NW-Bound
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National debt per citizen is $68,362. But debt per taxpayer is $183,030.
Gotta find some ways to turn more citizens into taxpayers.
Going All Cash in 401k
- Thread starter SoReadyToRetire
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National debt per citizen is $68,362. But debt per taxpayer is $183,030.
Gotta find some ways to turn more citizens into taxpayers.
NW-Bound
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I watched only a bit of the above video of Rogers' daughters because I do not know Chinese. I am not surprised they were fluent in Chinese (Mandarin?), because his goal of raising them in Singapore was to be close to China for them to learn the culture.
No longer watching any TV, let alone CNBC, I do not follow any pundit, except for when I happen to run across one on a Web headline. Because of this thread, I wonder what Rogers is up to recently, I search Youtube and find this interview which is entertaining.
Rogers told how he bought puts once when he turned bearish when everybody was bullish (some point in the 70s). In 6 months, he managed to sell the puts at the market bottom and tripled his money. He waited to do the same again when the market rallied. He waited 2 months, then shorted 6 stocks. He did not buy puts this time to save the premium. This time, he was early, and 2 months later he was wiped out. He was eventually vindicated when the stocks went bankrupt 2 years later, but that did not matter anymore.
I have read about this story, but just hear Rogers telling it in person. That's life of a trader. Interesting, but not for me to emulate.
No longer watching any TV, let alone CNBC, I do not follow any pundit, except for when I happen to run across one on a Web headline. Because of this thread, I wonder what Rogers is up to recently, I search Youtube and find this interview which is entertaining.
Rogers told how he bought puts once when he turned bearish when everybody was bullish (some point in the 70s). In 6 months, he managed to sell the puts at the market bottom and tripled his money. He waited to do the same again when the market rallied. He waited 2 months, then shorted 6 stocks. He did not buy puts this time to save the premium. This time, he was early, and 2 months later he was wiped out. He was eventually vindicated when the stocks went bankrupt 2 years later, but that did not matter anymore.
I have read about this story, but just hear Rogers telling it in person. That's life of a trader. Interesting, but not for me to emulate.
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We all choose our asset allocation strategy. I'm not seeing any real connection between your choices and the national debt, but good luck anyway.
I also can’t emulate a trader. He retired at 38 and traveled the world before the FIRE movement which got my attention. He has a trophy wife and he looks like a grandfather to his 10 years old daughter.
I also married a beautiful woman 20 years younger than me, I ride a motorcycle, and made a small fortune in the stock market by being aggressive because I knew generous pensions were coming to me by working like a dog for 44 years.
I agree with one important point. Think independently. Some people can’t do that. They feel more comfortable following the crowd which is why most people are passive investors.
Most people do not realize when they do that...that they become average investors. Most people read hundreds of articles stating passive investing is the way to go and those articles justify their passive investing decisions. However look at where he ended up. I thought independently and look where I ended up. I am thankful that I did not follow the crowd.
I know I will be criticized for the above comments but I do not care. All I care about now is maintaining my excellent health, my part time retirement life in Hawaii, surfing, making my young beautiful wife happy, and traveling all over the world. You only live once and I would not change anything.
24601NoMore
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Thinking independently is a good thing, IMHO. So, rather than criticize - I'd agree wholeheartedly.
It does seem there is a lot of follow-the-crowd behavior when it comes to investing. When the markets are on fire, people (in general) seem to be buying like crazy. When it drops, people sell like crazy.
I prefer to do the opposite of the crowd. When markets are up - I sell. When they are down - I buy. Not saying I get it right every time, but I agree with OP in part and do think markets are quite "frothy" at present and risks are increasing significantly. (Schiller PE has been through the roof, for example and at the 3rd highest point IN HISTORY as of a week ago. That can't end well. We MAY have room to run yet - at least for a while..but things are going to go splat at some point in the near future, and the signs are increasingly there that a potentially gut wrenching drop may not be far off - especially when we also have increasing political risks with an upcoming election, which typically causes markets a fair amount of increased anxiety).
That said, I do still struggle with taking risk off the table..am only at ~25% equities and even that is worrisome, as that 25% is not (at least to me) an insignificant sum - and if it got cut in half with the next market drop, it'd be very painful with me in ER - because I care about the "total number" in the kitty..and a 12% drop of the total number would really suck..to the point it'd eat my gut until it got back to where it was. I realize there are many posters here who decry the whole "where it was" thinking, but if you have $X, the goal is to KEEP (or exceed) $X, not get back to 80 or 90% of it. And while I realize it "probably" will get back or exceed within 10 or so years at most, the time period underwater would be very, very mentally painful being in ER..
As other posters have said..if you're in a position to de-risk and still meet your overall long-term financial needs, I think that's prudent - especially now. If, on the other hand, you need the average returns of stocks to meet your long-term financial needs, then you pretty much have little choice than to ride the roller coaster down and back up - and hope that over time markets revert to somewhat typical annualized performance..because the alternative certainly IS market timing, and as we all know market timing is very, very hard to get right consistently.
All JMHO and YMMV..but some good points raised about herd thinking, risk and current market conditions in this thread..
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
And as Taleb would point out, we are looking at a success story. There may be hundreds like him that failed, and no youtube video about them. As the song goes "Nobody knows you when you're down and out".
I won't criticize you for saying it, but I will point out that I don't think it is all that accurate.
Like I said above, you can "look at where he ended up", but how many like him failed? We don't know do we? Search the term "Survivorship bias". Most of those things you said you care about would probably not happen, or go away, if you were one of the failures.
Articles don't inform my decision to go passive, the data does (OK, articles that include that data count). It's great that you were successful, but to imply that "going for average" with passive investing isn't a good plan is disingenuous. And in fact, I think I've seen data that shows a true buy & hold investor does better than average, because the average is made up of too many people who buy high and sell low.
-ERD50
ncbill
Thinks s/he gets paid by the post
When you know you've got a pension (or more than one) that will fully meet your retirement needs, sure, you can remain 100% equities your entire accumulation phase.
Whether you follow a passive strategy by investing in index funds or active by trying to time the market/investing in sectors or even individual stocks.
But the pension is the most important part, IMHO...which is why I'm trying to convince my kids (who already owe several years service since the military paid for their undergrad) to go career for the pension & benefits for retired service members.
Whether you follow a passive strategy by investing in index funds or active by trying to time the market/investing in sectors or even individual stocks.
But the pension is the most important part, IMHO...which is why I'm trying to convince my kids (who already owe several years service since the military paid for their undergrad) to go career for the pension & benefits for retired service members.
NW-Bound
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The problem is that the timing has to be right. Rogers told how he was wiped out when his timing was wrong. Of course Rogers went "all the way" to maximize profits, and that was how it hurt in the story that he told.
In the late 90s, not everyone was joining the dotcom mania. Julian Robertson of the Tiger Fund shorted the dotcoms. He was early, and suffered huge losses. That plus some other mistakes caused the fund to be closed in early 2000.
The famed investor Templeton waited a few months and hit it just right. Templeton was already retired and was just managing his own money. He shorted $80 million worth, and never did have to cover his shorts. The companies all went bankrupt. The $80M was small compared to his holdings, so he could ride it out if he was early. Templeton was not greedy.
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I agree with your recommendations to convince your kids who have a military connection that they should attempt to get a job with a pension.
I had 7 years military service with duty in a combat zone. I returned stateside and I was fortunate to work with federal employees who then offered me a federal civilian job in New Jersey. I turned it down to get a lower paying federal civilian job at Mare Island Naval Shipyard in California. 15 years later, the Shipyard closed so I had to go back to college to update my job skills. I went through some hard times because I was in my 40's going to college with students in their 20's. However, Everything worked out.
The main points: Don't let them throw away an opportunity to get a job with a pension. If necessary, get a lower paying job because in the long term they will benefit from a government pension. If they do get a job with a government pension, tell them a government pension is not enough and they should invest part of their salary. If they had combat experience, they will become an aggressive investor because the greatest lesson that I learned as a combat soldier: "Never make decisions based on fear."
Now that I am in my late 60's, I realized I made a decision based on fear and re-allocate to 25%/75%...but I will never be 100% cash because that is unreasonable fear. My thought process: A 50% stock market crash translate to a 12.5% loss which is my risk tolerance. Everybody's risk tolerance is different. As long as your kid's thought process is a sound one, then they will be OK. I recommend that they have a "long term strategy". Young people generally do not have a long term strategy...but if they do, positive things will happen.
Finally, military provides a pension but civilian federal employment provides a pension too. So does a State employment and a City employment. My 7 years of military services opened a lot doors for me when I transition to a civilian job....with a pension. When I was young, I had a long term strategy and I simply worked to execute that strategy. I hope my story help.
No one knows what it's like
To be the bad man
To be the sad man
Behind blue eyes
Your point is correct. Picking a well-known success story, following it backwards to the beginning, then concluding that it is the true correct path is a logical mistake.
Good write-up.
Everyone's time horizon is different. Everyone's risk tolerance is different. Everyone's financial situation is different. Everyone's experience in the stock market is different. Everyone's personal situation is different. There are so many variables that it is extremely difficult to say whether we should buy or whether we should sell.
However, I always believe that investors should try to take chances and learn to increase their own personal knowledge base. I started going through my learning curve using about 5% or 10% of my portfolio and along the way, I made mistakes but I learned from it. Only later I started getting better. If I never took any chances, my personal knowledge base would stagnate.
I only object when people, who have never going through this process or they made their first mistake and they give up, they then say they know it all and strongly state passive investing is the ONLY way to go without being a seasoned and experienced active investor first.
They would argue "most" active investors fail. Maybe but maybe not. This is the classical case of whether the glass is half empty or half full.
IMO, it is a split decision. The passive investors can cite numerous articles stating passive investment out-perform active investors. Active investors can cite numerous articles they has a different conclusion:
https://www.morganstanley.com/access/active-vs-passive-investing
https://www.investmentnews.com/article/20190122/BLOG09/190129985/active-vs-passive-the-case-for-both
https://www.nasdaq.com/article/new-research-confirms-active-funds-place-in-your-portfolio-cm1147112
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3248056
Bottomline: Do what makes you happy.
NW-Bound
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And one should not try too hard to convert others either.
Evangelism is OK. Proselytism by browbeating, not so good.
PS. Come to think of it, in contrast to religions where the more believers you have on your side the better off you are, in investing you do not want to share the wealth with the crowd if you have a superior method. You would better keep it to yourself and make money off the uncouth.
PPS. The above applies to both indexing and active investing sides.
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Was there any actual verifiable data in there? I saw a bunch of hand-waving about "some active investors beat passive in some market conditions"? I would hope so, the proverbial monkeys and dartboards would do that too.
" We’ve found that active managers can be especially helpful during periods of market stress, when outperformance can be most critical for investors."
So was that another 'rear-view mirror' analysis? Was this 'market stress' identified in time to do something about it? And that begs the questions, do these same active managers go passive when the market isn't under stress?
edit/add: Sorry, I skipped the 3rd link, which does appear to have data. I'll check that out, however, their abstract seems to paint a left-handed compliment:
So they found that on average, low cost active funds didn't do worse than passive? That is not enticing.
OK, further edit/add after skimming the report: In the conclusion, they say:
Oh, boy. If I stick to the cheapest active funds, they do worse than passive, but it wasn't economically significant! What a ringing endorsement for active investing! I think someone with a $1M portfolio might feel differently. You can buy some nice stuff, or donate a to a favorite charity that would appreciate $1,300! Is that the best you can do? We're worse, but not by much? Hey, it was your link.
I would object to that as well. I don't see that sort of attitude on this forum. But one does not have to experience this for themselves, they can read the studies that show the active investors who can reliably beat the market are rare. I don't need to walk in front of a bus to have a good understanding of the outcome.
Good luck with your investing, but w/o some real data that outlines a superior methodology for a person to be confident they can do better than passive, it isn't really useful/actionable.
BTW, I have done the active investing for years. Did very well with some stocks (AAPL near its low in 1997), and an option strategy. But there was also a lot of volatility, and I saw what I felt appeared to be a reversion to the mean. So I went passive, and plan to stay that way until I see some convincing strategy with supporting data.
-ERD50
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Another quote from the article you linked:
Oh c'mon. So if this was the case, surely Morgan Stanley has people who can implement it, and I can buy into their mutual fund, and do better than the market.
Where are these funds?
-ERD50
Oh c'mon. So if this was the case, surely Morgan Stanley has people who can implement it, and I can buy into their mutual fund, and do better than the market.
Where are these funds?
-ERD50
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have become convinced that there is no such data. The investment industry knows that the vast majority of their income is based on the myth that stock picking works. There is a quotation sometimes attributed to Mahatma Ghandi: "First they ignore you. Then they laugh at you. Then they fight you. Then you win."
The "establishment" has been in the fighting phase for the past few years as the number of investors that don't buy the myth is increasing. The establishment has been fighting tooth and nail but all they have is mud-slinging ("communistic"), chicken little paranoia ("it will kill price discovery") and fact-free chaff, as in the articles that @vchan2177 cited.
So back to my point: If there were any statistical data or academic research to support the idea that stock-picking works, the establishment would have been beating us over the head with it for years. So, I conclude that none exists.
Really, these people are desperate. For example Morgan Stanley's "Wealth Management" business brings in something like $3.5B at a 25% net profit. That whole business is based on the myth of stock picking and a second myth, that if there are successful stock pickers that they would be selling their skills to all comers for a pittance. That both myths are false is an existential threat for them.
The original thread was started by SoReadytoRetire who asked for comments on going 100% cash.
Here is interesting link and some food for thought:
https://en.wikipedia.org/wiki/United_States_bear_market_of_2007–09
It took some time for the 2008 bear market to bottom. When the Bear Market was declared on June 27 2008......that day would have been a good day to cut your losses and sell. However, this is in hindsight.
I already decided that if the next bear market was a significant "global" event, (i.e. all the markets around the world are declining significantly), I will probably sell my 25% stock investment, take some losses, and be in 100% short term bonds and cash similar to "SoReadytoRetire".
A Bear market does not happen overnight like a crash. You do have time to decide whether to sell and take some losses and run...or ride it out. Naturally the passive investors will ride it out while the active investors will sell. However, we just had a historical 10 years bull run. This means there may be a bunch of people who are ready to take the money and run. We may be set up for a historical bear market.
I am just glad to be 75% cash and short term bonds at the moment.
Kinda interesting that the 2008 bear market started just before the election year when Obama was elected. Will history repeat itself? I like to speculate that the bear market may be triggered by a significant global event such as trade war impasse, Bernie Sanders get elected and implement socialism, ...or perhaps a real war in the middle east or N Korea. In any case, my sell order to actual sell execution is only 1 business day with Vanguard....unless the feds suspend trading which they did during 9/11. The drama continues. This thread is so entertaining.
Here is interesting link and some food for thought:
https://en.wikipedia.org/wiki/United_States_bear_market_of_2007–09
It took some time for the 2008 bear market to bottom. When the Bear Market was declared on June 27 2008......that day would have been a good day to cut your losses and sell. However, this is in hindsight.
I already decided that if the next bear market was a significant "global" event, (i.e. all the markets around the world are declining significantly), I will probably sell my 25% stock investment, take some losses, and be in 100% short term bonds and cash similar to "SoReadytoRetire".
A Bear market does not happen overnight like a crash. You do have time to decide whether to sell and take some losses and run...or ride it out. Naturally the passive investors will ride it out while the active investors will sell. However, we just had a historical 10 years bull run. This means there may be a bunch of people who are ready to take the money and run. We may be set up for a historical bear market.
I am just glad to be 75% cash and short term bonds at the moment.
Kinda interesting that the 2008 bear market started just before the election year when Obama was elected. Will history repeat itself? I like to speculate that the bear market may be triggered by a significant global event such as trade war impasse, Bernie Sanders get elected and implement socialism, ...or perhaps a real war in the middle east or N Korea. In any case, my sell order to actual sell execution is only 1 business day with Vanguard....unless the feds suspend trading which they did during 9/11. The drama continues. This thread is so entertaining.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+1
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
So it's that easy?
As is always pointed out, it's not only the exit, but the re-entry point that determines if getting out/in was better than holding.
When I look back, it looks like some formula like "get out when the bear is declared", would really leave you struggling with the re-entry point. Do you get back in on another 10% drop? What if we only ever see a 9% drop from there? Now you are left waiting for Godot.
Show us a system that would actually work, even with the benefit of hindsight.
Some refs:
https://www.invesco.com/static/us/i...ntId=049233173f5c3510VgnVCM100000c2f1bf0aRCRD
https://yhoo.it/30Lasz3 <<< short link to S&P chart
-ERD50
You are correct...the exit and re-entry points are difficult to determine. However, after a 20% drop which signal a bear market, then a decision should be made whether to stay or exit.
In the past, I have looked at the international markets, what the feds are going to do, whether corporations decide to layoff people, whether people are scared to buy cars, etc, etc. All of this can have a snowball effect of a continued decline. On the other hand, if the international markets may be doing well, the feds are taking action, there are no mass layoffs, etc, then this may be a temporary 20% decline. There is no objective system except a subjective one. In my specific situation, I do not need a re-entry point since I want to buy property at this time.
Here is an interesting video from Billionaire Jeffrey Gundlach who discusses some of these factors:
His main points which I found interesting:
- Need to raise taxes to address the national debt.
- Corporate bonds have higher risks because of a higher leverage ratio.
- Certain presidential candidates are lying to the public.
- A possibility exist of no candidate getting enough electoral votes which means Congress will decide who will be become president and VP.
Generally, if you are going to have a recession it is best to have a mild one. However, I am not sure that the next recession will be a mild one but that is my opinion. Jeffrey Gundlach seems to imply turmoil in the next recession.
I do not know how many Jeffery Gundlach's haters are out there so it looks like I am going to find out. It does not matter since I doing this for entertainment.
I do agree with Jeffery that taxes are needed to address the national debt. However, history has shown that LBJ had refused to raise taxes to pay for the Vietnam War. The results: Interest and inflation reached double digit. Are you old enough to remember that? This is why I am looking at property assets rather than stock market assets.
aja8888
Moderator Emeritus
I remember that and the war. I'm with Gundlach on this.
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Thanks for the reply with info, some interesting things to think about...
Ahh, so it is that easy (for me)! I'll stay!
A bit more seriously, certainly one could do well by sidestepping a downturn, but those darn exit and re-entry points are a tough one to deal with.
OK, but being subjective makes it a very tough thing to test for, or for me to build any confidence in. I just can't bring myself to making a big financial decision by "reading the tea leaves". If you can, and are successful, then that's great (for you).
Don't really know anything about this fellow, I'll watch later, but I'll assume he has some good points to make. But as always, I'll question if they are actionable. I also don't consider valid criticism as "hating", but we will see if any comes up.
LBJ left office in 1969, big inflation was in the 80's, I'm not sure that's the cause/effect? Regardless, a buy & hold still did well over most time frames. And they would need to identify and move to something else that was better for it to matter in any meaningful way.
As far as a sideways move into real estate, I have no insight, no opinion.
But I guess it all comes around to, if you feel you are capable of this subjective analysis that can lead to reliably beating the market, others must be capable as well. So why don't we see mutual funds consistently beating the market? I know, some will say these winners will keep it to themselves, but assuming it is a modest advantage (but significant over time with compounding), they probably could make more, and take less risk, by taking an annual % of other people's money. I would think they would do that.
Hedge funds try, I haven't seen good evidence that they reliably succeed (for the clients).
-ERD50
Ahh, so it is that easy (for me)! I'll stay!
A bit more seriously, certainly one could do well by sidestepping a downturn, but those darn exit and re-entry points are a tough one to deal with.
OK, but being subjective makes it a very tough thing to test for, or for me to build any confidence in. I just can't bring myself to making a big financial decision by "reading the tea leaves". If you can, and are successful, then that's great (for you).
Don't really know anything about this fellow, I'll watch later, but I'll assume he has some good points to make. But as always, I'll question if they are actionable. I also don't consider valid criticism as "hating", but we will see if any comes up.
LBJ left office in 1969, big inflation was in the 80's, I'm not sure that's the cause/effect? Regardless, a buy & hold still did well over most time frames. And they would need to identify and move to something else that was better for it to matter in any meaningful way.
As far as a sideways move into real estate, I have no insight, no opinion.
But I guess it all comes around to, if you feel you are capable of this subjective analysis that can lead to reliably beating the market, others must be capable as well. So why don't we see mutual funds consistently beating the market? I know, some will say these winners will keep it to themselves, but assuming it is a modest advantage (but significant over time with compounding), they probably could make more, and take less risk, by taking an annual % of other people's money. I would think they would do that.
Hedge funds try, I haven't seen good evidence that they reliably succeed (for the clients).
-ERD50
NW-Bound
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As a chart showed that I linked in to share somewhere on this forum, Ray Dalio's fund matched the S&P over a very long period. He trailed the S&P badly during the dotcom mania, but sidestepped the crash after the bubble burst and also 9/11. Similarly, he did very well during the Great Recession of 2008-2009, but the S&P has caught up with him again.
So, the value of his fund can be seen as providing more stability. That's what hedging is about. I hate it when people say no one can beat the S&P consistently. How can you? The only way to beat the S&P during the dotcom mania is to go leveraged and buy options on dotcom stocks. Similarly, the only way to beat the S&P during the housing bubble is to buy options on financial stocks. Do you really want to?
Silly, silly...
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
We'll disagree on this. I agree completely that the chart looks pretty good, but before we can conclude that there is skill rather than luck, we need to look inside the box. How much leverage was used and when? How much was done with short positions and when. Etc. Until we see this data (probably never) I don't think we can reach any conclusions about risk and, hence, long term stability.
Agreed, but that is the textbook story. Farmers hedging their wheat harvest, airlines hedging their fuel cost, etc.
"Hedge" funds do far more than classical hedging; some don't do classical hedging at all. To buy a hedge fund is to give the manager a blank check, which he often puts into a closed box where investors can't even see what he/she is doing. Long/short/naked calls/illiquid assets .... It might all be in there.
Edit: For example, Long Term Capital Management was called a hedge fund. If you like to read, "When Genius Failed" by Roger Lowenstein is fascinating. IIRC they looked pretty stable until their major scheme came crashing down.
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I'm not sure what you are pointing to as 'silly'?
I'll include in the definition of 'success' as providing better risk adjusted returns than Total Market/Bonds or S&P/bonds, but the AA target would need to be defined up front. IOW, I should be able to go to a hedge fund and say, I want lower volatility than 70/30, but I want the same total return as 70/30 (or whatever AA you agree to). After fees.
If they can't be counted on to reliably do that, what's the point?
The target could be 'risk free' investments, anything really. But the hedge fund would need to provide some measurable advantage.
-ERD50
