Author Topic: Top is in  (Read 112417 times)

DavidAnnArbor

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Re: Top is in
« Reply #600 on: August 20, 2017, 07:24:34 AM »
I've been watching The Big Short during some of my morning workouts lately, and was struck by something. One of the characters is insisting that we're in a bubble, and his boss says something like, "You never recognize a bubble until after it's popped". The character insists there are always signs if you look.

That's a huge fallacy, largely because there are always signs everywhere of everything collapsing. I work in an FDA-regulated industry, and about 75% of the companies I know of are thisclose to getting a Warning Letter from the FDA the next time they have an inspection. However, you never know which one is actually going to get the hammer brought down and exactly when it's going to happen.

It's the same thing with the various investment markets. There are tons of signs of things that could trigger the next bear market, but you won't know exactly which one will push us over the edge until after it happens.

Not a terribly happy state, but it's the one we've been in for a long long time, and I don't see it changing.

As the boys in the Big Short almost found out, the market can stay irrational far longer than you can remain solvent betting against it.

 Yes I recall in the movie that the investors were getting cold feet regarding the call that the subprime mortgage market was a bubble about to burst.

smedleyb

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Re: Top is in
« Reply #601 on: August 20, 2017, 01:07:19 PM »
I'm gonna say we're in for a correction next few months... ☺ market has lost faith and about to dump the trump bump.

Times like this I like my bonds.

Trump repeatedly referencing the record high stock market as some kind of validation of his presidency was always going to end badly.  Even Obama was never that foolish to make the connection, and he bought the market at the low and watched it triple.  Trump is buying in at the high, and gloating about it.  Quick 15% haircut immanent, IMO.

I actually think the rich/educated republicans sticking with trump will ditch him in a heartbeat if his shenanigans cause a 20%+ drop in the market. Right now they're all praying that some corporate tax cut will still come to fruition even though that's looking less and less likely.

The thing is, Trump didn't cause the last 20% rise, nor will he be responsible for the the next 20% drop (unless he does something unpredictably crazy like a nuclear strike on North Korea).  He's arriving on the scene after an unrelenting 8 1/2 year bull market that has nearly quadrupled off the low.  I don't try to pick tops or bottoms, but clearly we're much closer to the former than the latter based on time and price.  Trump is chaining himself the markets in a way Obama never did.  Like a fool, he's buying near the top and gloating about his amazing investment acumen, not realizing he's becoming a slave to momentum, and will surely suffer yet more humiliation when markets invariably turn.

Yes, it might be up, up and away from here.  The market might double and Trump can claim greatness.  Or -- and this is the way I'm personally betting -- a serious market gut check is immanent.  IMO, Trump's gloating is just another symptom of a bull market that's gotten far too complacent.  He's the ultimate jinx. 

GenXbiker

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Re: Top is in
« Reply #602 on: August 20, 2017, 02:11:59 PM »

I'm going to keep riding the Trump bull run with the money I've already got invested, which is about 80%.  The question is when to move more of my cash to stocks.  I like to buy on the dips and am looking for a good sale.

OurTown

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Re: Top is in
« Reply #603 on: August 21, 2017, 07:52:27 AM »
The market operates independently of politics, imo.

If you could predict the top, that would be great.  Even better if you could predict the bottom, then you could buy like a mofo.

thorstach

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Re: Top is in
« Reply #604 on: August 22, 2017, 04:32:54 PM »

By  John Coumarianos
Indexing the  S&P  500 is a speculative bet at these prices: GMO
"The stock market is now 35% passive and 65% terrified," says financial adviser and blogger  Josh Brown , a.k.a. "The Reformed Broker." Meaning that more investors nowadays are indexing their money, and active managers fear for their futures.
Which begs the question, did Brown (http://thereformedbroker.com/2017/06/15/id-like-to-solve-the-puzzle-pat/)get it backwards? Should the 35% of stock investments that's indexed actually be the terrified money? Yes,  James Montier  and  Matt Kadnar  of  Boston -based asset manager Grantham, Mayo, van Oterloo (GMO) assert in a new paper called "The  S&P  500: Just Say No (https://www.gmo.com/docs/default-source/research-and-commentary/strategies/asset-allocation/the-s-p-500-just-say-no.pdf)." The  S&P  500 is so expensive (http://www.marketwatch.com/story/just-say-no-to-the-sp-500-and-buy-these-stocks-instead-say-gmos-strategists-2017-08-16), they say, any money tracking the benchmark U.S. stock market index at this point is more speculation than investment.
Here's how the authors put it: "A decision to allocate to a passive  S&P  500 index is to say that you are ignoring what we believe is the most important determinant of long-term returns: valuation. At this point, you are no longer entitled to refer to yourself as an investor. You may call yourself a speculator, but not an investor.
"Going passive eliminates the ability of an active investor to underweight the most egregiously overpriced securities in the index (we obviously prefer a valuation-based approach for stock selection as well). When faced with the third most expensive US equity market of all time, maintaining a normal weight in a passive index seems to us to be a decision that will likely be very costly. Yet despite this, it remains a popular path, with around 30% of all assets in the U.S. equity market in the hands of passive indexers."
Montier and Kadnar divide stock prices into four components. Since 1970, dividends, earnings growth, profit margins, and P/E multiple changes have contributed 3.4%, 2.3%, 0.50%, and 0.10%, respectively, to the  S&P  500's 6.3% annualized return after inflation.
By contrast, those same inputs have contributed 2.8%, 3.1%, 3.2%, and 3.8% to the index's stunning 13.6% annualized real returns over the past seven years. In other words, the current rally is being carried by unusually high and persistent profit margins and multiple expansion, or the amount investors are willing to pay for earnings.
For recent returns to persist (http://www.marketwatch.com/story/bull-market-check-list-remains-intact-despite-pullback-morgan-stanley-says-2017-08-21), profit margins and P/E multiples must continue to expand. That's unlikely since both of these components are near all-time highs (http://www.marketwatch.com/story/a-bear-market-could-hit-us-stocks-any-time-now-2017-08-15). GMO uses these four components to try to peer into the future by analyzing the historical cycle of profits, and the firm's forecasts often resemble the signals of  Robert Shiller's  "cyclically adjusted PE ratio" or CAPE, which compares current stock prices to the past decade's worth of real earnings.
Basically, GMO thinks that U.S. stocks over the coming seven years will lose 6% due to P/E multiple contraction, and another 2.8% from margin contraction. While dividend yield and profit gains will contribute 5% to stock returns,, that still amounts to a real total return of -3.9% for the period.
Even assuming the current P/E ratio (http://www.marketwatch.com/story/heres-the-shocking-truth-about-the-russell-2000s-pe-ratio-2017-08-18)and profit margins are normal doesn't allow for the computation of continued robust returns (http://www.marketwatch.com/story/stock-prices-look-attractive-now-compared-to-bonds-2017-08-21) since P/E and margin expansion account for such a large part of recent gains. Basically, this is the third-most expensive U.S. market ever. The only times stock prices have been higher and prospective returns lower were in 1929 and 2000. A different cyclical adjustment that fund manager  John Hussman  uses shows the current market as the second-most expensive one.
Next, Montier and Kadnar examine stocks from a more bottom-up perspective, using the median stock's Shiller PE and Price/Sales ratio. It turns out that the median stock's Price/Sales ratio has never been more expensive since 1970. The median Shiller PE of stocks in the index is not quite as extreme, but still among the highest readings since 1970.
Finally, Montier and Kadnar run a  Benjamin Graham -style stock screen based on four criteria: Earnings yield twice the AAA bond yield; dividend yield two-thirds of the AAA bond yield; total debt less than two-thirds of tangible book value, and Shiller PE of less than 16x. They find no U.S. stocks currently meeting those criteria. The authors quote Graham: "When such opportunities have virtually disappeared, past experience indicates that investors should have taken themselves out of the stock market and plunged up to their necks in U.S. Treasury bills."
Even allowing for the fact that large U.S businesses are exhibiting monopolistic tendencies, and profit margin cycles appear different lately than in the past, Montier and Kadnar argue that stocks still aren't cheap.
The upshot is that investors should have as little exposure to U.S. stocks as possible. Foreign stocks don't offer compelling returns either, but they are priced to deliver at least somewhat higher returns (http://www.marketwatch.com/story/why-america-first-isnt-your-best-investment-idea-2017-08-14) than U.S. stocks. That's especially true for emerging markets stocks.
While investors who seek relative value must venture abroad, those investing on more absolute terms should hold some cash. "When there is nothing to do, do nothing," advise the authors. Both relative and absolute value investors should remember economist John Maynard Keynes's remark that they will necessarily seem "eccentric, unconventional, and rash in the eyes of average opinion."
- John Coumarianos ; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
 08-22-17   1746ET
 

Clean Shaven

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Re: Top is in
« Reply #605 on: August 22, 2017, 04:42:06 PM »
And for every one of those "stocks are waaaaay too expensive, according to _____" articles, there's one of these, proclaiming "stocks are cheap! BUY! BUY! BUY!"

https://www.cnbc.com/2017/08/18/by-this-measure-stocks-look-fairly-cheap-bmo.html


Whatever.  I'm selling everything and putting it all on Dutch tulip futures.

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« Last Edit: August 22, 2017, 04:43:50 PM by Clean Shaven »

JAYSLOL

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Re: Top is in
« Reply #606 on: August 22, 2017, 05:13:14 PM »
I think the more pressing question should be "is the bottom in?"

MrDelane

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Re: Top is in
« Reply #607 on: August 23, 2017, 09:46:18 PM »

DavidAnnArbor

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Re: Top is in
« Reply #608 on: August 24, 2017, 05:57:11 PM »
Here's a counter argument that someone posted in a different thread, suggesting that the CAPE 10 is not as high as it seems.

http://www.etf.com/sections/index-investor-corner/swedroe-wait-youll-likely-miss-out?nopaging=1

tyort1

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Re: Top is in
« Reply #609 on: August 24, 2017, 07:45:53 PM »
My stache on April 11th, when this thread was started:

$301k

My stache as of today:

$330k

Huh, I guess the top wasn't in.
Frugalite in training.

With This Herring

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Re: Top is in
« Reply #610 on: August 24, 2017, 08:46:29 PM »
My stache on April 11th, when this thread was started:

$301k

My stache as of today:

$330k

Huh, I guess the top wasn't in.

What if you cheated (hah!) and contributed $30K?!  WHAT THEN?!
Because your toaster got hacked because you tried to watch porn on your blender.

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Go soak your beans.  You know you keep forgetting.

Clean Shaven

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Re: Top is in
« Reply #611 on: August 30, 2017, 12:08:23 PM »
Feels like the right place to post this.


boarder42

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Re: Top is in
« Reply #612 on: August 30, 2017, 12:30:47 PM »
Here's a counter argument that someone posted in a different thread, suggesting that the CAPE 10 is not as high as it seems.

http://www.etf.com/sections/index-investor-corner/swedroe-wait-youll-likely-miss-out?nopaging=1

yep i started a thread about this a while back. 
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Lobo

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Re: Top is in
« Reply #613 on: August 31, 2017, 04:42:07 AM »

talltexan

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Re: Top is in
« Reply #614 on: August 31, 2017, 09:39:03 AM »
Thanks for posting the swedroe piece, that's really  nice!

sol

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Re: Top is in
« Reply #615 on: August 31, 2017, 10:04:31 AM »
Thanks for posting the swedroe piece, that's really  nice!

I agree, that's a well-written and comprehensive review of valuations.

My favorite part is the discussion about the EV for people who are waiting for the correction to come:

Quote
Looking back at 115 years of data, Elm asked: “During times when the market has been ‘expensive,’ what has been the average cost or benefit of waiting for a correction of 10% from the starting price level, rather than investing right away?” They defined “expensive” as the occasions when the stock market had a CAPE ratio more than one standard deviation above its historical average.
...
  • From a given “expensive” starting point, there was a 56% probability that the market had a 10% correction within three years, waiting for which would result in about a 10% return benefit versus having invested right away.
  • In the 44% of cases where the correction doesn’t happen, there’s an average opportunity cost of about 30%—much greater than the average benefit.
  • Putting these together, the mean expected cost of waiting for a correction was about 8% versus investing right away.
The takeaway is this: Even if you believe the probability of a correction is high, it’s far from certain. And when the correction doesn’t happen, the expected opportunity cost of having waited is much greater than the expected benefit.

And then there's a discussion of the psychological fallacy behind the "wait for a correction" strategy.  Basically, he suggests that people are only accounting on the correction being more likely to happen than to not happen, and failing to account for the payoff of those two probabilities.  Since the cost of getting it wrong if you wait is so much greater than the benefit of getting it right, those folks screwed up.  Ask anyone who's been sitting out of the market the past three years because they thought "valuations are too high" back in 2013.

DavidAnnArbor

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Re: Top is in
« Reply #616 on: August 31, 2017, 10:12:10 AM »
Ask anyone who's been sitting out of the market the past three years because they thought "valuations are too high" back in 2013.

Very apropos to this thread.

Exflyboy

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Re: Top is in
« Reply #617 on: August 31, 2017, 10:17:40 PM »
Another 10 points and the S&P will post a new top.. Actually my NW did post a new top today..:)

Radagast

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Re: Top is in
« Reply #618 on: August 31, 2017, 10:54:43 PM »
I hate mid month dips. All my money goes in at the begining/end.

talltexan

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Re: Top is in
« Reply #619 on: September 01, 2017, 12:07:13 PM »
I get paid twice a month, so I'm the Cal Ripken, Jr., of Dollar Cost Averaging!

Mr Mark

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Re: Top is in
« Reply #620 on: September 01, 2017, 12:38:38 PM »
Ask anyone who's been sitting out of the market the past three years because they thought "valuations are too high" back in 2013.

Very apropos to this thread.

+1

I find buying and selling in hindsight  works 100% of the time. ;-)
Mr. Mark

Optimiser

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Re: Top is in
« Reply #621 on: September 01, 2017, 12:43:42 PM »
Here's a counter argument that someone posted in a different thread, suggesting that the CAPE 10 is not as high as it seems.

http://www.etf.com/sections/index-investor-corner/swedroe-wait-youll-likely-miss-out?nopaging=1

yep i started a thread about this a while back.
This was a great read.

marielle

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Re: Top is in
« Reply #622 on: September 01, 2017, 01:41:29 PM »
I get paid twice a month, so I'm the Cal Ripken, Jr., of Dollar Cost Averaging!

I get paid every two weeks meaning my paycheck is on random dates, so I'm the best Dollar Cost Averager.

I wish getting paid daily was an option.

Exflyboy

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Re: Top is in
« Reply #623 on: September 01, 2017, 03:28:46 PM »
Ask anyone who's been sitting out of the market the past three years because they thought "valuations are too high" back in 2013.

Very apropos to this thread.

+1

I find buying and selling in hindsight  works 100% of the time. ;-)

I'm just glad I deposited $1000 with Warren Buffet at the end of 1964..:)

thorstach

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Re: Top is in
« Reply #624 on: September 05, 2017, 10:27:45 AM »
Failed breakout, top still in.

dividendman

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Re: Top is in
« Reply #625 on: September 05, 2017, 11:14:49 AM »
Failed breakout, top still in.

I love you.

MrStash

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Re: Top is in
« Reply #626 on: September 05, 2017, 11:23:58 AM »
Ohhhh how did I know that this thread would be the top one this morning.

dividendman

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Re: Top is in
« Reply #627 on: September 05, 2017, 11:33:32 AM »
Ohhhh how did I know that this thread would be the top one this morning.

Probably because Top is in.

MrDelane

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Re: Top is in
« Reply #628 on: September 05, 2017, 12:20:16 PM »
Failed breakout, top still in.

Since the time you started this thread in April my stache has gained roughly $60,000 (separate from my contributions).

Essentially, listening to you would have cost me $60K.


tyort1

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Re: Top is in
« Reply #629 on: September 05, 2017, 01:26:40 PM »
Failed breakout, top still in.

Since the time you started this thread in April my stache has gained roughly $60,000 (separate from my contributions).

Essentially, listening to you would have cost me $60K.

And mine has grown $30k.  Damn.
Frugalite in training.

solon

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Re: Top is in
« Reply #630 on: September 05, 2017, 01:31:45 PM »
Failed breakout, top still in.

Since the time you started this thread in April my stache has gained roughly $60,000 (separate from my contributions).

Essentially, listening to you would have cost me $60K.

And mine has grown $30k.  Damn.

I guess your top isn't in yet.

Clean Shaven

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Re: Top is in
« Reply #631 on: September 05, 2017, 02:20:45 PM »

MrDelane

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Re: Top is in
« Reply #632 on: September 05, 2017, 03:01:54 PM »
Failed breakout, top still in.

Since the time you started this thread in April my stache has gained roughly $60,000 (separate from my contributions).

Essentially, listening to you would have cost me $60K.

And mine has grown $30k.  Damn.

It would be interesting to tally the gains of everyone who has read this thread since the beginning of April.

Exflyboy

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Re: Top is in
« Reply #633 on: September 05, 2017, 05:24:10 PM »
Don't laugh too soon.. He may be right this time..:)

bacchi

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Re: Top is in
« Reply #634 on: September 05, 2017, 05:26:50 PM »
Don't laugh too soon.. He may be right this time..:)

Maybe but my faulty memory tells me that the market recovers fairly soon after world events such as this. War is good for business, after all.

moof

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Re: Top is in
« Reply #635 on: September 05, 2017, 06:26:42 PM »
Don't laugh too soon.. He may be right this time..:)

OK.  Let's say I sell and sit in cash.  How would we go about calling the bottom to get back in?

I've met a couple folks who called the 2008 crash roughly correct, but sat out way too long due to ongoing grim news and missing buying the trough and never re-bought at the bottom.  They mumble a lot when you ask to know how they did compared to riding it out.

Retire-Canada

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Re: Top is in
« Reply #636 on: September 05, 2017, 06:50:56 PM »
OK.  Let's say I sell and sit in cash.  How would we go about calling the bottom to get back in?

Just stay tuned to Thorstach's "Bottom is in!" thread?

Exflyboy

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Re: Top is in
« Reply #637 on: September 05, 2017, 07:31:02 PM »
Don't laugh too soon.. He may be right this time..:)

OK.  Let's say I sell and sit in cash.  How would we go about calling the bottom to get back in?

I've met a couple folks who called the 2008 crash roughly correct, but sat out way too long due to ongoing grim news and missing buying the trough and never re-bought at the bottom.  They mumble a lot when you ask to know how they did compared to riding it out.

I said he maybe right.. I didn't say I would anything different to what I am now.. I'm sitting at 80/20 (60/40 if you count my pensions as bonds) and have absolutely no intention of selling anything..:)

JAYSLOL

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Re: Top is in
« Reply #638 on: September 05, 2017, 09:14:53 PM »
I love this thread, it's fun, but there's so many lessons to take away from it.  I also love how thorstach said nothing all last week while the market was heading upwards.  Call your false breakout while its happening, anyone can predict the past.  I predict my account actually went up today, cause I deposited more money.

Mr Mark

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Re: Top is in
« Reply #639 on: September 06, 2017, 04:54:50 AM »
Ask anyone who's been sitting out of the market the past three years because they thought "valuations are too high" back in 2013.

Very apropos to this thread.

+1

I find buying and selling in hindsight  works 100% of the time. ;-)

I'm just glad I deposited $1000 with Warren Buffet at the end of 1964..:)

I cashed out of birkshire mid 2015 and put it all into bitcoins.  ;-)
Mr. Mark

tyort1

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Re: Top is in
« Reply #640 on: September 06, 2017, 07:57:43 AM »
This thread is great inoculation against all the other (much more scary) doomsday predictions that appear on "real" financial sites.
Frugalite in training.

Exflyboy

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Re: Top is in
« Reply #641 on: September 06, 2017, 09:37:06 AM »
Oh it will get scary one day.. in 2008 I set my 401k to buy nothing but stock indexes and turned off the media.

I would have gone crazy otherwise.

talltexan

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Re: Top is in
« Reply #642 on: September 06, 2017, 11:02:50 AM »
I was thinking now was a good time to dial back on the stocks, maybe get some bonds. Have I come to the right place?

OurTown

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Re: Top is in
« Reply #643 on: September 06, 2017, 11:03:24 AM »
You can have as many bonds as you like!

Clean Shaven

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Re: Top is in
« Reply #644 on: September 06, 2017, 11:23:09 AM »

moof

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Re: Top is in
« Reply #645 on: September 06, 2017, 11:50:25 AM »
Don't laugh too soon.. He may be right this time..:)

OK.  Let's say I sell and sit in cash.  How would we go about calling the bottom to get back in?

I've met a couple folks who called the 2008 crash roughly correct, but sat out way too long due to ongoing grim news and missing buying the trough and never re-bought at the bottom.  They mumble a lot when you ask to know how they did compared to riding it out.

I said he maybe right.. I didn't say I would anything different to what I am now.. I'm sitting at 80/20 (60/40 if you count my pensions as bonds) and have absolutely no intention of selling anything..:)
I'm around 85/15, and no intention of selling.  My investment strategy is simple:
1)  Stocks go up:  I buy.
2)  Stocks stay flat:  I buy.
3)  Stops go down:  I buy.

I keep a small cash cushion and plan for long term expenses, everything else gets invested ASAP.

I have a friend with amazing luck, who managed to get 50% return by putting all his money in NZ CD's to help gain residency for the coming apocalypse 5 years ago.  I have the exact opposite luck.  My investment strategy includes buying lots of VTSAX, since if I buy the whole market and my luck goes south I will take all you suckers down with me!

DavidAnnArbor

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Re: Top is in
« Reply #646 on: September 06, 2017, 02:08:14 PM »
Ask anyone who's been sitting out of the market the past three years because they thought "valuations are too high" back in 2013.

Very apropos to this thread.

+1

I find buying and selling in hindsight  works 100% of the time. ;-)

I'm just glad I deposited $1000 with Warren Buffet at the end of 1964..:)

I cashed out of birkshire mid 2015 and put it all into bitcoins.  ;-)

Hmmm bitcoin has gone up a million per cent  in value.
I guess you're a billionaire now.

Clean Shaven

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Re: Top is in
« Reply #647 on: September 06, 2017, 04:20:12 PM »
Failed breakout, top still in.

Since the time you started this thread in April my stache has gained roughly $60,000 (separate from my contributions).

Essentially, listening to you would have cost me $60K.

And mine has grown $30k.  Damn.

It would be interesting to tally the gains of everyone who has read this thread since the beginning of April.

$43K in gains for me, from April to Sept.

Thanks Thorstach!


sol

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Re: Top is in
« Reply #648 on: September 06, 2017, 04:28:48 PM »
It would be interesting to tally the gains of everyone who has read this thread since the beginning of April.

On paper, I'm up $152,954 since then.  That's cheating, though, since most of the gain isn't stock market valuation change.

It's still a crazy fucking number.  What a year.

boarder42

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Re: Top is in
« Reply #649 on: September 06, 2017, 04:58:31 PM »
I'm up 100k but there are contributions in there.  And some private stock gains
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