The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Mr. Green on August 21, 2015, 06:11:58 AM
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I think all the right elements are in place. Oil, China, rate hike, etc. I think we only need another 3% drop or so. I had some cash in an online savings account that I've been content to let sit until now. I've yanked it in anticipation of throwing it in with the rest of my investments. I'm not looking to time the bottom, just pick up a healthy bump on the drop since I don't see the fundamentals for a prolonged or deep drop in the markets. I know, I know timing. But this is just a little game for me that I enjoy.
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Might be a good time to add emerging markets to your portfolio if you don't already hold them...down over 20% in 3 months and at a price that I believe hasn't been seen since 2009. Of course, they may just keep going down, so DCA into them could be a good idea.
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Might be a good time to add emerging markets to your portfolio if you don't already hold them...down over 20% in 3 months and at a price that I believe hasn't been seen since 2009. Of course, they may just keep going down, so DCA into them could be a good idea.
Emerging markets fundamentals are also getting worse. If you are investing passively rather than based on fundamental research, you shouldn't buy just because the price is down.
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How do you know there will be a rate hike?
Sent from my iPhone using Tapatalk
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I think all the right elements are in place. Oil, China, rate hike, etc. I think we only need another 3% drop or so. I had some cash in an online savings account that I've been content to let sit until now. I've yanked it in anticipation of throwing it in with the rest of my investments. I'm not looking to time the bottom, just pick up a healthy bump on the drop since I don't see the fundamentals for a prolonged or deep drop in the markets. I know, I know timing. But this is just a little game for me that I enjoy.
Hmm... my portfolio is 80/20 stocks to bonds.... do I sell all my admiral bonds and move em to admiral stocks?
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I'm kind of excited about the dip this week--even though our daily losses are exceeding our monthly income :)
I hope we finally get down to more historically average valuations in the next few months. It will make me a lot richer in the long run.
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Really hoping this lasts for a good while - more or less missed the 2008 disaster due to my financial ineptitude at the time, and even most of the October dip last year. 6-12 months of down prices would help me a lot.
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I'm kind of excited about the dip this week--even though our daily losses are exceeding our monthly income :)
I hope we finally get down to more historically average valuations in the next few months. It will make me a lot richer in the long run.
Sold bonds. Bought Stocks. Thanks for the dip market.
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I've got my seat belt fastened.
(http://divinewealthjournal.files.wordpress.com/2011/08/monks_roller_coaster.jpg)
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The market is straight tanking today. C'mon 10% drop!
I think we'll see a rate hike because unemployment remains low, job growth remains steady, housing data is trending up, and consumers are starting to spend money. I'm still all in on the US. I have no investments internationally because I believe the US has the best fundamentals for the next few years. Plus it all averages out in the end anyway. I don't care if International stocks do better for a couple years because I'm investing for a 70 year span.
However, short term (a few months at most) I think we're ripe for a correction. China data looks bad, and a rate hike looks inevitable. The market has a history of a brief downturn before rate hikes. Plus there's the expectation of a correction because of how long this bull market has run. I think all that means I'm going to be presented with a good buying opportunity. I'm questioning whether it's worth cashing our 40k worth of 5-year CDs @ 3% early to take advantage. Maybe that will be Phase 2 if the drop is sustained and closer to 20% than 10%.
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The market is straight tanking today. C'mon 10% drop!
I think we'll see a rate hike because unemployment remains low, job growth remains steady, housing data is trending up, and consumers are starting to spend money. I'm still all in on the US. I have no investments internationally because I believe the US has the best fundamentals for the next few years. Plus it all averages out in the end anyway. I don't care if International stocks do better for a couple years because I'm investing for a 70 year span.
However, short term (a few months at most) I think we're ripe for a correction. China data looks bad, and a rate hike looks inevitable. The market has a history of a brief downturn before rate hikes. Plus there's the expectation of a correction because of how long this bull market has run. I think all that means I'm going to be presented with a good buying opportunity. I'm questioning whether it's worth cashing our 40k worth of 5-year CDs @ 3% early to take advantage. Maybe that will be Phase 2 if the drop is sustained and closer to 20% than 10%.
I agree. I hope it drops a bit more. Got my exchange order in. (in hopes of a giant rally on Monday of course)
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I save my contributions and invest 3x a year. To make it automatic I picked April 15, August 15 and December 15 as roughly the days I would buy the EFTs in my passive portfolio.
So here I am with the cash for the last few months savings ready to add and find myself hesitating as each day I looked things were dropping. You cannot time a bottom but I do find myself wanting to wait till there is a day or two with out triple digit drops.
Logic tells me to just stick to my plan because in 3-4 months I will have more cash to add and if it keeps dropping that will be invested lower. If it is higher then this months purchases will have made some gains. Plus you are here for the long run.
Any thoughts does anyone else find themselves holding off something planned this week to wait this out?
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TLH now, or wait a few more days to see what happens?
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I'll bite guys,
52 week low for S&P is ~1830, seems like a great time to start buying when we close in on that. 100 week low is just under 1700...
If you are still working and accumulating assets, keep buying the whole time, and have no worries about your decision. If you like lol "market timing", I like using 52 week low's as great starting points to start buying.
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To each his own. I'm already investing in two 401ks on the regular and dumping all our extra into brokerages accounts monthly. I just have some extra cheddar (34k) laying around in online savings account from before finding MMM. As a very small percentage of our liquid assets I was content with keeping it there until we saw a correction. It's still early in the day but two 300 point drops back-to-back would not be a bad time to make a purchase, correction or no correction. I'm waiting for a correction because I think we're going to get one. Don't buy or sell on my opinion though!
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I'm always ready for a correction, or an increase, or a decrease, or a plateau... you know what, there's more important things to do than stare at the stock market.
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I really really really hope the market keeps dropping for the rest of the year, but that seems unlikely.
Maybe if the Fed goes crazy with rate hikes or something... I dunno. Although I'm hopeful that China will continue to slide, and take the rest of the world with them.
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I really really really hope the market keeps dropping for the rest of the year, but that seems unlikely.
Maybe if the Fed goes crazy with rate hikes or something... I dunno. Although I'm hopeful that China will continue to slide, and take the rest of the world with them.
I'm pretty sure the Fed rate hike is going to be so minuscule that we'll all laugh about the fear it caused.
China is down but I think it's a blip. Too many people (and investors) there to seriously collapse their economy, and in the long run they should be more resilient to bears than US or Europe because they have greater freedom to intervene in their markets.
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BUY BUY BUY!
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Why I hate (all in good fun, that is) these inevitable threads as the markets go down:
1. We get all the expected market timers talking about "buying the dip," "firing their dry powder," "Just waiting for the Schiller Index divided by the ratio of pork bellies to Chinese futures to hit 32.84", etc. Gag me.
2. We get all those in the accumulation phase cheering for everything to get all f'ed up for those who are post-accumulation. It's like fucking dancing on someone's grave or throwing a party in a person's office (while they're still sitting there) who just got laid off, because you get to take over their corner office.
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I started investing in 2008, so I witnessed all the panic and crises from everyone, but I am glad I witnessed that period because today I invest with ease, I am hardly worried about investing during a downturn. I find it made me tougher. I just can't wait for september to arrive so i can contribute again.
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Why I hate (all in good fun, that is) these inevitable threads as the markets go down:
1. We get all the expected market timers talking about "buying the dip," "firing their dry powder," "Just waiting for the Schiller Index divided by the ratio of pork bellies to Chinese futures to hit 32.84", etc. Gag me.
2. We get all those in the accumulation phase cheering for everything to get all f'ed up for those who are post-accumulation. It's like fucking dancing on someone's grave or throwing a party in a person's office (while they're still sitting there) who just got laid off, because you get to take over their corner office.
I generally don't even look in this section of the forum. And I certainly don't take it very seriously. To me it's a game. Hopefully others are able to take it as lightly. I agree with matchewed that there are more important things to spend your time on. But since I happen to have some cash on hand due to my personal circumstances, I'm having a little fun with it.
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2. We get all those in the accumulation phase cheering for everything to get all f'ed up for those who are post-accumulation. It's like fucking dancing on someone's grave or throwing a party in a person's office (while they're still sitting there) who just got laid off, because you get to take over their corner office.
Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
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2. We get all those in the accumulation phase cheering for everything to get all f'ed up for those who are post-accumulation. It's like fucking dancing on someone's grave or throwing a party in a person's office (while they're still sitting there) who just got laid off, because you get to take over their corner office.
Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
LOL
By the way, I'll be in your office next Tuesday with balloons and streamers to measure the drapes. :-)
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Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
Better yet, let's just line up recent retirees in their 70s and kick them in the teeth! U-S-A! U-S-A!
Seriously, praying for the world economy to go to shit so you can get a 10% sale is a bit twisted. Most people don't invest and only get the shaft during these kinds of downturns. Self-congratulatory ER bloggers make up .000000002% of the world population.
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Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
Better yet, let's just line up recent retirees in their 70s and kick them in the teeth! U-S-A! U-S-A!
Seriously, praying for the world economy to go to shit so you can get a 10% sale is a bit twisted. Most people don't invest and only get the shaft during these kinds of downturns. Self-congratulatory ER bloggers make up .000000002% of the world population.
Well if most people aren't invested then the 10% drop shouldn't really affect them. :)
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Seriously, praying for the world economy to go to shit so you can get a 10% sale is a bit twisted. Most people don't invest and only get the shaft during these kinds of downturns. Self-congratulatory ER bloggers make up .000000002% of the world population.
So us atheists are in the clear! Come on crash!!
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I'm just reacting to the data at hand. Nothing I can do about China. It is what it is. Doesn't mean it can't be an opportunity.
And I'd be a little hesitant to call a 10% drop "going to shit." Call me when Lehman Brothers goes under and AIG is on the brink of collapse. :)
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With the market off by under 10%, I think it's a pretty big stretch to call this anything other than a dip at this point.
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Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
Better yet, let's just line up recent retirees in their 70s and kick them in the teeth! U-S-A! U-S-A!
Seriously, praying for the world economy to go to shit so you can get a 10% sale is a bit twisted. Most people don't invest and only get the shaft during these kinds of downturns. Self-congratulatory ER bloggers make up .000000002% of the world population.
Why does the economy have to be affected when investors start to have more realistic valuations for businesses? PE is still far above historical average.
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Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
Better yet, let's just line up recent retirees in their 70s and kick them in the teeth! U-S-A! U-S-A!
Seriously, praying for the world economy to go to shit so you can get a 10% sale is a bit twisted. Most people don't invest and only get the shaft during these kinds of downturns. Self-congratulatory ER bloggers make up .000000002% of the world population.
Well if most people aren't invested then the 10% drop shouldn't really affect them. :)
I think the poster meant that most people don't buy during a downturn, not that they aren't already invested. Hence, they get the shaft.
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Consider it payback for all the dancing on the graves of us accumulators done by all the self-congratulatory ER bloggers over the past few years of uninterrupted market gains.
Better yet, let's just line up recent retirees in their 70s and kick them in the teeth! U-S-A! U-S-A!
Seriously, praying for the world economy to go to shit so you can get a 10% sale is a bit twisted. Most people don't invest and only get the shaft during these kinds of downturns. Self-congratulatory ER bloggers make up .000000002% of the world population.
Well if most people aren't invested then the 10% drop shouldn't really affect them. :)
I think the poster meant that most people don't buy during a downturn, not that they aren't already invested. Hence, they get the shaft.
So aren't they, by definition, giving themselves the shaft? I don't get why people who don't invest deserve sympathy.
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As of market close today, The DJIA, Nasdaq, and Russell 2000 are all down 10%. The S&P 500 is down ~7.5%.
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As of market close today, The DJIA, Nasdaq, and Russell 2000 are all down 10%. The S&P 500 is down ~7.5%.
EURO STOXX down 15%. SSE (Shangai) down 32%.
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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.
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Well if most people aren't invested then the 10% drop shouldn't really affect them. :)
The "most people" you refer to tend to be affected the most, as they are the first to get laid off. What is worse, a 10% paper loss for an investor or a 100% income loss for a wage earner?
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It's hilarious how everyone's jumping in on the prediction game (although I must admit, the OP did nail it!)
Why even have an opinion on where the market is going unless,
1. Your opinion's have been right more often than not in the past. (Ie you you have beaten the market over long time periods actively investing.)
And
2. You believe that timing the market is smart?
We people are funny!
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Well if most people aren't invested then the 10% drop shouldn't really affect them. :)
The "most people" you refer to tend to be affected the most, as they are the first to get laid off. What is worse, a 10% paper loss for an investor or a 100% income loss for a wage earner?
10% market drop causes mass layoffs and a disaster of biblical proportions (https://www.youtube.com/watch?v=O3ZOKDmorj0)! MASS HYSTERIA!!
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Well if most people aren't invested then the 10% drop shouldn't really affect them. :)
The "most people" you refer to tend to be affected the most, as they are the first to get laid off. What is worse, a 10% paper loss for an investor or a 100% income loss for a wage earner?
10% market drop causes mass layoffs and a disaster of biblical proportions (https://www.youtube.com/watch?v=O3ZOKDmorj0)! MASS HYSTERIA!!
Cats and Dogs living together!
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I really really really hope the market keeps dropping for the rest of the year, but that seems unlikely.
Maybe if the Fed goes crazy with rate hikes or something... I dunno. Although I'm hopeful that China will continue to slide, and take the rest of the world with them.
Gee, and just two days ago, I used firecalc and it said "Retire now"
And you want the market to go down?
Don't you care about us retiring people?
Ok, a little fun on you. :-)
I've lost $60K in two days, and firecalc still says "Retire now"
Don't look for the "Retire Now" window in firecalc, I just had zero
failures to have assets after 30 years.
Neat program!
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It's hilarious how everyone's jumping in on the prediction game (although I must admit, the OP did nail it!)
Why even have an opinion on where the market is going unless,
1. Your opinion's have been right more often than not in the past. (Ie you you have beaten the market over long time periods actively investing.)
And
2. You believe that timing the market is smart?
We people are funny!
Cracks me up where this thread has gone. We went from a healthy correction to the world going to shit. I just posted because I thought it would be interesting to see if we get one, and I was having some fun. I didn't think we'd pretty much get there today. I called the market in '08, moving everything to cash, because it seemed obvious, but in the same breath I waited until partway through the recovery to get back in. That was a younger, dumber (maybe not?) me though. :)
I will say today was a great day to buy, and buy I did!
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Might be a good time to add emerging markets to your portfolio if you don't already hold them...down over 20% in 3 months and at a price that I believe hasn't been seen since 2009. Of course, they may just keep going down, so DCA into them could be a good idea.
I was over my target allocation on emerging markets, seems like the market did the rebalancing for me :'(
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Sometimes it's nice to hold in Canadian dollars. My Total US is still up 8.2% and my EAFE is up 11.3%, having bought late last year. What's the big deal? I'm diversified and unhedged. Seems the $CAD is dropping faster than the international markets.
However, I do wish I had more cash on hand to buy Canadian All Cap and Emerging. That is on sale right now.
A testament to Canadian Couch Potato! $C 250K has only dropped $C 3.5K since last weekend.
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It's still a far different feeling coming off of a recent high and driving into thirteen year lows.
https://web.archive.org/web/20090306024224/http://finance.yahoo.com/
I wish I did more then, but I wasn't sure if I should be saving for a downpayment. In the end, I did neither and accumulated too much cash. :(
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I got stuck leading a meeting during the entire trading day, so I missed out on the action. :\ FML. Hahah
I did buy every other day this week though, so I got some money in during this correction.
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I think all the right elements are in place. Oil, China, rate hike, etc. I think we only need another 3% drop or so. I had some cash in an online savings account that I've been content to let sit until now. I've yanked it in anticipation of throwing it in with the rest of my investments. I'm not looking to time the bottom, just pick up a healthy bump on the drop since I don't see the fundamentals for a prolonged or deep drop in the markets. I know, I know timing. But this is just a little game for me that I enjoy.
I'm in a similar boat...finished school and really got my spending levels down over the last couple years, as well as my income increasing quite a bit, so I finally got in a position where I could really start to invest heavily. I opened a brokerage account and started putting extra money into it waiting for a good time to buy. I guess some would call it timing the market but it seemed kind of dumb to hop in when the market was at all time highs, and I'm still thinking QE/0% rates have created a bit of a bubble, and we are towards a bull run that has been one of the longest in history...it just seemed way too likely a downturn was on the way.
I have no desire to try to be a wannabe daytrader or anything...I don't want to be buying/selling trying to time the market in that regard. I also have been keeping my 401k contributions steady regardless of market moving...but getting in with a lump sum over the last year just seemed like a bad idea. Even if I had spread it out so I put in 5k a month until I got it all it the market I'd still have lost at this point, as I would have just been buying into a sideways moving market hovering near all time highs. Once I get a decent entry point, which I'm thinking will be soon, I plan on approaching it with the mind set that shares = dividends = income, so ultimately I just want to accumulate shares of quality dividend payers.
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I purchased Netflix puts when it was over $125 and $@#% stupid stupid me sold them when it refused to fall below $120 after several days. We are not talking about a tiny bit of missed opportunity...I had 50 Sept $120 puts that I sold for $5.50, missing out on about $75,000 gain in the past couple of days.
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The end of days is upon us!
Liquidated my positions last night.
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I purchased Netflix puts when it was over $125 and $@#% stupid stupid me sold them when it refused to fall below $120 after several days. We are not talking about a tiny bit of missed opportunity...I had 50 Sept $120 puts that I sold for $5.50, missing out on about $75,000 gain in the past couple of days.
Ouch!
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I was ready. I have put about 70% of my formerly sizeable cash pile into the stock market over the past 6 weeks, and I bought a bunch more today. If the market prices continue going down, I will continue to buy.
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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..
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Watching the stock market is like watching paint dry... Or, "Drop! Drop! Drop!!"
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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.
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5 Things Investors Shouldn't Do Now (http://www.msn.com/en-us/money/savingandinvesting/5-things-investors-shouldnt-do-now/ar-BBlZ3rt)
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Watching the stock market is like watching paint dry... Or, "Drop! Drop! Drop!!"
I laughed at that because I was actually picturing it.
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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.
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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.
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5 Things Investors Shouldn't Do Now (http://www.msn.com/en-us/money/savingandinvesting/5-things-investors-shouldnt-do-now/ar-BBlZ3rt)
Best point in the article:
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.
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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.
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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.
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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.
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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.
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If markets were rational, there would never be sales or spikes.
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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.
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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.
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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.
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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.
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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?
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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.
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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.
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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
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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.
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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.
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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. )
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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!
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Ready, but won't pull the trigger yet.
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Dollar-cost averaging through whatever correction occurs. Regardless of what happens in China, still assuming that society will have recovered in 20 years.
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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.
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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.
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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.
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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.
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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.
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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.
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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. (http://www.independent.co.uk/life-style/gadgets-and-tech/yo-is-the-new-million-dollar-app-that-lets-you-send-just-one-word-to-your-friends-yo-9547805.html)
Venture Funding of U.S. Startups Last Year Was Most Since 2000 (http://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."
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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. (http://www.independent.co.uk/life-style/gadgets-and-tech/yo-is-the-new-million-dollar-app-that-lets-you-send-just-one-word-to-your-friends-yo-9547805.html)
Venture Funding of U.S. Startups Last Year Was Most Since 2000 (http://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.
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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 ;)
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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.
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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.
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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.
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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.
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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)
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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 ?
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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.
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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!
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The truth is, many of us on here (me included, of course!) are "summer insects." (http://www.innerscorecard.co/blog/2015/8/9/review-the-permanent-portfolio-2012) 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.
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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. (http://www.independent.co.uk/life-style/gadgets-and-tech/yo-is-the-new-million-dollar-app-that-lets-you-send-just-one-word-to-your-friends-yo-9547805.html)
Venture Funding of U.S. Startups Last Year Was Most Since 2000 (http://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.
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Here it comes.
Asian stocks tanking...
Futures down 2-3%....
More red tomorrow?
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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.
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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.
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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.
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The SSE Composite Index hit -9%... shit just got real!
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China Slowdown Worries Rattle Asian Markets - WSJ News Alert
Chinese stocks plummeted Monday, erasing gains for the year, as fears about the deepening effects of a slowdown in the world's No. 2 economy rattled investors world-wide.
Stock markets slid across Asia and a number of regional currencies fell to fresh multiyear lows. China's main stock index, which closed 8.5% lower on Monday, has tipped into negative territory for the year after gaining as much as 60% through its June peak. Benchmarks in Japan and Australia both shed nearly 4%.
At the heart of the selloff are questions about the severity of the slowdown in China's once-highflying economy.
Here is the article the alert links to:
China Shares Wipe Out All Gains This Year (http://www.wsj.com/articles/china-shares-wipe-out-all-gains-this-year-1440372751)
Note: if you don't have WSJ subscription just google the title of the article and select it from search list. Then you can read the whole article.
Dow futures are down around 400 points now; looks like we're in for -4% or more just like Australia, Japan, etc.
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Imagine my surprise this morning when I woke up to the Dow Futures showing another 400 point drop! Statistically, I was betting on a ~2% bounce back. If the drop holds throughout the day then we will certainly have our correction. I doubt it's going to have much staying power since it would be down 7% in 3 days. All things are possible though.
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500+ -700 is what I'm seeing. Not that it makes a ton of difference. #blackmonday
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So... We should be buying now, right?
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So... We should be buying now, right?
We should be buying always.
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So... We should be buying now, right?
Buy whenever you have the money to invest, regardless how the stock market is doing. Of course, the lower the prices, the better bargain you can get, but since we can't predict anything, you simply invest what you've got.
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Don't panic, people. Hold tight today. Been through these since the '87 deal.
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I really really really hope the market keeps dropping for the rest of the year, but that seems unlikely.
Maybe if the Fed goes crazy with rate hikes or something... I dunno. Although I'm hopeful that China will continue to slide, and take the rest of the world with them.
I'm pretty sure the Fed rate hike is going to be so minuscule that we'll all laugh about the fear it caused.
China is down but I think it's a blip. Too many people (and investors) there to seriously collapse their economy, and in the long run they should be more resilient to bears than US or Europe because they have greater freedom to intervene in their markets.
You assume they will perform their interventions competently, and that their interventions would work if implemented perfectly. I don't think there's a good reason to believe either.
I wish my surplus for August were going into the markets, rather than into replacing rotten porch columns and a broken window.
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Don't panic, people. Hold tight today. Been through these since the '87 deal.
Don't listen to this man, everyone start panicking NOW!!!
Sell, sell, sell and drive those prices down. TIA.
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Don't panic, people. Hold tight today. Been through these since the '87 deal.
Don't listen to this man, everyone start panicking NOW!!!
Sell, sell, sell and drive those prices down. TIA.
I've already moved everything to cash!
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We might be seeing some records today.
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Whoa! Dow down 950 points! That's one hell of an open. Should be an interesting day.
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Good news everyone! There's no need to be ready for a correction, it's here!
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Why I hate (all in good fun, that is) these inevitable threads as the markets go down:
1. We get all the expected market timers talking about "buying the dip," "firing their dry powder," "Just waiting for the Schiller Index divided by the ratio of pork bellies to Chinese futures to hit 32.84", etc. Gag me.
2. We get all those in the accumulation phase cheering for everything to get all f'ed up for those who are post-accumulation. It's like fucking dancing on someone's grave or throwing a party in a person's office (while they're still sitting there) who just got laid off, because you get to take over their corner office.
Not to get off topic I had this exact thing happen to me once. Within an hour of me getting notice out of nowhere that my job was done in a 30 days, a woman who was not getting canned brought a box of her stuff to my desk and was like "Im taking your cube when you leave, where can I put this box?" I was like...wtf are you serious????
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I've always found the massive sell off days to be amusing. I remember the last time the Dow dropped 1,000 points 5 or 6 years ago, standing in the lobby of my company's building marveling at how fear can cause such irrational behavior. I'm glad I didn't blow my cash load Friday!
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
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So... We should be buying now, right?
Buy whenever you have the money to invest, regardless how the stock market is doing. Of course, the lower the prices, the better bargain you can get, but since we can't predict anything, you simply invest what you've got.
Fair enough. I've been DCA-ing by putting in $50 a week, but I just got paid and had been thinking about putting in a lump sum soon anyway. Of course then the RMB went down and so some of my money to invest went with it (I get paid in RMB, but invest in USD).
Wait until tomorrow? :/
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Last week I was annoyed that my next 401k and HSA contributions wouldn't hit until August 31. Now it looks like it won't matter :)
I still haven't funded my wife's IRA for the year. I have the cash to do it now, but it'd be tight. I'm trying to decide when to pull trigger. Originally, I was just going to wait until I filed taxes, so I would know how much to put in traditional vs. Roth (Last year, I had to re-characterize my contributions, and that was kind of a PITA). Other than that, the drop hasn't had much of an impact on me. I'm one of those post-2009 investors that everyone seems to be expecting will freak out. Meh. We all knew this would come. What's the big deal?
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Personally I wouldn't rush out and change anything just to put money into the market today if I already had a game plan in place. Plus it takes time to money money around anyway. This is all fear selling, not real. If there's still a sizable drop at the end of the day, some folks might be in a position to take advantage but otherwise it's likely not to matter.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
I mean I don't market time. I maxed my Roth on January 1st. Also I think of market timing like looking for 1% swings here and there. A 5% change is a bit more noteworthy, I guess.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
I mean I don't market time. I maxed my Roth on January 1st. Also I think of market timing like looking for 1% swings here and there. A 5% change is a bit more noteworthy, I guess.
I don't market time either, I invest when I have it. Which is why our IRAs are maxed already.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
I mean I don't market time. I maxed my Roth on January 1st. Also I think of market timing like looking for 1% swings here and there. A 5% change is a bit more noteworthy, I guess.
The Dow has recovered to only less than a 300 point drop so your window was about 60 minutes. Yet another reason to take any intraday swings with a world record sized grain of salt.
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The market might not even close down today anyway - if you're in mutual funds, you get end of day pricing. Dow was down more than 1K at its lowest point today. Now it is less than 300 points off. And the market hasn't even been open for an hour yet.
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The market might not even close down today anyway - if you're in mutual funds, you get end of day pricing. Dow was down more than 1K at its lowest point today. Now it is less than 300 points off. And the market hasn't even been open for an hour yet.
True, even if it doesn't close down, though, prices are still good. If I was already planning a lump sum buy, I'd be pretty happy.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
I mean I don't market time. I maxed my Roth on January 1st. Also I think of market timing like looking for 1% swings here and there. A 5% change is a bit more noteworthy, I guess.
The Dow has recovered to only less than a 300 point drop so your window was about 60 minutes. Yet another reason to take any intraday swings with a world record sized grain of salt.
I was thinking today, per se, but more like a few weeks if it continues to drop. Is that worthwhile?
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Im not convinced we are done. Not buy or selling just watching the chaos. Hope none of you are hurt, scared, or rush into anything stupid. Wish everyone the best of luck today
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
I mean I don't market time. I maxed my Roth on January 1st. Also I think of market timing like looking for 1% swings here and there. A 5% change is a bit more noteworthy, I guess.
The Dow has recovered to only less than a 300 point drop so your window was about 60 minutes. Yet another reason to take any intraday swings with a world record sized grain of salt.
I was thinking today, per se, but more like a few weeks if it continues to drop. Is that worthwhile?
Everyone wonders these questions on days such as today. You are by no means alone.
That being said, here are my opinions on the answers.
1. The reason that everyone is wondering these questions is because no one has the answers.
2. Anyone who answers your question with the right time to buy is either selling something or not worth listening to.
3. If you don't know the right thing to do, the correct answer is almost always to nothing.
Hope that helps.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
I had the same question. But isn't this market timing, which conventional wisdom is against? I don't even have a taxable account at this point, but I could open one today at Vanguard and transfer some cash from our ER account. I don't really want to, though, so I probably won't. I'm gonna split the baby and add a 100 bucks to the kids' 529 accounts.
I mean I don't market time. I maxed my Roth on January 1st. Also I think of market timing like looking for 1% swings here and there. A 5% change is a bit more noteworthy, I guess.
The Dow has recovered to only less than a 300 point drop so your window was about 60 minutes. Yet another reason to take any intraday swings with a world record sized grain of salt.
I was thinking today, per se, but more like a few weeks if it continues to drop. Is that worthwhile?
If we see a decline that hangs around for a few weeks, or even months, I would be inclined to take advantage of it by investing what I could if I had cash laying around. I'm not taking all my cash off the table because you never know when having a little cash on hand would be handy but in my case I had 34k sitting in an online savings account. I was willing to gamble we'd see a correction because of how long the bull has run and some of the fear factors that people have been latching on to, so I hadn't dumped that money into the market. I moved that money Friday and I'll invest the majority, if not all, of it today if things stay down significantly. Am I technically timing the market? Absolutely. Does the prevailing wisdom recommend it? Absolutely not. But that's what I'm doing. Am I looking for the bottom? Nope. Just looking to get in at a lower price. If the market continues to drop I will not care. If you have a good handle on your investing and already have a plan don't change because a couple people are doing something different.
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Rule #3 is very underrated.
When there's turmoil the best thing to do in my opinion is sit and wait.
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Should I invest all of my savings into a taxable? I've already maxed my Roth.
Just scrapped together the cash to max out the last of my tax advantage accounts for the year this morning.
The rest of my savings this year will end up in taxable accounts.
The reduced cost of the ETFs I'm buying just makes me more focused about saving and putting off expenses that can wait a few months so I have more cash to invest.
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Dissapointed - I was rushing to buy, all that red ink was a great buy opportunity.
Then clicked the year-to-date charts and it's still up 5% - damn I should have pilled in in January
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Dissapointed - I was rushing to buy, all that red ink was a great buy opportunity.
Then clicked the year-to-date charts and it's still up 5% - damn I should have pilled in in January
Must have a lot of bonds if you are up 5% YTD.
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Dissapointed - I was rushing to buy, all that red ink was a great buy opportunity.
Then clicked the year-to-date charts and it's still up 5% - damn I should have pilled in in January
Must have a lot of bonds if you are up 5% YTD.
Nope - I have $CDN so all the stocks are up 20% on no change
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Dissapointed - I was rushing to buy, all that red ink was a great buy opportunity.
Then clicked the year-to-date charts and it's still up 5% - damn I should have pilled in in January
Must have a lot of bonds if you are up 5% YTD.
I don't think any of the US markets are still positive for the year.
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Dissapointed - I was rushing to buy, all that red ink was a great buy opportunity.
Then clicked the year-to-date charts and it's still up 5% - damn I should have pilled in in January
Must have a lot of bonds if you are up 5% YTD.
I don't think any of the US markets are still positive for the year.
Exchange rates are outpacing declines.
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Dissapointed - I was rushing to buy, all that red ink was a great buy opportunity.
Then clicked the year-to-date charts and it's still up 5% - damn I should have pilled in in January
Must have a lot of bonds if you are up 5% YTD.
Nope - I have $CDN so all the stocks are up 20% on no change
Makes sense as long as you deduct 20% when the $CDN rallies.
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So... We should be buying now, right?
Nope. I buy on Fridays. I'm not going to try to time the market.
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Makes sense as long as you deduct 20% when if the $CDN rallies.
True. Although I corrected it for you. There is nothing on the horizon that suggests the CDN to USD exchange is going anywhere good for a long time.
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Woohoo, stocks on sale! Our IRA contribution is also scheduled for tomorrow, so hopefully it stays low.
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I apologize, friends. This decline is all my fault. You see, I opened a Fidelity account last week and funded it to the tune of $6.5K. Apparently, that was all it took to set this dip in motion!
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Woohoo, stocks on sale!
Just because the market value of stocks has fallen, it doesn't mean they are "on sale". Have you determined the intrinsic value of these stocks and found that it is more than the market value?
The Investor Alley forum has lately become "toxic to your financial health (http://forum.mrmoneymustache.com/investor-alley/is-there-any-value-to-cnbc-at-all/msg775976/#msg775976)", similar to investing material found in popular news media.
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So when's the collective opinion on when to invest? Today, tomorrow, all week, all month?
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So when's the collective opinion on when to invest? Today, tomorrow, all week, all month?
Whenever you have money to invest!
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So when's the collective opinion on when to invest? Today, tomorrow, all week, all month?
On your normal schedule.
Today might be the bottom and not investing today means you aren't going to get the best price. Or today might be the start of a very very long dip so investing today means you are tossing money away.
Don't try to time the market.
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So when's the collective opinion on when to invest? Today, tomorrow, all week, all month?
Every day! On a 20-year time horizon nearly every day this year is basically the same.
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Woohoo, stocks on sale!
Just because the market value of stocks has fallen, it doesn't mean they are "on sale". Have you determined the intrinsic value of these stocks and found that it is more than the market value?
I'm not buying anything I normally wouldn't, just keeping up our monthly 401k/IRA contributions. I used the term "on sale" to reflect that the price has dropped significantly.
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Woohoo, stocks on sale!
Just because the market value of stocks has fallen, it doesn't mean they are "on sale". Have you determined the intrinsic value of these stocks and found that it is more than the market value?
I'm not buying anything I normally wouldn't, just keeping up our monthly 401k/IRA contributions. I used the term "on sale" to reflect that the price has dropped significantly.
If you haven't read too many of Cathy's posts, you might not know that she is hyper-pedantic, so I wouldn't take any offense to her critique. And I mean that in the best possible way, Cathy! ;)
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can someone explain why it is a "correction" when the markets drop? I mean, what is it correcting for? Nothing seems to be different in how businesses are ran... Aside from maybe China fixing their currency, which would normally just affect the companies that deal with china/their exports. So why would things like reits/bonds be affected by China when they don't interact with it?
It seems like my payout from the down market is pretty good on my write/put etfs though. Been using them since last year and they seem to be doing their job how I hoped (namely, I get "some" returns when the markets are flat/low instead of nothing).
Other than that, I'm down I think $10-15k in the last weeks, but why should I care about it? I just won't sell it, and eventually it'll recover. Even if I let it sit in bank, it won't "gain" me much anyways, even if it doesn't "go down", the cash value of it means nothing to me since I never touch it in bank anyways. The G fund has been good to me though, yay for using that as my "bond" allocation
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A correction is a small bear drop (5%-20%) during a bull market. Generally, it's in reaction to prices getting to far ahead of themselves. Contrast this with a bear market rally, where prices have fallen too far and rally as a result.
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I know I shouldn't be paying attention and keep the course, but man, the past 5 days have been difficult to stomach.
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A correction is a small bear drop (5%-20%) during a bull market. Generally, it's in reaction to prices getting to far ahead of themselves. Contrast this with a bear market rally, where prices have fallen too far and rally as a result.
my mind is missing part of the concept i think... if i was ready to spend $x on the item last week, and i go to the store this week and it is for 20% off, i would still buy it... i mean its like going to the mall, if i plan to buy it, i go, them hanging 20% off signs didnt get me into the store in the first place. sure it is a nice discount but it did nothing to motivate me to buy, or make me value the purchase as less/cheaper. i will still use the crap out of it even if i bought it at full price.
if you mean that the prices of stocks got inflated because of hype, and a correction is them reseting the tables, like end of a poker game. then sure, everyone gets a new set of cards but it doesnt change the rules of the game, just like the businesses havent changed how they operate before the correction. so why would i value them less during correction? IE, why would i act differently now that the markets are down? I might buy more since it is a cheaper buy in for the game, but why are people quitting it/pulling money out?
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A correction is a small bear drop (5%-20%) during a bull market. Generally, it's in reaction to prices getting to far ahead of themselves. Contrast this with a bear market rally, where prices have fallen too far and rally as a result.
my mind is missing part of the concept i think... if i was ready to spend $x on the item last week, and i go to the store this week and it is for 20% off, i would still buy it... i mean its like going to the mall, if i plan to buy it, i go, them hanging 20% off signs didnt get me into the store in the first place. sure it is a nice discount but it did nothing to motivate me to buy, or make me value the purchase as less/cheaper. i will still use the crap out of it even if i bought it at full price.
if you mean that the prices of stocks got inflated because of hype, and a correction is them reseting the tables, like end of a poker game. then sure, everyone gets a new set of cards but it doesnt change the rules of the game, just like the businesses havent changed how they operate before the correction. so why would i value them less during correction? IE, why would i act differently now that the markets are down? I might buy more since it is a cheaper buy in for the game, but why are people quitting it/pulling money out?
Correct. Generally, people pull money out because something causes them to view stocks as being overvalued (a drop in perceived NAV). You also have to factor in the market-timing aspect, where the market is driven by herd behavior (up and down). But, a correction comes when enough people realize that stocks are over priced and sell to get their profits. This causes a chain reaction of people selling (buy low, sell high), and the market drops. At some point, the market hits a point where people like you or me go "oh damn, stocks on sale, gonna buy". When that happens, the correction stops and comes back towards the "true" value of the asset (stock).
In simple terms, stocks got too far away from the "true" value that is given by overall economics like employment, interest rates, inflation, etc. At least they will return to just around "true" value, at most, they will go on sale.
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Here I thought we might end the day only down a little bit but it seems like things are trending back down toward a big loss. Looks like I'll be placing a big purchase order after all!
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so why arent positive growths called corrections? i mean if stocks jumped 5-20% in a short time, maybe they were all undervalued and just correcting it by making them more expensive, i mean you said after the drop, there is going to be another run up on markets as people pump money in again. why not call that event a correction?
my view is that the drop is from panic and not an over valuation of the markets, and the correction would be making them be worth what it is before the crisis/panic...
i probably needed to take economic classes in college but i didnt
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Note: if you don't have WSJ subscription just google the title of the article and select it from search list. Then you can read the whole article.
Not working for me.
Try this link - it is the google search. Should be the first search result.
https://www.google.com/search?q=China+Shares+Wipe+Out+All+Gains+This+Year (https://www.google.com/search?q=China+Shares+Wipe+Out+All+Gains+This+Year)
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Here I thought we might end the day only down a little bit but it seems like things are trending back down toward a big loss. Looks like I'll be placing a big purchase order after all!
If you wanted the lows of the day you should have bought in the first ten minutes. A couple of my ETF's were down over 20% then. Good thing I didn't do anything; they recovered fairly well and ended up down about the same as the market (-4%). I didn't check at the time but I'm guessing the spreads were huge.
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checked my index fund this morning. dropped 1000p (10% drop) in one day. lucky thing it's payday today and time for a top up :D :D :D
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Why I hate (all in good fun, that is) these inevitable threads as the markets go down:
2. We get all those in the accumulation phase cheering for everything to get all f'ed up for those who are post-accumulation. It's like fucking dancing on someone's grave or throwing a party in a person's office (while they're still sitting there) who just got laid off, because you get to take over their corner office.
I'm a post-accumulation retiree and I am happily using my cash portion of my portfolio to buy! Moving some money around and waiting to see if it drops lower. I am not sweating it. Even retirees can take advantage of a market dip.
Miss Prim
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so why arent positive growths called corrections? i mean if stocks jumped 5-20% in a short time, maybe they were all undervalued and just correcting it by making them more expensive, i mean you said after the drop, there is going to be another run up on markets as people pump money in again.
Haha... Because the word "rally" is much more fun. We live in an Orwellian world where every word has to have some positive type of connotation. "Correction" sounds better than "taking a crap"--like a corrections a good thing and it's to be expected and a good think. But if it's going up? Hell, you can put an even bigger spin on it--"Rally!!" Which reminds us of sports cars and dragsters or getting your team together at the last second to vanquish the enemy, and other cool stuff like that.
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I think even in retirement the market downturns are only a real problem if they are persistent for years. If one has excess bond income, you could re allocate that to get more equity exposure and come out even or ahead in the long run!
Also, the market is always right, so only good things can be said about it. Or else!
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Well, today ended on an interesting note. Looks like we're about 12% off of the high. I wonder how low we can go??? This is exciting, but somewhat frustrating since I don't have a pile of cash ready and waiting (as I shouldn't), and we don't get paid until the 31st.
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Stings a bit to see a YTD loss of 1 year living expenses.
Long term, it shouldn't matter too much.
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Stings a bit to see a YTD loss of 1 year living expenses.
Long term, it shouldn't matter too much.
I hear you; I just remind myself that it's not a loss unless I sell. I still own the same amount of each of those companies, and now it costs less to buy more.
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Stings a bit to see a YTD loss of 1 year living expenses.
Long term, it shouldn't matter too much.
I hear you; I just remind myself that it's not a loss unless I sell. I still own the same amount of each of those companies, and now it costs less to buy more.
I have to disagree. A loss is a loss. Sure you lock it in when you sell, but for all accounting purposes (net worth, FIRE calc's, withdrawal rates) your portfolio value on any given day is what it is.
You have absolutely no guarantees that those companies will return to previous price, or keep dropping for that matter, all you can do is see what its worth today.
That being said, maybe we all need to stop looking at our account balances so frequently.
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Stings a bit to see a YTD loss of 1 year living expenses.
Long term, it shouldn't matter too much.
I hear you; I just remind myself that it's not a loss unless I sell. I still own the same amount of each of those companies, and now it costs less to buy more.
I have to disagree. A loss is a loss. Sure you lock it in when you sell, but for all accounting purposes (net worth, FIRE calc's, withdrawal rates) your portfolio value on any given day is what it is.
You have absolutely no guarantees that those companies will return to previous price, or keep dropping for that matter, all you can do is see what its worth today.
That being said, maybe we all need to stop looking at our account balances so frequently.
Perhaps we should, but perhaps it's like the urge to poke at a bruise or pick at a scab. We're just checking to see how much it hurts :-)
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Or look at a traffic accident. We are human not Homo Economicus. What we should logically do has very little to do with what we actually do.
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Makes sense as long as you deduct 20% when if the $CDN rallies.
True. Although I corrected it for you. There is nothing on the horizon that suggests the CDN to USD exchange is going anywhere good for a long time.
I suppose "if" is technically accurate, it's just a terribly low probability play to expect that the CAD will never again strengthen relative to the dollar. Few laws in investing are as robust as reversion to the mean.
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Makes sense as long as you deduct 20% when if the $CDN rallies.
True. Although I corrected it for you. There is nothing on the horizon that suggests the CDN to USD exchange is going anywhere good for a long time.
I suppose "if" is technically accurate, it's just a terribly low probability play to expect that the CAD will never again strengthen relative to the dollar. Few laws in investing are as robust as reversion to the mean.
Not in currencies. There are tons of currencies that have long term trends that don't revert to some magical level.
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Not in currencies. There are tons of currencies that have long term trends that don't revert to some magical level.
But not when both are developed economies and one relies on the other for the majority of it's trade.
The CDN$ is basically an index of US housing starts (lumber exports) and iPhone sales (copper sales to china)
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Not in currencies. There are tons of currencies that have long term trends that don't revert to some magical level.
But not when both are developed economies and one relies on the other for the majority of it's trade.
The CDN$ is basically an index of US housing starts (lumber exports) and iPhone sales (copper sales to china)
Nailed it!
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Not in currencies. There are tons of currencies that have long term trends that don't revert to some magical level.
But not when both are developed economies and one relies on the other for the majority of it's trade.
The CDN$ is basically an index of US housing starts (lumber exports) and iPhone sales (copper sales to china)
I disagree. You've restricted the number of possible situations by a lot, but consider:
Mexico/USD
or JPY/USD
or French franc/Deutche mark before the introduction of the Euro
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I'm watching the interesting levels of note, particularly the 52 week low (we just blew through it) and the 104 week low (S&P ~1700). Those prove to both be good buy points, so buying now, and continuing to buy at S&P 1700.
If you have >10 year time frame than just buy like nothing happened, nothing to see here. I just enjoy watching the charts and resistance/support analysis.
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Not in currencies. There are tons of currencies that have long term trends that don't revert to some magical level.
But not when both are developed economies and one relies on the other for the majority of it's trade.
The CDN$ is basically an index of US housing starts (lumber exports) and iPhone sales (copper sales to china)
I disagree. You've restricted the number of possible situations by a lot, but consider:
Mexico/USD
or JPY/USD
or French franc/Deutche mark before the introduction of the Euro
The exception proves the rule, (besides the fact that Mexico is not a developed country, and neither of the other examples are responsible for the majority of the others trade.)
The canadian dollar will likely continue to do as well as resources/cpmmodities (particularly oil) do.
Why did you not not include the CAD/Dollar chart, by the way? (since that is what we are discussing.)
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Not in currencies. There are tons of currencies that have long term trends that don't revert to some magical level.
But not when both are developed economies and one relies on the other for the majority of it's trade.
The CDN$ is basically an index of US housing starts (lumber exports) and iPhone sales (copper sales to china)
I disagree. You've restricted the number of possible situations by a lot, but consider:
Mexico/USD
or JPY/USD
or French franc/Deutche mark before the introduction of the Euro
The exception proves the rule, (besides the fact that Mexico is not a developed country, and neither of the other examples are responsible for the majority of the others trade.)
The canadian dollar will likely continue to do as well as resources/cpmmodities (particularly oil) do.
Why did you not not include the CAD/Dollar chart, by the way? (since that is what we are discussing.)
Are there any comparable examples to the US/Canada in your eyes? If you're really arguing that it's unique, that's fine, but the original statement was:
Few laws in investing are as robust as reversion to the mean.
If "robust" equals "in this case" then fine, but I don't see how your original statement is born by the facts, nor by your increasingly narrow set of criteria: developed countries, one country is responsible for a majority of the trade..
Doesn't sound like the most robust law to me.
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After I retire, I'm writing a book about mean reversion. The caveman who thinks the spread of fire is a fad, and everyone will soon revert back to raw mammoth meat. Buggy whip producers who expect their sales to revert as soon as people get over their fascination with automobiles. Retail sales corps who are sure brick and mortar store sales will revert as soon as the internet stops growing, any day now honest.
Does the fact that Netflix and Apple have grown 3000% mean that they are destined to grow more slowly in the future, or are they, like fire and the automobile and the internet, transformative technologies that will reshape society in ways the caveman can't yet envision?
Reversion to the mean only has relevance under normal probability distributions. If your country gets nuked, don't expect the currency to come back.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
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After I retire, I'm writing a book about mean reversion. The caveman who thinks the spread of fire is a fad, and everyone will soon revert back to raw mammoth meat. Buggy whip producers who expect their sales to revert as soon as people get over their fascination with automobiles. Retail sales corps who are sure brick and mortar store sales will revert as soon as the internet stops growing, any day now honest.
Does the fact that Netflix and Apple have grown 3000% mean that they are destined to grow more slowly in the future, or are they, like fire and the automobile and the internet, transformative technologies that will reshape society in ways the caveman can't yet envision?
Reversion to the mean only has relevance under normal probability distributing. If your country gets nuked, don't expect the currency to come back.
For every "fire" and "internet" there are thousands of inventions that recede into nothing or never emerge. The transformative power is what makes things like the wheel noteworthy. In other words your consideration of their failure to revert to the mean (yet) may merely be selection bias. You are focusing on tail events (automobiles, internet, fire, nuclear war) to the exclusion of the much more probable "normal" events.
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True - reversion to the mean is not a global rule of currencies.
But the US$/ CDN$ is not a general case of two random currencies - Canada is essentially a US commodity index
(although with stronger beer, bigger balls and a longer field)
Anyway it is completely off topic to the central argument of the thread which is = DON"T PANIC and BUY BUY BUY !!!!!
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
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For every "fire" and "internet" there are thousands of inventions that recede into nothing or never emerge.
Right, and that's exactly the challenge. Is Apple's 3000% growth the former or the latter? Will it mean revert to market average returns, or continued to outperform and come to dominate the entire global economy?
Switching from coal to oil is perhaps a better analogy for currencies. As the world changes, some things are relegated to perpetual second (and dropping) place. I think CAD is probably safe, but there are certainly more failed currencies in the world today than there are successful ones. Everyone who bet on them lost.
Over long enough time scales, they all revert to zero anyway.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
That paper says commodities trade at equivalent purchasing power parity. It doesn't talk about one currency relative to another. Unless there's a quote you'd like to extract showing it saying anything relevant to your point?
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
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For every "fire" and "internet" there are thousands of inventions that recede into nothing or never emerge.
Right, and that's exactly the challenge. Is Apple's 3000% growth the former or the latter? Will it mean revert to market average returns, or continued to outperform and come to dominate the entire global economy?
Switching from coal to oil is perhaps a better analogy for currencies. As the world changes, some things are relegated to perpetual second (and dropping) place. I think CAD is probably safe, but there are certainly more failed currencies in the world today than there are successful ones. Everyone who bet on them lost.
Over long enough time scales, they all revert to zero anyway.
Totally agree.
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Ok, here is a plot of CADUSD since 8/10/1953. The mean value of the 62 year period is 0.8789.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?
Let me help you out. Perhaps your computer is not so good at opening attachments. Section 2.1 is entitled "currency markets" and its conclusion is...
Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.
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The thing that I like the most about this correction is to watch my psych/emotions during the downturn. How do I feel and how strong is my emotional belief into the markets - a joyful experience (also I'm only in the 3rd year of investing, so I anyways don't have much to lose. And thusfar I have only experienced a bull market).
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?
Let me help you out. Perhaps your computer is not so good at opening attachments. Section 2.1 is entitled "currency markets" and its conclusion is...
Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.
It's illustrative that you follow condescension with a quote from your source that talks about commodities reverting to the "productivity weighted purchasing power parity" mean. Even more so when I already pointed that out upthread.
Next time please provide a source that actually addresses your claim that currency exchange rates revert to some mean.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?
Let me help you out. Perhaps your computer is not so good at opening attachments. Section 2.1 is entitled "currency markets" and its conclusion is...
Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.
It's illustrative that you follow condescension with a quote from your source that talks about commodities reverting to the "productivity weighted purchasing power parity" mean. Even more so when I already pointed that out upthread.
Next time please provide a source that actually addresses your claim that currency exchange rates revert to some mean.
Still waiting for evidence of your claim Beltim.
Yawn.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?
Let me help you out. Perhaps your computer is not so good at opening attachments. Section 2.1 is entitled "currency markets" and its conclusion is...
Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.
It's illustrative that you follow condescension with a quote from your source that talks about commodities reverting to the "productivity weighted purchasing power parity" mean. Even more so when I already pointed that out upthread.
Next time please provide a source that actually addresses your claim that currency exchange rates revert to some mean.
Still waiting for evidence of your claim Beltim.
Yawn.
I provided three contrary examples. You can argue that they're cherry picking, but the fact is that you have provided no evidence for your original claim that mean reversion occurs in currencies.
I'm resigned to not being able to convince you, but I'd just like to point out to anyone else who cares that you still haven't provided evidence for your claim, and are instead responding by asking me to prove the negative of your claim. That's silly, since you made the original claim, but hey, at least I provided some data. Three data points are more than zero.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?
Let me help you out. Perhaps your computer is not so good at opening attachments. Section 2.1 is entitled "currency markets" and its conclusion is...
Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.
It's illustrative that you follow condescension with a quote from your source that talks about commodities reverting to the "productivity weighted purchasing power parity" mean. Even more so when I already pointed that out upthread.
Next time please provide a source that actually addresses your claim that currency exchange rates revert to some mean.
Still waiting for evidence of your claim Beltim.
Yawn.
I provided three contrary examples. You can argue that they're cherry picking, but the fact is that you have provided no evidence for your original claim that mean reversion occurs in currencies.
I'm resigned to not being able to convince you, but I'd just like to point out to anyone else who cares that you still haven't provided evidence for your claim, and are instead responding by asking me to prove the negative of your claim. That's silly, since you made the original claim, but hey, at least I provided some data. Three data points are more than zero.
I provided an academic paper with the following conclusion about currency market trading:
"Large deviations from the productivity weighted PPP do however produce a speedy and measurable mean reversion."
If you have any academic evidence to support your claim, please share it. I am certainly no expert on currency markets, and merely am of the belief that when investing internationally you should either always or never hedge because currency risk tends to cancel itself out over long time horizons (ie revert to the mean.)
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I provided an academic paper with the following conclusion about currency market trading:
"Large deviations from the productivity weighted PPP do however produce a speedy and measurable mean reversion."
If you have any academic evidence to support your claim, please share it. I am certainly no expert on currency markets, and merely am of the belief that when investing internationally you should either always or never hedge because currency risk tends to cancel itself out over long time horizons (ie revert to the mean.)
Alright, I think I see the problem - you're misreading the paper. Let's look at what that section actually says:
Identical commodities should sell at identical prices in different markets – after allowing for costs of transport. Rogoff (1996), in a valuable literature review, outlines a puzzle that – in the short run at least - they do not. In that paper, he suggests that while economists all believe that purchasing power parity (PPP) should hold in some form or other, it had taken some 400 years of research to find persuasive data to demonstrate that prices do tend to revert to the expected mean.
Now pair that with the conclusion:
It certainly appears to me that recent research has resolved the puzzle of PPP. Small deviations from PPP present little in the way of profitable arbitrage opportunities, and can remain for some time. Large deviations from the productivity weighted PPP do however produce a speedy and measurable mean reversion.
So the paper is saying exchange rates revert to PPP. But you are assuming that that statement is equivalent to saying that exchange rates revert to a nominal mean. There is simply no support for that statement anywhere in anything that you've quoted.
Perhaps you'd listen better to another source. I direct you to http://2012books.lardbucket.org/books/policy-and-theory-of-international-finance/s09-05-ppp-in-the-long-run.html which shows that although exchange rates do fluctuate around a PPP level, this level is not constant. The example they show in Figure 6.4 is the US/UK exchange rate since 1913, and actual exchange rates fluctuate around the theoretical level predicted by PPP. So yes, exchange rates show a tendency to revert to PPP, but the PPP itself fluctuates over time.
Academic treatments of this effect (called the Balassa-Samuelson effect) can be found here:
http://www.nber.org/papers/w15868.pdf
http://www.jstor.org/stable/1829464?seq=1#page_scan_tab_contents
http://www.jstor.org/stable/1928178?seq=1#page_scan_tab_contents
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Hallelujah! Data! I'll read later.
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I provided an academic paper with the following conclusion about currency market trading:
"Large deviations from the productivity weighted PPP do however produce a speedy and measurable mean reversion."
If you have any academic evidence to support your claim, please share it. I am certainly no expert on currency markets, and merely am of the belief that when investing internationally you should either always or never hedge because currency risk tends to cancel itself out over long time horizons (ie revert to the mean.)
Alright, I think I see the problem - you're misreading the paper. Let's look at what that section actually says:
Identical commodities should sell at identical prices in different markets – after allowing for costs of transport. Rogoff (1996), in a valuable literature review, outlines a puzzle that – in the short run at least - they do not. In that paper, he suggests that while economists all believe that purchasing power parity (PPP) should hold in some form or other, it had taken some 400 years of research to find persuasive data to demonstrate that prices do tend to revert to the expected mean.
Now pair that with the conclusion:
It certainly appears to me that recent research has resolved the puzzle of PPP. Small deviations from PPP present little in the way of profitable arbitrage opportunities, and can remain for some time. Large deviations from the productivity weighted PPP do however produce a speedy and measurable mean reversion.
So the paper is saying exchange rates revert to PPP. But you are assuming that that statement is equivalent to saying that exchange rates revert to a nominal mean. There is simply no support for that statement anywhere in anything that you've quoted.
Perhaps you'd listen better to another source. I direct you to http://2012books.lardbucket.org/books/policy-and-theory-of-international-finance/s09-05-ppp-in-the-long-run.html which shows that although exchange rates do fluctuate around a PPP level, this level is not constant. The example they show in Figure 6.4 is the US/UK exchange rate since 1913, and actual exchange rates fluctuate around the theoretical level predicted by PPP. So yes, exchange rates show a tendency to revert to PPP, but the PPP itself fluctuates over time.
Academic treatments of this effect (called the Balassa-Samuelson effect) can be found here:
http://www.nber.org/papers/w15868.pdf
http://www.jstor.org/stable/1829464?seq=1#page_scan_tab_contents
http://www.jstor.org/stable/1928178?seq=1#page_scan_tab_contents
Thank you for this beltim. I remember being on a different thread where reversion to the mean came up and I just couldn't accept the belief that there is reversion to a nominal mean for currencies. Now I have some things to cite.
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I couple more days like today (so far) and yesterday... I guess by next week the correction will be "corrected" and we will be back to all time highs?
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I couple more days like today (so far) and yesterday... I guess by next week the correction will be "corrected" and we will be back to all time highs?
(http://img05.deviantart.net/94e0/i/2011/269/1/c/saroumane_and_his_palantir_by_arskaron-d4b1h5f.jpg)
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hey, I don't really follow the market news... I don't know how long a correction should last :D So I'm picking Sept 16th
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I am kind of pissed, I usually invest the first of every month and if it continues this way, it would mean I have missed out on any correction :(
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"PANIC ON WALL STREET!!"
"RALLY ON WALL STREET!!"
Meanwhile passive investors be like:
(http://www.greaterfool.ca/wp-content/uploads/2015/08/DOG-COFFEE-modified.jpg?8f4c78)
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I think lots of people were expecting a market correction at some point. Even hoping for it, as a natural part of market growth cycles that had to happen before the market can move higher.
I'm just not sure that a one week long correction/recovery really satisfies that criteria. Like does a flash crash count? How about a slightly slower flash crash?
If the market does continue to trend up in the short term, I suggest the media start calling this the flash correction. So fast most investors entirely missed it.
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I am kind of pissed, I usually invest the first of every month and if it continues this way, it would mean I have missed out on any correction :(
You need a low interest rate line of credit. Then you can invest any time there is a good opportunity and just pay it off when you get paid. Interest costs are negligible if you are carrying the debt for only a week or two.
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I am kind of pissed, I usually invest the first of every month and if it continues this way, it would mean I have missed out on any correction :(
You need a low interest rate line of credit. Than you can invest any time there is a good opportunity and just pay it off when you get paid. Interest costs are negligible if you are carrying the debt for only a week or two.
Why didn't I think of it. Next time I guess. Can someone explain me why we crashed on monday only to be back to where we were before the crash on thursday?
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Can someone explain me why we crashed on monday only to be back to where we were before the crash on thursday?
Because fear & greed, baby! What makes our current world go round. ....Fear & greed. :/
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Because fear & greed, baby! What makes our current world go round. ....Fear & greed. :/
This is true.
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I couple more days like today (so far) and yesterday... I guess by next week the correction will be "corrected" and we will be back to all time highs?
WE have a ways to go to reach all time highs...it was expected the market would go back up it was way oversold and now it will run into resistance. Also volume going up has been avg so we are far from out of the woods...if we fail and go past old low things will get ugly fast.
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I think lots of people were expecting a market correction at some point. Even hoping for it, as a natural part of market growth cycles that had to happen before the market can move higher.
I'm just not sure that a one week long correction/recovery really satisfies that criteria. Like does a flash crash count? How about a slightly slower flash crash?
If the market does continue to trend up in the short term, I suggest the media start calling this the flash correction. So fast most investors entirely missed it.
I'm in agreement. If the market goes back to where it was before then I don't consider this the needed correction. It was a great buying opportunity that I took advantage of but I think there needs to be something that lingers for weeks or a couple months. With the newly revised GDP data and the Fed backtracking on their rate raising language the wind has been taken out of the fearmongers' sails a little bit.
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You cherry pick three charts (with different time frames!) and no relationship to the statement in question as proof that reversion to the mean does not apply to currencies.
Your charts provide no such proof of your original statement and do not prove that reversion to the mean does not apply to currency trading, (it's actually a common approach to trading currencies.)
If you have actual evidence that reversion to the mean does not apply to currency trades, please share it. I'd love to learn something new.
Your current evidence is analogous to saying that markets don't appreciate because of Russia. china, and germany which have all had stock markets go to zero.
You're complaining that my three data points (literally the first three I looked up, so it's cherry picking in name recognition I suppose) is insufficient to disprove your claim that you support with NO data?
Okay. First, you prove your claim, or even supply a modicum of evidence, and then I'll respond. Until then, your assertion is worth exactly the same as the evidence you've supplied - zero.
http://actuaries.asn.au/Library/fsf06_paper_asher_mean%20reversion.pdf
(yawn)
The paper is "Mean reversion in investment markets: a survey"; we're talking about currency markets. ;-)
Perhaps a more thorough reading of the paper (ie reading more than just the title) would be helpful here?
Let me help you out. Perhaps your computer is not so good at opening attachments. Section 2.1 is entitled "currency markets" and its conclusion is...
Small deviations from PPP present little in the way of profitable arbitrage
opportunities, and can remain for some time. Large deviations from the productivity weighted
PPP do however produce a speedy and measurable mean reversion.
And if you read it a little more you will see that the mean reversion is to PPP, not to some fixed exchange rate. So, the CADUSD plots above could very well be plots of the PPP. Do you have proof that the exchange rate is deviating from PPP? If so, what are you using to measure the deviation?
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bumping to ask a question and didn't think it needed another thread.
since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.
So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?
I didn't rebalance, just wondering about the timing of doing it.
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bumping to ask a question and didn't think it needed another thread.
since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.
So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?
I didn't rebalance, just wondering about the timing of doing it.
My personal take (if you disagree please let me know) is that I rebalance only once a year, meaning if one of my ETF's is off by 5%, I rebalance, but if in the same calendar year it goes off again by 5%, I don't do anything until the following calendar year if it remains that way.
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bumping to ask a question and didn't think it needed another thread.
I didn't rebalance, just wondering about the timing of doing it.
Are you still accumulating investments?
I'm buying more with my savings each month so I put the new money into whichever asset is undervalued based on my asset allocation. So I'm tweaking the balance each month.
I got my monthly injection into my investments a bit early this month to take advantage of the dip in prices.
Unless things get totally out of balance I'll keep nudging my asset allocation back towards the correct ratios each month.
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bumping to ask a question and didn't think it needed another thread.
I didn't rebalance, just wondering about the timing of doing it.
Are you still accumulating investments?
I'm buying more with my savings each month so I put the new money into whichever asset is undervalued based on my asset allocation. So I'm tweaking the balance each month.
I got my monthly injection into my investments a bit early this month to take advantage of the dip in prices.
Unless things get totally out of balance I'll keep nudging my asset allocation back towards the correct ratios each month.
Yeah I do this too. I have yet to find myself not being able to correct my portfolio's AA, if it hit a rebalancing threshold, with my new monthly contribution (in fact, I'm pretty sure I've never hit a rebalancing threshold yet!). Then again, I started investing in 2013.
You can apply this principle in reverse too - if you are retired and making withdrawals, withdraw from the asset which is relatively overweighted according to your AA. Of course, with the typical Mustachian's low level of spending, rebalancing this way may not always be possible, and may actually require you to sell some of your relatively overweighted assets to buy your relatively underweighted assets ;)
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The crystal ball is too hazy. I expect turbulence, take advantage of good offers, and position myself into "don't give a crap what it does cause I got good stuff."
Edited for language. I cuss like a sailor because I was one. Working on it
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I made a few trades during the flash correction which eased some pain, but our overall portfolio is still down along with the market. I have a decent amount of cash built up for living expenses but could not react fast enough to get the super hot deals (Apple for $95, Gilead for $90).
I am a little better positioned for the next flash correction, which should happen in the next few weeks based on economic conditions that are not solved yet, but still have a ton of money in the market because I see as through a glass darkly.
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bumping to ask a question and didn't think it needed another thread.
since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.
So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?
I didn't rebalance, just wondering about the timing of doing it.
Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):
http://johncbogle.com/wordpress/?s=rebalancing (http://johncbogle.com/wordpress/?s=rebalancing)
Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done. He says that if someone wants to rebalance he won't tell them not to do it. Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.
I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years. He said something to the effect of letting the winners run.
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I let the winners run mostly out of laziness to bother rebalancing :S
I just do it with new money, I invest 1 or 2 times a year, whenever I have $10k saved up. I have my dividend reinvestments set to the % that I want the portfolio but that isn't a good way to do it, but it's how I've done for the past 2-3 years (I haven't invested all that long)
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bumping to ask a question and didn't think it needed another thread.
since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.
So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?
I didn't rebalance, just wondering about the timing of doing it.
Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):
http://johncbogle.com/wordpress/?s=rebalancing (http://johncbogle.com/wordpress/?s=rebalancing)
Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done. He says that if someone wants to rebalance he won't tell them not to do it. Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.
I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years. He said something to the effect of letting the winners run.
Yeah that's true, but rebalancing is about managing risk, not returns. People decide on an asset allocation because they want to limit the risk they take on. If it was purely about returns, everybody would just be 100% stocks.
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bumping to ask a question and didn't think it needed another thread.
since I've decided to call this a flash correction... since it seems to recover fairly quickly, it seems like it wasn't worth the bother to well, bother with. Over on bogleheads and online, I see people asking if they should have used the correction to "rebalance". In a flash correction (not that they wouldn't have known it would end so quickly), is there a point to rebalance if you normally do it at year end? I mean if they decided to rebalance last week, and sold bonds to buy stocks, and now all of the sudden, their stocks are "out of balance" again, they need to rebalance yet again. This seems to create another taxable event.
So like with dollar cost averaging and such, do people really "time" the market to rebalance when they think it is going to be a down market? Or does rebalancing on a set date keep with the "staying the course" plan? IE, the plan is 80/20 and to invest once a year on the new years week. And also use that time to rebalance. No matter what else happens during the year, don't touch the account. If that was the plan, does rebalancing outside that first week time frame count against the investor, is it market timing if all you do is rebalance?
I didn't rebalance, just wondering about the timing of doing it.
Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):
http://johncbogle.com/wordpress/?s=rebalancing (http://johncbogle.com/wordpress/?s=rebalancing)
Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done. He says that if someone wants to rebalance he won't tell them not to do it. Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.
I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years. He said something to the effect of letting the winners run.
Yeah that's true, but rebalancing is about managing risk, not returns. People decide on an asset allocation because they want to limit the risk they take on. If it was purely about returns, everybody would just be 100% stocks.
I agree. The wide bands for rebalancing John Bogle mentioned was 5% which is what many people use. He was saying you don't have to use 0.1% bands. I don't agree with his statement that it doesn't need to be done as do many others (should have mentioned that before.)
Here is a nice whitepaper from Vanguard - Best practices for portfolio rebalancing (http://www.vanguard.com/pdf/icrpr.pdf)
Some quotes:
1st paragraph of executive summary
The primary goal of a rebalancing strategy is to minimize risk relative to a target asset allocation, rather than to maximize returns. A portfolio’s asset allocation is the major determinant of a portfolio’s risk-and-return characteristics. Yet, over time, asset classes produce different returns, so the portfolio’s asset allocation changes. Therefore, to recapture the portfolio’s original risk-and-return characteristics, the portfolio should be rebalanced.
Conclusion
Just as there is no universally optimal asset allocation, there is no universally optimal rebalancing strategy. The only clear advantage as far as maintaining a portfolio’s risk-and-return characteristics is that a rebalanced portfolio more closely aligns with the characteristics of the target asset allocation than with a never-rebalanced portfolio. As our analysis shows, the risk-adjusted returns are not meaningfully different whether a portfolio is rebalanced monthly, quarterly, or annually; however, the number of rebalancing events and resulting costs increase significantly. As a result, we conclude that a rebalancing strategy based on reasonable monitoring frequencies (such as annual or semiannual) and reasonable allocation thresholds (variations of 5% or so) is likely to provide sufficient risk control relative to the target asset allocation for most portfolios with broadly diversified stock and bond holdings.
So, it seems like there is no optimal rebalancing method. One point they do make is to not rebalance too often in an after tax account due to tax implications and to also use dividends and income to rebalance to minimize portfolio turnover.
I use more of the threshold criterion (I use <=5%, depends on what market is doing) and not so much of the time criterion. They evaluate both of these and also time+threshold criterion.
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Here is John Bogle's take on rebalancing (watch the second video that shows up in the search):
http://johncbogle.com/wordpress/?s=rebalancing (http://johncbogle.com/wordpress/?s=rebalancing)
Summary is to set wide bands for rebalancing; don't set rules for when it needs to be done; and in general he doesn't think it needs to be done. He says that if someone wants to rebalance he won't tell them not to do it. Over a 25 year time period sometimes a rebalanced portfolio will win and sometimes it won't.
I've seen other interviews with John Bogle where he mentioned he had not rebalanced his own portfolio for over three years. He said something to the effect of letting the winners run.
Yeah that's true, but rebalancing is about managing risk, not returns. People decide on an asset allocation because they want to limit the risk they take on. If it was purely about returns, everybody would just be 100% stocks.
I agree. The wide bands for rebalancing John Bogle mentioned was 5% which is what many people use. He was saying you don't have to use 0.1% bands. I don't agree with his statement that it doesn't need to be done as do many others (should have mentioned that before.)
Here is a nice whitepaper from Vanguard - Best practices for portfolio rebalancing (http://www.vanguard.com/pdf/icrpr.pdf)
Some quotes:
[removed for brevity]
So, it seems like there is no optimal rebalancing method. One point they do make is to not rebalance too often in an after tax account due to tax implications and to also use dividends and income to rebalance to minimize portfolio turnover.
I use more of the threshold criterion (I use <=5%, depends on what market is doing) and not so much of the time criterion. They evaluate both of these and also time+threshold criterion.
Haha I should have read the link before I responded.
I use a 5% rebalancing threshold as well, but I've never had to sell to rebalance since I'm still in my wealth accumulation stage.
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The future says buy, buy, buy!
http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233
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I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.
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I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.
If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.
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The future says buy, buy, buy!
http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233
And the market opened slightly down and is still down so far.
I'm ready for another correction! :)
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The future says buy, buy, buy!
http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233
And the market opened slightly down and is still down so far.
I'm ready for another correction! :)
Correction + correction = bear market!
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Correction + correction = bear market!
Unless it's a correction to the correction = the same place we were a month ago
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Correction + correction = bear market!
Unless it's a correction to the correction = the same place we were a month ago
The "up" variety doesn't really have a name (beyond bull market) where the "down" variety has several!
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I'm glad I at least got a little piece of correction prices before everything shot back up 20%
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I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.
If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.
Makes sense, but I need to rebalance away from stuff where I have gains.
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The future says buy, buy, buy!
http://www.cnbc.com/pre-markets/?trknav=dw:topnav:markets:premarkets:100746233
And the market opened slightly down and is still down so far.
I'm ready for another correction! :)
Correction + correction = bear market!
A bear market at least every other Friday would be great!
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I put 75% of my cash position in right at the bottom. Of course that bottom is relative. Things could head south again and go lower than where I bought, which is why I don't make a habit of timing things. I'll take my 10% lower price tag and be happy with it.
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And September starts with an early session selloff.
I think this volatility will be around for a while folks. Buckle up!
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And September starts with an early session selloff.
I think this volatility will be around for a while folks. Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)
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Better keep that cash coming, I think there will be a lot of "sales" as the stock markets bounce around in September.
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I still plan on buying heavy throughout September. I have a feeling we are going to see a rocky month.
kind of excited!!
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I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.
If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.
Can I ask you is that?
Just a technical question.
Thanks!
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I'm planning on rebalancing when gains become long-term, which is September 10th. This is the first year I've really had an investment strategy.
If you have losses, you want to harvest your losses before they go long term, as short term losses are more valuable than long term ones.
Can I ask you is that?
Just a technical question.
Thanks!
Short-term capital gains are taxed as ordinary income, where long-term capital gains have special rates as low as 0%. This only applies to gains. Losses count against income, so it only matters to wait when you have gains.
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Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks
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And September starts with an early session selloff.
I think this volatility will be around for a while folks. Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)
please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.
you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.
I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
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Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks
The reason short term is better for a loss is that it cancels out short-term gains first before income. Long-term can only cancel out long-term gains before income, and the income is limited to $3k losses per year (carries over).
Let's say you had $5k gains this year from rebalancing earlier in the year (short-term), then the market goes to shit and you rebalance again. Let's also say that if you rebalance today it's short-term and if you do it tomorrow, it's long-term. You will incur $10k of losses in the rebalancing.
If you rebalance today, you get $10k of short-term losses, which cancels out the $5k of gains and leaves you with $5k to write off on your taxes ($3k this year, $2k next year) or cancel future short-term gains. If you rebalance tomorrow, you get $10k in long-term losses, which you can write off against income ($3k for three years, $1k the final year) or future long-term gains. Note that long-term losses do not cancel out all of the short-term gains. You'd still pay taxes on the $2k and be unable to reduce income farther.
Hopefully that helps to better understand it.
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And September starts with an early session selloff.
I think this volatility will be around for a while folks. Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)
please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.
you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.
I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
I looked at channelsandpatterns. These are some tough data to read. They need to go back and read their Tufte!
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And September starts with an early session selloff.
I think this volatility will be around for a while folks. Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)
please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.
you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.
I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
I actually do like MMM says "not to time the market, whenever you have the money to invest, invest it now". I usually invest in the beginning of every month, so even if the market didn't drop today, I would of still invested tomorrow (it takes 24 hours for my money to transfer to Questrade. Next month will be the samething, on the first I will invest and if the markets still go down, hooray, if not, it's ok, I am already buying my ETF's at a rebate.
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I can't help but see the irony in so many people using products Jack Bogle invented yet not listening to one of his primary messages: "Do nothing!" If you missed the thread it's at:
http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/ (http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/)
You tinker when markets move around you're bound to sooner or later fail. Set it forget it, go snack and have a nap. Listen to the advice of a man who's smarter at money than you'll likely ever be. (Note: It's not me either.) Watch the video below. Watch cat videos on YouTube. Go for a swim. Stare at a wall with your hands in your pockets. But for the love of God stop messing around with your portfolios/allocations/balances when you have no clue what's going on.
http://time.com/money/3956351/jack-bogle-index-fund/ (http://time.com/money/3956351/jack-bogle-index-fund/)
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please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.
you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.
I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
Wow, if you actually believed in what you are saying you would be buying puts left and right and profiting from this downtrend that you are so 100% sure is going to happen because the charts say so.
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And September starts with an early session selloff.
I think this volatility will be around for a while folks. Buckle up!
Right on time, I just transfered my money from my bank account to Questrade, tomorrow I will be buying stocks on sale :)
please don't do that, please wait until October. this ride down is not going to stop this week; major support and trends have broken. best thing now is to hold you extra cash. if you are contributing automatically with every paycheck, sure keep that up; but putting extra savings in the market now is a bad idea.
you don't have to believe me, but read someone that knows charts and supports and you'll see more downside is coming.
I suggest: http://www.channelsandpatterns.com/ or getting the http://streettalklive.com/ newsletter.
Momentum also predicted a crash in 2010 and 2011 but they were just corrections.
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Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks
The reason short term is better for a loss is that it cancels out short-term gains first before income. Long-term can only cancel out long-term gains before income, and the income is limited to $3k losses per year (carries over).
Let's say you had $5k gains this year from rebalancing earlier in the year (short-term), then the market goes to shit and you rebalance again. Let's also say that if you rebalance today it's short-term and if you do it tomorrow, it's long-term. You will incur $10k of losses in the rebalancing.
If you rebalance today, you get $10k of short-term losses, which cancels out the $5k of gains and leaves you with $5k to write off on your taxes ($3k this year, $2k next year) or cancel future short-term gains. If you rebalance tomorrow, you get $10k in long-term losses, which you can write off against income ($3k for three years, $1k the final year) or future long-term gains. Note that long-term losses do not cancel out all of the short-term gains. You'd still pay taxes on the $2k and be unable to reduce income farther.
Hopefully that helps to better understand it.
Thanks a lot for the explanation, super clear and very good to know.
I actually almost never sell and rebalance only through buying so it never made a difference for me
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I can't help but see the irony in so many people using products Jack Bogle invented yet not listening to one of his primary messages: "Do nothing!" If you missed the thread it's at:
http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/ (http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/)
You tinker when markets move around you're bound to sooner or later fail. Set it forget it, go snack and have a nap. Listen to the advice of a man who's smarter at money than you'll likely ever be. (Note: It's not me either.) Watch the video below. Watch cat videos on YouTube. Go for a swim. Stare at a wall with your hands in your pockets. But for the love of God stop messing around with your portfolios/allocations/balances when you have no clue what's going on.
http://time.com/money/3956351/jack-bogle-index-fund/ (http://time.com/money/3956351/jack-bogle-index-fund/)
Great advice.
In other words if you are a buy and hold indexer, stick to your system.
Everyone thinks they can make small improvements in their plan but the small improvements usually cause big damage. We are wired to fail.
The same is true for any systematic approach really.
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
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I can't help but see the irony in so many people using products Jack Bogle invented yet not listening to one of his primary messages: "Do nothing!" If you missed the thread it's at:
http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/ (http://forum.mrmoneymustache.com/investor-alley/john-bogle-a-mustachian-man-in-an-industry-of-hustlers/)
You tinker when markets move around you're bound to sooner or later fail. Set it forget it, go snack and have a nap. Listen to the advice of a man who's smarter at money than you'll likely ever be. (Note: It's not me either.) Watch the video below. Watch cat videos on YouTube. Go for a swim. Stare at a wall with your hands in your pockets. But for the love of God stop messing around with your portfolios/allocations/balances when you have no clue what's going on.
http://time.com/money/3956351/jack-bogle-index-fund/ (http://time.com/money/3956351/jack-bogle-index-fund/)
Great advice.
In other words if you are a buy and hold indexer, stick to your system.
Everyone thinks they can make small improvements in their plan but the small improvements usually cause big damage. We are wired to fail.
The same is true for any systematic approach really.
+1 for the above advice. I would just make one exception to the "do nothing" message: harvest your tax losses if you can.
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
Actually charts do show fear. You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.
Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.
I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.
Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market. Either you got out awhile ago or just wait the storm out.
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I agree. On the parabolic trajectory of asset price bubbles the first slope is greed and the second is fear, neither can be explained by fundamentals.
As to whether or not this is going to be a bear market, I, for one have no idea. But this ain't a bubble.
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I agree. On the parabolic trajectory of asset price bubbles the first slope is greed and the second is fear, neither can be explained by fundamentals.
As to whether or not this is going to be a bear market, I, for one have no idea. But this ain't a bubble.
To be honnest, I have no idea what period we are now. In '08, I remember it was clear we were heading towards a recession and a housing bubble, but this year, I have no clue how all this will turn out.
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Given the low interest rates I think we're close (another 5%+ drop away) to a "fair" valuation of US equities after today's drop assuming the economy stays steady. But there are signs of slowdown around the world. And I don't know how fearful people are. And if rates do start to tick up, the "fair" valuation ticks down. A "good" valuation is another 20% drop away.
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
Actually charts do show fear. You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.
Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.
I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.
Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market. Either you got out awhile ago or just wait the storm out.
I don't see it. Hiring is still strong, unemployment numbers are down, people are spending more money, wages are starting to tick up, GDP growth is good, and interest rates are still low. Sure the market could go down. But it could also turn around and go right back up too. I don't look at charts, only broad economic indicators. No selling for this guy!
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
Actually charts do show fear. You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.
Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.
I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.
Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market. Either you got out awhile ago or just wait the storm out.
I don't see it. Hiring is still strong, unemployment numbers are down, people are spending more money, wages are starting to tick up, GDP growth is good, and interest rates are still low. Sure the market could go down. But it could also turn around and go right back up too. I don't look at charts, only broad economic indicators. No selling for this guy!
With current data, I also think that it would be irrational for US markets to go down too much more (who knows with China). But even a drop of 10% would still be in the bounds of rational by my estimation. But markets are irrational sometimes.
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Given the low interest rates I think we're close (another 5%+ drop away) to a "fair" valuation of US equities after today's drop assuming the economy stays steady. But there are signs of slowdown around the world. And I don't know how fearful people are. And if rates do start to tick up, the "fair" valuation ticks down. A "good" valuation is another 20% drop away.
A 20% drop from here would put many dividend stocks like Apple, Corning, Intel at PE 7 or 8. I would call that better than good.
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Exactly that's what I knew, obviously you want all the eventual gains to be long term, but a loss is a loss, short or long term doesn't make a difference.
But maybe I missed something I'm not American and I've only been here 5 years.
Just wanted to be sure, thanks
The reason short term is better for a loss is that it cancels out short-term gains first before income. Long-term can only cancel out long-term gains before income, and the income is limited to $3k losses per year (carries over).
Let's say you had $5k gains this year from rebalancing earlier in the year (short-term), then the market goes to shit and you rebalance again. Let's also say that if you rebalance today it's short-term and if you do it tomorrow, it's long-term. You will incur $10k of losses in the rebalancing.
If you rebalance today, you get $10k of short-term losses, which cancels out the $5k of gains and leaves you with $5k to write off on your taxes ($3k this year, $2k next year) or cancel future short-term gains. If you rebalance tomorrow, you get $10k in long-term losses, which you can write off against income ($3k for three years, $1k the final year) or future long-term gains. Note that long-term losses do not cancel out all of the short-term gains. You'd still pay taxes on the $2k and be unable to reduce income farther.
Hopefully that helps to better understand it.
Thanks a lot for the explanation, super clear and very good to know.
I actually almost never sell and rebalance only through buying so it never made a difference for me
No Absolutely not. That's not how it works.
First long term losses cancel long term gains, and short term losses cancel short term gains. If you have long term losses and short term gains, you net the long term losses against the short term gains. If you have short term losses and long term gains, you net the short term losses against the long term gains.
So in your example Pooperman, if you rebalance tomorrow. you have $10k of long term losses, which you net against your long term gains of zero, and then you net that against your $5k of short term gains. Now you have $0 in short term capital gains, and $5k in long term losses. You use $3k against income, and carry forward $2k of long term losses to next year.
To see this, download schedule D (http://"http://www.irs.gov/pub/irs-pdf/f1040sd.pdf").
You have a net short term capital gain of $5k on line 7.
You have a net long term capital loss of $10k on line 15.
On the back, line 16, combine lines 7 and 15: $-5k. This is a loss, skip lines 17 to 20, go to line 21.
On line 21, enter ($3000).
Now to figure out the carryover. Go to page 11 of the schedule D instructions (http://schedule D instructions).
That's the 2014 instructions, so you'd carry over 2013's losses. Replace 2014 with 2016, and 2013 with 2015.
Line 1: (Some large number, capital losses are disallowed if you don't have taxable income)
Line 2: 3000
Line 3: 3000
Line 4: 3000
Line 7 of 2015's Schedule D is a short term capital gain of $5k. We enter zero on line 5 and go to line 9
Line 5: 0
Line 9: $10k (Line 15 of 2015's Schedule D is a long term capital loss of $10k)
Line 10: $5k
Line 11: $3k
Line 12: $8k
Line 13: $2k.
Line 13 is our long term capital loss carryover for 2016.
Here's the example where short term losses are more valuable than long term losses. I'm going to try make it as dramatic as possible.
Suppose you're in the 15% marginal bracket (and therefore 0% long term capital gain (LTCG) bracket)
Suppose you have $5k in short term capital gains (STCG) and $5k in (LTCG). You have $7k of unrealized STCL that will become unrealized LTCL tomorrow.
If you sell and incur $5k of STCL today, you have a net $0 STCG, and a $5k LTCG. You're in the 0% LTCG bracket, so your taxes on all your capital gains and losses is $0.
If you sell and incur $5k of LTCL tomorrow, you have a net $5k STCG, and a $5k LTCG. You're taxed 15% * $5000 = $750 on STCG, and 0 on your LTCG. Your net taxes paid on all capital losses and gains is $750.
Now notice I said you have $7k of unrealized STCL. What if you sold for a $7k STCL today?
You would have a $2k STCL, and a $5k LTCG. You net these together, and you have a net $3k LTCG. You're in the 0% LTCG tax bracket, so your taxes on capital gains and losses is zero. BUT, if you sold to incur the $7k STCL to TLH, then this was stupid. You haven't changed your tax bill at all (compare it to the above where you realize $5k of STCL). But you have lowered the basis of the funds you just TLH'd. Meaning you will realize a larger capital gain in the future.
What if you sold for a $7k LTCL tomorrow?
You would have a $2k LTCL and a $5k STCG, which net against each other, so you have a $3k STCG. You owe taxes of 3000*.15 = $450 for your capital loses and gains.
Clearly, it is best to incur up to $5k of STCL today (but no more, because then you're lowering your LTCG which you owe no taxes on anyways)
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
Actually charts do show fear. You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.
Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.
I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.
Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market. Either you got out awhile ago or just wait the storm out.
I don't see it. Hiring is still strong, unemployment numbers are down, people are spending more money, wages are starting to tick up, GDP growth is good, and interest rates are still low. Sure the market could go down. But it could also turn around and go right back up too. I don't look at charts, only broad economic indicators. No selling for this guy!
Thats because the stock market goes into a correction then the economy follows it. Hey it could go back up and break thru and start a new bull market I just don't see it happening but you never know with what the Fed could do. Market must hold the lows from last monday if they break below that we would be in big trouble. So all we can do is wait and expect huge wild swings up and down and guess what the next day will bring.
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
Actually charts do show fear. You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.
Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.
I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.
Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market. Either you got out awhile ago or just wait the storm out.
I don't see it. Hiring is still strong, unemployment numbers are down, people are spending more money, wages are starting to tick up, GDP growth is good, and interest rates are still low. Sure the market could go down. But it could also turn around and go right back up too. I don't look at charts, only broad economic indicators. No selling for this guy!
Thats because the stock market goes into a correction then the economy follows it. Hey it could go back up and break thru and start a new bull market I just don't see it happening but you never know with what the Fed could do.
We're at least a year off of a recession, probably closer to two. Interest rates are low so it's not a case of Black Monday causing the 1990-1994 slowdown. The market will do what it does, and the economy will do what it does. They may ignore eachother at times, but for the most part the economy controls the market, not the other way around.
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Given the low interest rates I think we're close (another 5%+ drop away) to a "fair" valuation of US equities after today's drop assuming the economy stays steady. But there are signs of slowdown around the world. And I don't know how fearful people are. And if rates do start to tick up, the "fair" valuation ticks down. A "good" valuation is another 20% drop away.
A 20% drop from here would put many dividend stocks like Apple, Corning, Intel at PE 7 or 8. I would call that better than good.
It would put the S&P500 around 15.6 vs 19.5 now. Who knows what individual stocks would look like. There's probably a reason why the PE's for those stocks are lower than the market now.
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Given the low interest rates I think we're close (another 5%+ drop away) to a "fair" valuation of US equities after today's drop assuming the economy stays steady. But there are signs of slowdown around the world. And I don't know how fearful people are. And if rates do start to tick up, the "fair" valuation ticks down. A "good" valuation is another 20% drop away.
A 20% drop from here would put many dividend stocks like Apple, Corning, Intel at PE 7 or 8. I would call that better than good.
It would put the S&P500 around 15.6 vs 19.5 now. Who knows what individual stocks would look like. There's probably a reason why the PE's for those stocks are lower than the market now.
Whatever the reason that the market has priced these stocks lower, there is plenty of evidence that these stocks that are undervalued relative to the market will outperform going forward.
This is the value effect. Efficient market types tack the word "risk" onto the end of value, but even they don't dispute this anomaly. Cheap stocks outperform.
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Charts don't show fear, and fear is what's moving the needle right now. Since it looks like the downturn wasn't a flash correction after all I invested the remaining 25% of my cash position today and liquidated some I-Bonds that were earning me nothing with the intent of investing them over the next fear days if I'm feeling it.
Actually charts do show fear. You will see a market that ran up for like 6 years and in the last year go sideways as we had a equal amount of buyers and sellers and now more sellers than buyers and why you see the markets on the charts moving down.
Look at the big charts the 5 year charts and a 200 day moving avg that is the most important moving avg of all for long term investing.
When markets break the 200 day moving avg it usually means we are going into a bear market 90% of the time...unless it was a quick bounce off the 200 day moving avg.
I moved my 401k into a money market fund 4 weeks ago and will await to see what happens but right now I would say I am 90% certain we are going into a bear market...unless the FED announces another QE.
Those in the market turn off the computer and don't look at your balances things could get ugly....worst thing you could do is sell 3-5 months into a bear market. Either you got out awhile ago or just wait the storm out.
I don't see it. Hiring is still strong, unemployment numbers are down, people are spending more money, wages are starting to tick up, GDP growth is good, and interest rates are still low. Sure the market could go down. But it could also turn around and go right back up too. I don't look at charts, only broad economic indicators. No selling for this guy!
Thats because the stock market goes into a correction then the economy follows it. Hey it could go back up and break thru and start a new bull market I just don't see it happening but you never know with what the Fed could do. Market must hold the lows from last monday if they break below that we would be in big trouble. So all we can do is wait and expect huge wild swings up and down and guess what the next day will bring.
Or the market could go sideways for a year and not go any lower. Up and down aren't the only options. Then if I've pulled my money out when do I put it back in? Odds are I'll miss the first 5-10% of gains by the time I realize things are moving up again. My point was I see no data that screams any one particular thing to me like I saw in '08 so my money is staying put. If the market does indeed drop then I'll just buy more.
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Given the low interest rates I think we're close (another 5%+ drop away) to a "fair" valuation of US equities after today's drop assuming the economy stays steady. But there are signs of slowdown around the world. And I don't know how fearful people are. And if rates do start to tick up, the "fair" valuation ticks down. A "good" valuation is another 20% drop away.
What is your definitions for "fair" and "good" value based on? P/E ratios (or the inverse: earnings yield)? http://www.multpl.com/s-p-500-earnings-yield
I think the Ben Graham's old saying that the market in the short term is a voting machine and in the long term it is a weighing machine is appropriate. In the short term (6-12 months) the market can be VERY irrational and not very interested in earnings yield even if it is significantly higher than risk free assets. That is not to say that we, as aspiring successful investors, should not be cognizant of these values though.
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I'm a little sad that our automatic 401-K monthly contribution went in on Aug 31st, when the market was higher than the days on either side of it.
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I'm a little sad that our automatic 401-K monthly contribution went in on Aug 31st, when the market was higher than the days on either side of it.
Me too--on the 31st! Mine also went on the 17th (another slightly "up day"). But you can't win at that game. Just ignore and truck along. It means less in the grand scheme than stepping in gum. :)
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Given the low interest rates I think we're close (another 5%+ drop away) to a "fair" valuation of US equities after today's drop assuming the economy stays steady. But there are signs of slowdown around the world. And I don't know how fearful people are. And if rates do start to tick up, the "fair" valuation ticks down. A "good" valuation is another 20% drop away.
What is your definitions for "fair" and "good" value based on? P/E ratios (or the inverse: earnings yield)? http://www.multpl.com/s-p-500-earnings-yield
Just ballparking with simple PE.
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I'm a little sad that our automatic 401-K monthly contribution went in on Aug 31st, when the market was higher than the days on either side of it.
Me too--on the 31st! Mine also went on the 17th (another slightly "up day"). But you can't win at that game. Just ignore and truck along. It means less in the grand scheme than stepping in gum. :)
Oh agreed! This doesn't change our investing plans at all! DH gets paid just once a month and the investment generally goes through on the last day of the month, but sometimes is a few days later.
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slight bump...
so... was that the correction? I saw two small drops, I'm still down about $10k but it wasn't really all that painful. I mean, well, if I wasn't so hyped up over the excitement of it, I probably wouldn't have even known it happened. It's like hitting a bug on the windshield, I see the deflection after hitting it, but it didn't do much to slow me down. Maybe I wiped glass off?
But really, if this is a standard correction, why the hell would people freak out over it? Admittedly, I haven't experienced any other corrections before. I probably have, but I never knew they were corrections, I just thought it was normal ups/downs of the markets and I had better things to do than watch "news" of it.
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Corrections are not particularly scary, and are truly never scary in retrospect when you can see the bottom. They are scary when they are going down and you have no idea whether or not they will continue to go down a long way.
Whether this current market movement turns out to be a correction or a bear market is an open question at this point.
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Corrections are not particularly scary, and are truly never scary in retrospect when you can see the bottom. They are scary when they are going down and you have no idea whether or not they will continue to go down a long way.
Whether this current market movement turns out to be a correction or a bear market is an open question at this point.
In the interest of full disclosure, miles is being on the bear market and has converted to cash. His personal returns will improve if enough people follow his lead and sell out of stocks. So his observations might not be entirely unbiased.
This recent correction was a baby, not enough to test anyone's metal. Seek out some of the threads here about those of us who have weathered real downturns for a clearer picture of dealing with paper losses.
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Corrections are not particularly scary, and are truly never scary in retrospect when you can see the bottom. They are scary when they are going down and you have no idea whether or not they will continue to go down a long way.
Whether this current market movement turns out to be a correction or a bear market is an open question at this point.
In the interest of full disclosure, miles is being on the bear market and has converted to cash. His personal returns will improve if enough people follow his lead and sell out of stocks. So his observations might not be entirely unbiased.
This recent correction was a baby, not enough to test anyone's metal. Seek out some of the threads here about those of us who have weathered real downturns for a clearer picture of dealing with paper losses.
Please flesh out your absurd first paragraph out a bit Sol. Exactly what part of my statement was in any way attempting to influence others as to what investment strategy to take in the future? Where did I mention DM?
More to the point, I've already refuted your prior unsubstantiated claim in the Dual Momentum thread that writing about my chosen strategy is in any way self serving. The effects of having other people adopt my strategy is nothing more than an unknown. There is zero evidence that having others adopting DM helps or hurts me at all (This was all discussed in detail in the DM thread if your memory fails you.)
Since you've decided to take this off topic turn, here feel free to provide the first bit of evidence to support your hypothesis. The next bit of evidence you provide will be your first, for those keeping score at home.
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correct me if I'm wrong, but if you have an AA that you like, why would you care that you couldn't see the bottom?
I get this might be a small correction, but even if it is a bear market, so what?
I've been trying out a puts etf, and a bear market would be good for it so no worries on that front. Sure it drags me down a little in a bull market but any AA away from 100% stocks does that... I have G fund for bonds in 401k so no drops there either.
On non-G fund side, I would probably use EE bonds where they are guaranteed to double after 20 years (which gives 3.6%/year from rule of 72).
Pretty much, what is it about a bear market that people are afraid of? I understand market crashes are bad, but if it is steady (not growing or falling), why would this cause panic?
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People don't like to see their wealth collapse. Seeing your net worth go from $2,000,000 ti $1,000,000 is about twice as painful as seeing the reverse is joyful. This is the fundamental finding of prospect theory.
Add to this the all to human tendency to extrapolate current conditions forward, and the fact that any 50% loss in equity value is likely to occur in extremely uncertain times (like the 2007 financial collapse) and you may get a flavor for why this is not a pleasant experience for most.
Meb Faber always shares this question, which I think illustrates the pain of losing money pretty well.
Q: What do you call an investor who lost 90% of the value of his portfolio?
A: An investor who lost 80% of his portfolio's value, and then lost 50% of its remaining value.
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If anyone was freaking out about the idea of a 10% drop after a 6 year bull market, that person needs to read more. Everyone should have been expecting a correction at some point, if not something more than just a correction. I welcome the notion of a little downturn because I'm looking to FIRE in about 18 months and statistically I'm in a lot better shape FIREing after some turbulence than at the peck of a, what would then be, 7.5 year bull market. To me it's just math, plus I had a small cash position from my pre-MMM days that I was looking to invest. Even though I don't generally time the market, I felt the conditions where right for a little dip that merited siting on that position until said dip happened. It did, and I executed.
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slight bump...
so... was that the correction? I saw two small drops, I'm still down about $10k but it wasn't really all that painful. I mean, well, if I wasn't so hyped up over the excitement of it, I probably wouldn't have even known it happened. It's like hitting a bug on the windshield, I see the deflection after hitting it, but it didn't do much to slow me down. Maybe I wiped glass off?
But really, if this is a standard correction, why the hell would people freak out over it? Admittedly, I haven't experienced any other corrections before. I probably have, but I never knew they were corrections, I just thought it was normal ups/downs of the markets and I had better things to do than watch "news" of it.
I don't think the market turbulence is over. I don't know the path it takes, but I think it will be more reactive to news than typical. I still think it's overvalued.
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slight bump...
so... was that the correction? I saw two small drops, I'm still down about $10k but it wasn't really all that painful. I mean, well, if I wasn't so hyped up over the excitement of it, I probably wouldn't have even known it happened. It's like hitting a bug on the windshield, I see the deflection after hitting it, but it didn't do much to slow me down. Maybe I wiped glass off?
But really, if this is a standard correction, why the hell would people freak out over it? Admittedly, I haven't experienced any other corrections before. I probably have, but I never knew they were corrections, I just thought it was normal ups/downs of the markets and I had better things to do than watch "news" of it.
I don't think the market turbulence is over. I don't know the path it takes, but I think it will be more reactive to news than typical. I still think it's overvalued.
I agree that it's still turbulent. When you're still seeing 2% daily fluctuations, it's turbulent (at least, compared to how before this August correction began, it was pretty rare to see a 2% change in the value of VTI or VOO).
Whether it's still overvalued, I don't have any opinion one way or another.
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slight bump...
so... was that the correction? I saw two small drops, I'm still down about $10k but it wasn't really all that painful. I mean, well, if I wasn't so hyped up over the excitement of it, I probably wouldn't have even known it happened. It's like hitting a bug on the windshield, I see the deflection after hitting it, but it didn't do much to slow me down. Maybe I wiped glass off?
But really, if this is a standard correction, why the hell would people freak out over it? Admittedly, I haven't experienced any other corrections before. I probably have, but I never knew they were corrections, I just thought it was normal ups/downs of the markets and I had better things to do than watch "news" of it.
I don't think the market turbulence is over. I don't know the path it takes, but I think it will be more reactive to news than typical. I still think it's overvalued.
I agree. By any metric The US stock market is now overvalued.
http://www.researchaffiliates.com/Production%20content%20library/Are%20Stocks%20Overvalued_%20A%20Survey%20of%20Equity%20Valuation%20Models_pdf.pdf
The only thing is that we were just as clearly overvalued 1 and 2 years ago and by all the same metrics. So its really tough to argue that solely valuation is causal for the recent volatility.
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slight bump...
so... was that the correction? I saw two small drops, I'm still down about $10k but it wasn't really all that painful. I mean, well, if I wasn't so hyped up over the excitement of it, I probably wouldn't have even known it happened. It's like hitting a bug on the windshield, I see the deflection after hitting it, but it didn't do much to slow me down. Maybe I wiped glass off?
But really, if this is a standard correction, why the hell would people freak out over it? Admittedly, I haven't experienced any other corrections before. I probably have, but I never knew they were corrections, I just thought it was normal ups/downs of the markets and I had better things to do than watch "news" of it.
I don't think the market turbulence is over. I don't know the path it takes, but I think it will be more reactive to news than typical. I still think it's overvalued.
I agree. By any metric The US stock market is now overvalued.
http://www.researchaffiliates.com/Production%20content%20library/Are%20Stocks%20Overvalued_%20A%20Survey%20of%20Equity%20Valuation%20Models_pdf.pdf
The only thing is that we were just as clearly overvalued 1 and 2 years ago and by all the same metrics. So its really tough to argue that solely valuation is causal for the recent volatility.
(http://www.cliparthut.com/clip-arts/531/wile-e-coyote-cliff-531213.jpg)
Maybe sometimes the Coyote takes a while to realize he's walking on air
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slight bump...
so... was that the correction? I saw two small drops, I'm still down about $10k but it wasn't really all that painful. I mean, well, if I wasn't so hyped up over the excitement of it, I probably wouldn't have even known it happened. It's like hitting a bug on the windshield, I see the deflection after hitting it, but it didn't do much to slow me down. Maybe I wiped glass off?
But really, if this is a standard correction, why the hell would people freak out over it? Admittedly, I haven't experienced any other corrections before. I probably have, but I never knew they were corrections, I just thought it was normal ups/downs of the markets and I had better things to do than watch "news" of it.
I don't think the market turbulence is over. I don't know the path it takes, but I think it will be more reactive to news than typical. I still think it's overvalued.
I agree. By any metric The US stock market is now overvalued.
http://www.researchaffiliates.com/Production%20content%20library/Are%20Stocks%20Overvalued_%20A%20Survey%20of%20Equity%20Valuation%20Models_pdf.pdf
The only thing is that we were just as clearly overvalued 1 and 2 years ago and by all the same metrics. So its really tough to argue that solely valuation is causal for the recent volatility.
(http://www.cliparthut.com/clip-arts/531/wile-e-coyote-cliff-531213.jpg)
Maybe sometimes the Coyote takes a while to realize he's walking on air
I love this metaphor.
Of course when it comes to the market the coyote can walk on air for a very long time. And he will in fact never fall until there is a catalyst. (In the coyote's case the catalyst is looking down of course.)
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Of course the idea of being overvalued depends on your definition of "at value." This can certainly change over time since our 100 years or market data is not a great sample. A statistician would probably tell you that's a fairly shitty data pool for making a claim that known market behavior is likely the only behavior we'll ever see. If the definition "at value" is changing then maybe the coyote hasn't left the cliff yet.
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If anyone was freaking out about the idea of a 10% drop after a 6 year bull market, that person needs to read more. Everyone should have been expecting a correction at some point, if not something more than just a correction. I welcome the notion of a little downturn because I'm looking to FIRE in about 18 months and statistically I'm in a lot better shape FIREing after some turbulence than at the peck of a, what would then be, 7.5 year bull market. To me it's just math, plus I had a small cash position from my pre-MMM days that I was looking to invest. Even though I don't generally time the market, I felt the conditions where right for a little dip that merited siting on that position until said dip happened. It did, and I executed.
If you look around for threads in mid-August, you'll find new investors who were really upset about 1% gains or tiny losses. I'm sure that when the 10% dip hit, some people (even here) freaked out.
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If you look around for threads in mid-August, you'll find new investors who were really upset about 1% gains or tiny losses. I'm sure that when the 10% dip hit, some people (even here) freaked out.
Or, with more reason, freaked by a 10year 1%/year decline, or even stability
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If you look around for threads in mid-August, you'll find new investors who were really upset about 1% gains or tiny losses. I'm sure that when the 10% dip hit, some people (even here) freaked out.
Or, with more reason, freaked by a 10year 1%/year decline, or even stability
That would be bothersome, but hasn't happened, so it sort of sounds like jumping at shadows.
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Or, with more reason, freaked by a 10year 1%/year decline, or even stability
That would be bothersome, but hasn't happened, so it sort of sounds like jumping at shadows.
cough, Japan, cough
We had a decade of low inflation growth, followed by a decade of commodities boom, a decade of stagnation isn't totally impossible and would hurt more than a 10% "crash"
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Or, with more reason, freaked by a 10year 1%/year decline, or even stability
That would be bothersome, but hasn't happened, so it sort of sounds like jumping at shadows.
cough, Japan, cough
We had a decade of low inflation growth, followed by a decade of commodities boom, a decade of stagflation isn't totally impossible and would hurt more than a 10% "crash"
That's true (and I meant to refer to the US, but Canada works, too), but I doubt that you have a lot of your money tied up in Japan's economy. Are you worried about the world economy going into a decade of flat growth? That seems a little hand-wavey to me.
ETA: You've mentioned "crash". I've been really careful to use the word "dip", because I don't think that 10% even qualifies as a "drop".
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Or, with more reason, freaked by a 10year 1%/year decline, or even stability
That would be bothersome, but hasn't happened, so it sort of sounds like jumping at shadows.
cough, Japan, cough
We had a decade of low inflation growth, followed by a decade of commodities boom, a decade of stagnation isn't totally impossible and would hurt more than a 10% "crash"
Highly unlikely though. Japan has a population problem that is fueling their stagnation. The US has no such problem and won't in my lifetime due to the changing population demographics.
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There have been several good threads here specifically about the Japan stagnation. It looks like it wasn't really as bad as commonly cited, for a diversified investor who continued to invest regularly. Straight up stock charts don't always tell the whole story.
Not that I'm looking for a Japan style economic downturn in the US, mind you. But much of the reason the Japanese market looked so bad was that it bubbled up to P/E ratios never seen anywhere before or since, before the crash. It's not entirely fair to quote 20 years of flat market returns starting with the biggest stock market bubble ever seen. We're not anywhere close to those conditions in the US, financially or economically or demographically.
tl;dr: don't be afraid of Japan.
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Also, the crash in the japanese stock market coincided with a massive increase in value in the yen. So if a japanese investor was drip feeding into an all world tracker their yen was buying more and more equity outside of japan.
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Highly unlikely though. Japan has a population problem that is fueling their stagnation. The US has no such problem and won't in my lifetime due to the changing population demographics.
Well so long as you don't build that wall ;-)
Europe has a demographic issue, so do a lot of SE Asia's industrial countries.
It's looking tough for Canada and Australia if people don't start buying more made-in-china gadgets
Anyway - my real point was that for all the news and media hysteria about a few % market blip for a week - while the gradual slowdown of the entire market, a long term low oil price, <1% inflation are probably more worrying.
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Anyway - my real point was that for all the news and media hysteria about a few % market blip for a week - while the gradual slowdown of the entire market, a long term low oil price, <1% inflation are probably more worrying.
Why do people see long term low oil prices as a bad thing? I would think that the positive impacts on every other industry would dramatically outweigh the negative impact that has on the oil industry. If the prices stay low to the point where the majority of exploration and refining dries up and then we see a whiplash in prices then sure that would be ugly but up until that point everyone who is spending money benefits. Cheaper flights, cheaper plastics, cheaper trips, consumers spending more money. What am I missing, just curious?
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Anyway - my real point was that for all the news and media hysteria about a few % market blip for a week - while the gradual slowdown of the entire market, a long term low oil price, <1% inflation are probably more worrying.
Why do people see long term low oil prices as a bad thing? I would think that the positive impacts on every other industry would dramatically outweigh the negative impact that has on the oil industry. If the prices stay low to the point where the majority of exploration and refining dries up and then we see a whiplash in prices then sure that would be ugly but up until that point everyone who is spending money benefits. Cheaper flights, cheaper plastics, cheaper trips, consumers spending more money. What am I missing, just curious?
I think cheap oil is generally thought to be good for the economy (ignoring the environment or people's health).
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Cheap oil is a great opportunity to buy something low in a very expensive market, so there's that at least :)
Also I am not a veteran at all here, but have been lurking for a while, and cannot understand how a very rational member like sol can actually believe the posts of another member can possibly have even the most insignificant influence on the markets.
If all the forum net worth combined was put into the market in one day, we would likely have the same effect on it than a fart has on earth's rotation
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Anyway - my real point was that for all the news and media hysteria about a few % market blip for a week - while the gradual slowdown of the entire market, a long term low oil price, <1% inflation are probably more worrying.
Why do people see long term low oil prices as a bad thing? I would think that the positive impacts on every other industry would dramatically outweigh the negative impact that has on the oil industry. If the prices stay low to the point where the majority of exploration and refining dries up and then we see a whiplash in prices then sure that would be ugly but up until that point everyone who is spending money benefits. Cheaper flights, cheaper plastics, cheaper trips, consumers spending more money. What am I missing, just curious?
Cheaper oil is a good thing on balance.
The problem is what the really cheap oil signifies on the demand side, slowing growth worldwide, particularly in China. Which is definitely bad for the economy.
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cannot understand how a very rational member like sol can actually believe the posts of another member can possibly have even the most insignificant influence on the markets.
I wasn't suggesting that any one person could move the markets, but that one particular strategy, widely adopted by millions of market participants, could move markets.
Imagine what the market fluctuations would look like if every investor was a momentum trader; every random motion would be instantly translated into a race to zero or infinity. Now imagine half of investors are momentum traders, and otherwise normal fluctuations would be greatly amplified by the market timers trying to catch every little wave. At some smaller percentage of momentum traders the effect must diminish, but I think that current market gyrations make a lot more sense once you recognize that there are momentum traders out there right now, piling on to every price swing in the pursuit of short term profit.
Momentum trading strategies amplify market volatility. They are a counterproductive force in the markets, rational actors who seek personal advantage by disrupting the market for everyone else. I'm not a fan, just on philosophical ground.
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Thanks for your reply sol.
I am philosophically against any sort of short term speculation, so I'm with you 100% on that
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[Why do people see long term low oil prices as a bad thing? I would think that the positive impacts on every other industry would dramatically outweigh the negative impact that has on the oil industry. If the prices stay low to the point where the majority of exploration and refining dries up and then we see a whiplash in prices then sure that would be ugly but up until that point everyone who is spending money benefits. Cheaper flights, cheaper plastics, cheaper trips, consumers spending more money. What am I missing, just curious?
It's the reason oil is cheap. It isn't because everybody suddenly bought Priuses it's because demand for plastics and chemicals is down along with a big drop in energy usage as low demand shuts factories. Same with copper at the moment, you cant give the stuff away
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Yeah but oil is basically an oligopoly where few control supply, and where demand has increased and will continue to increase for the foreseeable future.
We will never understand exactly what is going on now, but it seems that a mix of dick size contest among those who control supply, China "not growing double digits any more OMG we are fucked!", some economical warfare to hurt Russia and who knows what else are depressing the prices.
In the long term I feel pretty confident the absurdly large amounts of money at stake will help everybody figure stuff out and go back to healthier business.
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cannot understand how a very rational member like sol can actually believe the posts of another member can possibly have even the most insignificant influence on the markets.
I wasn't suggesting that any one person could move the markets, but that one particular strategy, widely adopted by millions of market participants, could move markets.
Imagine what the market fluctuations would look like if every investor was a momentum trader; every random motion would be instantly translated into a race to zero or infinity. Now imagine half of investors are momentum traders, and otherwise normal fluctuations would be greatly amplified by the market timers trying to catch every little wave. At some smaller percentage of momentum traders the effect must diminish, but I think that current market gyrations make a lot more sense once you recognize that there are momentum traders out there right now, piling on to every price swing in the pursuit of short term profit.
Momentum trading strategies amplify market volatility. They are a counterproductive force in the markets, rational actors who seek personal advantage by disrupting the market for everyone else. I'm not a fan, just on philosophical ground.
Interesting tangent.
We all have our irrational picadillos Sol. DM is clearly yours.
Some observations...
1. You have yet to demonstrate that my comment in question in any way was an attempt to convince other people to adopt my strategy. (It clearly wasn't.)
2. You have yet to demonstrate a shred of evidence that having more people adopt DM would boost my returns. (You can't)
3. You have yet to demonstrate a cursory understanding of what dual momentum is and isn't. (Your critique once again displays a stunning lack of insight as to what DM entails.)
4. Comparing DM to short term momentum strategies and HFT displays a stunning ignorance of what DM is.
5. DM has far more in common with buy and hold in terms of trading frequency than it does with the "market timers who try to catch every wave."
6. It is stunningly arrogant for you to presume that you know what is a "counterproductive" force in the markets, particularly when you obviously have not even a basic understanding of the strategy which you feel comfortable critiquing.
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Take a pill, miles. I've spent as much time in the DM thread as anyone, and have thus far offered what I think are the simplest and clearest explanations of the strategy there. Don't pretend to discredit my reading comprehension; you might hurt my feelings.
More people adopting momentum strategies positively reinforces their returns just like it does for the buy and hold strategy. We've already been over this. Markets respond to groupthink.
We're not even specifically talking about DM in this thread anymore, just momentum strategies in general. Don't get so defensive about your chosen investing dogma. DM is just a better diversified and slower rolling version of HFT or other kinds of market timing shenanigans.
I'll continue to ignore the personal attacks like "stunningly ignorant" here, as I did in the DM thread, as I don't feel like wallowing in that pond with you. You've got a mean streak, brother.
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[Why do people see long term low oil prices as a bad thing? I would think that the positive impacts on every other industry would dramatically outweigh the negative impact that has on the oil industry. If the prices stay low to the point where the majority of exploration and refining dries up and then we see a whiplash in prices then sure that would be ugly but up until that point everyone who is spending money benefits. Cheaper flights, cheaper plastics, cheaper trips, consumers spending more money. What am I missing, just curious?
It's the reason oil is cheap. It isn't because everybody suddenly bought Priuses it's because demand for plastics and chemicals is down along with a big drop in energy usage as low demand shuts factories. Same with copper at the moment, you cant give the stuff away
Let's not forget that just about every major oil producer in the world is producing more oil than it ever has and OPEC is playing chicken with the US for production. I'm sure the decline in China is part of it but there is also that.
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"More people adopting momentum strategies positively reinforces their returns just like it does for the buy and hold strategy. We've already been over this. Markets respond to groupthink."
This conveniently ignores that the most likely thing to happen when people crowd into an investment strategy is for the outperformance to be arbitraged away. Buy and hold is the exception to the rule. So in order to be internally consistent you shouldn't you include a disclosure that you employ that strategy before each of your posts?
"DM is just a better diversified and slower rolling version of HFT or other kinds of market timing shenanigans."
No it's not. This statement highlights how poor your understanding of DM is. You make a very specific (and obviously false) claim here that you provide no evidence for. If you believe this to be the case why not provide one shred of evidence?
"I'll continue to ignore the personal attacks like "stunningly ignorant" here, as I did in the DM thread, as I don't feel like wallowing in that pond with you. You've got a mean streak, brother."
Before we start worrying about personal attacks, "mean streaks" and wallowing, let's remind ourselves that this entire interchange began with you leveling a personal attack on my credibility by implying that I had failed to disclose a conflict of interest which clearly does not exist. The fact that you repeatedly ignore this, strongly suggests that you know this to be the case. If defending myself constitutes a mean streak, then how would you define your own aloof grenade Lobbing?
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Yeah but oil is basically an oligopoly where few control supply
What? There are thousands of players of every size who are not all aligned and who can alter the supply of crude oil at a whim.
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Miles, at this point I think sol brings up this issue only to tease out a certain reaction from you, and you make it too easy for him. You keep answering his mischievous button-pushing with the same exaggerated fight response. Take a step back and reread what sol actually wrote within the confines of this thread (which was unassailably true). I understand that you were responding within the context of the broader background, but in general it might serve you better to excise emotions from your posts. Sol's posts may be pushing buttons, but they're doing so dispassionately.
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in order to be internally consistent you shouldn't you include a disclosure that you employ that strategy before each of your posts?
Only if the post is about the relative merits of trading strategies. If you're going to tout a strategy that you use, shouldn't you disclose that you use it and stand to gain from being right, rather than presenting your advice as impartial analysis?
why not provide one shred of evidence?
How about we keep the DM discussion in the DM thread? I think it's sufficient to say you're comfortable weathering the correction because you sold into cash last week, without anyone having to argue why that was or was not a good decision.
this entire interchange began with you leveling a personal attack on my credibility
Relax, I didn't mean to question your credibility, just to disagree with your chosen strategy. You expressed support, I expressed resistance, this is how conversations work. It's not about you.
how would you define your own aloof grenade Lobbing?
Charming and whimsical?
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Miles, at this point I think sol brings up this issue only to tease out a certain reaction from you, and you make it too easy for him. You keep answering his mischievous button-pushing with the same exaggerated fight response. Take a step back and reread what sol actually wrote within the confines of this thread (which was unassailably true). I understand that you were responding within the context of the broader background, but in general it might serve you better to excise emotions from your posts. Sol's posts may be pushing buttons, but they're doing so dispassionately.
You seem to be saying that Sol is trolling (mischievous button pushing you generously call it ) here. So the obvious question: Why give Sol a pass on trolling, Brooklyn?
It seems to me that the obvious advice for you to dispense would be for Sol to not troll. Whether he is passionate or dispassionate about his trolling is immaterial.
If someone questions my integrity I take it seriously and I call them out, particularly when the argument is so sloppily made.
Perhaps you should ignore for a moment that we disagree about DM, and consider your own advice more carefully.
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You seem to be saying that Sol is trolling (mischievous button pushing you generously call it ) here. So the obvious question: Why give Sol a pass on trolling, Brooklyn?
That's a fair question. I suppose there's a fine line between value-adding provocativeness and value-detracting trolling, but I'm not a moderator so thankfully I don't have to make those judgment calls. Sol never denies that he can be deliberately inflammatory, which is part of the reason his posts are so well-loved by many (and so hated by others). The same is true of MMM's posts on the main site.
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Let's be clear: I'm not asking for censorship. I'm just looking for intelligent arguments. And when poorly defended provocative accusations are leveled my way, I will continue to point out that they are:
1. Poorly thought out.
2. Unsubstantiated.
3. Revealing of a very poor understanding of the subject at hand.
4. Sloppily constructed.
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Yeah but oil is basically an oligopoly where few control supply
What? There are thousands of players of every size who are not all aligned and who can alter the supply of crude oil at a whim.
?
OPEC?
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Yeah but oil is basically an oligopoly where few control supply
What? There are thousands of players of every size who are not all aligned and who can alter the supply of crude oil at a whim.
?
OPEC?
Agreed. You could count the players that can actually cause a ripple in the oil market on two hands (assuming you consider OPEC a single entity).
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What? There are thousands of players of every size who are not all aligned and who can alter the supply of crude oil at a whim.
OPEC?
Agreed. You could count the players that can actually cause a ripple in the oil market on two hands (assuming you consider OPEC a single entity).
Probably the only ones with enough capacity, low enough production costs and political will to affect the market are OPEC and the USA.
But US producers aren't allowed to export, Venezuela probably couldn't extract or ship enough to matter and everyone else is too expensive to flood the market at <$40.
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The Chinese government officials are hardcore Bogleheads:
Police officers have downloaded extensive trading data and asked fund managers why they sold shares when the market was going down, prompting discussions about basic investment strategy. Officers have bluntly told some fund managers to just stop selling.
http://www.nytimes.com/2015/09/10/world/asia/in-china-a-forceful-crackdown-in-response-to-stock-market-crisis.html
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The Chinese government officials are hardcore Bogleheads:
Police officers have downloaded extensive trading data and asked fund managers why they sold shares when the market was going down, prompting discussions about basic investment strategy. Officers have bluntly told some fund managers to just stop selling.
http://www.nytimes.com/2015/09/10/world/asia/in-china-a-forceful-crackdown-in-response-to-stock-market-crisis.html
if they don't sell, how else will the fund managers get their pay? :D
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The Chinese government officials are hardcore Bogleheads:
Police officers have downloaded extensive trading data and asked fund managers why they sold shares when the market was going down, prompting discussions about basic investment strategy. Officers have bluntly told some fund managers to just stop selling.
http://www.nytimes.com/2015/09/10/world/asia/in-china-a-forceful-crackdown-in-response-to-stock-market-crisis.html
if they don't sell, how else will the fund managers get their pay? :D
By buying moar
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The Chinese government officials are hardcore Bogleheads:
Police officers have downloaded extensive trading data and asked fund managers why they sold shares when the market was going down, prompting discussions about basic investment strategy. Officers have bluntly told some fund managers to just stop selling.
http://www.nytimes.com/2015/09/10/world/asia/in-china-a-forceful-crackdown-in-response-to-stock-market-crisis.html
Sell your stocks? Go to jail! (and do not collect $200!)
Wow! Just a taste of the manipulation in the Chinese stock market. They also recently arrested around 200 journalists for covering the stock market slide and lower growth.
http://money.cnn.com/2015/08/31/investing/china-arrests-markets-crash/
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The Chinese government officials are hardcore Bogleheads:
Police officers have downloaded extensive trading data and asked fund managers why they sold shares when the market was going down, prompting discussions about basic investment strategy. Officers have bluntly told some fund managers to just stop selling.
http://www.nytimes.com/2015/09/10/world/asia/in-china-a-forceful-crackdown-in-response-to-stock-market-crisis.html
Sell your stocks? Go to jail! (and do not collect $200!)
Wow! Just a taste of the manipulation in the Chinese stock market. They also recently arrested around 200 journalists for covering the stock market slide and lower growth.
http://money.cnn.com/2015/08/31/investing/china-arrests-markets-crash/
That stuff blows my mind man. Totally thankful I wasn't born in a communist country!
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The Chinese government officials are hardcore Bogleheads:
Police officers have downloaded extensive trading data and asked fund managers why they sold shares when the market was going down, prompting discussions about basic investment strategy. Officers have bluntly told some fund managers to just stop selling.
http://www.nytimes.com/2015/09/10/world/asia/in-china-a-forceful-crackdown-in-response-to-stock-market-crisis.html
Sell your stocks? Go to jail! (and do not collect $200!)
Wow! Just a taste of the manipulation in the Chinese stock market. They also recently arrested around 200 journalists for covering the stock market slide and lower growth.
http://money.cnn.com/2015/08/31/investing/china-arrests-markets-crash/
That stuff blows my mind man. Totally thankful I wasn't born in a communist country!
It's horrible, but communism is not the issue. Totalitarianism is.
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Well communism is one of the textbook forms of totalitarian government, so...
:)
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That stuff blows my mind man. Totally thankful I wasn't born in a communist country!
Idiots, don't they know that if you want to restore public faith in the markets you print a few $100Bn of public money to give to any institutions that made a bad bet so they can pay bonuses.
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That stuff blows my mind man. Totally thankful I wasn't born in a communist country!
Idiots, don't they know that if you want to restore public faith in the markets you print a few $100Bn of public money to give to any institutions that made a bad bet so they can pay bonuses.
QE4 to save the day!
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Can we just make QEX a permanent part of the US economy? As long as inflation isn't a problem, is there a downside to just perpetually printing money that is essentially turned into instantly rising corporate valuations? Seems like it's only a problem if they shut it off, but that's true of most government programs.
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Can we just make QEX a permanent part of the US economy? As long as inflation isn't a problem, is there a downside to just perpetually printing money that is essentially turned into instantly rising corporate valuations?
As long as the rest of the world buys it there really shouldn't be a problem....
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Can we just make QEX a permanent part of the US economy? As long as inflation isn't a problem, is there a downside to just perpetually printing money that is essentially turned into instantly rising corporate valuations? Seems like it's only a problem if they shut it off, but that's true of most government programs.
I think the reason they really don't want to is because inflation is a multi-fauceted problem.
For example, if they keep printing until inflation does start edging upward, then eventually anyone the US government already owes debt to starts to see a very real valuation decrease in their holdings.
Now, investors/other governments do not operate on the concept of "so long as dollar inflation is down right now my holdings are still good". They act upon the, "What did they do right now which might impact me for the next 5-10-15 years?"
If the US comes out and announces that we will just keep on printing so long as people keep hoarding dollars, that alone can trigger a flush of dollar debt so that the investor avoids getting caught in the eventual future pinch of debt eroding with inflation.
And that flush would also impact current inflation, and a bit of self-fulfilling prophecy happens and people panic, and so on.
On a related note, I believe the Feds' current stance on relieving itself from its QE collected assets is to allow the debt to mature naturally rather than reselling it on the secondary market. If they try to sell their substantial amount of debt assets to quickly, it floods the market which can again trigger an inflation slide if the economy can't proportionally keep up with the transfer of money.
I don't think there is a lot of historical situations with a similar enough setup in globalized debt ownership with multiple, inter-connected fiat currency systems all being used at once to really give us a good idea on what would happen. And of course, this is all theoretical smoke. The actual market reaction can turn the "theory" all up on its head and leave everyone wondering wtf happened, and then why, and then "Oh! Why didn't i obviously see that coming?".
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cannot understand how a very rational member like sol can actually believe the posts of another member can possibly have even the most insignificant influence on the markets.
I wasn't suggesting that any one person could move the markets, but that one particular strategy, widely adopted by millions of market participants, could move markets.
I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
At some level it's a ponzi scheme - if I can convince enough people that a company (or commodity...) is "only going up" then they eventually might buy it. If they begin convincing other people the same, it eventually results in a situation that it can be in your best interests to convince others that stock (or gold commodity) is great, too.
But the flip side is that this is nearly exactly how the entire market works, just to varying levels.
Which when you think about it is rather frightening.
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I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
This forum has repeatedly linked to studies that show that companies that Kramer features on his program as great buys experience a temporary price bump. It's consistent and repeatable, and probably worth millions to the savvy market timer.
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I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
It has been happening for a very long time.
http://www.library.hbs.edu/hc/ssb/history.html
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cannot understand how a very rational member like sol can actually believe the posts of another member can possibly have even the most insignificant influence on the markets.
I wasn't suggesting that any one person could move the markets, but that one particular strategy, widely adopted by millions of market participants, could move markets.
Imagine what the market fluctuations would look like if every investor was a momentum trader; every random motion would be instantly translated into a race to zero or infinity. Now imagine half of investors are momentum traders, and otherwise normal fluctuations would be greatly amplified by the market timers trying to catch every little wave. At some smaller percentage of momentum traders the effect must diminish, but I think that current market gyrations make a lot more sense once you recognize that there are momentum traders out there right now, piling on to every price swing in the pursuit of short term profit.
Momentum trading strategies amplify market volatility. They are a counterproductive force in the markets, rational actors who seek personal advantage by disrupting the market for everyone else. I'm not a fan, just on philosophical ground.
I have the same opinion about index fund investing. If a significant majority of investment funds are just automatic systems tracking an index, and the index itself is a representation of a very recent snapshot of the state of the market being tracked; then there is a tipping point at which the 'feedback loop' created by automated index fund investing becomes unstable. Once index investing becomes large enough to influence the index itself, an aware market mover can deliberately game the index. Like a finger flicking the first domino that each domino is 1% larger than the last. I have no idea if this has already happened, or if it ever will, but the thought has concerned me in the past considering the magnitude of funds invested in this manner.
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I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
This forum has repeatedly linked to studies that show that companies that Kramer features on his program as great buys experience a temporary price bump. It's consistent and repeatable, and probably worth millions to the savvy market timer.
But probably only to the market timer that knows the content of the latest show before it airs. If Kramer himself did this, it would be against the law; but what if his camera man or 'grip boy' was doing this just following the taping of the show? Would that be insider trading? How would anyone catch it?
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Not sure opinion rises to the level of insider trading. I'm pretty sure it doesn't.
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Not sure opinion rises to the level of insider trading. I'm pretty sure it doesn't.
Hard to say. But I would think that it would be very difficult to spot, until the cameraman was making more on trades than by controlling a camera.
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I have the same opinion about index fund investing. If a significant majority of investment funds are just automatic systems tracking an index, and the index itself is a representation of a very recent snapshot of the state of the market being tracked; then there is a tipping point at which the 'feedback loop' created by automated index fund investing becomes unstable. Once index investing becomes large enough to influence the index itself, an aware market mover can deliberately game the index. Like a finger flicking the first domino that each domino is 1% larger than the last. I have no idea if this has already happened, or if it ever will, but the thought has concerned me in the past considering the magnitude of funds invested in this manner.
This issue has been discussed at length in various "what if everyone indexed?" threads, but the distinction between this and the philosophical objection sol expressed to momentum strategies is that this would not disrupt the market for everyone else (i.e., in this case, active traders), but make the market less efficient and therefore easier for them to exploit (which, in practice if not in theory, is why the hypothetical tipping point will never be reached).
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But probably only to the market timer that knows the content of the latest show before it airs.
If someone can find the previously posted links, you might change your mind. If memory serves, it was like a 2.5% bump in the price of his buy recommendations, starting the day after the show and lasting somewhere between a week to a month before the prices re-equilibrated.
It's really no different than any other pump and dump scheme. The Motley Fool does the exact same thing, trying to reach as wide of an audience as possible to promote a stock and bid up the price temporarily, but Kramer has a wider (and probably even less educated) audience.
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Can we just make QEX a permanent part of the US economy? As long as inflation isn't a problem, is there a downside to just perpetually printing money that is essentially turned into instantly rising corporate valuations? Seems like it's only a problem if they shut it off, but that's true of most government programs.
Greater federal fiscal spending would also help boost demand in the economy which would feed into rising corporate valuations, but also give us the added benefit of better infrastructure/reduced carbon and pollution emissions.
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I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
It has been happening for a very long time.
http://www.library.hbs.edu/hc/ssb/history.html
They even made a movie about it called Boiler Room. Slightly different details, same exact concept.
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I have the same opinion about index fund investing. If a significant majority of investment funds are just automatic systems tracking an index, and the index itself is a representation of a very recent snapshot of the state of the market being tracked; then there is a tipping point at which the 'feedback loop' created by automated index fund investing becomes unstable. Once index investing becomes large enough to influence the index itself, an aware market mover can deliberately game the index. Like a finger flicking the first domino that each domino is 1% larger than the last. I have no idea if this has already happened, or if it ever will, but the thought has concerned me in the past considering the magnitude of funds invested in this manner.
This is a common misunderstanding of how index funds work. They are market neutral in the market they are indexing. They don't buy and sell (other than people adding to or subtracting from their accounts), they just sit there.
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They could have an effect on stocks near the bottom of the index.
If the 499th SP500 company gets bought every day by millions of ETFs then its price is going to rise - it could create a big gulf between this and the 501st which is self reinforcing.
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I have the same opinion about index fund investing. If a significant majority of investment funds are just automatic systems tracking an index, and the index itself is a representation of a very recent snapshot of the state of the market being tracked; then there is a tipping point at which the 'feedback loop' created by automated index fund investing becomes unstable. Once index investing becomes large enough to influence the index itself, an aware market mover can deliberately game the index. Like a finger flicking the first domino that each domino is 1% larger than the last. I have no idea if this has already happened, or if it ever will, but the thought has concerned me in the past considering the magnitude of funds invested in this manner.
This is a common misunderstanding of how index funds work. They are market neutral in the market they are indexing. They don't buy and sell (other than people adding to or subtracting from their accounts), they just sit there.
Typically, yes, but every investor has an effect upon the market. There is a feedback effect to index funds, I just don't know how significant it may be.
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Just to clarify, index funds totally do buy and sell, and they don't typically hold every stock in the index. The goal is to track the index with a representative sampling of stocks, not own every company. That's why they all have tracking errors.
It's never practical to buy more shares of every company in an index every time any investors buys into the index. They buy big lots of stocks less frequently, to try to simulate the total index return by maintaining an appropriate balance of industries, but they necessarily have to hold some cash in between, too.
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Just to clarify, index funds totally do buy and sell, and they don't typically hold every stock in the index. ...It's never practical to buy more shares of every company in an index every time any investors buys into the index.
OK - I assumed they did buy a market weighted amount of each stock.
Obviously they don't do this everytime I buy a single ETF share but I assumed they gradually, over the day, bought and sold to match their total holding - and this was the cause of the tracking error.
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I assumed they did buy a market weighted amount of each stock.
Transaction costs on the Russel 5000 would be killer.
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Just to clarify, index funds totally do buy and sell, and they don't typically hold every stock in the index. The goal is to track the index with a representative sampling of stocks, not own every company. That's why they all have tracking errors.
It's never practical to buy more shares of every company in an index every time any investors buys into the index. They buy big lots of stocks less frequently, to try to simulate the total index return by maintaining an appropriate balance of industries, but they necessarily have to hold some cash in between, too.
Actually that's not correct. I'm just going to go off of Vanguard's practices since they are the originator and leader of index funds. Other funds could have different practices, but index funds are explicitly designed to own the index, and the entire index, and in the same proportions as dictated by the index. If no one was buying or selling shares of the index fund, Vanguard would not be buying or selling any shares at all (unless the index changed--which it does infrequently as a new stock is added to or removed from the index the fund is tracking). That's why index funds are so cost efficient--there's almost no buying and selling. If no one buys or sells VFIAX on a particular day and Apple doubles in market price, the index does not buy or sell any Apple shares, or any other shares.
Now Vanguard does do some smart stuff to manage how they buy and sell shares so that they put the money into play right away and can track the index more perfectly. One of those tactics is to buy or sell index futures when the underlying shares don't have as much liquidity as desired. So for VFIAX when a bunch of people buy more VFIAX, Vanguard might buy an S&P500 e-Mini temporarily (so the money goes to work day 1) while they slowly buy the underlying stocks when liquidity is available. But otherwise they put almost 100% of the money directly into the underlying stocks (a very small fraction is held in the Vanguard Liquidity Fund to pay out cash for dividends and redemptions). You can see exactly how much they own of every single company in the index on the fund's holding web page.
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Just to clarify, index funds totally do buy and sell, and they don't typically hold every stock in the index. ...It's never practical to buy more shares of every company in an index every time any investors buys into the index.
OK - I assumed they did buy a market weighted amount of each stock.
Obviously they don't do this everytime I buy a single ETF share but I assumed they gradually, over the day, bought and sold to match their total holding - and this was the cause of the tracking error.
Actually they do buy a market weighted amount of stock. When you buy an ETF you are buying it from someone else who owns that share. So the underlying index doesn't do any buying or selling at all. Sometimes the index fund creator issues new lots ("creation units") of usually 50,000 shares, and sometimes market makers will redeem a creation unit amount of shares and receive the underlying stocks in return. But ETF trading incurs no transaction costs for the fund itself (but it does for you personally).
I assumed they did buy a market weighted amount of each stock.
Transaction costs on the Russel 5000 would be killer.
There is hardly any transaction cost for these small stocks because very few shares are actually transacted. Again, the genius of a market weighted index. And Vanguard uses Russell index futures to even further minimize any transaction or liquidity expense associated with buying or selling VTSAX. If you look at the annual report for VTSAX you can see the portfolio holding of all the different companies and the index futures as well.
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but index funds are explicitly designed to own the index, and the entire index, and in the same proportions as dictated by the index. If no one was buying or selling shares of the index fund, Vanguard would not be buying or selling any shares at all (unless the index changed--which it does infrequently as a new stock is added to or removed from the index the fund is tracking).
This. While Sol is correct in the sense that not all index funds respond immediately and precisely, the very definition of an index fund is a mutual fund that replicates an index with pre-determined rules regarding weighting. Market cap weighting is the typical method, but an index fund can choose another weighting methodology, such as the 10 year P/E ratio average, or dividend income weighting, etc. But a mutual fund that does not possess every individual stock listed on an index is not an index fund. My understanding, which may be incorrect, is that index funds rebalance against their index periodicly. The main reason that there isn't much actual turnover is that a large index fund sort-of functions as an off-street marketplace in it's own right, because the index fund only buys or sells stocks when in-flows and out-flows of cash payments don't balance out well. VFIAX is so large that the cash fund necessary to buffer those cash flows is miniscule compared to the total fund value; so generally speaking, the larger the index fund, the lower the turnover rate.
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but index funds are explicitly designed to own the index, and the entire index, and in the same proportions as dictated by the index. If no one was buying or selling shares of the index fund, Vanguard would not be buying or selling any shares at all (unless the index changed--which it does infrequently as a new stock is added to or removed from the index the fund is tracking).
This. While Sol is correct in the sense that not all index funds respond immediately and precisely, the very definition of an index fund is a mutual fund that replicates an index with pre-determined rules regarding weighting. Market cap weighting is the typical method, but an index fund can choose another weighting methodology, such as the 10 year P/E ratio average, or dividend income weighting, etc. But a mutual fund that does not possess every individual stock listed on an index is not an index fund. My understanding, which may be incorrect, is that index funds rebalance against their index periodicly. The main reason that there isn't much actual turnover is that a large index fund sort-of functions as an off-street marketplace in it's own right, because the index fund only buys or sells stocks when in-flows and out-flows of cash payments don't balance out well. VFIAX is so large that the cash fund necessary to buffer those cash flows is miniscule compared to the total fund value; so generally speaking, the larger the index fund, the lower the turnover rate.
You have several errors here:
1) An index fund does not have to be a mutual fund (most ETFs are index funds)
2) Many index funds do not contain every security in the index. This is perhaps most common in bond indices, where there are thousands or tens of thousands of individual issues in an index. As an example, the Vanguard Total Bond Market Fund contains 7632 bonds, while the index it tracks contains 9541 bonds. https://personal.vanguard.com/us/funds/snapshot?FundId=0084&FundIntExt=INT#tab=2
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I think all the right elements are in place. Oil, China, rate hike, etc. I think we only need another 3% drop or so. I had some cash in an online savings account that I've been content to let sit until now. I've yanked it in anticipation of throwing it in with the rest of my investments. I'm not looking to time the bottom, just pick up a healthy bump on the drop since I don't see the fundamentals for a prolonged or deep drop in the markets. I know, I know timing. But this is just a little game for me that I enjoy.
Margin debt is at all time highs again (high as 2000, higher than 2008) and turning over---not a bad time to get defensive imo.
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I think all the right elements are in place. Oil, China, rate hike, etc. I think we only need another 3% drop or so. I had some cash in an online savings account that I've been content to let sit until now. I've yanked it in anticipation of throwing it in with the rest of my investments. I'm not looking to time the bottom, just pick up a healthy bump on the drop since I don't see the fundamentals for a prolonged or deep drop in the markets. I know, I know timing. But this is just a little game for me that I enjoy.
Margin debt is at all time highs again (high as 2000, higher than 2008) and turning over---not a bad time to get defensive imo.
Thread resurrection! I won't being making any moves out of equities because I think someone is ripe to get burned on timing. Everyone is hopping on the bear bandwagon so each little piece of disappointing data is being played up by the media. We're already down ~10%. If you get out now, we could see good data and things go back up. I don't want to have to think that much because it makes me anxious and that makes me unhappy.
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I don't really care, still as scheduled for today rebalanced my TLH and last taxable savings for this year.
But can someone please tell me how we started this morning with -1.5% on a crappy jobs report and now we're up .5%
WTF is going on, there is no correlation to any relevant data. I think this was asked before, but who is responsible for the trading volume?
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WTF is going on, there is no correlation to any relevant data. I think this was asked before, but who is responsible for the trading volume?
Basically, bad news means no rate hike. No rate hike means higher equity prices and possibly even another QE (even more into equities). So there's that.
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I don't really care, still as scheduled for today rebalanced my TLH and last taxable savings for this year.
But can someone please tell me how we started this morning with -1.5% on a crappy jobs report and now we're up .5%
WTF is going on, there is no correlation to any relevant data. I think this was asked before, but who is responsible for the trading volume?
Ahh correlation. I love that term, people spend soo much time and money trying to identify correlation between two independent variables, by looking at historical data.
This is why economics is considered a social science vs physics or chemistry. Humans do not obey any universal laws as we are all different and react to the same stimulation differently. We learn and adopt, so I find it comical when I work with so many 'smart' people that develop trading strategies based on historical data and complain that their correlation models are not working. It works some of the time but the only constant is that it will continuously change.
Think Long-Term Capital in the early 90's.
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I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
This forum has repeatedly linked to studies that show that companies that Kramer features on his program as great buys experience a temporary price bump. It's consistent and repeatable, and probably worth millions to the savvy market timer.
cramer has done this before.
check out jon stewart interviewing him - I'm sure its on youtube.
cramer is the biggest talking head of all.
But probably only to the market timer that knows the content of the latest show before it airs. If Kramer himself did this, it would be against the law; but what if his camera man or 'grip boy' was doing this just following the taping of the show? Would that be insider trading? How would anyone catch it?
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I was thinking about this today, specifically about how significantly speculation can increase the prices of single companies (or entire industries).
This forum has repeatedly linked to studies that show that companies that Kramer features on his program as great buys experience a temporary price bump. It's consistent and repeatable, and probably worth millions to the savvy market timer.
cramer has done this before.
check out jon stewart interviewing him - I'm sure its on youtube.
cramer is the biggest talking head of all.
But probably only to the market timer that knows the content of the latest show before it airs. If Kramer himself did this, it would be against the law; but what if his camera man or 'grip boy' was doing this just following the taping of the show? Would that be insider trading? How would anyone catch it?
No, it wouldn't be insider trading. Kramer, nor the camera guy, possess material non-public information. Front running the market on a hunch is legal.
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I don't really care, still as scheduled for today rebalanced my TLH and last taxable savings for this year.
But can someone please tell me how we started this morning with -1.5% on a crappy jobs report and now we're up .5%
WTF is going on, there is no correlation to any relevant data. I think this was asked before, but who is responsible for the trading volume?
Ahh correlation. I love that term, people spend soo much time and money trying to identify correlation between two independent variables, by looking at historical data.
This is why economics is considered a social science vs physics or chemistry. Humans do not obey any universal laws as we are all different and react to the same stimulation differently. We learn and adopt, so I find it comical when I work with so many 'smart' people that develop trading strategies based on historical data and complain that their correlation models are not working. It works some of the time but the only constant is that it will continuously change.
Think Long-Term Capital in the early 90's.
Sorry if pedantic, but it was late-90's. Their models' tail risk didn't envision the Asian and Russian financial crises.
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Another QE is a joke. Not going to happen.
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Another QE is a joke. Not going to happen.
QE4 + NIRP will happen.
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Another QE is a joke. Not going to happen.
QE4 + NIRP will happen.
Maybe during the next recession. Just my opinion.
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hm, what happens if they did an interest rate hike alongside the QE? I know it doesn't make sense, but it might even it out and let people get used to the higher rate?
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it might even it out and let people get used to the higher rate?
We're talking about a quarter of a point here. It's impact will be more symbolic than material. Why are people acting like credit markets will dry up and there will be wailing and gnashing of teeth?
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i thought you were talking 2-3%.
<1% to me makes no difference...
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You can't hike into a global deflationary backdrop.