Author Topic: calling the top  (Read 16544 times)

Le Barbu

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Re: calling the top
« Reply #100 on: April 19, 2017, 06:50:18 AM »
I did backesting 3 years ago, short-term treasury vs stock market

90% chances to win over any 10 years period
97% over 20 years
100% over 30 years

Even over 3 years periods, 70% had a positive outcome!


Okay, so the answer to sovereign's question appears to be "Yes, it's always been a "can't miss" proposition as long as you're willing to wait up to 30 year."

Did you use real (after inflation) market returns?  If not, any idea on how those numbers change when you account for inflation?

Inflation adjusted
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Le Barbu

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Re: calling the top
« Reply #101 on: April 19, 2017, 07:00:18 AM »
I did backesting 3 years ago, short-term treasury vs stock market

90% chances to win over any 10 years period
97% over 20 years
100% over 30 years

Even over 3 years periods, 70% had a positive outcome!

Wow. I would not have expected that.

Leveraging with low cost debt always work, if done properly!

You have to borrow money at very low cost, stay the course, pay low fees, optimise taxes, do not overleverage!
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Le Barbu

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Re: calling the top
« Reply #102 on: April 19, 2017, 07:09:33 AM »
I did backesting 3 years ago, short-term treasury vs stock market

90% chances to win over any 10 years period
97% over 20 years
100% over 30 years

Even over 3 years periods, 70% had a positive outcome!

Okay, so the answer to sovereign's question appears to be "Yes, it's always been a "can't miss" proposition as long as you're willing to wait up to 30 year."

That backtest doesn't really answer that question, because, unless you are the United States government, you generally can't borrow at the short term treasury rate (and even then, not for long term periods).  The type of debt that is best suited for leveraged investing and that is actually available to retail stock market investors (or at least the property-owning subset thereof) is mortgage debt -- the "Welcome and General Discussion" subforum currently has at least a few active threads going that examine the historical success rates of leveraged-investing-via-mortgage strategies, in addition to the umpteen older threads covering that topic that are gathering dust in the forum archives.

Quote
Did you use real (after inflation) market returns?  If not, any idea on how those numbers change when you account for inflation?

Factoring in inflation shouldn't change the results (either both sets of returns would be adjusted for inflation, or not, so the historical success rates should remain constant).

I am not in the USA but Canada. When I ran my numbers, I factored everything to be as close as possible to my reality. In Canada, the lowest borowing cost for average Joe is a variable rate mortgage. The main reason for this strategy succes is the risk increase. I am willing to take that risk within reasonable bounds.
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Retire-Canada

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Re: calling the top
« Reply #103 on: April 19, 2017, 08:37:23 AM »
I am not in the USA but Canada. When I ran my numbers, I factored everything to be as close as possible to my reality. In Canada, the lowest borowing cost for average Joe is a variable rate mortgage. The main reason for this strategy succes is the risk increase. I am willing to take that risk within reasonable bounds.

I am in Canada as well. My variable rate is sub 2%. It has a lot of room to increase before it even gets to the 4% rate many folks use for their calculations. Additionally the excess money I invest that could have been used to pay down the mortgage faster is in my TFSA and Non-Reg accounts so it's readily accessible if I decide I should pay my mortgage down fast.

That leaves the risk that at the moment I want to pay down my mortgage there is a market crash. There are many scenarios where even after a significant crash I would have the same or more money available by investing than by accelerating the mortgage. And I would suggest having the liquidity of those investments available to me to deal with whatever comes my way actually reduces my risk so the number of scenarios where I come out worse shrinks again.

I don't see the invest vs. accelerated payments as terribly risky even in Canada. I think the accelerated payment proponents underestimate the risks of that approach.

Le Barbu

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Re: calling the top
« Reply #104 on: April 19, 2017, 10:43:28 AM »
I am not in the USA but Canada. When I ran my numbers, I factored everything to be as close as possible to my reality. In Canada, the lowest borowing cost for average Joe is a variable rate mortgage. The main reason for this strategy succes is the risk increase. I am willing to take that risk within reasonable bounds.

I am in Canada as well. My variable rate is sub 2%. It has a lot of room to increase before it even gets to the 4% rate many folks use for their calculations. Additionally the excess money I invest that could have been used to pay down the mortgage faster is in my TFSA and Non-Reg accounts so it's readily accessible if I decide I should pay my mortgage down fast.

That leaves the risk that at the moment I want to pay down my mortgage there is a market crash. There are many scenarios where even after a significant crash I would have the same or more money available by investing than by accelerating the mortgage. And I would suggest having the liquidity of those investments available to me to deal with whatever comes my way actually reduces my risk so the number of scenarios where I come out worse shrinks again.

I don't see the invest vs. accelerated payments as terribly risky even in Canada. I think the accelerated payment proponents underestimate the risks of that approach.

Retire-Canada, you know you can make your mortgage deductible through taxable account investing? My net rate is lower than 1.5% net actually!
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zoltani

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Re: calling the top
« Reply #105 on: April 19, 2017, 11:03:35 AM »
I'll need to check in with old co-workers who discuss trading stocks daily. One of them bought $10,000 of Apple the week it peaked and still complains that his broker screwed him.

I laugh since it went even higher since you posted this.

Bateaux

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Re: calling the top
« Reply #106 on: April 20, 2017, 04:43:55 PM »
My call was November 2016.  So don't listen to me.  Still fully invested and buying like there is no end in sight.
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Eric

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Re: calling the top
« Reply #107 on: February 08, 2018, 05:56:53 PM »
Per sol's guidelines in the first post

The US stock market will crash again, eventually.  It has always done this periodically and I see no reason to expect anything different.  It's just a structural feature of publicly traded markets.

But WHEN will this next happen?  Some forum members have been "calling the top" every few months since about 2012, and have missed out on 15% per year gains since then.  I don't think we're ready to crash yet, but I fully expect it to happen again eventually and I want to hear your guesses on when, and how much.

All submissions should include a proposed month/year for the market peak, and a S&P500 percentage drop of >10% to occur after that.  For example, I might propose that the market will peak in November 2017 and then suffer a maximum 15% drop (before exceeding that value again).  This format removes all ambiguities about the duration of a potential downturn, because if a 15% drop sticks around for six months and then drops another 15%, that's just a 30% drop and the peak date remains unchanged.

Who is brave enough to venture a guess?

sol says the top will be June 2018, then a maximum drawdown of -15%.


After today's ~4% slide, I show we're down 10.1% from the peak on 1/26/2018.  (2872.87 to 2581.00)

Best guesses so far according to the date (amount TBD!)

Jan 2018: 25%


Sometime in early 2018 when Janet Yellen is replaced by a crank who doesn't understand monetary policy.

Oh yeah, i'd say a 50% drop. Will take a few years to recover

Although David maybe cheated through vagueness, it's still close.

Good work you two!  Now let's see who nailed the percentage.
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