"Nobody Knows Nuthin"
There are simply far too many variables in the equations.
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I don’t think that’s right. The stock market drops in anticipation of the economic pain. By the time it bottoms, future returns are actually better.
Sometimes gets toppy and can drop prior, but its usually in the midst of a recession and sometimes afterward where its still coming to grips with the fear. At the bottom, by definition returns are better, but to the degree it harms the real economy its not good and depending on the actions of the CBs and policy choices by admin, you're usually pulling future returns forward or some other measure to put people at ease.
The other part to my post above on volatility and how its high this year. That is perfectly normal after a year like last year, where we had volatility at a 50+year low. Low vol years are usually followed by higher vol, everything cycles. It intensifies the discomfort, but its normal.Leave a comment:
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Where do you think are we now? I’m hoping return to normal. People are not anticipating a recession but by the time we get there, it is too late. DOW 6600 is too much but certainly possible. I would be impressed if people can really “buy and hold forever or stay the course”.
Which people are you referring to? I’m sure some people, as always, will act impulsively or irrationally. But I will not change course at all, because I don’t see any better option.
I'll be buying and holding forever because I'm not smart enough to know the alternatives. (Some of these permabear posts don't even read like English to me)
Fortunately / unfortunately, buying and holding low cost passive index funds is all I've known in terms of investing.
Luckily for me, I make enough and spend so little that I'm fairly certain I'll be fine no matter what the market provides.Leave a comment:
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Where do you think are we now? I’m hoping return to normal. People are not anticipating a recession but by the time we get there, it is too late. DOW 6600 is too much but certainly possible. I would be impressed if people can really “buy and hold forever or stay the course”.
Which people are you referring to? I’m sure some people, as always, will act impulsively or irrationally. But I will not change course at all, because I don’t see any better option.Leave a comment:
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Where do you think are we now? I'm hoping return to normal. People are not anticipating a recession but by the time we get there, it is too late. DOW 6600 is too much but certainly possible. I would be impressed if people can really "buy and hold forever or stay the course".Leave a comment:
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I don't think that's right. The stock market drops in anticipation of the economic pain. By the time it bottoms, future returns are actually better.Leave a comment:
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Its important to see whats implied or thought of as the range in the market. VIX is 25 right now, but thats elevated due to basically closing out on the lows two days in a row. It has been around 15-18 steadily in the good times since volmageddon. Lets say good times mean an SP at around 2700. What does that VIX level imply (not that its true, just what does it mean)?
The VIX is the monthly view of the annual volatility of the market with a 1SD (68%) range. For ease of example, lets use 2700 and a VIX of 15. The VIX of 15 means the market "implies" or thinks is possible within a 1 SD probability that the SP moves +/-15% on the year. That means the expected range would be roughly 2300-3100, which is a massive range but is what it is. This is of course neither perfect nor predictive (in fact the usual case is implied volatility>realized volatility) but helps to color scenarios and whats happening. All it really shows is where/how much people are willing to pay for protection in the options/futures market.
So to put it in context our current trading range of which neither the high or low have been retested (high was breached in NDX) is 2532-2872. This is well within the ranges of even the low but stable VIX we've seen recently. While the speed of the whipping has been a little crazy, the % moves are well within normal bull market years with positive returns. I'll say personally this does not appear to be a healthy market and theres a lot of piling on with geopolitical issues as well, which again is normal unfortunately.
I am not a fan of the what looks like move exacerbating nature or algos and MMs just pulling liquidity every time the market makes a down move. Lots of algo on algo violence lately. Am a little concerned how these exaggerated moves will influence things come the next recession. Starting to think that bigger, scarier moves are almost a given unless something is done to beef up the underlying infrastructure of the market and reign in how powerful some of the derivatives and systematic funds affect the market.Leave a comment:
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I was much more excited at Dow 6600.
The problem with a drop like that is that it effects the economy. It’s not “just a buying opportunity,” future returns actually get hurt.
Yes. A correction or buying opportunity is nice if you happen to have timed cash flow available. Anything more than that has the possibility of affecting (or reflecting) the greater economy and means things are not great overall and harm is done. You cant get back lost production, and those events are largely negative and we dont want that ever. We just know they will likely occur unfortunately.Leave a comment:
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I was much more excited at Dow 6600.
The problem with a drop like that is that it effects the economy. It's not "just a buying opportunity," future returns actually get hurt.Leave a comment:
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I can't even get excited about a 10% decline. My reward pathways are all screwed up.
Call me when we're down 30%.Leave a comment:
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Wow, with stocks cratering why is the 10Y not dropping in yield? Why is the USDX down? And oh baby, what happening this Sunday night?
Yeah this week has been more traditional risk off type of day which was not great for banks, which were needed to control the damage.Leave a comment:
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from these valuations, a 50% market decline is always a possibility.
Fixed that for you.
What does this mean, you do not believe valuation matters?
Bogleheads are price insensitive. They see a nominal price chart of the last 40 years & believe on a long enough timeline they’ll be bailed out, blissfully unaware of the forces behind such a chart. They believe in the magic money machine.
https://www.youtube.com/watch?v=RO7TnZvKuy4
Yes. Far better to believe in conspiracy theories that lead one to hold a portfolio consisting mostly of gold miner stocks and precious metals, because the magic metal will bail us out.
https://www.youtube.com/watch?v=NSyGpO5zpO8
“If you don’t own gold…there is no sensible reason other than you don’t know history or you don’t know the economics of it” – Ray Dalio
Long as we're quoting experts, I prefer Bernstein to Dalio:
As you might suspect, there’s a price to be paid. You think that value and small-stock exposures were a tough row to hoe in the 90s? Have Japanese stocks given you fits for the past 15 years? You ain’t seen nothin’: since 1963, the precious metals equity (PME) series has lost more than 35% five different times and, on one occasion, nearly 70%. Between October 1980 and August 1998, it lost a total of 53.8%, or 4.2% annualized—a 7.7% annualized loss after inflation. For the more than 24 years between October 1980 and December 2004, the real return of PME was –0.3%.
That’s nearly a quarter century of zero real returns, pilgrims. How hard was it hard to keep the faith? To quote Klaus von Bulow, You’ve No Idea. What with central banks divesting themselves of their reserves, the permanent demise of inflation, and the dwindling industrial usefulness of the metal, some very smart people went on record that this particular hard asset was as welcome in your portfolio as Hillary Clinton on the op-ed page of The Wall Street Journal.
Not that I’m a gold bug. Far from it; anyone who rebalances this asset class (and, dare I say it, overbalances it) is actually an anti-gold bug, hibernating when these little creatures are most frenzied, and coming out to prowl only when interest has waned.
What percentage of investors has the discipline to stay the course with an asset capable of withering away for an entire generation before reverting to its mean? (If indeed the past 41.5 years have given us a realistic picture of its mean.) I wouldn’t even venture a guess, but I’m pretty sure that the answer is not too far above zero.
http://www.efficientfrontier.com/ef/adhoc/gold.htm
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from these valuations, a 50% market decline is always a possibility.
Fixed that for you.
What does this mean, you do not believe valuation matters?
Bogleheads are price insensitive. They see a nominal price chart of the last 40 years & believe on a long enough timeline they’ll be bailed out, blissfully unaware of the forces behind such a chart. They believe in the magic money machine.
https://www.youtube.com/watch?v=RO7TnZvKuy4
Yes. Far better to believe in conspiracy theories that lead one to hold a portfolio consisting mostly of gold miner stocks and precious metals, because the magic metal will bail us out.Leave a comment:
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from these valuations, a 50% market decline is always a possibility.
Fixed that for you.
What does this mean, you do not believe valuation matters?
Of course it matters (although I really don't think it's particularly helpful to adjust your asset allocation in order to reduce risk or boost returns.) But the point is that a 50% market decline is always a possibility, no matter what valuations are.Leave a comment:
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