Poll: Is this you?

[wabmester]

Hussman has a good article with the following description of investor psychology in a bear market:

"This is my retirement money. I can't afford to be out of the market anymore!"

"I don't care about the price, just get me in!!"

"It's a healthy correction"

"See, it's already coming back, better buy more before the new highs"

"Alright, a retest. Add to the position - buy the dip"

"What a great move! Am I a genius or what?"

"Uh oh, another selloff. Well, we're probably close to a bottom"

"New low? What's going on?!!"

"Alright, it's too late to sell here, I'll get out on the next rally"

"Hey!! It's coming back. Glad that's over!"

"Another new low. But how much lower can it go?"

"No, really, how much lower can it go?"

"Sweet Mother of Joseph! How much lower can it go?!?"

"There's no way I'll ever make this back!"

"This is my retirement money. I can't afford to be in the market anymore!"

"I don't care about the price, just get me out!!"


Is this you? (Now, be honest.)

 

[brewer12345]

Not me. But I think I would have a lot harder time being a cool head if I were invested in indexes rather than individual stocks. Yeah, my portfolio is probably more volatile, but I know and understand pretty well each of the businesses in which I own a stake and have a lot easier time waiting out market fluctuations as a result.

 

[unclemick]

Hmmm

Sure it's me. However:

ACTION IS NOT A REQUIREMENI! Emotions are just feelings - everybody's got them - God Bless them.

heh heh heh heh - another Bogle-ism: Stay the Course. Er ah some of us need a little side money to putz with - right? - bargin shopping only - heh heh heh

 

[maddythebeagle]

Hmm. a lot of my individual stocks are doing fine....Seems one advantage to individual stocks is that you can get in at a more "pessimistic point" which might not be when the total market is selling off. I will look at my index funds later in the year to see where I am (no need to worry about them now)

 

[Nords]

If it's taught me anything, investing in individual stocks has taught me that I need to be much more patient and move much more slowly. Messing around on the margins of the retirement portfolio has also kept me from messing with the core of the portfolio, and that's generally a good thing.

Except for the shorts, I'm still watching the numbers before I buy-- and I think I'll be watching for another couple months.

 

[cute fuzzy bunny]

I think a lot of people would have those feelings.

Acting on them is the problem.

I've got some cash that i'm going to put to work pretty soon. After that, the plan is to keep a close eye on everything and do nothing.

I have gotten in the habit lately of not bothering to look at the old portfolio on sharply down days.

 

[lazygood4nothinbum]

i've never been a gambling guy. in high school i put down $2 bucks on a friend's trotter. we lost. then i once lost another 15 bucks in a college poker game and so ended that. about that time a friend took me to a dog track and another once to jai-lai fronton; they insisted i bet but i didn't like it.

i do on occasion put a dollar on the lottery, but i consider that a sure thing: i'm going to lose the dollar.

i thought real estate was a sure thing but now you've scared me that i'll lose more than a dollar on that. i'm trying to understand market investing so i'll be able to be comfortable with all this retirement cash.

so far, i was happiest collecting allowance.

 

[cute fuzzy bunny]

Fun stat of the day: You're 20 times more likely to be killed by drinking tap water than you are likely to win the lottery by buying one ticket.

 

[haha]

Hussman is a very subtle writer. IMO, he is like Shiller, he tells you things that if you understand them you have a hard time not accepting them.

His ideas are however hard on whatever preferred dream state one is accustomed to living in.

Ha

 

[wabmester]

Hussman is a very subtle writer. IMO, he is like Shiller, he tells you things that if you understand them you have a hard time not accepting them.

His ideas are however hard on whatever preferred dream state one is accustomed to living in.

Well, I think you also have to look at his motivation.   Why does a fund manager write a weekly commentary?   It's a marketing piece.   He's trying to convince you that not only is he right, but that he has the only solution.

I loved this bit though:

"Alright, it's too late to sell here, I'll get out on the next rally"

"Hey!! It's coming back. Glad that's over!"

That's me!

 

[haha]

Well, I think you also have to look at his motivation.   Why does a fund manager write a weekly commentary?   It's a marketing piece.   He's trying to convince you that not only is he right, but that he has the only solution.

I suppose you have to be correct. Still, it is an awfully soft sell. Easy to sell greed, and at times it is easy to sell fear. He seems to be trying to sell judiciousness, which I imagine is usually a very hard sell. 

Ha

Edit: I am sure you have done this, but if not, dig through his archives. There is a chart to support almost every assertion he has made.

 

[wabmester]

I am sure you have done this, but if not, dig through his archives. There is a chart to support almost every assertion he has made.

I did make a cursory look through his commentary of 2003/2004 just to verify what I suspected -- he's more or less a permabear, and his valuation metrics ignore macroeconomic factors.

Here's his commentary from Sept 2003, near the start of the bull run:

This week, I've described the market's overvaluation as unusual. By any reliable measure, the valuation of the market now exceeds all other historical valuations except for 1929, 1965, 1972, 1987, and of course 2000.

Personally, I don't see the point of valuation metrics that ignore such obviously strong factors on the economy as interest rates, tax rates, and war-time deficit spending, for example.

 

[dusk_to_dawn]

I don't talk to myself quite that much. During corrections or bear markets, I remind myself that the group of assets I have received the highest return on are the mutual funds in my son's college account, which happen to be funds that I rarely check or make changes to.

 

[haha]

Personally, I don't see the point of valuation metrics that ignore such obviously strong factors on the economy as interest rates, tax rates, and war-time deficit spending, for example.

You have a very good point. I guess that the valuation people would say that these factors are external to valuation. I tend to see it the same way. I personally was able to benefit reasonably well from the up market, even though I saw it as risky, by using some degree of hedging.

Even Warren Buffet feels that one should not materially alter his discount rate by referencing interest rates of the moment. They change, and an investor is not required to play every game offered.

I suppose more than anything it is a matter of personal philosophy.

Ha

 

[wabmester]

I suppose more than anything it is a matter of personal philosophy.

The trick is to find the common thread among everybody's personal philosophy.    So far, that seems to be something like "people accept risk during good times, and people shun risk during bad times."    I think we're finally making that transition between good times and bad times.   Sell now, and buy again at the bottom of the recession, when everybody else wouldn't touch stocks with a 10-foot pole.

I can't recognize a top or bottom via valuation metrics, but I can recognize macro factors that will stimulate or slow the economy and mark a turning point.

 

[trixs]

Hmm. a lot of my individual stocks are doing fine....Seems one advantage to individual stocks is that you can get in at a more "pessimistic point" which might not be when the total market is selling off. I will look at my index funds later in the year to see where I am (no need to worry about them now)

I retooled my portfolio about a week before the S&P 500 highs. Got out of some mutual funds I was in and went with 20 large cap stocks that pay reliable dividends.. While the S&P is down more than 6% I am only down 1% with a 100% stock portfolio. Really amazing!

 

[haha]

I can't recognize a top or bottom via valuation metrics, but I can recognize macro factors that will stimulate or slow the economy and mark a turning point.

Neither can Shiller or Hussman. They clearly state that they are not picking tops or bottoms, just highlighting zones where the long term returns tend to be low.

Ha

 

[wabmester]

Neither can Shiller or Hussman. They clearly state that they are not picking tops or bottoms, just highlighting zones where the long term returns tend to be low.

Yup, by Shiller's metric, you should have been out of the market since 1992, and by 1996 he thought it was high enough that he asked Greenspan to do something about it.    That's what I call *way* early.    You would have been much better off riding the strong economy up to the top and sticking with the 2000-2003 correction.

But if you had ignored absolute valuations, and just looked at relative value using something as simple as the Fed Model, you would have stayed in the market till 1999, got out, and then back in around 2002.

I'm not recommending the Fed Model as a great market timing method, but so far, it seems to have had much better predictive value than a single metric like PE10, so I guess I don't see the attraction to PE10. It worked about as well as P/E did in the past, but neither of those has been a useful guide since P/E stayed high starting in about 1985.

 

[cute fuzzy bunny]

I've got your common thread.

Everyones irrational all the time, except for when you assume they'll be irrational. Then its you.

 

[Ed_The_Gypsy]

I am still hanging on by my teeth. (Still up from Dec 31, though). Thinking about starting Galeno's CD ladder, however. I hung on through 1987 and other stressful times. I have no intention of creating my own Great Depression as my sister did.

 

[kaudrey]

I probably go through those emotions, but I rarely act on them. I don't sell, anyway. Long term buy and hold for me.

Although, I will admit that I've stopped looking at my portfolio for awhile. I used to look about once a week. I haven't looked in 3 weeks. I may look at the end of June - to update my spreadsheets, but I may skip it altogether!

However, I have some money not invested at the moment, so I'm starting to smell a good buying opportunity!

My plan is that I have 15 years until I FIRE at 52.

Karen