Join Early Retirement Today
Thread Tools Display Modes
What did we learn from the Bubble?
Old 05-21-2006, 08:46 PM   #1
Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
What did we learn from the Bubble?

From Cliff Asness in the Financial Analysts Journal:

Rubble Logic: What Did We Learn from the Great Stock Market Bubble?

Some constructive advice
Investing is simple, but not easy. - Warren Buffett

Despite all the criticism I have leveled at our collective understanding, we basically know how to invest. A good analogy is to dieting and diet books. We all know how to lose weight and get in better shape: Eat less and exercise more. But as Warren Buffett would say, that is simple—but not easy. Investing is no different.

Some simple, but not easy, advice for good investing and financial planning in general includes
• diversify widely,
• keep costs low,
• rebalance in a disciplined fashion,
• spend less,
• save more,
• make less heroic assumptions about future returns,
• when something sounds like a free lunch, assume it is not free unless very convincing arguments are made—and then check again,
• stop watching the stock markets as if they were on ESPN, and
• work less on investing, not more (after finishing this article, of course).

Perhaps the most important advice, in true Hippocratic fashion, is: Do No Harm! You do not need a magic bullet. Little can change the fact that current expected returns on a broad set of asset classes are low versus history, and explicitly or implicitly “levering up” low expected returns to make them high is not usually a great idea. Stick to the basics with discipline, and ignore Bubble Logic.
- Alec
ats5g is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: What did we learn from the Bubble?
Old 05-21-2006, 11:09 PM   #2
Thinks s/he gets paid by the post
wabmester's Avatar
Join Date: Dec 2003
Posts: 4,459
Re: What did we learn from the Bubble?

Great article.* *Probably about a year's worth of thread fodder in there.

In case the link above didn't work for you, try this one.

I didn't follow his argument against the fed model, though.* *He argues that you can't compare E/P to the yield on the 10-year because E/P is real and the 10-year is nominal.

If he really believed that, then we should be comparing E/P to the real yield, which is about 2%.* *So stocks should be fairly valued at a P/E of 50 today by his logic, which is counter to his argument that the fed model allows stocks to get overvalued.
wabmester is offline   Reply With Quote
Re: What did we learn from the Bubble?
Old 05-22-2006, 08:15 AM   #3
Thinks s/he gets paid by the post
maddythebeagle's Avatar
Join Date: Jun 2005
Posts: 2,450
Re: What did we learn from the Bubble?

spend less and save more
hard to argue with that
- Hurry! to the cliffs of insanity!
maddythebeagle is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Sizing the Housing Bubble wabmester FIRE and Money 434 04-06-2007 10:14 PM
What Real Estate Bubble? Art FIRE and Money 76 11-09-2006 02:33 PM
Houston, Dallas, Austin Real Estate bubble? Sam FIRE and Money 26 08-31-2006 03:29 PM
Hoping to learn from you all J-Lu Hi, I am... 2 01-24-2006 09:11 PM
Zer, new here... eager to learn more about early retirement Zer Hi, I am... 9 07-24-2005 11:58 AM

» Quick Links

All times are GMT -6. The time now is 08:22 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.