This Market Is Crazy - What do Y'all Think???

[ragabnh]

Invested in Toilet paper companies since covid 19, lost my ass off, on the positive side no more toilet paper for me.

 

[FIREarly]

Invested in Toilet paper companies since covid 19, lost my ass off, on the positive side no more toilet paper for me.

Invest in PPE?
Sell from garage?

 

[WyomingLife]

Because nobody can predict the future, the answer is have an AA and stick with it.

 

[Badger]

Looks like a few of you have not been following/considering the collective wisdom of the members here that have a good deal of experience in investing.


Cheers!

 

[FIREarly]

Looks like a few of you have not been following/considering the collective wisdom of the members here that have a good deal of experience in investing.

Relax and enjoy a laugh. It'll help you live a longer and healthier life.

 

[Koolau]

"Keep to the Code." Jack Sparrow

(Have a plan and stick with it. Ko'olau)

 

[Fermion]

"you have got to ask yourself one question: 'Do I feel lucky?' - Clint Eastwood

 

[Starsky]

I am very risk-averse in this market and focused on asset preservation; but I'm glad we've been able to make some good profits without risking sizable portions of our portfolio to keep up with inflation. I've been dollar-cost-averaging into BRK-B since July and raising my open stop orders slowly as the share price increases to lock in profits. It's a nice way to indirectly own a great portfolio that has so far been less volatile than the shares they own.

 

[razztazz]

"Keep to the Code." Jack Sparrow

(Have a plan and stick with it. Ko'olau)

Sunk cost argument? Sorry couldn't resist. Plans are only good as long as the conditions the plan was designed to meet remain in effect. Not saying B&H is no longer valid but the reality is we can't know that they are. Life on the street these days speaks more to, as some others have mentioned, capital preservation, abnormalities in the system, and other contortions. Enough to have less confidence than usual "how we've always done it."

But I am not one with a $5 mil 401k like some here. If I were I could take up real gambling. Seems like the only time one can truly say fuggetaboudit is when you have huge amounts of money or no money to lose.

 

[copyright1997reloaded]

No one wants to leave the party until just before the cops show up.

Yup. I'll claim 45 years, though not all of them with the smartest investment tactics. But yes, stay the course.

Great Saying, love it. I'm at 42 years (first stock I bought was in 1978, Warner Lambert I think).

Personally, I believe the market with all the uncontrolled and unregulated algorithmic trading, is completely unnatural. I look at P/E ratios and Tesla, just to name one example had a P/E ratio of 1,200. IMHO anything above 50 is risky. If you put it into perspective the market capitalization for Tesla was equal to all other automobile manufacturers combined which is, of course, ridiculous.

I won't argue with your general theme (market may be quite bubble-licous), nor do I own TSLA, but I can still remember when this young no-profit company called Amazon was worth as much as Barnes and Noble and Borders combined. I thought that was C-R-A-Z-Y. Now. Borders is no longer and Amazon is well...much larger. I am just thankful I wasn't foolish enough to try to short it. Similarly, I remember when NetFlix (NFLX) became worth more than Blockbuster....

p.s. I doubt I will ever score big on a company like this (high flyer, no earnings, people just buying on revenue growth) as I am unable to make myself 'buy up' on these sort of things. Where I have made nice change is on things like Apple (bought @ $18 share when they had $13/share in cash), Marriott, Honeywell, Edwards, Abbott Labs, Analog Devices (via Linear Technology), Styker and so on. All of these had (at the time at least) reasonable PE ratios.

p.p.s. I managed to lose money in both Facebook and NetFlix.

 

[USGrant1962]

I've had this idea in my head that says "what else are you going to invest in?" I keep coming back to the issue of the investable market - stocks, bonds, and cash (money markets, CDs, bank accounts, etc.). I compare stocks to bonds or cash, which earn nothing or less after inflation.

So I finally spent a little time researching and came across the "Fed Model" which describes my thoughts. Originally proposed by Ed Yardeni, it looks at the yield of stocks versus bonds. Basically the E/P (earnings yield) versus bond yield (the 10-year is IMO the most relevant). It turns out that, as I expected, stocks are a screaming buy versus bonds based on earnings yield versus bond yield.

https://www.yardeni.com/pub/valuationfed.pdf

The S&P500 trailing P/E of ~29 (E/P of ~3.5%) is high in historical stock market terms, but it is not high compared to the alternative of ten year bonds at ~0.7%. Yardeni uses the forward earnings yield for S&P500 which is ~4.5%, if you believe forward earnings estimates, which makes the comparison even more favorable for equities.

So while the future nominal returns of equities might be lower than past returns, between low interest rates and low inflation they might not be overpriced. Or maybe they are

 

[ESRwannabe]

My taxable account is 100% in etf VYM. The P/E on it is around 18 or so. It is high, but not crazy high. I consider a P/E of around 15-16 to be "normal".

A 20% decline would put it at 14.4 P/E. A 30% decline would put it at a 12.6 P/E.

 

[Koolau]

Sunk cost argument? Sorry couldn't resist. Plans are only good as long as the conditions the plan was designed to meet remain in effect. Not saying B&H is no longer valid but the reality is we can't know that they are. Life on the street these days speaks more to, as some others have mentioned, capital preservation, abnormalities in the system, and other contortions. Enough to have less confidence than usual "how we've always done it."

But I am not one with a $5 mil 401k like some here. If I were I could take up real gambling. Seems like the only time one can truly say fuggetaboudit is when you have huge amounts of money or no money to lose.

I agree that NO plan always works. I set mine up more to "survive" most somewhat-foreseeable events than to "make my fortune so I could ER." I could have had the $5MM 401(K) had I been more aggressive. It was much more important to me to know - short of truly unforeseen events - that I would never have to go back to w*rk.

Heh, heh, I loved the 'sunk cost' reference!

 

[ESRwannabe]

My taxable account is 100% in etf VYM. The P/E on it is around 18 or so. It is high, but not crazy high. I consider a P/E of around 15-16 to be "normal".

A 20% decline would put it at 14.4 P/E. A 30% decline would put it at a 12.6 P/E.

I don't want to get into a debate about this, just making a statement about my personal opinion. Investing for dividend income only gives me a lot of piece of mind. If I didn't invest this way I would not be comfortable with 100% stocks. I'd probably have half in bonds or something.

My dividend income has gone up this year, so far.

 

[razztazz]

I agree that NO plan always works. I set mine up more to "survive" most somewhat-foreseeable events than to "make my fortune so I could ER." I could have had the $5MM 401(K) had I been more aggressive. It was much more important to me to know - short of truly unforeseen events - that I would never have to go back to w*rk.

Heh, heh, I loved the 'sunk cost' reference!

Actually this is the way I've been playing it all these years. Even way back when I really was buy & hold, I wasn't doing it to maximize the end results. I was just trying to acquire "enough."

 

[target2019]

I don't want to get into a debate about this, just making a statement about my personal opinion. Investing for dividend income only gives me a lot of piece of mind. If I didn't invest this way I would not be comfortable with 100% stocks. I'd probably have half in bonds or something.

My dividend income has gone up this year, so far.

You've chosen companies very wisely if income is rising. Congrats.

 

[OldShooter]

... Plans are only good as long as the conditions the plan was designed to meet remain in effect. Not saying B&H is no longer valid but the reality is we can't know that they are. ...

I agree that NO plan always works. ...

All true. Words like "always" and "never" are pretty dangerous in an investing context.

What we do know, however, is what history tells us about equity portfolio growth. Over long periods it is as reliable as the sun coming up in the morning. That's why really good diversification and B&H have worked for manybe a century or more. Will that strategy continue to work in the future? Ask me in five or ten years, but I am planning on it.

In around 45 years of investing I have learned one important fact about current events: "This, too, shall pass."

 

[2177V]

All true. Words like "always" and "never" are pretty dangerous in an investing context.

What we do know, however, is what history tells us about equity portfolio growth. Over long periods it is as reliable as the sun coming up in the morning.

I agree with "Always is pretty dangerous"

I only partially agree about equity being reliable over the long term..... because it conflicts with the "Always" argument.

The Japanese Stock market has not recovered since the Nikkei 225 crash of 1990. This is 30 years and counting. It will recover...but 30 plus years is a long time for investors.

The question is: Can this happen in the US? Japan is heavily in debt and China is making their products cheaper than Japan. Sounds familiar?

My point: Nothing in the US stock market is risk free. Equities are reliable in the long term but the words "long term" may vary. Try telling the Japanese investors who invested in 1990 that "Equities are reliable as the sun coming up in the morning". To say, it will never happen in the US Market, then you will be violating your own "Always" and "Never" argument.

 

[GravitySucks]

"The Japanese Stock market has not recovered since the Nikkei 225 crash of 1990. This is 30 years and counting. It will recover...but 30 plus years is a long time for investors"

But if you dollar cost averaged in from 1980 to 1990 you'd still be doing well. If you went from 0 to all in 1989 you'd be screwed.

 

[OldShooter]

... My point: Nothing in the US stock market is risk free. Equities are reliable in the long term but the words "long term" may vary. Try telling the Japanese investors who invested in 1990 that "Equities are reliable as the sun coming up in the morning". To say, it will never happen in the US Market, then you will be violating your own "Always" and "Never" argument.

If you re-read my post more carefully you will see that I never referred to equity behavior as anything but history, where equity growth can be seen to have been very reliable.

Then keep reading and you will find "Will that strategy continue to work in the future? Ask me in five or ten years ..." I never (there's that word!) predict anything in investing beyond the apocryphal words of JP Morgan re market behavior: "It will fluctuate."

 

[ESRwannabe]

You've chosen companies very wisely if income is rising. Congrats.

Well I didn't chose them. I'm using the ETF version of Vanguard's High Dividend Yield Index.

I was also using VYMI Vanguard International High Div Yield and VT Vanguard Total World Stock Index, but I changed my mind about investing outside the US for now. Everything is so chaotic right now, I'd rather just put it all in the US, for better or worse.

I'm still working full time (remotely) and will probably keep doing that for a while (I'm 44). Definitely no desire to retire now with the pandemic still going on.

I feel like we could see countries actually collapse. Governments get overthrown. The world is in chaos.

 

[NW-Bound]

The Japanese Stock market has not recovered since the Nikkei 225 crash of 1990. This is 30 years and counting. It will recover...but 30 plus years is a long time for investors...

But if you dollar cost averaged in from 1980 to 1990 you'd still be doing well. If you went from 0 to all in 1989 you'd be screwed.

The Nikkei had a wonderful rise in the 1980-1990 decade, followed by 20 miserable years. The recent decade of 2010-2020 is decent.

Following numbers are total returns with dividend reinvested. Returns are shown in yen, and inflation-adjusted.

1980-1990: 402.51% (17.52% per annum)
1990-2000: -49.06% (-6.52% per annum)
2000-2010: -39.91% (-4.97% per annum)
2010-2020: 169.63% (10.43% per annum)

Japanese shareholders had to suffer through 20 years before they got a break.

For the miserable 20-year period (1990-2010): -69.39% (-5.75% per annum)

For the past 30-year period (1990-2020): -17.46% ( -0.64% per annum)

For the past 40-year period (1980-2020): 314.77% (3.62% per annum)

I guess that if a Japanese kept accumulating though his 40 years of worklife, starting when he was 20 in 1980, at this point in 2020 when he is 60-year old and ready to retire, he is doing OK but not great.

It is however very tough to keep investing through the period of 1990-2010, when you see your $1 become 30c, even with dividend reinvestment.


PS. There were errors in my earlier posted numbers. They have been corrected.

 

[2177V]

Sunk cost argument? Sorry couldn't resist. Plans are only good as long as the conditions the plan was designed to meet remain in effect. Not saying B&H is no longer valid but the reality is we can't know that they are. Life on the street these days speaks more to, as some others have mentioned, capital preservation, abnormalities in the system, and other contortions. Enough to have less confidence than usual "how we've always done it."

But I am not one with a $5 mil 401k like some here. If I were I could take up real gambling. Seems like the only time one can truly say fuggetaboudit is when you have huge amounts of money or no money to lose.

There is some truth to the statement: Plans are only good as long as the conditions the plan was designed to. 40 years ago, an old coworker of mine advised me to structure my portfolio to 90% passive index funds and 10% active investing. His rationale: You learn very little with low risk passive index funds. You learn a lot more with higher risk active investing such as option trading, buying during a correction, understanding the bond market, etc.

Over the years, my 90% passive index funds achieved market returns while I went thru my learning curve on my 10% active investing. I prefer to reallocate from 60/40 to 70/30 after a market correction and then reallocate back to 60/40 after the recovery. Doing this meets my risk tolerance and this improves my performance slightly.

In 2019, I reallocated from 60/40 to 100% treasuries after the yield curve inverted. I did not believe the bull market will continue on its record breaking streak so I made a decision to put my portfolio into an asset preservation portfolio. Similar to gambling. If you are gambling in Vegas and you made a bunch of money, do you quit while you are ahead and deposit your money into a money market account... or do you continue gambling?

I was risking future appreciation on equities in 2020 in return for asset preservation. However, I discovered long term treasuries makes pretty good money of about 7%....versus 10% to 12% for equities so the 3% to 5% of potential under performance was acceptable to me.

My point: Some investors follow a plan to the very end while other investors follow a plan initially but then change it after acquiring more knowledge and experience. There is nothing wrong with either strategy as long as you have experience, knowledge and historical returns of passive funds to justify your decision.