Author Topic: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis  (Read 10220 times)

PDXTabs

  • Walrus Stache
  • *******
  • Posts: 5160
  • Age: 40
  • Location: Vancouver, WA, USA
“Instead of buying low and selling high, you’re buying high and crossing your fingers,” Gross, 73, said Wednesday at the Bloomberg Invest New York summit.

https://www.bloomberg.com/news/articles/2017-06-07/bill-gross-says-market-risk-is-highest-since-before-2008-crisis?link=mktw

I would never advocate for market timing your long term investments, but I for one look forward to 50% off stocks.

LAGuy

  • Bristles
  • ***
  • Posts: 318
  • Age: 49
  • Location: Los Angeles
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #1 on: June 10, 2017, 05:47:51 PM »
I'm too lazy. Can somebody please post links showing how Bill Gross has been a stock market doom and gloomer for the past decade? Pretty much what you'd expect I guess who makes his money on bonds.

PDXTabs

  • Walrus Stache
  • *******
  • Posts: 5160
  • Age: 40
  • Location: Vancouver, WA, USA
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #2 on: June 10, 2017, 07:42:30 PM »
He has also been very successful. Co-founding PIMCO, his fund made almost $2B during the housing crash, writing 8 figure checks to charities, etc. He may be wrong, but he isn't a quack.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 7916
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #3 on: June 10, 2017, 07:58:29 PM »
If you believe that stocks will take a 50% haircut. You should exit your current position and buy back in when it happens =D

Otherwise it's all noise.

PDXTabs

  • Walrus Stache
  • *******
  • Posts: 5160
  • Age: 40
  • Location: Vancouver, WA, USA
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #4 on: June 10, 2017, 08:05:10 PM »
If you believe that stocks will take a 50% haircut. You should exit your current position and buy back in when it happens =D

I'm 100% cash with my short and medium term accounts, but my retirement account is still 86% equities - as a hedge against myself.

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2266
  • Age: 58
  • Location: Ann Arbor, Michigan
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #5 on: June 10, 2017, 09:14:38 PM »
He has also been very successful. Co-founding PIMCO, his fund made almost $2B during the housing crash, writing 8 figure checks to charities, etc. He may be wrong, but he isn't a quack.

And he lost a lot of money back in 2012/2013 when he said long term bonds would fall apart as inflation was just about to go up any day now.
There's a reason why he's not at PIMCO anymore.

lost_in_the_endless_aisle

  • Guest
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #6 on: June 10, 2017, 11:48:19 PM »
He's no Warren Buffet or Paul Singer in any case

aspiringnomad

  • Pencil Stache
  • ****
  • Posts: 956
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #7 on: June 11, 2017, 01:18:01 AM »
He has also been very successful. Co-founding PIMCO, his fund made almost $2B during the housing crash, writing 8 figure checks to charities, etc. He may be wrong, but he isn't a quack.

And he lost a lot of money back in 2012/2013 when he said long term bonds would fall apart as inflation was just about to go up any day now.
There's a reason why he's not at PIMCO anymore.

+1. His track record is quite spotty. Good luck picking the right spot!

Stache-O-Lantern

  • Stubble
  • **
  • Posts: 121
  • Location: Northern California
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #8 on: June 11, 2017, 01:27:52 AM »
And thorstache says the top is in.

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8682
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #9 on: June 11, 2017, 07:34:09 AM »
If you believe that stocks will take a 50% haircut. You should exit your current position and buy back in when it happens =D

Otherwise it's all noise.

Yup. Time to commit! You'll double your money when you buy and the bottom and stocks recover.

WhiteTrashCash

  • Handlebar Stache
  • *****
  • Posts: 1983
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #10 on: June 11, 2017, 07:49:28 AM »
All the "experts" don't really know anything. And all it takes to become a "expert" in the markets is to get lucky with your gambling, er, I mean stock picking.

dividendman

  • Handlebar Stache
  • *****
  • Posts: 1900
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #11 on: June 11, 2017, 08:37:14 AM »
I agree with WhiteTrashCash.

Bill Gross made a lot of money for himself, and not much for other people. He's someone who got lucky, and that's it.

Also, why do people care what anyone says about the stock market? Why aren't these people making the predictions all the richest people in the world by leveraging huge amounts of money on the positions of their predictions and buying the planet?

On another note, people should realize all of these CEOs of huge organizations and banks, founders of investment firms and and hedge funds have one thing in common: they're all extremely lucky people. Just because the CEO of JP Morgan Chase or PIMCO says some crap doesn't make them any more right than the VP of no-name company who wasn't as lucky who is making the opposite prediction.

90% of extreme success is luck, I don't know why people don't treat it that way.

MrDelane

  • Pencil Stache
  • ****
  • Posts: 618
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #12 on: June 11, 2017, 08:41:06 AM »
I'm too lazy. Can somebody please post links showing how Bill Gross has been a stock market doom and gloomer for the past decade? Pretty much what you'd expect I guess who makes his money on bonds.

Here are his predictions from 2012.

And here is SPY from the day that article was published to today:



PDXTabs

  • Walrus Stache
  • *******
  • Posts: 5160
  • Age: 40
  • Location: Vancouver, WA, USA
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #13 on: June 11, 2017, 09:15:48 AM »
Thanks MrDelane.

It was years between when Alan Greenspan gave his irrational exuberance speech until when it crashed. It didn't make him wrong, but it does highlight how difficult it is to time the markets. Of note: Greenspan missed the housing bubble, which did make him wrong.
« Last Edit: June 11, 2017, 09:20:21 AM by PDXTabs »

MrDelane

  • Pencil Stache
  • ****
  • Posts: 618
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #14 on: June 11, 2017, 09:23:20 AM »
Thanks MrDelane.

It was years between when Alan Greenspan gave his irrational exuberance speech until when it crashed. It didn't make him wrong, but it does highlight how difficult it is to time the markets. Of note: Greenspan missed the housing bubble, which did make him wrong.

True - and I'm not saying Gross is wrong... he may be right for all we know, but if it's not actionable information then, as 2Birds1Stone said above, it's just noise.

On a long enough timeline everyone that calls a crash has a 100% success rate.

Stache-O-Lantern

  • Stubble
  • **
  • Posts: 121
  • Location: Northern California
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #15 on: June 11, 2017, 09:28:44 AM »
I'm too lazy. Can somebody please post links showing how Bill Gross has been a stock market doom and gloomer for the past decade? Pretty much what you'd expect I guess who makes his money on bonds.

Here are his predictions from 2012.


Speaking of no name VP's from less flashy companies.  At the very end of this article, they randomly quote a Wasif Latif, who in mid-2012 said he liked the healthcare sector.  Which has done better than VTSAX as judged by VGHCX since then.  But despite his name sounding like elvish poetry, nobody quotes poor Wasif Latif in headlines.

MrDelane

  • Pencil Stache
  • ****
  • Posts: 618
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #16 on: June 11, 2017, 09:54:21 AM »
Speaking of no name VP's from less flashy companies.  At the very end of this article, they randomly quote a Wasif Latif, who in mid-2012 said he liked the healthcare sector.  Which has done better than VTSAX as judged by VGHCX since then.  But despite his name sounding like elvish poetry, nobody quotes poor Wasif Latif in headlines.

Meanwhile Bill Gross recommended the Healthcare sector over 3 years later in Jan of 2016.

Here is VGHCX from the day that article was posted to today:



And VTSAX from the day that article was posted to today:


Livewell

  • Stubble
  • **
  • Posts: 179
  • Location: SF Bay Area
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #17 on: June 11, 2017, 10:07:46 AM »
You have to wonder about a guy like Gross that has been so wrong for so long.  Gross falsely interpreted the Feds actions post 2009 as a primer for huge inflation and made some big bets along those lines.  When it didn't work out he just kept singing the same song.  Is this the behavior of a rational investor or someone who is unable to see the truth through their idealogically shaded glasses?

This guy gets published because he makes for good click bait.  Why anyone takes him seriously with his track record I don't know.
« Last Edit: June 11, 2017, 10:12:04 AM by Livewell »

LAGuy

  • Bristles
  • ***
  • Posts: 318
  • Age: 49
  • Location: Los Angeles
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #18 on: June 11, 2017, 11:00:41 AM »
You have to wonder about a guy like Gross that has been so wrong for so long.  Gross falsely interpreted the Feds actions post 2009 as a primer for huge inflation and made some big bets along those lines.  When it didn't work out he just kept singing the same song.  Is this the behavior of a rational investor or someone who is unable to see the truth through their idealogically shaded glasses?

This guy gets published because he makes for good click bait.  Why anyone takes him seriously with his track record I don't know.

I've wondered the same about him recently. He used to be a pretty respectable voice, but since he got pushed out of PIMCO he kind of seems to have gone off the rails for a bit. Part of his frustration probably is that there's just been no money to be made in his chosen field, bonds, for years now and I'm sure his fondest wish before he heads off into the sunset would be to rub Mohamed El-Erain's nose in some sort -of any sort- of major success.

lost_in_the_endless_aisle

  • Guest
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #19 on: June 11, 2017, 07:53:46 PM »
Thanks MrDelane.

It was years between when Alan Greenspan gave his irrational exuberance speech until when it crashed. It didn't make him wrong, but it does highlight how difficult it is to time the markets. Of note: Greenspan missed the housing bubble, which did make him wrong.
When it comes to investing, being early is the same thing as being wrong.

acanthurus

  • Stubble
  • **
  • Posts: 130
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #20 on: June 11, 2017, 09:10:10 PM »
Disgusting to see so many people denigrate Bill Gross.

Quote
"He's a true legend. There aren't too many people in my field who measure up to that test. In an industry based on illusion, Bill Gross is the real thing."

That's Jack Bogle talking about Gross in late 2014. The man had a hell of a career, with a rough past couple of years. Gross is worth paying attention to.

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2266
  • Age: 58
  • Location: Ann Arbor, Michigan
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #21 on: June 11, 2017, 10:01:41 PM »
Disgusting to see so many people denigrate Bill Gross.

Quote
"He's a true legend. There aren't too many people in my field who measure up to that test. In an industry based on illusion, Bill Gross is the real thing."

That's Jack Bogle talking about Gross in late 2014. The man had a hell of a career, with a rough past couple of years. Gross is worth paying attention to.

Oh wrong!  Bill Gross argued in 2011 that low interest rates were hurting the economy, just as the economy was still in recovery from the Great Recession. Gross obsessed about budget deficits when the economy was tanking, yet federal deficits would stabilize the economy.
Finally, writes financial journalist Neil Irwin, "A disastrous bet he made against United States Treasury bonds in 2011 led to three years of underperformance and billions in withdrawals."
https://nyti.ms/2sd5soY

Jamese20

  • Stubble
  • **
  • Posts: 233
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #22 on: June 12, 2017, 08:40:55 AM »
I think the only people who should really be concerned with this sort of thing is people who are literally one year away from hitting their goals for retiring early

Me personally I hope there is one this year so I can start buying really cheap stocks in 2018 but I would be hoping for another 5 year good run if I was almost FI so that would set me up for an ever lasting retirement!

The 4% rule already is meant to take this into account but I still would prefer a nice 5 year run of 14-18 % average returns to boost me up thats for sure!

fattest_foot

  • Pencil Stache
  • ****
  • Posts: 856
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #23 on: June 12, 2017, 10:43:21 AM »
Disgusting to see so many people denigrate Bill Gross.

Quote
"He's a true legend. There aren't too many people in my field who measure up to that test. In an industry based on illusion, Bill Gross is the real thing."

That's Jack Bogle talking about Gross in late 2014. The man had a hell of a career, with a rough past couple of years. Gross is worth paying attention to.

So because Bogle said he's worth paying attention to, we should?

The way some people in the FI community deify Bogle is baffling to me.

He has/had great ideas, but that doesn't mean he's never wrong.

ChpBstrd

  • Walrus Stache
  • *******
  • Posts: 6659
  • Location: A poor and backward Southern state known as minimum wage country
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #24 on: June 12, 2017, 11:37:58 AM »
I'm envisioning a social gaming app that allows you to pick a pundit and make bets on whether their latest prediction is correct. We can get all the usual financial celebrities involved, and have a shit-talking board to keep it lively. You join a team and wage flame war against the Boggleheads or the Buffeteers or the Sky-Is-Falling Coalition, depending on your ideological blinders.

All the while, ads stream by the bottom of the app, and I catch a fraction of the revenue from yahoo, marketwatch, or the other sites middle/working class people get their investment instructions from.

dividendman

  • Handlebar Stache
  • *****
  • Posts: 1900
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #25 on: June 12, 2017, 12:46:54 PM »
I'm envisioning a social gaming app that allows you to pick a pundit and make bets on whether their latest prediction is correct. We can get all the usual financial celebrities involved, and have a shit-talking board to keep it lively. You join a team and wage flame war against the Boggleheads or the Buffeteers or the Sky-Is-Falling Coalition, depending on your ideological blinders.

All the while, ads stream by the bottom of the app, and I catch a fraction of the revenue from yahoo, marketwatch, or the other sites middle/working class people get their investment instructions from.

I think you're being sarcastic but.... I think this idea is actually a winner.

DavidAnnArbor

  • Handlebar Stache
  • *****
  • Posts: 2266
  • Age: 58
  • Location: Ann Arbor, Michigan
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #26 on: June 12, 2017, 02:21:56 PM »
pick a pundit and make bets on whether their latest prediction is correct.

What about fake news that falsely reports a prediction comes true?

ChpBstrd

  • Walrus Stache
  • *******
  • Posts: 6659
  • Location: A poor and backward Southern state known as minimum wage country
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #27 on: June 12, 2017, 03:30:05 PM »
pick a pundit and make bets on whether their latest prediction is correct.

What about fake news that falsely reports a prediction comes true?
These are debated in the shit-talking boards (see, I have a plan to be part of an existing trend here). Actual points are scored based on daily market movements, because that's how often one should check. It's basically a training device to become a bad investor.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #28 on: June 12, 2017, 03:51:04 PM »
All the "experts" don't really know anything. And all it takes to become a "expert" in the markets is to get lucky with your gambling, er, I mean stock picking.

Add me to the list of people that agree with this comment. My FIL was a hedge fund manager and a Treasurer for a big bank. He gets it wrong consistently. He is really rich though but it's more to do with being frugal and earning a fortune rather than good market picks.

Travis

  • Magnum Stache
  • ******
  • Posts: 4219
  • Location: California
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #29 on: June 12, 2017, 09:42:21 PM »
It helps that the financial news industry is very forgiving when their experts/commentators/anchors/demigods get it wrong the other 364 days of the year (and how often can you just chalk up that 1 day to a "broken clock" mulligan?).  If they actually kept people on their shows based on their track records they wouldn't have anyone left to talk to.

PDXTabs

  • Walrus Stache
  • *******
  • Posts: 5160
  • Age: 40
  • Location: Vancouver, WA, USA
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #30 on: June 12, 2017, 10:09:48 PM »
Did anyone see what was on the front page of the WSJ (print edition) today?
https://www.wsj.com/articles/feds-effort-to-guide-markets-falls-short-1497182401

Paul der Krake

  • Walrus Stache
  • *******
  • Posts: 5854
  • Age: 16
  • Location: UTC-10:00
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #31 on: June 12, 2017, 10:28:10 PM »
Disgusting to see so many people denigrate Bill Gross.

Quote
"He's a true legend. There aren't too many people in my field who measure up to that test. In an industry based on illusion, Bill Gross is the real thing."

That's Jack Bogle talking about Gross in late 2014. The man had a hell of a career, with a rough past couple of years. Gross is worth paying attention to.

So because Bogle said he's worth paying attention to, we should?

The way some people in the FI community deify Bogle is baffling to me.

He has/had great ideas, but that doesn't mean he's never wrong.
I will give the benefit of the doubt to anyone endorsed by Jack Bogle, whether it's Warren Buffet of Donald Duck.

This doesn't mean we should give Bill Gross a blind check, but a little respect is warranted.
« Last Edit: June 12, 2017, 10:30:15 PM by Paul der Krake »

EscapeVelocity2020

  • Magnum Stache
  • ******
  • Posts: 4815
  • Age: 50
  • Location: Houston
    • EscapeVelocity2020
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #32 on: June 12, 2017, 11:21:04 PM »
The only thing Bill Gross got wrong was that this bubble was more than a magnitude larger than the last one and has longer to run.  To his credit, I believe that history will show that he predicted the right bubble, but the wrong timing and magnitude (with the Fed ultimately looking like it was again behind the curve, leaving rates too low for too long).  Even Einstein gets things like this wrong, having to work from history with a limited perspective.  I don't think it's a reason to stop listening to him now.

Can't fault the Fed though, there was no historically precedented reason to raise rates, so why fix something that ain't broke?  The current market is the result of a luxury of low inflation that is only now possible because of high productivity and technology raising quality of life at no cost.  But yes, I still value experience over 'expertise', so Bill should not be cast aside entirely.  Maybe the status quo is OK with the 99% for a few more years, but eventually that growth will be spread too thin and unsustainable.  It is inevitable that capital markets will need to retrench (the business cycle), which at least used to result in a migration of investors from equities to bonds.  I think this last bit is the problem, that no-one wants to buy bonds this time around, even if you have a shit-ton of money.  Anemic demand, distorted market.

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 43
  • Location: NYC
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #33 on: June 13, 2017, 12:35:55 AM »
I never understand why people don't look at these things with a probabilistic approach.
It is obviously impossible to correctly time the markets, as high valuations can go higher and vice versa, but it is equally stupid to buy at today's prices and assume the same old average 7% real return in the next 10-15 years.
It could happen, but the probability is extremely low.   
So yes, in a way risk has never been higher than today since 2008.
This doesn't mean sell everything and go cash: it just means we need to have realistic expectations about future returns.

Jamese20

  • Stubble
  • **
  • Posts: 233
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #34 on: June 13, 2017, 04:18:27 AM »
I never understand why people don't look at these things with a probabilistic approach.
It is obviously impossible to correctly time the markets, as high valuations can go higher and vice versa, but it is equally stupid to buy at today's prices and assume the same old average 7% real return in the next 10-15 years.
It could happen, but the probability is extremely low.   
So yes, in a way risk has never been higher than today since 2008.
This doesn't mean sell everything and go cash: it just means we need to have realistic expectations about future returns.

Can't say I agree, on one statement you say you can't time the market but then say it's highly probable we are in bubble territory like 2008? Based on not knowing there is as much chance  of 7% average returns than a market crash

At every peak in the market in the last 100+ years I am pretty sure everyone stated we couldn't go any higher.. My question is why not? Why can't it go up? If your long term view for investing is that you will gain returns then surely you do beleive there we will be new highs as you shouldn't be Investing in the first place should you if you beleive there is a peak?

In my opinion if you think it's too risky to invest and expect returns over the next decade or so you should not be thinking of investing in the first place as you are timing the markets and people can't do it so you should not be investing at all

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 43
  • Location: NYC
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #35 on: June 13, 2017, 04:39:03 AM »
I imagined the market timing police would show up.
If you do your research (the guys over at starcapital do a good job), you will notice there is a very strong correlation between valuations and forward 10-15 year returns.
This does NOT mean that the market is going to tank tomorrow, or next week or next year: nobody knows for sure and those who say they know are either idiots or liars (or both).
This though does mean that, historically, there is now a very high chance of the US equity market doing worse than average, in the next 10-15 years.
Please note:
1- "very high chance" doesn't mean "for sure"
2- the 10-15 year timeframe (not really a "timing" thing
3- there is no "crash" prediction. The lower returns could also come with a lateral move.

Jamese20

  • Stubble
  • **
  • Posts: 233
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #36 on: June 13, 2017, 04:54:27 AM »
I imagined the market timing police would show up.
If you do your research (the guys over at starcapital do a good job), you will notice there is a very strong correlation between valuations and forward 10-15 year returns.
This does NOT mean that the market is going to tank tomorrow, or next week or next year: nobody knows for sure and those who say they know are either idiots or liars (or both).
This though does mean that, historically, there is now a very high chance of the US equity market doing worse than average, in the next 10-15 years.
Please note:
1- "very high chance" doesn't mean "for sure"
2- the 10-15 year timeframe (not really a "timing" thing
3- there is no "crash" prediction. The lower returns could also come with a lateral move.

High probability means that you think you have an edge and are almost waiting for a correction to me

I dont  even bank on 7% average returns anyhow and I don't think it's sensible to do that personally

My 10-15 year plan is more based on 6% real returns on average and hopefully the average does come in

There has also been a lot of 15-18% averages across that time period... I think the markets are very young still so I'm optimistic overall long term

A sensible plan takes care of this sort of worry for me

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 43
  • Location: NYC
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #37 on: June 13, 2017, 05:01:22 AM »
I imagined the market timing police would show up.
If you do your research (the guys over at starcapital do a good job), you will notice there is a very strong correlation between valuations and forward 10-15 year returns.
This does NOT mean that the market is going to tank tomorrow, or next week or next year: nobody knows for sure and those who say they know are either idiots or liars (or both).
This though does mean that, historically, there is now a very high chance of the US equity market doing worse than average, in the next 10-15 years.
Please note:
1- "very high chance" doesn't mean "for sure"
2- the 10-15 year timeframe (not really a "timing" thing
3- there is no "crash" prediction. The lower returns could also come with a lateral move.

High probability means that you think you have an edge and are almost waiting for a correction to me


That's not at all what I wrote, not sure how you assumed this.
I'm not native speaking in English so I maybe just explained myself unclearly

PDXTabs

  • Walrus Stache
  • *******
  • Posts: 5160
  • Age: 40
  • Location: Vancouver, WA, USA
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #38 on: June 13, 2017, 08:30:35 AM »
That's not at all what I wrote, not sure how you assumed this.
I'm not native speaking in English so I maybe just explained myself unclearly

Your English is fine. I'm not sure how Jamese20 missed it.

Travis

  • Magnum Stache
  • ******
  • Posts: 4219
  • Location: California
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #39 on: June 13, 2017, 08:57:26 AM »
I imagined the market timing police would show up.
If you do your research (the guys over at starcapital do a good job), you will notice there is a very strong correlation between valuations and forward 10-15 year returns.
This does NOT mean that the market is going to tank tomorrow, or next week or next year: nobody knows for sure and those who say they know are either idiots or liars (or both).
This though does mean that, historically, there is now a very high chance of the US equity market doing worse than average, in the next 10-15 years.
Please note:
1- "very high chance" doesn't mean "for sure"
2- the 10-15 year timeframe (not really a "timing" thing
3- there is no "crash" prediction. The lower returns could also come with a lateral move.

Why shouldn't the "market timing" police show up?  The main problem with anyone who says "the market will do something, someday" is that they aren't giving you information you can actually use.  If Gross or anyone else saying the market is going to tank or simply not do as well in 10-15 years is right, what are you going to change tomorrow?  If it happens he can say he was right all along even if it happens in 9 years or 16 years instead of 10-15. Based on his words and your probabilities (wherever those are coming from) are you going to change your portfolio and sit on his bonds for 15 years hoping he's right?  If he's wrong are you going to still sing his praises if at the end you realize you missed out on a decade of stock growth because it was probably going to happen? 

Jamese20

  • Stubble
  • **
  • Posts: 233
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #40 on: June 13, 2017, 10:13:26 AM »
High probability based on what rational?

Even the the guy who has constantly beat the market claims that the US isn't in bubble territory at the moment.

Surely you are only going to be slightly concerned with today's current climate if you are just about to pull the plug on your job for good? Apart from that we should be welcoming some cheap stocks

Let's hope he's right :)

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 43
  • Location: NYC
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #41 on: June 13, 2017, 10:44:35 AM »
I imagined the market timing police would show up.
If you do your research (the guys over at starcapital do a good job), you will notice there is a very strong correlation between valuations and forward 10-15 year returns.
This does NOT mean that the market is going to tank tomorrow, or next week or next year: nobody knows for sure and those who say they know are either idiots or liars (or both).
This though does mean that, historically, there is now a very high chance of the US equity market doing worse than average, in the next 10-15 years.
Please note:
1- "very high chance" doesn't mean "for sure"
2- the 10-15 year timeframe (not really a "timing" thing
3- there is no "crash" prediction. The lower returns could also come with a lateral move.

1-Why shouldn't the "market timing" police show up? 
2- The main problem with anyone who says "the market will do something, someday" is that they aren't giving you information you can actually use.  If Gross or anyone else saying the market is going to tank or simply not do as well in 10-15 years is right, what are you going to change tomorrow?  If it happens he can say he was right all along even if it happens in 9 years or 16 years instead of 10-15.
3- Based on his words and your probabilities (wherever those are coming from)
4- are you going to change your portfolio and sit on his bonds for 15 years hoping he's right?  If he's wrong are you going to still sing his praises if at the end you realize you missed out on a decade of stock growth because it was probably going to happen?

1- because  I wasn't advocating for market timing at all.

2- I am giving you information you can use: as I said before, you should lower your expectations because probably you won't see the same gains in the next 10-15 years that we've historically seen

3- probabilities are coming from history. Just looking back at when valuations were at similar levels as today and what happened in the next 10-15 years.
Go look on starcapital, or Vanguard, they did studies on valuations and forward returns.

4- no I'm not going to change my asset allocation significantly. I'm not selling anything as high valuations can go even higher.
I'm just lowering my expectations on future returns on USA stocks.
I have made a slight tilt to european and emerging markets equities since beginning of 2016.


Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 43
  • Location: NYC

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 8682
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #43 on: June 13, 2017, 10:58:53 AM »
If you are going to use CAPE to predict future market returns you should consider the problems with this metric.

http://www.philosophicaleconomics.com/2013/12/shiller/

Livewell

  • Stubble
  • **
  • Posts: 179
  • Location: SF Bay Area
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #44 on: June 13, 2017, 01:06:22 PM »
On Gross - he obviously had a lot of success in the past, but his current track record is aweful (OP article states his fund has outperformed "22% of its peers")

On the real issue at hand - no one can predict returns so the best one can do is to plan for low-moderate returns and hope things work out higher than expectations.  What your definition of low or moderate is will indicate your willingness to take on risk.  This evolves over time, so just keep occasionally thinking about it and write down an investment plan.  If you can live with it, then you have the right assumptions in mind.

Jamese20

  • Stubble
  • **
  • Posts: 233
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #45 on: June 13, 2017, 02:27:22 PM »
High probability based on what rational?



Since you clearly will not bother to use google, let me help you out

http://www.starcapital.de/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdf

https://personal.vanguard.com/pdf/s338.pdf

If it was just based on CAPE then it would be easy wouldn't it to predict crashes or lower returns? I'm. Pretty sure for the last 3 years people have been saying expect lower return next year expect lower return the following year etc.. Yet the last 5 years ifs been a 14-18% return on average.

As I said before... I naturally think you are running the risk of disappointment if you made your plan on the average anyway.. I base mine on doing better than the best saving account and try to save more to get the goal I need or get the promotion I'm seeking to increase my security and wage.

As is say I think the largest concern for people are the ones on the brink of reaching their stash level that makes them FI. The last thing they need is a crash right now if they are about to pull the plug 

Eric

  • Magnum Stache
  • ******
  • Posts: 4057
  • Location: On my bike
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #46 on: June 13, 2017, 03:08:48 PM »
High probability based on what rational?



Since you clearly will not bother to use google, let me help you out

http://www.starcapital.de/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdf

https://personal.vanguard.com/pdf/s338.pdf

If it was just based on CAPE then it would be easy wouldn't it to predict crashes or lower returns? I'm. Pretty sure for the last 3 years people have been saying expect lower return next year expect lower return the following year etc.. Yet the last 5 years ifs been a 14-18% return on average.

As I said before... I naturally think you are running the risk of disappointment if you made your plan on the average anyway.. I base mine on doing better than the best saving account and try to save more to get the goal I need or get the promotion I'm seeking to increase my security and wage.

As is say I think the largest concern for people are the ones on the brink of reaching their stash level that makes them FI. The last thing they need is a crash right now if they are about to pull the plug

It seems like you're intentionally missing what Seppia is (correct in) saying.  This is not measured in a 12 month interval.  The statement was that it's *likely* that returns will be lower than average over the next decade. 

This makes intuitive sense, just based on math, since you also just listed that the last 5 years have returned 14-18% while the long term average is closer to 10%.  So the only way to get back to average would be to have some below average returns. 

Read this Kitces article where he breaks down how CAPE is a good predictor of returns over the next decade.

https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/


It has nothing to do with market timing.  It's simply setting reasonable expectations for planning purposes.

(edit -- this link is even better, but both are worth reading:  https://www.kitces.com/blog/shiller-cape-market-valuation-terrible-for-market-timing-but-valuable-for-long-term-retirement-planning/ )
« Last Edit: June 13, 2017, 03:19:56 PM by Eric »

Seppia

  • Pencil Stache
  • ****
  • Posts: 616
  • Age: 43
  • Location: NYC
Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #47 on: June 13, 2017, 03:11:45 PM »
If it was just based on CAPE then it would be easy wouldn't it to predict crashes or lower returns? I'm. Pretty sure for the last 3 years people have been saying expect lower return next year expect lower return the following year etc.. Yet the last 5 years ifs been a 14-18% return on average.

I've been talking of 10-15 years and probability since my first post in this thread.
Since you keep bringing it back to short term and "crash predictions" I assume I either am terrible at explaining myself or you are willfully misinterpreting my posts every time.
No point keeping arguing either way.

If you are going to use CAPE to predict future market returns you should consider the problems with this metric.

http://www.philosophicaleconomics.com/2013/12/shiller/

Again I am not "predicting", I am speaking in probabilistic terms.
I am aware in the last XX years averages have been higher.
In the late 70s they called the death of equities.
I have no idea what's going to happen next, I just expect long term lower returns based on history and the laws of probability.

Jamese20

  • Stubble
  • **
  • Posts: 233
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #48 on: June 13, 2017, 03:53:30 PM »
If it was just based on CAPE then it would be easy wouldn't it to predict crashes or lower returns? I'm. Pretty sure for the last 3 years people have been saying expect lower return next year expect lower return the following year etc.. Yet the last 5 years ifs been a 14-18% return on average.

I've been talking of 10-15 years and probability since my first post in this thread.
Since you keep bringing it back to short term and "crash predictions" I assume I either am terrible at explaining myself or you are willfully misinterpreting my posts every time.
No point keeping arguing either way.

If you are going to use CAPE to predict future market returns you should consider the problems with this metric.

http://www.philosophicaleconomics.com/2013/12/shiller/

Again I am not "predicting", I am speaking in probabilistic terms.
I am aware in the last XX years averages have been higher.
In the late 70s they called the death of equities.
I have no idea what's going to happen next, I just expect long term lower returns based on history and the laws of probability.

i think i am actually misrepresenting what i am saying... i answered your 10-15 year point by stating if you expect average returns then this to me sets up some potentially disappointing future outlooks as if you look at history this throws off all sorts of results

my overall point on the timing thing is this... when people say "expect lower than average returns " it makes out and sounds as if you know or have an edge on what the market is doing when none of us know its all a guess where lots of people constantly get it wrong, so the probability based on a rational metric makes very little credibility in my view.

i don't know what to expect from the next 10 years and we should not second guess or use "rational" based argument as the market isn't rational or logical.

its not uncommon to see 15-18% 15 year average returns by the way so this could be another period of this... especially with interests rates remaining low company's will earn more money and seek new opportunity.

the market has always gone up over time so there has to be new peaks overtime as we go on...


Tyson

  • Magnum Stache
  • ******
  • Posts: 3025
  • Age: 52
  • Location: Denver, Colorado
Re: Bill Gross Says Market Risk Is Highest Since Pre-2008 Crisis
« Reply #49 on: June 19, 2017, 10:44:52 AM »
The stock market might go stagnant once world population stops growing and 80% of the homes in the world have US-level middle class amenities.  Till then, plenty of room for more growth.

 

Wow, a phone plan for fifteen bucks!