Author Topic: Market Bubble? Should I make a move now?  (Read 10915 times)

ProfWinkie

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Market Bubble? Should I make a move now?
« on: July 09, 2014, 06:23:39 AM »
While I am not a market timer it seems the market bubble we are currently in is showing some signs of a pending material correction of greater than 20%.

I am thinking of taking profits and increasing cash. I worry that after the midterm elections the fed will tighten along with increasing Middle Eastern conflicts / tensions.

Also, while national employment numbers have improved, the quality of the jobs is poor at best and inflation is driving gas and food cost higher as you all know.

What are your thoughts, worries and recommendations?

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #1 on: July 09, 2014, 06:45:04 AM »
http://forum.mrmoneymustache.com/investor-alley/new-%27the-sky-is-about-to-fall%27-stock-chart/
http://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/

What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

johnintaiwan

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Re: Market Bubble? Should I make a move now?
« Reply #2 on: July 09, 2014, 06:54:50 AM »
http://forum.mrmoneymustache.com/investor-alley/new-%27the-sky-is-about-to-fall%27-stock-chart/
http://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/

What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

Yep, it seems we are getting about 1 post a day now on this topic. I think the news is doing pretty well. Or maybe it is all the fear mongering before the elections.

My thoughts are that is everyone "knows" a huge correction is coming then wouldn't all the big players be jumping ship already and so we would already see the sky falling?

Rollin

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Re: Market Bubble? Should I make a move now?
« Reply #3 on: July 09, 2014, 07:12:36 AM »
What we (me and the other responders) don't know is your time horizon.  They have good advice if you have quite a long time before you need the $$.  I wanted to preserve my $$ so I took some profits (nothing wrong with making a profit right?) and realigned my portfolio (to 40% equities) since I am close to FIRE, but with a cushion/goal of 4 years.

thor800

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Re: Market Bubble? Should I make a move now?
« Reply #4 on: July 09, 2014, 07:19:45 AM »
It depends on your timelines and what equities you have positions - are they longer term dividend growth stocks or volatile social media esque unproven companies with giant P/E ratios ? 

How long have you been holding ?  Would you pay short term or long term gains ?

hodedofome

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Re: Market Bubble? Should I make a move now?
« Reply #5 on: July 09, 2014, 07:56:31 AM »
Can't speak for the entire country but I can tell you our company (accounting/ERP software) is having it's best year ever and we have been busy all year. Our clients are really busy with increased work as well. We haven't seen it like this since 2007. FWIW, the economy in Texas from my point of view is booming.

Now that doesn't mean the market and the economy are 100% correlated of course. You can have a market crash/correction during a good economy and a market rally in a bad economy. It also doesn't mean that what we're experiencing here down south is the same as what the rest of the country is experiencing.

soccerluvof4

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Re: Market Bubble? Should I make a move now?
« Reply #6 on: July 09, 2014, 08:24:56 AM »
A 20% correction would only put the market at about 13,500 and the question you raised seems daily since 12k. Your guess is as good as mine as that's all it seemingly would be. Does it seem inflated yes but I think it could go to 20k as easily as 13,500K.  Depending on as others said your age ,, time frame etc... Its hard to give advice. My time frame is shorter than many on here so I have taken profits in my trading accounts and realigned my index funds and am still contributing weekly but a lesser amount. But thats based all on emotion and I am in a position where raising a little more cash lets me sleep at night.

nereo

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Re: Market Bubble? Should I make a move now?
« Reply #7 on: July 09, 2014, 08:34:36 AM »
Quote
the market bubble we are currently in is showing some signs of a pending material correction of greater than 20%.
What is this market bubble?  Which signs are you referring to?  How do you arrive at a correction 'greater than 20%'?  Granted, the markets have gone up - but we've also had 7 consecutive months of good economic news. 

Quote
I am thinking of taking profits and increasing cash.
If you have a short time line and will need money from your investment, this isn't a bad move. If you have a decade+ in front of you and will not need this cash, I'm not so sure it will work out very well.  That's timing the market, plain and simple.

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I worry that after the midterm elections the fed will tighten...
First, you are worrying about things you can't control.  If the fed tightens [the supply of money] it will be done in an effort to keep the economy chugging along.  Yallen has been far more willing to telegraph what the fed plans on doing, which means the markets have weeks and months to digest instead of jumping around after every fed meeting.

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...along with increasing Middle Eastern conflicts / tensions.
Increasing?  Sure, the last 48 hours have seen more military action than hte previous 48 hours, but look through the last 50 or 500 years and there doesn't appear to me to be any more conflict or tension in that region than average.  Plus, I am curious why you are letting bad news abroad influence your decisions.  Are you heavily invested in Israel or Iraq?

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Also, while national employment numbers have improved, the quality of the jobs is poor at best ...
I question whether you are confusing the quality of jobs of the newly re-employed and the quality of jobs overall in the US.  If this is the case, any job is better than no job for someone who has been unemployed.  It's also the best way for them to eventually advance to a better job.  If you are arguing that the quality of jobs overall is deteriorating, I'd like to see your source.

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... and inflation is driving gas and food cost higher as you all know.
In terms of gasoline, I just don't see this.  In the past 3 months gasoline prices have been remarkably stable, and if anything we are in a downward trend.  If you compare summer 2014 to the summers of 2013, 2012 and 2011 they appear remarkably similar.
http://www.gasbuddy.com/gb_retail_price_chart.aspx
As for food prices, the food price index has increased 2.5% year-over-year, which is in line with typical inflation.
http://www.ers.usda.gov/data-products/food-price-outlook.aspx#.U71PS6i0bA4

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What are your thoughts, worries and recommendations?
Look - I'm not saying the market isn't overvalued right now - it very well may be.  But broadly speaking there are three ways the market can correct for this.  1) the market crashes, and very soon.  2) the market goes sideways for many months, and then resumes its upward climb.  3) the market contines to go up for many months, and then it crashes. 
Problem is, if it's #2 or #3 and you pull your money out now, you loose. 

Of course, there's also the possibility that the market isn't that overvalued at all.  So much of the talk is based on the market's preformance relative to 2008.  BUt if you go back 10 and 15 years, returns have been below the mean.    We have corporations with better balance sheets, more cash than ever before, an unemployment that has been trending steadily down, recovery in (most) housing markets, a healthy amount of new starts for homes... in short all the things I like to see in an economy.

waltworks

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Re: Market Bubble? Should I make a move now?
« Reply #8 on: July 09, 2014, 01:24:42 PM »
If anyone really believed this they would be shorting the crap out of all kinds of things. If YOU believe it, put your money where your mouth is and get rich off the correction. Otherwise, stop following business news and go about your life.

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birdman2003

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Re: Market Bubble? Should I make a move now?
« Reply #9 on: July 09, 2014, 03:09:21 PM »

Quote
Also, while national employment numbers have improved, the quality of the jobs is poor at best ...
I question whether you are confusing the quality of jobs of the newly re-employed and the quality of jobs overall in the US.  If this is the case, any job is better than no job for someone who has been unemployed.  It's also the best way for them to eventually advance to a better job.  If you are arguing that the quality of jobs overall is deteriorating, I'd like to see your source.


I think ProfWinkie is talking about full-time versus part-time jobs.  Everybody gets excited when they hear "276,000 jobs added to the economy in June!" but nobody likes to report that we lost 523,000 full-time jobs, and gained 799,000 part-time jobs.  Don't get me wrong, part-time jobs are excellent, but they don't give me confidence that the economy is fine and dandy.

Edit: source for the job numbers are at http://www.bls.gov/news.release/empsit.t09.htm
« Last Edit: July 09, 2014, 03:11:11 PM by birdman2003 »

waltworks

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Re: Market Bubble? Should I make a move now?
« Reply #10 on: July 09, 2014, 03:59:44 PM »
Where are you coming up with those numbers? AFAIK, they are not in the link you included.

And again, if you think the economy sucks - what are you shorting/selling/etc? If you aren't taking action, why not? People are always saying the crash is right around the corner, but haters gonna hate, right? If you always see the downside of everything, I just sort of pity you, I guess. Must suck to live that way.

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Quote
Also, while national employment numbers have improved, the quality of the jobs is poor at best ...
I question whether you are confusing the quality of jobs of the newly re-employed and the quality of jobs overall in the US.  If this is the case, any job is better than no job for someone who has been unemployed.  It's also the best way for them to eventually advance to a better job.  If you are arguing that the quality of jobs overall is deteriorating, I'd like to see your source.


I think ProfWinkie is talking about full-time versus part-time jobs.  Everybody gets excited when they hear "276,000 jobs added to the economy in June!" but nobody likes to report that we lost 523,000 full-time jobs, and gained 799,000 part-time jobs.  Don't get me wrong, part-time jobs are excellent, but they don't give me confidence that the economy is fine and dandy.

Edit: source for the job numbers are at http://www.bls.gov/news.release/empsit.t09.htm

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #11 on: July 09, 2014, 04:09:37 PM »
Where are you coming up with those numbers? AFAIK, they are not in the link you included.

And again, if you think the economy sucks - what are you shorting/selling/etc? If you aren't taking action, why not? People are always saying the crash is right around the corner, but haters gonna hate, right? If you always see the downside of everything, I just sort of pity you, I guess. Must suck to live that way.

-W


Quote
Also, while national employment numbers have improved, the quality of the jobs is poor at best ...
I question whether you are confusing the quality of jobs of the newly re-employed and the quality of jobs overall in the US.  If this is the case, any job is better than no job for someone who has been unemployed.  It's also the best way for them to eventually advance to a better job.  If you are arguing that the quality of jobs overall is deteriorating, I'd like to see your source.


I think ProfWinkie is talking about full-time versus part-time jobs.  Everybody gets excited when they hear "276,000 jobs added to the economy in June!" but nobody likes to report that we lost 523,000 full-time jobs, and gained 799,000 part-time jobs.  Don't get me wrong, part-time jobs are excellent, but they don't give me confidence that the economy is fine and dandy.

Edit: source for the job numbers are at http://www.bls.gov/news.release/empsit.t09.htm

In the table.

Full-time workers 118,727 (May #)-118,204 (June #)=523. Numbers are in thousands.
Part-time workers 27,219 (May)-28,018 (June)=-799.

For the purposes of that calculation obviously a positive result is a loss of jobs and a negative result is a gain of jobs.

Regardless this doesn't mean the sky is falling and shouldn't impact your investment strategy.

waltworks

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Re: Market Bubble? Should I make a move now?
« Reply #12 on: July 09, 2014, 04:23:41 PM »
Ah, got it. Looks to me like it's pretty noisy month to month - FT is actually up since March, PT down. Not by much, though.

-W

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #13 on: July 09, 2014, 04:33:50 PM »
Ah, got it. Looks to me like it's pretty noisy month to month - FT is actually up since March, PT down. Not by much, though.

-W

Yeah I don't think month to month comparisons are altogether that useful. Probably much better to look at broader trends.

RyanHesson

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Re: Market Bubble? Should I make a move now?
« Reply #14 on: July 09, 2014, 06:33:53 PM »
Quote
What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

It has exactly 20% impact. If the stock market crashes 20% tomorrow, he would be 20% poorer in 40 years by putting in his money today instead of the end tomorrow.

The market will crash sometime, I don't know when. So my money's in there for now. If I somehow find out it's going to be soon, I'll take it out. I'm gonna be that one guy here who does try to time the market. But there's no indication that I've seen that it's crashing in the immediate future.

Mr. Frugalwoods

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Re: Market Bubble? Should I make a move now?
« Reply #15 on: July 09, 2014, 06:55:42 PM »
No offense, but I put "I'm not a market timer but..." in the same rhetorical category as "I'm not a racist but..."

If you have to say it, then you already have your answer.

This entire bull market has had legions of naysayers.  One day they'll be correct.  Until then they are missing out on some massive gains.  The old saying about short selling also applies to sitting on the sidelines: "The market can stay irrational longer than you can remain solvent".  Of course you aren't risking solvency by not being in the market, but you are missing years of appreciation that gets you that much closer to FIRE.

FWIW, I agree that things seem frothy.  That being said, I thought that last year around this time.  So what the hell do I know? :-)  And that's the point.

drpeteone

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Re: Market Bubble? Should I make a move now?
« Reply #16 on: July 09, 2014, 07:32:25 PM »
Don't let emotion (fear) keep you from realizing your long term goals.   I used to struggle with this as well, but with time I learned that you can't jump out when the media is preaching fear.    If you decide to get out, ask yourself when will you jump back in?  A friend cashed out of the market in March 2009, he missed the recovery and has never recovered. Successful investing requires discipline and focus.  Hang in there!

Mr. Frugalwoods

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Re: Market Bubble? Should I make a move now?
« Reply #17 on: July 09, 2014, 08:26:28 PM »
I went looking for an example of how folks have called an end to the run up every year.  I didn't have to look far:

http://www.calculatedriskblog.com/2014/07/wednesday-fomc-minutes.html

Quote
Here is Faber on April 10th: 2014 crash will be worse than 1987's: Marc Faber
"This year, for sure—maybe from a higher diving board—the S&P will drop 20 percent," Faber said, adding: "I think, rather, 30 percent"
And Faber from August 8, 2013:
Faber expect to see stocks end the year "maybe 20 percent [lower], maybe more!"
And from October 24, 2012:
"I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent," Faber said...
Since the market is up 40% since his 2012 prediction, shouldn't he be expecting something like a 50%+ decline now?

Sure, this is just some dude.  But it serves to show that even (maybe especially!) people who are paid to be smart about these things are constantly wrong.  I know I'm not any smarter, so I just keep plugging along with low fee index funds.  It's not sexy, but it works.

Rienk

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Re: Market Bubble? Should I make a move now?
« Reply #18 on: July 10, 2014, 03:21:57 AM »
One thing that's important to consider is that equity prices reflect investors' estimates of the future. Therefore, you can't say "Effect X is going to cause a market correction" but you can only ever say "Investors are underestimating the effects of X" or "Investors are underestimating the probability of effect X occurring". To time the market, you must be better at predicting the future than the people who do it for a living.

With that in consideration, I believe that for any non-professional investor we should always act as if the market is correctly priced at the moment.

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #19 on: July 10, 2014, 05:44:50 AM »
Quote
What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

It has exactly 20% impact. If the stock market crashes 20% tomorrow, he would be 20% poorer in 40 years by putting in his money today instead of the end tomorrow.

The market will crash sometime, I don't know when. So my money's in there for now. If I somehow find out it's going to be soon, I'll take it out. I'm gonna be that one guy here who does try to time the market. But there's no indication that I've seen that it's crashing in the immediate future.

No it won't have an exact 20% impact. Markets recover.

We can look at DCAing and just investing over time. Before and after recessions. 3k initial investment and 500 a month thereafter.

2007 - $65,232.67

2009 - $50,742.81

2000 - $132,859.48

2002 - $116,405.73

Between 2007 and 2009 there was a 50% drop. Weird... that's not reflected in the money. The individual who chose to invest his money in 2007 isn't 50% poorer.

This is just pure short term speculation. You may think you're somehow immune to psychological factors which have demonstrated that people trying to time markets fail and get burned, and if you are awesome. For the rest of us we'll pay attention to that little thing you're ignoring. 40 year returns. The difference between 2007 and 2009 will be meaningless. Also a good read for this concept that the saving and investing regardless of market conditions is superior I present again for these forums the worlds worst market timer.

The important part is to keep saving and investing.


frugalnacho

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Re: Market Bubble? Should I make a move now?
« Reply #20 on: July 10, 2014, 09:00:52 AM »
No it won't have an exact 20% impact. Markets recover.

We can look at DCAing and just investing over time. Before and after recessions. 3k initial investment and 500 a month thereafter.

Between 2007 and 2009 there was a 50% drop. Weird... that's not reflected in the money. The individual who chose to invest his money in 2007 isn't 50% poorer.

Because you aren't showing only the initial investment you are including on going deposits.  If you only consider the initial lump sum he would indeed be 20% poorer at any point in the future (if he invests the day before a 20% drop).

But that is part of the risk.  The market could also rise 20% tomorrow and he could forever have lost out on that 20% gain. 

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #21 on: July 10, 2014, 09:13:57 AM »
No it won't have an exact 20% impact. Markets recover.

We can look at DCAing and just investing over time. Before and after recessions. 3k initial investment and 500 a month thereafter.

Between 2007 and 2009 there was a 50% drop. Weird... that's not reflected in the money. The individual who chose to invest his money in 2007 isn't 50% poorer.

Because you aren't showing only the initial investment you are including on going deposits.  If you only consider the initial lump sum he would indeed be 20% poorer at any point in the future (if he invests the day before a 20% drop).

But that is part of the risk.  The market could also rise 20% tomorrow and he could forever have lost out on that 20% gain.

Yeah I'm not going to show just initial investment. It's an unrealistic comparison. How many people on this board (and investors in general) are going to invest only once in their lives? Only considering the lump sum is a stupid comparison. Which is why in my initial post I stated -
Quote
What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

Also math. If we even take the ridiculous claim that a 20% drop in the market means being 20% poorer in the long term then it'd reflect that in a nice simple historical example. Between 2007 and 2009 there was a >50% drop in the markets right? So if I invested in 2007 $10k it should be less than half the value than if I invested the same amount in the beginning of 2009.

2007 - $13,556

2009 - $19,978

Hmm... not great at math but one thing is more than half the other...

So it's still not reflected in the money.

rmendpara

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Re: Market Bubble? Should I make a move now?
« Reply #22 on: July 10, 2014, 09:40:45 AM »
While I am not a market timer it seems the market bubble we are currently in is showing some signs of a pending material correction of greater than 20%.

I am thinking of taking profits and increasing cash. I worry that after the midterm elections the fed will tighten along with increasing Middle Eastern conflicts / tensions.

Also, while national employment numbers have improved, the quality of the jobs is poor at best and inflation is driving gas and food cost higher as you all know.

What are your thoughts, worries and recommendations?

No, focus on saving and investing and developing an asset allocation that you believe is appropriate for your goals and risk tolerance.

Market timing? Sorry, but you are not smart enough to do that.

Don't feel bad... 98% of us aren't either...

frugalnacho

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Re: Market Bubble? Should I make a move now?
« Reply #23 on: July 10, 2014, 11:30:03 AM »
No it won't have an exact 20% impact. Markets recover.

We can look at DCAing and just investing over time. Before and after recessions. 3k initial investment and 500 a month thereafter.

Between 2007 and 2009 there was a 50% drop. Weird... that's not reflected in the money. The individual who chose to invest his money in 2007 isn't 50% poorer.

Because you aren't showing only the initial investment you are including on going deposits.  If you only consider the initial lump sum he would indeed be 20% poorer at any point in the future (if he invests the day before a 20% drop).

But that is part of the risk.  The market could also rise 20% tomorrow and he could forever have lost out on that 20% gain.

Yeah I'm not going to show just initial investment. It's an unrealistic comparison. How many people on this board (and investors in general) are going to invest only once in their lives? Only considering the lump sum is a stupid comparison. Which is why in my initial post I stated -
Quote
What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

Also math. If we even take the ridiculous claim that a 20% drop in the market means being 20% poorer in the long term then it'd reflect that in a nice simple historical example. Between 2007 and 2009 there was a >50% drop in the markets right? So if I invested in 2007 $10k it should be less than half the value than if I invested the same amount in the beginning of 2009.

2007 - $13,556

2009 - $19,978

Hmm... not great at math but one thing is more than half the other...

So it's still not reflected in the money.

I agree that just looking at the initial investment and ignoring other contributions misses the larger long run picture, but you seem to be claiming that a 20% drop is somehow not real and will not translate into an actual loss of money in proportion to the drop.  The money will magically be made up in the long term.

It's difficult to tell all the details from the links you posted but I disagree with your analysis.  The 2007 $10,000 purchase bought you 10.127 shares, and your 2009 purchase bought you 6.827 shares*.  So your 2009 money bought you 67.85% of the amount of shares you would own had you purchased in 2007 (which is only a 32.15% drop not >50%).  The ending portfolio is also 67.85% of the other portfolio.  It seems to me that the portfolios are each exactly proportional to the initial purchase price. 

* As far as I can tell you started the portfolio in June 2007, and the other in June 2009.   The price I found corresponding to those dates is 1536.34 on 6-1-2007 and 940.09 on 6-5-2009 which is a 39% drop. 

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #24 on: July 10, 2014, 11:42:47 AM »
No it won't have an exact 20% impact. Markets recover.

We can look at DCAing and just investing over time. Before and after recessions. 3k initial investment and 500 a month thereafter.

Between 2007 and 2009 there was a 50% drop. Weird... that's not reflected in the money. The individual who chose to invest his money in 2007 isn't 50% poorer.

Because you aren't showing only the initial investment you are including on going deposits.  If you only consider the initial lump sum he would indeed be 20% poorer at any point in the future (if he invests the day before a 20% drop).

But that is part of the risk.  The market could also rise 20% tomorrow and he could forever have lost out on that 20% gain.

Yeah I'm not going to show just initial investment. It's an unrealistic comparison. How many people on this board (and investors in general) are going to invest only once in their lives? Only considering the lump sum is a stupid comparison. Which is why in my initial post I stated -
Quote
What you're doing is letting your emotions drive your investing decisions. That is generally a bad thing for your portfolio growth. You are not investing for tomorrow you are investing for the next 40+ years. A 20% drop today has little to no impact on what your portfolio will look like in the long term.

Also math. If we even take the ridiculous claim that a 20% drop in the market means being 20% poorer in the long term then it'd reflect that in a nice simple historical example. Between 2007 and 2009 there was a >50% drop in the markets right? So if I invested in 2007 $10k it should be less than half the value than if I invested the same amount in the beginning of 2009.

2007 - $13,556

2009 - $19,978

Hmm... not great at math but one thing is more than half the other...

So it's still not reflected in the money.

I agree that just looking at the initial investment and ignoring other contributions misses the larger long run picture, but you seem to be claiming that a 20% drop is somehow not real and will not translate into an actual loss of money in proportion to the drop.  The money will magically be made up in the long term.

It's difficult to tell all the details from the links you posted but I disagree with your analysis.  The 2007 $10,000 purchase bought you 10.127 shares, and your 2009 purchase bought you 6.827 shares*.  So your 2009 money bought you 67.85% of the amount of shares you would own had you purchased in 2007 (which is only a 32.15% drop not >50%).  The ending portfolio is also 67.85% of the other portfolio.  It seems to me that the portfolios are each exactly proportional to the initial purchase price. 

* As far as I can tell you started the portfolio in June 2007, and the other in June 2009.   The price I found corresponding to those dates is 1536.34 on 6-1-2007 and 940.09 on 6-5-2009 which is a 39% drop.

You're right I accidentally used June. Using January you get 13k and 23k respectively for 2007 and 2009. It's still a shit way to view it. So why even discuss it? It's meaningless.

frugalnacho

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Re: Market Bubble? Should I make a move now?
« Reply #25 on: July 10, 2014, 11:54:31 AM »
You're right I accidentally used June. Using January you get 13k and 23k respectively for 2007 and 2009. It's still a shit way to view it. So why even discuss it? It's meaningless.

It's the topic of the thread.  I wouldn't say it's meaningless to understand the nuts and bolts of how your money grows, but it's meaningless in the sense that it is market timing and you have no idea if the market is going to drop 50% or increase 50%.  You will be better off (on average) by getting in earlier and taking advantage of the relentless climb of the market over time. 

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #26 on: July 10, 2014, 12:36:04 PM »
You're right I accidentally used June. Using January you get 13k and 23k respectively for 2007 and 2009. It's still a shit way to view it. So why even discuss it? It's meaningless.

It's the topic of the thread.  I wouldn't say it's meaningless to understand the nuts and bolts of how your money grows, but it's meaningless in the sense that it is market timing and you have no idea if the market is going to drop 50% or increase 50%.  You will be better off (on average) by getting in earlier and taking advantage of the relentless climb of the market over time.

Well to be honest the topic of the thread is right in the title. Which is a) asking if the market is in a bubble, and b) asking what to do with it. When someone is telling the person to jump out because they'll lose money I have to question that advice as market timing is not a reliable thing. In other words the answer to a) is who knows? and the answer to b) is keep investing. So what is the value of pursuing the consequences of market drops?

kyleaaa

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Re: Market Bubble? Should I make a move now?
« Reply #27 on: July 10, 2014, 02:50:46 PM »
Why does everybody ALWAYS make sure to inform everyone they aren't a market timer before advocating market timing?

Jack

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Re: Market Bubble? Should I make a move now?
« Reply #28 on: July 10, 2014, 03:26:08 PM »
What we (me and the other responders) don't know is your time horizon.  They have good advice if you have quite a long time before you need the $$.  I wanted to preserve my $$ so I took some profits (nothing wrong with making a profit right?) and realigned my portfolio (to 40% equities) since I am close to FIRE, but with a cushion/goal of 4 years.

Pretty much everyone here has a long time horizon. For example, if you're "close to FIRE" then I'll assume you're (at most) about 50 years old. In that case, your time horizon is still at least 40 years or so, which is plenty long enough for 60-80% equities to make perfect sense.

If you don't believe me, check something like FireCalc. With the default 30-year retirement, 40-60% equities tends to have the highest success rate. With a longer retirement, the percentage of equities with the best success rate goes up.

The only time horizons short enough to justify 40% equities (in my opinion) would be if you were already over 70 or if a doctor had given you some really bad news.

Why does everybody ALWAYS make sure to inform everyone they aren't a market timer before advocating market timing?

Because if they weren't in denial, they wouldn't bother posting.

foobar

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Re: Market Bubble? Should I make a move now?
« Reply #29 on: July 10, 2014, 09:43:55 PM »
Best time to invest is when others are fearful. It is a much worse time to invest when you turn on the news and hear about how it is a great time to buy stocks. The question you have to ask is will the market go up 30% or more before the drop of 30%.

If you are worried about market corrections, you might want to look at your AA. It is probably too aggressive.


While I am not a market timer it seems the market bubble we are currently in is showing some signs of a pending material correction of greater than 20%.

I am thinking of taking profits and increasing cash. I worry that after the midterm elections the fed will tighten along with increasing Middle Eastern conflicts / tensions.

Also, while national employment numbers have improved, the quality of the jobs is poor at best and inflation is driving gas and food cost higher as you all know.

What are your thoughts, worries and recommendations?

ProfWinkie

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Re: Market Bubble? Should I make a move now?
« Reply #30 on: July 11, 2014, 06:18:09 AM »
Thanks for everyones input.

IMHO, I belive many here are making a fatal flaw the 2008-2014 is normal market behavior after a correction. Look at the decade of the 1970s ten years of sideways market.

Also, it seems most responses have choosen to ignore the inflation factor , again see the 1970s and early 80s.

Simple math if you loose 20% you need to gain approx 40% to recover. There are several good sources on up capture vs down capture markets and the long term cost of down capture events.

matchewed

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Re: Market Bubble? Should I make a move now?
« Reply #31 on: July 11, 2014, 06:33:20 AM »
Thanks for everyones input.

IMHO, I belive many here are making a fatal flaw the 2008-2014 is normal market behavior after a correction. Look at the decade of the 1970s ten years of sideways market.

Also, it seems most responses have choosen to ignore the inflation factor , again see the 1970s and early 80s.

Simple math if you loose 20% you need to gain approx 40% to recover. There are several good sources on up capture vs down capture markets and the long term cost of down capture events.

The point is it is not fatal. It is not the end of the world. Crashes happen. The sooner you accept these things and come up with a realistic approach to them the better off you will be in handling them.

Putting it another way, you are working yourself up about something you can't predict when it will happen, how it will happen, or what you should do about it. I've got my plan in place and know what I will do regardless of those three things. So who's more secure?

Iron Mike Sharpe

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Re: Market Bubble? Should I make a move now?
« Reply #32 on: July 11, 2014, 07:44:05 AM »
Just keep regularly adding to your investments according to your AA.  You'll get to buy cheap stocks during the decline and you'll still earn dividends on what you already have.

RapmasterD

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Re: Market Bubble? Should I make a move now?
« Reply #33 on: July 12, 2014, 08:45:03 AM »
OP -- Please take this constructively.

Stop postulating. Turn off CNBC and Fox Business News. Stop reading the crap on Yahoo Finance and on CNBC. Seeking Alpha? Forget about it. All of this is noise and much of it negative to induce bait clicking or the video equivalent -- staying tuned.

If you DO want to time (and I have mixed thoughts about this), only one thing matters -- price over time. How are shorter term moving averages -- or exponential moving averages -- moving in relation to longer term moving averages? When that line crosses, then you MAY have a signal to get out or get in.

But again, I have mixed feelings about this. That said, Jim Cramer doesn't matter, the boneheads on marketwatch.com don't matter. Portugal doesn't matter (had to get that one in, and no offense to my friends from Portugal -- great culture/shitty economy). Need I say more?

soccerluvof4

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Re: Market Bubble? Should I make a move now?
« Reply #34 on: July 12, 2014, 09:03:47 AM »
+1^ twice in the last ten minutes on different threads I agree with your analysis!!