The stock market highs

[street]

Nobody knows.....many claim to know with theories and analysis....don't believe them. But then again you shouldn't be concerned if you have an AA consistent with your risk tolerance level and time horizon. History has shown us that you are just as likely to be wrong than right about predicting the short term direction of the market. I told this story in another thread when the market was declining in the spring of 2020 but I will repeat it here.

I have a friend who moved away from my area but I still keep in touch. He had a problem letting his emotions and predictions rule his investment decisions and he knew it, he would watch the business news, listen to the sensationalist talking heads and churn his portfolio as a result. He was doing terrible and he knew it. Several years back he decided it was worth it to have Fidelity manage the account and suck it up and pay the management fee. IMHO based on his history, I couldn't disagree with him. Along comes the recent turmoil and what does he do.....he calls Fidelity and demands that they sell everything....they tell him he can't since he has a managed account so he has them change it back to un-managed and unloads his entire portfolio to cash.

A rookie mistake and a cardinal sin. I did something similar about 35 years ago with not a lot of money in the market but still got nervous and sold. Lol

It has been drilled into every market investor since God was a boy, to never make that mistake. A very hard thing to do but need to stick in there during hard times.

 

[Montecfo]

Is this part accurate? I haven't been following the numbers, so I don't really know. But I keep hearing talking heads on the news saying we're in the midst of a recession. That doesn't seem accurate with the market setting new highs, but the jobs growth claim doesn't seem right either. And I the earnings numbers only seem like they apply to the FAANG type stocks. Don't we have small businesses shutting down right and left?

I really don't understand either set of claims, doing great or deep in a recession. But the market keeps going up. So that is what it is.

With the vaccines, the market is expecting economies to open up during 2021 and massive earnings and job growth are expected. So I think that is an accurate statement of market expectations. What actually happens? Time will tell.

 

[CaptTom]

It's tough not to listen to those little voices in my head which tell me this run-up simply can't go on much longer.

It's even harder when I talk to a friend who is a real estate broker. When he starts citing statistics about how many foreclosures and evictions they're expecting once the Covid-based moratoriums (moratoria?) expire, and then goes off about the national debt, I get nervous. I can't argue with his logic, and see visions of 2008 all over again. But he's actually been saying this since long before Covid, so I'm trying to hold off taking any action. Look at what I'd have missed out on if I'd listened to him a year or two ago.

 

[Markola]

With the vaccines, the market is expecting economies to open up during 2021 and massive earnings and job growth are expected. So I think that is an accurate statement of market expectations. What actually happens? Time will tell.

+1. The economists team at Goldman Sachs is forecasting 6%+ GDP growth in 2021 because of the Covid recovery. I have no idea and won’t change anything but I enjoy hearing smart people discuss their predictions.

https://www.goldmansachs.com/insights/podcasts/episodes/01-08-2021-jan-hatzius.html

 

[BrianB]

When I start getting nervous I re-read J. L. Collins' essay "There's a major market crash coming!"

https://jlcollinsnh.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/

The other essays in his series are worthwhile, too!

BrianB

 

[someguy]

It's even harder when I talk to a friend who is a real estate broker. When he starts citing statistics about how many foreclosures and evictions they're expecting once the Covid-based moratoriums (moratoria?) expire

It's not just the moratorium on evictions and foreclosures, there's the forbearance of rent/mortgage payments. Can anyone cite actual data on how many loans/rents (and how many $) are behind/in forbearance? Anecdotally, it seems most landlords here aren't having widespread issues and any landlords I know IRL aren't having major issues, either.

 

[Midpack]

It's tough not to listen to those little voices in my head which tell me this run-up simply can't go on much longer.

It's even harder when I talk to a friend who is a real estate broker. When he starts citing statistics about how many foreclosures and evictions they're expecting once the Covid-based moratoriums (moratoria?) expire, and then goes off about the national debt, I get nervous. I can't argue with his logic, and see visions of 2008 all over again. But he's actually been saying this since long before Covid, so I'm trying to hold off taking any action. Look at what I'd have missed out on if I'd listened to him a year or two ago.

When I start getting nervous I re-read J. L. Collins' essay "There's a major market crash coming!"

https://jlcollinsnh.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/

The other essays in his series are worthwhile, too!

BrianB

It can be difficult to tune out the “little voices” of doubt, but remember the “carnage” of 1987, 2000, 2008, 2020 (Covid) - and take the long look at them below, they look relatively small in hindsight. Yes it’s not fun when the market tanks for (many) months - but patience is handsomely rewarded. If you look at the LONG view DJIA, it’s even more convincing. Trying to time in and out is virtually impossible to get right, tons of people got financially creamed panic/selling in 2008-09 while those who stayed the course did very well (as always)...

Having the first hand experience of not selling in past downturns, or even buying in, makes the “next downturn” much easier to wade through. Happily I did not sell in 87, 00, 09 or 20 - so it’s easier to sleep at night even when the P/Es or other Econ indicators get frothy. That’s always been a part of market (human) behavior. And if/when we have a permanent downturn, we’re all going to get $ hurt no matter how we react.

 

[Markola]

When I start getting nervous I re-read J. L. Collins' essay "There's a major market crash coming!"



https://jlcollinsnh.com/2012/04/15/...-market-crash-coming-and-dr-lo-cant-save-you/



The other essays in his series are worthwhile, too!



BrianB

+1. JL Collins has been important to my growth toward FIRE. It might help others who read that link to know that he has a strong bias toward a two fund AA consisting of just the total domestic stock index and bond funds vs. international or other kinds of diversification. I have different diversification preferences but I highly recommend all of his writing.

 

[Montecfo]

When I start getting nervous I re-read J. L. Collins' essay "There's a major market crash coming!"

https://jlcollinsnh.com/2012/04/15/stocks-part-1-theres-a-major-market-crash-coming-and-dr-lo-cant-save-you/

The other essays in his series are worthwhile, too!

BrianB

I could summarize Collins' views by reiterating what I think are the three most important words for the investor to keep in mind: Stay Fully Invested.

 

[JoeWras]

It can be difficult to tune out the “little voices” of doubt, but remember the “carnage” of 1987, 2000, 2008, 2020 (Covid) - and take the long look at them below, they look relatively small in hindsight. Yes it’s not fun when the market tanks for (many) months - but patience is handsomely rewarded. If you look at the LONG view DJIA, it’s even more convincing. Trying to time in and out is virtually impossible to get right, tons of people got financially creamed panic/selling in 2008-09 while those who stayed the course did very well (as always)...

Having the first hand experience of not selling in past downturns, or even buying in, makes the “next downturn” much easier to wade through. Happily I did not sell in 87, 00, 09 or 20 - so it’s easier to sleep at night even when the P/Es or other Econ indicators get frothy. That’s always been a part of market (human) behavior. And if/when we have a permanent downturn, we’re all going to get $ hurt no matter how we react.

Let's go back to the 70s.

Now that was tough.

 

[Midpack]

Let's go back to the 70s.

Now that was tough.

No doubt, but what’s happened since. So far it’s always been just a matter of time...

 

[JoeWras]

I wish there was a measure of arrogance that we could graph.

I was with a tech company in the late 90s and we were all arrogant jerks. There was no way tech would fall, and we were 100% sure. I hedged my bets on my company by "diversifying" into other tech companies. What a great move. (sarcasm)

Today, it feels like the arrogance factor has reached some peak. Let's see where this goes.

I gotta tell you, the humble crap pie I ate in the early aughts was quite a wake up call. I'm somewhat ashamed of how I acted in the late 90s. It gives me a certain perspective of what I'm seeing right now.

 

[JoeWras]

No doubt, but what’s happened since. So far it’s always been just a matter of time...

Yeah, I have no idea of when we'll have another 30s or 70s. I'm not saying we are on the verge of such now. No idea.

As a budding investor (thanks Dad!) in the 70s, I would graph my stock and the S&P every week. I also liked math. Frankly, I'm surprised I'm still in stocks. It was depressing. Luckily, I got involved in school and forgot about it for about 8 years (HS and College). When I got to the other side, things had finally recovered, and once I started making money, I kept with investing.

 

[Andre1969]

If you were an investor in the 70's, would there still have been enough good years in there, that if you were diversified and rebalanced when things got too out of whack, that it could still have been a good decade?

I was just a kid then, so the only thing I really remember from a financial standpoint is in '79, when gasoline started getting rare and people were complaining about it going over $1/gal. But, IIRC, there was a mild recession around 1970 or 1971. 1972 and most of 1973 were good, but then the first oil embargo made a mess of things in 1974 and 1975. 1976-1978 were good years, and I think most of 1979 was, as well. As I recall, the oil embargo did start early in the year, but the market didn't react and crash until the fall.

Similarly, they call the 2000's a "lost decade", if you look at where the market was on 1/1/00 versus 12/31/09. But there were still plenty of peaks, valleys, and good times in there. I got a little burned by being invested too aggressively at the start of the Great Recession, but still did okay that decade. Of course, I did better in the following decade.

 

[NW-Bound]

I wish there was a measure of arrogance that we could graph.

I was with a tech company in the late 90s and we were all arrogant jerks. There was no way tech would fall, and we were 100% sure. I hedged my bets on my company by "diversifying" into other tech companies. What a great move. (sarcasm)

Today, it feels like the arrogance factor has reached some peak. Let's see where this goes.

I gotta tell you, the humble crap pie I ate in the early aughts was quite a wake up call. I'm somewhat ashamed of how I acted in the late 90s. It gives me a certain perspective of what I'm seeing right now.

In the late 90s, I did not have any money in the phony dot-coms, but I thought I was safe with the semiconductor stocks and the Internet infrastructure stocks. Nortel, Lucent, Global Crossing, Cisco, I had them all. Made good money until the bubble burst. Still, I hung on thinking my stocks were real, and not like dotcoms.

But, but, but, the "real" tech stocks all depended on the phony stocks to buy their hardware/software. When I could not take it anymore and bailed out of techs, had 57c on the dollar from the top instead of 22c like the Nasdaq.

Made back the lost money on material stocks when they rode high due to the housing bubble. Bailed out when the subprime hit, not very early but not too late, and did better that time. Heh heh heh...

I see the arrogance now in the EV and renewable energy segments. It's not easy to short them, so I just have to watch to see any sign of the bubble bursting spilling over to my own "real" stocks.

Not selling anything now, because the interest rate is still low. Back in 2000, the US Treasury was offering I-bond with a composite rate as high as 7.49% and people still snubbed it. Heck, they made that much in a day with their hot stocks. Buy, buy, buy...

PS. My current stock AA is below 60%. That's bearish for me, because I usually run 70-80% stock.

 

[audreyh1]

Similarly, they call the 2000's a "lost decade", if you look at where the market was on 1/1/00 versus 12/31/09. But there were still plenty of peaks, valleys, and good times in there. I got a little burned by being invested too aggressively at the start of the Great Depression, but still did okay that decade. Of course, I did better in the following decade.

That was the Great Recession. You weren’t investing in the late 1920s were you?

 

[Andre1969]

That was the Great Recession. You weren’t investing in the late 1920s were you?

Oops! I'm getting up there in years, but not quite THAT old! I guess they say the mind can be the first thing to go

(Note: I went back and corrected that little boo-boo)

 

[marko]

The Great Recession (aka "end of the world" by some) of 2008 emboldened me quite a bit insofar as worrying about a crash. Crashes/recessions come and go as do run-ups. I think it was Buffett who said that Wall St is the only market where people run out of the store when the price goes down.

In fact, unlike 2008, during the most recent March dip, I moved some stuff around and have netted 46% on what I moved (not the whole portfolio).

Print a graph of the Dow over the past 100 years, tack it to the wall, step back 20 feet and you'll see a pretty straight line in the positive direction.

 

[Digger1000]

In the dotcom crash I went from 276k in net worth down to 15k. So I switched from dotcom/tech to S&P 500 index. I retired in early 2017 at age 51. Doesnt take a lot for me to live on. My net worth is up 62.5% since retirement. If the S&P 500 goes down 67% from where its at today my yearly spending would be 4.2% of that amount. My current yearly spending is at 1.4% of my current net worth(or 2.3% of my net worth at retirement in 2017).

 

[NW-Bound]

Print a graph of the Dow over the past 100 years, tack it to the wall, step back 20 feet and you'll see a pretty straight line in the positive direction.

Most people do not have 100 years left to live, let alone the geezers on this forum who do not buy unripe bananas and avocados.

 

[harley]

Who you calling a geezer, you young whippersnapper!?!

 

[Koolau]

Not selling anything now, because the interest rate is still low. Back in 2000, the US Treasury was offering I-bond with a composite rate as high as 7.49% and people still snubbed it. Heck, they made that much in a day with their hot stocks. Buy, buy, buy...

Yeah, I came late to that party, but did pick up some I Bonds before they became a joke. I made plenty of mistakes in my investing "c*reer". I look at missing the I-bond "top" as one of my bigger ones, but YMMV.

 

[NW-Bound]

Who you calling a geezer, you young whippersnapper!?!

Geezers are the ones who are 75+. I believe you are still a pre-geezer, like myself.

Yeah, I came late to that party, but did pick up some I Bonds before they became a joke. I made plenty of mistakes in my investing "c*reer". I look at missing the I-bond "top" as one of my bigger ones, but YMMV.

I did not know about I Bonds until 2004, so also missed the nice, nice interest rate. But I am not sure even if I knew about the 7.49% I bond in 2000, I would buy some. That rate did not feel so impressive then, when compared to stocks.

 

[Tetto]

I live in CT and at Rentschler field, where the UCONN huskies play football, they have a massive Covid testing and vaccine lines. In fact they have three lines; one for testing, one for getting a shot and one for food. The food line I saw cars lined up at was incredible. We are in the twilight zone here and the next few years to me, regardless of P/E ratios, quant, free this or that are looking to be very strange days indeed, most peculiar momma. (Thx John Lennon)

 

[jurgs01]

The markets are being propped up by central banks (QE, artificially low interest rates, and ever increasing debt). Stock buybacks, leverage and multiple expansion for the past 5 years are also a main driver. Risk taking and speculation is also in overdrive due to the "Fed backstop".



No idea how long it can continue. Maybe they'll start talking quadrillions in easy money instead of trillions, who knows. It's a huge Ponzi and will collapse on itself one day. Make no mistake, markets are up, but we are in no way a prosperous economy. Since 2008, we added $17T in debt. Most of America's wealth has already been transferred with things of value sold off or outsourced to other countries. Enjoy the fake prosperity while it lasts.

This guy gets it.