or peak to peak, or trough to peak differ widely, and can be used by one to make any kind of argument.

But one thing for sure is that timing becomes important, unlike the secular bull market of 1983-2000 when one was assured of always winning. But that said, because timing to buy low/sell high is difficult, rebalancing can capture some gains from that up/down stock movements, but the individual's performance depends much on the execution.

'

Thanks. Think I'll break out the popcorn and lite beer and put on Cramer.

I no longer have access to CNBC, so just come here to watch the teeth gnashing and the Wh***'s. It's interactive and cheaper too.

 

[mathjak107]

while i agree the points you pick are going to determine the results being humans we all maintain a high water mark in our heads.

it is only natural that now that we hit a new peak our benchmark for moving forward is greater.

there is not one of us that does not feel sad we are down from where we were a few weeks ago. after all that nice balance we saw is now the high water mark and whether we are ahead or behind where we were is kind of based on that number.

if our portfolios hit the old balance again 6 months from now you won't feel that was such an accomplishment. after all you were there 6 months ago.

well in the same light 15 years ago many of us had sizeable portfolios and the balance we hit back then had not been seen again for almost 15 years .


so while yes time frames picked matter some carry far more weight in our minds.

 

[Live And Learn]

While I agree that this is nothing to panic over, I do worry about the complacency demonstrated in this thread. People not worried about the market, 3% down minimums on mortgages and the latest barrage of "buy your Christmas gifts on credit" ads on TV makes me think that we are indeed heading towards something more than a correction.
If I say more Porky will be coming for a visit, so I'll just leave y'all to ponder.

 

[REWahoo]

While I agree that this is nothing to panic over, I do worry about the complacency demonstrated in this thread.

For the long-term investor, complacency has proven to be a winning strategy.

 

[Live And Learn]

For the long-term investor, complacency has proven to be a winning strategy.

Since I am a long term investor at 3% WR at peak, I'll take it. But how many average folk are "long term investors"?

 

[REWahoo]

Since I am a long term investor at 3% WR at peak, I'll take it. But how many average folk are "long term investors"?

I don't think the majority of those on this board are 'average folk' when it comes to investing.