EvrClrx311
Full time employment: Posting here.
- Joined
- Feb 8, 2012
- Messages
- 648
I'm a mechanical investor, so I avoid emotions (best I can) and stick to plans, always looking for a deeper understanding of how these processes work. Over the years I've read countless books on the long long term patterns in the market, and I've even started to run my own on what I can get a hold of (Shiller's data is fun to play with). Statistics and numbers fascinate me, I actually enjoy sitting and running models on big data, often writing computer programs to do this for fun... just to gain a deeper understanding of what's going on.
Last fall I decided to project the market peaks and troughs into today's dollars using inflation adjusted values. Basically projecting each of the markets highs and lows over the last 100 years onto today... and I also found the median stock market value (that line that is created on a long horizon). What I found is that most of the Highs averaged out to a market or approximately 23,000 (in 2016... which would be about 23,700 today). That is... when looking at the half dozen highs in the history of the DOW... and averaging them out, they peaked on average right where the market is right now. That said, some peaked lower in todays dollars (19,000 was the lowest peak I saw) and some were much higher (I believe 35,000 in today's dollars, and I think it was that rally that happened a decade before the great depression (1916ish was it?) - 35K sounds high, but it's really just 30% higher than we are now - another year of gains like we've seen Nov 2016 - Nov 2017 and we'll get there).
On the lows, I saw that the troughs averaged out to around 12,500 in todays dollars (the bad times would translate to our current market being 45% lower than it is today... yicks). With the lowest of the worst going way down to 7,000 or so in todays dollars and the less shocking long terms lows being around 15,000 in todays DOW figures.
The median of all of this puts the market around 18,000... regression to the mean (that 100 year linear line the market follows of around 7.1% after inflation) indicates that we are higher than our regression pressures want us.
This doesn't mean the market is absolutely going down in the next year or even five years. But I can safely say it's higher than it should be on a longer term view (20+ years) ... if it were to correct 20-30% it would then be lower than it should be on the longer term trend.
To my question... I've never tried timing the market. In fact, I've been very against it... choosing to just index and let compounding work it magic. Staying the course. Noticing what I noticed above... I'm so tempted to pull back my 100% equity stake to move 10-30% of my 401k towards bonds or cash in anticipation of this regression happening in the next year or two (that's timing though... ugh).
Just speaking out loud my thoughts on this... as I'm curious to hear others thoughts. I'm probably going to do nothing and just stick to my current plan... however... it's so tempting, based on my understanding of how history repeats. Times like this (when everyone thinks it's ridiculous to move away from stocks) have shown to be the time when people should have. I'm sure I'll read this thread again in a year or two and chuckle about it Probably wishing I either had or hadn't done something different... but that's the key I've learned in all of my research and reading stories of people timing the market. The more you do, the worst off you are. Which is why I tend to lean on doing nothing.
That said, in all my years of studying these patterns, I've never felt such a strong desire to act on... call it a gut feeling.
Last fall I decided to project the market peaks and troughs into today's dollars using inflation adjusted values. Basically projecting each of the markets highs and lows over the last 100 years onto today... and I also found the median stock market value (that line that is created on a long horizon). What I found is that most of the Highs averaged out to a market or approximately 23,000 (in 2016... which would be about 23,700 today). That is... when looking at the half dozen highs in the history of the DOW... and averaging them out, they peaked on average right where the market is right now. That said, some peaked lower in todays dollars (19,000 was the lowest peak I saw) and some were much higher (I believe 35,000 in today's dollars, and I think it was that rally that happened a decade before the great depression (1916ish was it?) - 35K sounds high, but it's really just 30% higher than we are now - another year of gains like we've seen Nov 2016 - Nov 2017 and we'll get there).
On the lows, I saw that the troughs averaged out to around 12,500 in todays dollars (the bad times would translate to our current market being 45% lower than it is today... yicks). With the lowest of the worst going way down to 7,000 or so in todays dollars and the less shocking long terms lows being around 15,000 in todays DOW figures.
The median of all of this puts the market around 18,000... regression to the mean (that 100 year linear line the market follows of around 7.1% after inflation) indicates that we are higher than our regression pressures want us.
This doesn't mean the market is absolutely going down in the next year or even five years. But I can safely say it's higher than it should be on a longer term view (20+ years) ... if it were to correct 20-30% it would then be lower than it should be on the longer term trend.
To my question... I've never tried timing the market. In fact, I've been very against it... choosing to just index and let compounding work it magic. Staying the course. Noticing what I noticed above... I'm so tempted to pull back my 100% equity stake to move 10-30% of my 401k towards bonds or cash in anticipation of this regression happening in the next year or two (that's timing though... ugh).
Just speaking out loud my thoughts on this... as I'm curious to hear others thoughts. I'm probably going to do nothing and just stick to my current plan... however... it's so tempting, based on my understanding of how history repeats. Times like this (when everyone thinks it's ridiculous to move away from stocks) have shown to be the time when people should have. I'm sure I'll read this thread again in a year or two and chuckle about it Probably wishing I either had or hadn't done something different... but that's the key I've learned in all of my research and reading stories of people timing the market. The more you do, the worst off you are. Which is why I tend to lean on doing nothing.
That said, in all my years of studying these patterns, I've never felt such a strong desire to act on... call it a gut feeling.
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