Author Topic: Ready for a Correction  (Read 90406 times)

ender

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Re: Ready for a Correction
« Reply #50 on: August 21, 2015, 08:04:32 PM »
I'm glad this is happening now, when we have some assets but not too many assets.

It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

Pooperman

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Re: Ready for a Correction
« Reply #51 on: August 21, 2015, 08:26:59 PM »
Watching the stock market is like watching paint dry... Or, "Drop! Drop! Drop!!"

Jack

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Re: Ready for a Correction
« Reply #52 on: August 21, 2015, 08:37:33 PM »
I'm mildly annoyed that I bought a big chunk of VTSMX on Wednesday. It wouldn't be so bad if I were DCAing into the market, bu t I was just figuring out my HSA and had let a couple of paychecks' worth of contributions pile up in cash.

a1smith

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Re: Ready for a Correction
« Reply #53 on: August 21, 2015, 08:53:26 PM »

fb132

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Re: Ready for a Correction
« Reply #54 on: August 22, 2015, 06:13:51 AM »
Watching the stock market is like watching paint dry... Or, "Drop! Drop! Drop!!"
I laughed at that because I was actually picturing it.

wienerdog

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Re: Ready for a Correction
« Reply #55 on: August 22, 2015, 06:45:18 AM »
I'd be shocked if the Fed raises by more than 25 bps anytime in the next 12 months. The only reason to do so would be to get off the zero bound just to again lower rates after they torpedo the economy. There's a better chance we'll get QE4 and negative rates before we see materially higher rates.

Yup here comes QE4.

forummm

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Re: Ready for a Correction
« Reply #56 on: August 22, 2015, 07:46:14 AM »
I'd be shocked if the Fed raises by more than 25 bps anytime in the next 12 months. The only reason to do so would be to get off the zero bound just to again lower rates after they torpedo the economy. There's a better chance we'll get QE4 and negative rates before we see materially higher rates.

Yup here comes QE4.

I don't think a 0.25% interest rate hike will kill the economy.

Retire-Canada

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Re: Ready for a Correction
« Reply #57 on: August 22, 2015, 08:31:29 AM »
5 Things Investors Shouldn't Do Now

Best point in the article:

Quote
No. 5: Don't think you--or anyone else--knows what will happen next.

After a market drop, or at any other time, no one knows what the market will do next. The one thing you can be fairly sure of is that the louder and more forcefully a market pundit voices his certainty about what is going to happen next, the more likely it is that he will turn out to be wrong.  Stocks could drop another 10% from here, or another 25% or 50%; they could stay flat; or they could go right back up again.  Diversification and patience and, above all, self-knowledge are your best weapons against this irreducible uncertainty.

DoubleDown

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Re: Ready for a Correction
« Reply #58 on: August 22, 2015, 09:07:04 AM »
For everyone who's excited about sinking some extra money into the markets, including longtime MMM posters, to "take advantage" of this dip/correction/catastrophe, what makes you so sure the markets won't drop again on Monday? Or all next week? Or be down 25% for the entire year? Then you'd lose more money and realize you were foolish to invest more right at this time. Better to wait until the exact day it hits rock bottom before a long steady climb. That is, what makes you think you can time the market? Thinking that "now" is the right time to buy is complete voodoo. It's always the right time to invest, like clockwork, and today is no different than any other day.

ender

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Re: Ready for a Correction
« Reply #59 on: August 22, 2015, 09:10:53 AM »
For everyone who's excited about sinking some extra money into the markets, including longtime MMM posters, to "take advantage" of this dip/correction/catastrophe, what makes you so sure the markets won't drop again on Monday? Or all next week? Or be down 25% for the entire year? Then you'd lose more money and realize you were foolish to invest more right at this time. Better to wait until the exact day it hits rock bottom before a long steady climb. That is, what makes you think you can time the market? Thinking that "now" is the right time to buy is complete voodoo. It's always the right time to invest, like clockwork, and today is no different than any other day.

I was already all-in for 2015 investments, finished the 401k/IRAs earlier this year.

Which gives me an interesting hindsight based question to all this, which ultimately I won't know until April 15 2016 :)

Still a lot of months remain in 2015.

wienerdog

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Re: Ready for a Correction
« Reply #60 on: August 22, 2015, 09:25:42 AM »

I don't think a 0.25% interest rate hike will kill the economy.

He said he will be shocked if they did raise it by more.  They won't raise it that much if they do at all.  There is nothing in the numbers that says they can and they know it.  China has already fired the first shot.  The Feds don't know what to do so they will do QE4.

Retire-Canada

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Re: Ready for a Correction
« Reply #61 on: August 22, 2015, 10:02:42 AM »
For everyone who's excited about sinking some extra money into the markets, including longtime MMM posters, to "take advantage" of this dip/correction/catastrophe, what makes you so sure the markets won't drop again on Monday?

The answer is nothing, but if the current dip motivates some folks to save more, free up cash tied up in other things and buy stocks or rebalance their portfolios that's a good thing.

I made some choices that allowed me to invest more right now than I would have otherwise. I don't pretend to know what's going to happen next, but if there is a 25% drop next month I'll be highly motivated to invest what I can and I'll keep doing that. A lot of human behaviour is not rationale. I don't mind harnessing some of that "crazy" when it suits my purposes and motivates me to do something I think is positive like put off purchases and save extra.


« Last Edit: August 22, 2015, 01:47:46 PM by Vikb »

Pooperman

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Re: Ready for a Correction
« Reply #62 on: August 22, 2015, 10:05:22 AM »
If markets were rational, there would never be sales or spikes.

Mr. Green

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Re: Ready for a Correction
« Reply #63 on: August 22, 2015, 10:43:13 AM »
I couldn't care less about timing the bottom. I just have a chunk of cash that I'll invest if we see an official correction. If it drops another 10% then so be it. Hell, I might even invest the cash now if it doesn't pop back up 2% on Monday. Normally I would have no spare cash but since I do and it's a small amount, I'm having some fun with the game of it, whether it's the optimal thing to do or not.
« Last Edit: August 22, 2015, 10:46:08 AM by Mr. Green »

sol

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Re: Ready for a Correction
« Reply #64 on: August 22, 2015, 11:03:31 AM »
If markets were rational, there would never be sales or spikes.

I'm not so sure about this.  People always talk about the 2000 tech bubble/crash as an obvious example of irrational markets, but it seemed to make perfect sense at the time.  Prices are based on people's expectations of future profits, so when expectations change prices change.  Expectations can change for all sorts of reasons.

Last month, the prevailing view in the financial pages was that megacorp tech firms were dominating the markets because they are so insanely profitable.  Apple is worth more than Exxon/Mobil but it has 200 billion in cash and a P/E of only 13, so it must still be a good value, right?  Fast forward a month and China devalues their currency and Iran is dumping oil during a glut and the fed is raising interest rates, and suddenly everyone's expectations for the future are not so rosy anymore.

Nothing really changed over that month other than how people think the future will unfold, given some new information.  It seems perfectly rational to me for people one month ago to expect Apple and Google and Amazon and Facebook to continue to mint their own money.  It also seems perfectly rational to me for people today to think profits will mean-revert.  A 10% price swing on those rational expectations doesn't strike me as anything freakishly unusual.
« Last Edit: August 22, 2015, 11:40:25 AM by sol »

milesdividendmd

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Re: Ready for a Correction
« Reply #65 on: August 22, 2015, 11:04:23 AM »

For everyone who's excited about sinking some extra money into the markets, including longtime MMM posters, to "take advantage" of this dip/correction/catastrophe, what makes you so sure the markets won't drop again on Monday? Or all next week? Or be down 25% for the entire year? Then you'd lose more money and realize you were foolish to invest more right at this time. Better to wait until the exact day it hits rock bottom before a long steady climb. That is, what makes you think you can time the market? Thinking that "now" is the right time to buy is complete voodoo. It's always the right time to invest, like clockwork, and today is no different than any other day.

I have a theory on this question.

People who buy and hold know both that losing money in the stock market is emotionally painful and that selling in response to this pain is counterproductive, so this "the market is dropping yay!" mantra is a psychological buffer against that pain and against making foolish moves.

It's pretty smart psychology in my book, especially since bear markets are actually good things for accumulators.

My only fear of such an approach would be that when the shit really hit the fan, this thin facade would be insufficient to the task at hand.

hodedofome

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Re: Ready for a Correction
« Reply #66 on: August 22, 2015, 11:35:39 AM »
It is entirely possible that rates stay where they are for years. Have you considered this in your scenario? It is also possible that the Fed raises rates and the market rallies. Don't impose your beliefs on the market, anything can happen and it's generally unpredictable.

milesdividendmd

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Re: Ready for a Correction
« Reply #67 on: August 22, 2015, 11:45:37 AM »

It is entirely possible that rates stay where they are for years. Have you considered this in your scenario? It is also possible that the Fed raises rates and the market rallies. Don't impose your beliefs on the market, anything can happen and it's generally unpredictable.

Who is this in response to Hoded?

hodedofome

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Re: Ready for a Correction
« Reply #68 on: August 22, 2015, 11:48:07 AM »
Response to a few on this thread, not any one in particular. Some on this thread predict that rates will rise and believe the market will fall in response. That belief could be entirely wrong. The reality is that nobody knows what the fed will do until they do it. And nobody knows exactly how the market will react to what the fed eventually does.

Dexterous

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Re: Ready for a Correction
« Reply #69 on: August 22, 2015, 12:26:53 PM »
For everyone who's excited about sinking some extra money into the markets, including longtime MMM posters, to "take advantage" of this dip/correction/catastrophe, what makes you so sure the markets won't drop again on Monday? Or all next week? Or be down 25% for the entire year? Then you'd lose more money and realize you were foolish to invest more right at this time. Better to wait until the exact day it hits rock bottom before a long steady climb. That is, what makes you think you can time the market? Thinking that "now" is the right time to buy is complete voodoo. It's always the right time to invest, like clockwork, and today is no different than any other day.

We're not sure, but some of us have extra "play money".  For example, I have a set retirement date based upon my military service and will meet my investment goals sooner than that date.  So I've got extra money to play with whenever I choose.  Sometimes I go on vacation with that extra money, and at other times I'll invest it when I see big dips.

milesdividendmd

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Re: Ready for a Correction
« Reply #70 on: August 22, 2015, 12:30:05 PM »

For everyone who's excited about sinking some extra money into the markets, including longtime MMM posters, to "take advantage" of this dip/correction/catastrophe, what makes you so sure the markets won't drop again on Monday? Or all next week? Or be down 25% for the entire year? Then you'd lose more money and realize you were foolish to invest more right at this time. Better to wait until the exact day it hits rock bottom before a long steady climb. That is, what makes you think you can time the market? Thinking that "now" is the right time to buy is complete voodoo. It's always the right time to invest, like clockwork, and today is no different than any other day.

We're not sure, but some of us have extra "play money".  For example, I have a set retirement date based upon my military service and will meet my investment goals sooner than that date.  So I've got extra money to play with whenever I choose.  Sometimes I go on vacation with that extra money, and at other times I'll invest it when I see big dips.

Even if it's play money, do you want it to appreciate any less than your "serious" money?

This seems like an obvious example of mental accounting.

http://www.investopedia.com/university/behavioral_finance/behavioral5.asp

milesdividendmd

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Re: Ready for a Correction
« Reply #71 on: August 22, 2015, 12:45:53 PM »

If markets were rational, there would never be sales or spikes.

I'm not so sure about this.  People always talk about the 2000 tech bubble/crash as an obvious example of irrational markets, but it seemed to make perfect sense at the time.  Prices are based on people's expectations of future profits, so when expectations change prices change.  Expectations can change for all sorts of reasons.

Last month, the prevailing view in the financial pages was that megacorp tech firms were dominating the markets because they are so insanely profitable.  Apple is worth more than Exxon/Mobil but it has 200 billion in cash and a P/E of only 13, so it must still be a good value, right?  Fast forward a month and China devalues their currency and Iran is dumping oil during a glut and the fed is raising interest rates, and suddenly everyone's expectations for the future are not so rosy anymore.

Nothing really changed over that month other than how people think the future will unfold, given some new information.  It seems perfectly rational to me for people one month ago to expect Apple and Google and Amazon and Facebook to continue to mint their own money.  It also seems perfectly rational to me for people today to think profits will mean-revert.  A 10% price swing on those rational expectations doesn't strike me as anything freakishly unusual.

You seem to be arguing for a perfectly efficient market here Sol.

You don't really believe that the market is perfectly efficient do you? 

If so I would love to hear your explanation for the following anomaly involving a closed end fund ticker symbol CUBA, with no holdings in Cuba which traded at a significant discount to NAV prior to obamas announcement on opening up Cuba, and at a significant premium after!

http://www.pbs.org/newshour/bb/economists-think-differently-humans/

If your point is that it is hard to exploit market inefficiencies or to recognize bubbles before they happen, I 100% agree.

But if you truly believe in a perfectly efficient market, wow, I couldn't disagree more.

sol

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Re: Ready for a Correction
« Reply #72 on: August 22, 2015, 12:53:10 PM »
You seem to be arguing for a perfectly efficient market here Sol.

You don't really believe that the market is perfectly efficient do you? 

Rational does not mean efficient. 

I recognize there are market inefficiencies.  Information is unevenly distributed.  Transactions are not instantaneous.  People can manipulate prices.

But in the broadest context, if you believe that prices are set by the expectation of future profits relative to alternative investments, then introducing new information can rationally cause dramatic price swings over short periods of time.   It wasn't irrational that the tech bubble popped, but neither was it irrational that it inflated in the first place.

milesdividendmd

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Ready for a Correction
« Reply #73 on: August 22, 2015, 01:55:00 PM »
Except for the fact that there really was no fundamental change in the market that caused the tech bubble to pop. If you think that investors were calculating share prices based on expected future earnings on the last day of the bubble and on day 100 of the crash then to what factor do you attribute the sudden collapse of earnings expectations?

Did the web suddenly become unpopular ?  Did web activity stop growing?  Was there a government law enacted against commerce on the web. I don't remember that.

I agree that bubbles are hard to recognize before the fact, but it doesn't follow that prices are set exclusively by rational expectations of future profits.

They are partially sent by that, of course, and partially set but irrational human behavior, such as performance Chasing, recency bias, loss aversion, etc.

(That's the only rational way of looking at it in my view. )
« Last Edit: August 22, 2015, 04:05:52 PM by milesdividendmd »

BTDretire

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Re: Ready for a Correction
« Reply #74 on: August 22, 2015, 03:07:04 PM »
I'm glad this is happening now, when we have some assets but not too many assets.

It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

 I sent an email to my 24 year old daughter, keep her eye on the market, it may be time to fund her Roth for this year.
I said, the market seems to be in a bit of a correction, I hope it's not a bear market.
A bear market would be good for you but not for me!

csr

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Re: Ready for a Correction
« Reply #75 on: August 22, 2015, 10:41:49 PM »
Ready, but won't pull the trigger yet.

Abe

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Re: Ready for a Correction
« Reply #76 on: August 23, 2015, 08:09:35 AM »
Dollar-cost averaging through whatever correction occurs. Regardless of what happens in China, still assuming that society will have recovered in 20 years.

codemonkey

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Re: Ready for a Correction
« Reply #77 on: August 23, 2015, 08:46:23 AM »
Dollar-cost averaging through whatever correction occurs. Regardless of what happens in China, still assuming that society will have recovered in 20 years.

This is my strategy, although if things drop further I will probably move some of my HSA funds that have been 'spent' on medical expenses this year into the market since our HSA account is a fixed 2% interest account.

rocketpj

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Re: Ready for a Correction
« Reply #78 on: August 23, 2015, 09:59:09 AM »
My prediction, which is worth about as much as a typical string of words on the internet:

A correction over the next couple of months, followed by a rate hike.  External forces will continue to drive capital towards 'safe harbours' - meaning the USD, T-Bills and ultimately the US stock markets.  The more chaos that happens abroad, the more will flow to the US - eventually too much.

So we'll see a short-term drop, followed by a rate hike.  The rate hike will vacuum capital into the US.  Much of the emerging market debt is denominated in USD, so suddenly it will get more expensive to pay.  So there will be more upheaval and more capital fleeing to the US. 

So ultimately I think we'll see a big spike in the Dow and other US based markets.  Followed by a precipitous drop.  I try not to indulge in market timing, but if the Dow gets up into nosebleed 30-40000 territory I will most likely reconsider that position.

There is a precedent for the current situation.  A sovereign debt crisis in Europe, followed by Capital flight to the US and a spike in the stock market.  The late 20s had a very similar pattern, and we all know what happened next.

fb132

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Re: Ready for a Correction
« Reply #79 on: August 23, 2015, 10:13:52 AM »
My prediction, which is worth about as much as a typical string of words on the internet:

A correction over the next couple of months, followed by a rate hike.  External forces will continue to drive capital towards 'safe harbours' - meaning the USD, T-Bills and ultimately the US stock markets.  The more chaos that happens abroad, the more will flow to the US - eventually too much.

So we'll see a short-term drop, followed by a rate hike.  The rate hike will vacuum capital into the US.  Much of the emerging market debt is denominated in USD, so suddenly it will get more expensive to pay.  So there will be more upheaval and more capital fleeing to the US. 

So ultimately I think we'll see a big spike in the Dow and other US based markets.  Followed by a precipitous drop.  I try not to indulge in market timing, but if the Dow gets up into nosebleed 30-40000 territory I will most likely reconsider that position.

There is a precedent for the current situation.  A sovereign debt crisis in Europe, followed by Capital flight to the US and a spike in the stock market.  The late 20s had a very similar pattern, and we all know what happened next.
I hope you are wrong or else we might get another depression era which I hope we never go through.

AlexK

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Re: Ready for a Correction
« Reply #80 on: August 23, 2015, 10:41:42 AM »
I retired in July and initiated the 401k rollover from Prudential to Vanguard. Prudential just closed the account end of day Friday 8/21 to send the check to Vanguard. On the worst day of the stock market since 2011. $180k. So I can pretty much guarantee you guys the markets will be up next week.

Carlos Danger

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Re: Ready for a Correction
« Reply #81 on: August 23, 2015, 11:38:04 AM »
Unemployment remains low

Correction:  The official U3 rate of unemployment is low.

NO investor should be basing their decision-making on the U3 rate without knowing what it means, what it is made up of, how it is calculated, etc.

In the past U3 was a very good gauge to use, and a very good measurement because throught past expansions and contractions in the economic cycle, we were experiencing a steady and sustained increase in labor force participation over the long term.

It has been rendered meaningless now as anything other than something for politicians to pat themselves on the back with.  The constant of increasing labor force participation has been removed, and in fact we are still in the midst of a historically unprecedented and sustained DECLINE in labor force participation, and one that is primarily driven by the WORKING AGED population (older, retirement aged Americans are actually participating at a high level compared to the past).

To put it in simple terms, remember school science projects?  Remember how you need things like a constant or a control to make comparisons meaningful?  With respect to U3, the constant or control, steady and/or rising labor force participation, has been removed.

Know what you're looking at.  Whether you're a bull or a bear, do not base decisions on the false premise, relying on a now useless U3 measurement, that employment in the U.S. is close to "full" employment. 

milesdividendmd

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Ready for a Correction
« Reply #82 on: August 23, 2015, 11:53:20 AM »
I retired in July and initiated the 401k rollover from Prudential to Vanguard. Prudential just closed the account end of day Friday 8/21 to send the check to Vanguard. On the worst day of the stock market since 2011. $180k. So I can pretty much guarantee you guys the markets will be up next week.

Ouch! 

If it makes you feel any better the futures market on us stocks looks pretty grizzly right now, so you'll likely miss out on some more down days in the meantime.

This bit of bad luck indicates why I always prefer in kind transfers. If you only move your money once or twice in a lifetime these moves expose you to a fair bit of idiosyncratic risk.
« Last Edit: August 23, 2015, 03:11:09 PM by milesdividendmd »

a1smith

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Re: Ready for a Correction
« Reply #83 on: August 23, 2015, 01:50:10 PM »
If markets were rational, there would never be sales or spikes.

I'm not so sure about this.  People always talk about the 2000 tech bubble/crash as an obvious example of irrational markets, but it seemed to make perfect sense at the time.

There were irrational things going on back then.

In venture capital, I recall two high school students getting $1M funding for the mail server they had set up in their basement.

Another example of the market going crazy was Iomega.  There were people spying on the company's loading docks with binoculars and posting how many trucks were leaving each day.  Anyone who posted anything negative about the company (such as a better storage system will supercede Zip drives) was met with death threats which the FBI was investigating.

And then the whole mantra of "clicks, not bricks" was rationalization.

When Marc Andreesens's father told him to sell enough NSCP (anyone remember that ticker symbol?) to live off of the rest of his life (I believe he sold $10M) there was a big selloff because news got out that one of the founders was selling out.  What he sold was a small percentage of his holdings.  He has a smart dad!

So, what do we have now?  A company who receives $1m venture capital funding for an app that sends one word - Yo.

Venture Funding of U.S. Startups Last Year Was Most Since 2000

Just when the NASDAQ finally gets back to its 2000 level.  At least this time I don't think we'll have a 78% "correction."

forummm

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Re: Ready for a Correction
« Reply #84 on: August 23, 2015, 04:38:12 PM »
If markets were rational, there would never be sales or spikes.

I'm not so sure about this.  People always talk about the 2000 tech bubble/crash as an obvious example of irrational markets, but it seemed to make perfect sense at the time.

There were irrational things going on back then.

In venture capital, I recall two high school students getting $1M funding for the mail server they had set up in their basement.

Another example of the market going crazy was Iomega.  There were people spying on the company's loading docks with binoculars and posting how many trucks were leaving each day.  Anyone who posted anything negative about the company (such as a better storage system will supercede Zip drives) was met with death threats which the FBI was investigating.

And then the whole mantra of "clicks, not bricks" was rationalization.

When Marc Andreesens's father told him to sell enough NSCP (anyone remember that ticker symbol?) to live off of the rest of his life (I believe he sold $10M) there was a big selloff because news got out that one of the founders was selling out.  What he sold was a small percentage of his holdings.  He has a smart dad!

So, what do we have now?  A company who receives $1m venture capital funding for an app that sends one word - Yo.

Venture Funding of U.S. Startups Last Year Was Most Since 2000

Just when the NASDAQ finally gets back to its 2000 level.  At least this time I don't think we'll have a 78% "correction."

The difference now is that these companies are in the pre-IPO stage, so if the bubble pops, only some really rich people who knew they were making very risky and speculative bets would lose one of their many shirts. In the late 90s you had blue collar people throwing their life savings into a ticker symbol they knew nothing about because someone told them it would be great.

Emilyngh

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Re: Ready for a Correction
« Reply #85 on: August 23, 2015, 04:49:00 PM »

It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

This.   We're down like $6k (pretty conservative portfolio helped to smooth the drop).   Meh.   I thought I'd care a lot more than I do.   Still rich ;)

milesdividendmd

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Re: Ready for a Correction
« Reply #86 on: August 23, 2015, 05:02:56 PM »


It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

This.   We're down like $6k (pretty conservative portfolio helped to smooth the drop).   Meh.   I thought I'd care a lot more than I do.   Still rich ;)

Glad you're feeling confident, but I don't think last week was much of a test at all.  The S&P dropped less than 6%!  Would you feel comfortable bring down 60K a month from now? That's a more interesting (and historically relevant) question, I'd argue.

Emilyngh

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Re: Ready for a Correction
« Reply #87 on: August 23, 2015, 05:13:35 PM »


It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

This.   We're down like $6k (pretty conservative portfolio helped to smooth the drop).   Meh.   I thought I'd care a lot more than I do.   Still rich ;)

Glad you're feeling confident, but I don't think last week was much of a test at all.  The S&P dropped less than 6%!  Would you feel comfortable bring down 60K a month from now? That's a more interesting (and historically relevant) question, I'd argue.

I agree.   Although this is the largest drop I've been in (well, I had some investments during 2008, but freaked and sold early and as luck would have it timed the markets really well so was out when it was dropping and back in near bottom).   But, since then I've found MMM and decided to stick out the next one.   So, I was nervous that even this would freak me out.   But yes, only time will tell if/when things get really dicey.

ender

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Re: Ready for a Correction
« Reply #88 on: August 23, 2015, 05:55:35 PM »


It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

This.   We're down like $6k (pretty conservative portfolio helped to smooth the drop).   Meh.   I thought I'd care a lot more than I do.   Still rich ;)

Glad you're feeling confident, but I don't think last week was much of a test at all.  The S&P dropped less than 6%!  Would you feel comfortable bring down 60K a month from now? That's a more interesting (and historically relevant) question, I'd argue.

Sure it is more useful to drop 40% and do a "test."

But acting like a nearly 6% drop in a week is not an interesting data point for those of us younger people on the forums who had no meaningful assets in 2009 or 2000 isn't exactly a fair (or helpful, for that matter) response at all.

milesdividendmd

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Ready for a Correction
« Reply #89 on: August 23, 2015, 06:16:13 PM »


It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

This.   We're down like $6k (pretty conservative portfolio helped to smooth the drop).   Meh.   I thought I'd care a lot more than I do.   Still rich ;)

Glad you're feeling confident, but I don't think last week was much of a test at all.  The S&P dropped less than 6%!  Would you feel comfortable bring down 60K a month from now? That's a more interesting (and historically relevant) question, I'd argue.

Sure it is more useful to drop 40% and do a "test."

But acting like a nearly 6% drop in a week is not an interesting data point for those of us younger people on the forums who had no meaningful assets in 2009 or 2000 isn't exactly a fair (or helpful, for that matter) response at all.

Fair criticism.

A 6% drop is very uncomfortable, I will admit, my only point is that it's not an existential threat to your portfolio, so it's probably too early to pop the champagne.

I would also argue that considering how you would react to a 50% drop in stocks, is a useful exercise.
« Last Edit: August 23, 2015, 09:29:36 PM by milesdividendmd »

Zaga

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Re: Ready for a Correction
« Reply #90 on: August 23, 2015, 07:07:37 PM »
Since we started investing significant amounts of money in early 2009, this is our first taste of a drop of several thousand dollars inside a week.  So far my reaction is pretty meh.  And our next automatic investment goes in (probably) on the last day of the month, so that will (probably) be a good time to buy low.

I did change what we are buying to buy only our most underweight fund.  But we'll still have to rebalance at some point if this keeps up.  (or down, as it were)

nobodyspecial

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Re: Ready for a Correction
« Reply #91 on: August 23, 2015, 08:19:08 PM »
Slightly annoyed to discover that it takes 3working days for the electronic money to move electronically from my online bank to my online ETF buying site to buy more. Slow these electrons aren't they ?

innerscorecard

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Re: Ready for a Correction
« Reply #92 on: August 23, 2015, 08:50:23 PM »


It's good for me to realize... I care a lot less than I thought I would about "losing" quite a few thousand. I only noticed the drop since someone sent me an article about my company stock..

This.   We're down like $6k (pretty conservative portfolio helped to smooth the drop).   Meh.   I thought I'd care a lot more than I do.   Still rich ;)

Glad you're feeling confident, but I don't think last week was much of a test at all.  The S&P dropped less than 6%!  Would you feel comfortable bring down 60K a month from now? That's a more interesting (and historically relevant) question, I'd argue.

The duration of the pain will also be a test. Sharp drops aren't so tough to endure. It's the feeling of putting money into an abstract account and seeing it only grow smaller, so that you would have gotten a better result by not putting it in, and then that happening over and over again, that will be the real test.

I'm seeing a lot of bravado right now. We'll see if it lasts.

Abe

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Re: Ready for a Correction
« Reply #93 on: August 23, 2015, 09:00:36 PM »

Regarding this being a test, I agree with milesdividendmd and innerscorecard (as someone who started investing after 2008 crash). It's not that much different than the myriad 2-3% weekly gains/losses often seen historically. I don't check my accounts often enough to have realized there was a drop except for this thread (I never read news stories about stock prices; waste of time). Also, my investments are automated. This strategy of willful ignorance helps avoid jitters with a drop and only tunes you in to long-term downturns that are of more concern.

I think if you are basically able to ignore this drop (or throw more money into your investments), then you'll be fine with a strong equity allocation. If something this small makes you even consider re-allocation to less equity exposure, then you probably should! It can (and probably will, at some point in our lifetimes) get a lot more turbulent!

innerscorecard

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Re: Ready for a Correction
« Reply #94 on: August 23, 2015, 09:05:20 PM »
The truth is, many of us on here (me included, of course!) are "summer insects." We think we know what the next season is like, try to imagine it, model it, and project, but you never know until it happens.

a1smith

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Re: Ready for a Correction
« Reply #95 on: August 23, 2015, 09:46:54 PM »
If markets were rational, there would never be sales or spikes.

I'm not so sure about this.  People always talk about the 2000 tech bubble/crash as an obvious example of irrational markets, but it seemed to make perfect sense at the time.

There were irrational things going on back then.

In venture capital, I recall two high school students getting $1M funding for the mail server they had set up in their basement.

Another example of the market going crazy was Iomega.  There were people spying on the company's loading docks with binoculars and posting how many trucks were leaving each day.  Anyone who posted anything negative about the company (such as a better storage system will supercede Zip drives) was met with death threats which the FBI was investigating.

And then the whole mantra of "clicks, not bricks" was rationalization.

When Marc Andreesens's father told him to sell enough NSCP (anyone remember that ticker symbol?) to live off of the rest of his life (I believe he sold $10M) there was a big selloff because news got out that one of the founders was selling out.  What he sold was a small percentage of his holdings.  He has a smart dad!

So, what do we have now?  A company who receives $1m venture capital funding for an app that sends one word - Yo.

Venture Funding of U.S. Startups Last Year Was Most Since 2000

Just when the NASDAQ finally gets back to its 2000 level.  At least this time I don't think we'll have a 78% "correction."

The difference now is that these companies are in the pre-IPO stage, so if the bubble pops, only some really rich people who knew they were making very risky and speculative bets would lose one of their many shirts. In the late 90s you had blue collar people throwing their life savings into a ticker symbol they knew nothing about because someone told them it would be great.

I was just comparing VC levels now and then showing that they are similar.  Many of these pre-IPO companies will go public.  If the bubble pops I assume you mean the market so the pre-IPO companies won't be the cause of that since they aren't listed.

Why do you think only blue collar people were throwing their life savings into the market?  I think it was more of a universal thing.  And that isn't something that was happening just back then, I read about people buying individual stocks even now (even in this forum) where they don't know anything more about the company than what they sell - no fundamental analysis, etc.  I read an article once that said many people research buying appliances more than they do stocks - read Consumer Reports, check prices at multiple stores, etc but then buy a stock because someone at work said they heard it's the next big thing.

milesdividendmd

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Re: Ready for a Correction
« Reply #96 on: August 23, 2015, 09:58:30 PM »
Here it comes.

Asian stocks tanking...

Futures down 2-3%....

More red tomorrow?

a1smith

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Re: Ready for a Correction
« Reply #97 on: August 23, 2015, 10:19:43 PM »
Here it comes.

Asian stocks tanking...

Futures down 2-3%....

More red tomorrow?

Sure sounds like it.  The people who have only been investing after 2008 are going to find out if their stated risk tolerance = actual risk tolerance.

I agree with what you say about thought exercise for what you would do in at 50% drop.  However, that's really hard to do - it's kind of like losing money when you have your trading software (e.g. thinkorswim) set to paper money vs live trading.  You just don't know how you will really react until it's your money.

Roland of Gilead

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Re: Ready for a Correction
« Reply #98 on: August 23, 2015, 10:30:43 PM »
Any big drop we get is going to be  pretty sharp V.

The reason is bonds don't even keep up with inflation.   The big boys are not going to lose 1% a year to inflation for years...they will figure out some way to pump the market back up.

If bonds were paying 6% or 7% then we might see a prolonged flight from the market.


All of that being said, the market could easily drop 20% to 30% this September...but I think it would rebound at least half of that by December.

milesdividendmd

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Re: Ready for a Correction
« Reply #99 on: August 23, 2015, 11:17:57 PM »

Any big drop we get is going to be  pretty sharp V.

The reason is bonds don't even keep up with inflation.   The big boys are not going to lose 1% a year to inflation for years...they will figure out some way to pump the market back up.

If bonds were paying 6% or 7% then we might see a prolonged flight from the market.


All of that being said, the market could easily drop 20% to 30% this September...but I think it would rebound at least half of that by December.

I half agree with you (not that it matters, my opinion won't change my actions).

But I think the low interest rates are largely irrelevant. Japan had near zero interest rate policy for the nearly entirety of there 20+ year bear market, so low interest rates are no guarantee of rapid recovery.

I doubt this will be a prolonged bear market simply because there is little sign if growth stagnation/recession risk in the U.S. ecomomy now.