The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: bthewalls on December 10, 2018, 03:53:45 PM
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hello all,
I am curious of what a significant reduction in sp500 would look like nowadays, considering at the peak of this prolonged bull market it was 2900+ (I do like a bargain).
Wonder could everyone throw a guess at what they think it might drop too over the foreseeable? Its 2600+ today, is 2300 or less even likely?
Baz
PS I know its not that important to 'time the market', just to buy. I'm only trying to guesstimate what this bear market will get to.:-)
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No one knows. I recommend against trying to time the market.
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I don't know why everyone is so worried. We're currently down about 10% from the all time high, but that sort of thing normally happens multiple times per year anyway, without causing a major recession. Look at the charts and do some reading, and you'll see that over half of all three month periods see a decline of 10% or more from the trailing year's high. 10% corrections are normal and happen all the time.
Personally, I think that so many years of relentlessly positive growth, without any of the market's normal volatility, has deceived people. They think they can never lose money, and they don't understand that these temporary price declines are part of what makes dollar cost averaging so profitable to begin with. Chop wood, carry water. Go on living your life and try not to stress. A 10 percent drop does not mean a recession is imminent.
The average correction bottoms out around -13% and lasts about 3.5 months. We're at 10% and two months. We would need to see another 3% drop over the next month to even get around to average.
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Guys. You might be misreading. I’m not talking bout recession or market timing...just opinion of what a sp500 drop could amount to.
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If anyone knew the answer to the question with any certainly, they definitely wouldn't share it with you for free. That answer would be worth a lot of money.
BTW, this is not a bear market. We'd need a 20% drop from the peak to reach that designation.
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Troll here: -50% = 1318.5 = late 2012 timeframe Booooo!!!, Halloween is 365/24. Dooooom Glooom!!!!
Actually I'm with Sol here. Buck-up Buttercup!
For reference 9/1/2008 (just before the cliff) to Oct 2012, the S+P was UP in price (dividends not included) ~15%.
You ARE cost-dollar-averaging, right?
From 11/1/2008 (just after the cliff, not the april 2009 bottom) to Oct 2012 S+P was UP in price (dividends not included) ~55%.
Disclosure: FIRED 6/1/18, not worried. Source: http://bigcharts.marketwatch.com , Advance chart.
Irritating and scary, yep. Problem? not for accumulators or 4%withdrawers.
[scarcasm]
The Top is IN https://forum.mrmoneymustache.com/investor-alley/top-is-in/
Because of the :
Death Cross! https://forum.mrmoneymustache.com/investor-alley/death-cross/
So we should:
https://forum.mrmoneymustache.com/investor-alley/buying-gold-silver-and-crypto-before-market-crash-100090/
[/scarcasm]
Actually, I'd like to apologize to the OP bthewalls for my over-the-top response, but I've been holding it in, and I'm at a keyboard instead of my iPad, so I thought I'd just get it out.
Edit for last to paragraphs and apology to the OP and others.
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It could drop to zero, but then the world would end and nobody would have a cent left. Seems likely. Better panic sell now and stuff it in a mattress.
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Guys. You might be misreading. I’m not talking bout recession or market timing...just opinion of what a sp500 drop could amount to.
Define “amount to.” Your question doesn’t make any sense aside from the answers you’ve received.
Let’s see.. if it was at 2600 and dropped to 1300, then it’s be.. 50% less?
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Google says average bear market sees a 41% decline and lasts almost a year and a half. I'd love to see a 41% off sale, but I'm not holding my breath.
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1999 or less
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1999 or less
I'll call, and I'll raise ya 100 points. 1899 or less.
(Are we gambling yet?)
;)
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BTW, this is not a bear market. We'd need a 20% drop from the peak to reach that designation.
I agree, but MSCI ACWI exUS has crossed the 20% threshold, and the SP500 may very well follow. Not that it worries me.
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thanks some of you for your very interesting and helpful replies. Def gives me something to think about.
am dollar point indeed.
Some others seem quite 'irate', but all forums go that way eventually when the power dynamic establishes?. In those cases I would suggest cashing in some of that fine sp500 vanguard and investing in a good therapist. Its an online forum guys, ...no need to be a dick.
Ta very much.
Baz
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Some others seem quite 'irate', but all forums go that way eventually when the power dynamic establishes?. In those cases I would suggest cashing in some of that fine sp500 vanguard and investing in a good therapist. Its an online forum guys, ...no need to be a dick.
It's largely because the corrections this year have brought out a lot of scared "OMG is the world coming to an end??!!" posts from newbies, and when you're old and jaded and lived through 2008/2009, you sometimes lose patience. Seeing the same. posts. over. and. over. again. from people that clearly didn't read the stickied threads can make one snippy, and sometimes people don't back away from the keyboard when we should.
And coming into an established space and scolding the regulars? Also not good manners.
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Some others seem quite 'irate', but all forums go that way eventually when the power dynamic establishes?. In those cases I would suggest cashing in some of that fine sp500 vanguard and investing in a good therapist. Its an online forum guys, ...no need to be a dick.
It's largely because the corrections this year have brought out a lot of scared "OMG is the world coming to an end??!!" posts from newbies, and when you're old and jaded and lived through 2008/2009, you sometimes lose patience. Seeing the same. posts. over. and. over. again. from people that clearly didn't read the stickied threads can make one snippy, and sometimes people don't back away from the keyboard when we should.
And coming into an established space and scolding the regulars? Also not good manners.
I did apologize :-).
What Maenad said is correct. And most of the newbie threads start, "THEY say the crash is imminent " and leads into a panicky head for the exits, no matter what the oldtmers say. I just wanted to jump on the thread fast.
Gee, I'm glad I didn't include a "You can't handle the truth" meme. Back on my iPad, everyone is safe again.
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It could drop to zero, but then the world would end and nobody would have a cent left. Seems likely. Better panic sell now and stuff it in a mattress.
I'm going to ignore the humor value in order to point out to the OP that the above is not possible.
If the 500 largest U.S. companies ever have a combined worth of $1,000 I'm buying all of them. Apple for $4? Pretty sure I can sell their IP, plants and equipment for more than that. An airline or two? Again thinking a purchase price of $2 for an entire airline might be worth it for selling each plane for millions of dollars, etc.
But unfortunately for me, it will never hit $1,000 because all those billions in assets will encourage someone else to buy all 500 large public companies long before it hits $1,000. So the stock market literally can't hit $1,000 let alone $0. The ability to sell off 500 large public companies is too valuable for that.
Shares aren't just a price on a screen - they are ownership of the company. And that ownership will never be worth $0 unless there's $0 worth of assets at all 500 of the largest public companies in the U.S.
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Shares aren't just a price on a screen - they are ownership of the company. And that ownership will never be worth $0 unless there's $0 worth of assets at all 500 of the largest public companies in the U.S.
Yea, they'll be work $0 when there is approximately no society left. In which case, you'll have bigger problems.
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I'm going to ignore the humor value in order to point out to the OP that the above is not possible.
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Pretty sure I can sell their IP, plants and equipment for more than that.
I think you're missing the point. It's not that the assets of these companies will be worth less than that, it's that the venue for trading shares that entitle you to a portion of their earnings will cease to exist.
The United States could be annihilated by nuclear attack in the next 20 minutes. There are several countries that have the power to turn our hundred largest cities into smoldering radioactive craters. No electricity, no highways, no pipelines, and then a decade of nuclear winter would cause massive crop failures. Billions would die.
But the assets of those companies would still be worth more than $1000, to someone. Just not to you, cut off in your underground bunker. I suspect that every single one of the SP500 has more than $1000 worth of assets stored in an out-of-the-way country, but you would be unable to participate in the marketplace that supports their current stock price or the transfer of their profits to your etrade account.
I don't worry about the market crashing 99%. But I absolutely worry about all of Vanguard's computer records being wiped out by a Chinese hacker, and thus having all of my investment accounts instantly evaporated. It's a carefully balanced house of cards out there, and I have millions of dollars worth of ones and zeros on some third party's ledger, with nothing more than their vague and unsubstantiated promise that I will ever be able to access that value. Our entire financial system is built on trust and cooperation and reliable technological infrastructure, and all three of those are easy to destroy with a few well placed mushroom clouds.
I think most of us worry about the wrong risks. I have a couple of rental properties, and while some landlords worry about a having to cut their rents to find good tenants virtually none of them worry about the destruction of their property by an earthquake that cuts of power and water and gas to the remaining pile of rubble. The worst-case threat isn't a decline in market prices due to economic recession, it's obliteration of the marketplace that gives the property a tradable value in the first place. I think that same risk apply to every investment type.
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@sol
A little off topic, but I worry about that too. Does anyone here have a plan for if the US falls into the ocean but we escape with our lives? I'd hate to have my life savings disappear into a puff of logic.
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@sol
A little off topic, but I worry about that too. Does anyone here have a plan for if the US falls into the ocean but we escape with our lives? I'd hate to have my life savings disappear into a puff of logic.
Yup, grab a spoon and start rebuilding.......
Or Panic (Not picnic). Which ever result annoys the doomsdayer the most
Also any one picked 1701 yet?
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I'll change the topic a little from complete economic annihilation and go back to historical downturns.
There have always been downturns of 10-20% (orange) as seen in the graph below, and occasionally those of 20% or more. Two of the biggest occurred in the last 20 years. I suspect, but have no way of knowing, that it'll continue down a little more over the next year or so. Not straight down, but up and down as it's been with slightly more downs than ups. But who knows.
https://engaging-data.com/market-all-time-high/#graph2
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BTW, this is not a bear market. We'd need a 20% drop from the peak to reach that designation.
I agree, but MSCI ACWI exUS has crossed the 20% threshold, and the SP500 may very well follow. Not that it worries me.
Wow cool I didn't know. The nice thing about international funds is that if they fall nobody notices.
I see the 52 week S&P500 low is 2532.69. It could go that low! Or any other random number. It would be way more interesting if it took out the Y2K top though. I secretly root for that.
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I disagree that it is impossible for the S&P to go to literally zero. It is certainly true that in bankruptcy the companies will still have assets. But they will also still have debt. If the debt exceeds the liquidation value, the net value of the company is less than zero. It is theoretically possible for every company in the index to become excessively indebted and have a negative residual value.
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You'll be a smarter (and more successful) investor once you realize that the answer to your question is that the S&P could go to zero.
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You'll be a smarter (and more successful) investor once you realize that the answer to your question is that the S&P could go to zero.
This is wrong, per my earlier post in this thread. Owing the assets of the largest 500 public U.S. companies is worth far more than $0, just by selling off the assets of those companies.
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You'll be a smarter (and more successful) investor once you realize that the answer to your question is that the S&P could go to zero.
I will always give you $20 for the 505 largest publicly traded companies in the US. I'm sure that there is something of value there. Sure, some of them might end up in Chapter 7, but all of them? Don't forget about Chapter 11. How many airlines have filed for Chapter 11 protection and are still flying?
It can go to zero if there isn't a US (or much of a world) economy left, but I surely won't live through the event that would cause that.
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Guys. Some interesting views of current market.
Let me ask a quick one. Is now a good time to buy a heap of vanguard or stick to dollar point?
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Guys. Some interesting views of current market.
Let me ask a quick one. Is now a good time to buy a heap of vanguard or stick to dollar point?
You're thinking about it wrong.
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Guys. Some interesting views of current market.
Let me ask a quick one. Is now a good time to buy a heap of vanguard or stick to dollar point?
"Hey guys, I'm trying to get stronger. Is today a good day to lift weights?"
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I think you're missing two important questions that need to be asked alongside the question, "What could it drop to?": "By when?" and also, "What could it rise to? (by when?)" And are you asking if it will stay there, or assuming that now that you've calculated a bottom or top that it won't move the opposite direction after that time?
The options market is pricing that a year from now we have a 68% chance of being between 3100 and 2200 (current price 2650), but keep in mind that there's a lot of uncertainty right now so that range is higher than usual. So if you trust those numbers you can assume that in a year you might be up $450 or down $450. It's more likely that we'll move less than that, and of course there's a possibility of staying flat.
But if you had asked me in September, the numbers would have been skewed around the current ATH price.
Now if you're looking 10+ years down the road like most people on this forum, who knows? Probably buy some now, and next year hopefully you've saved more money so you can buy more. But if you want to retire next year then consider you could be down $450/share and is that acceptable? If not, get some fixed-return assets. Take the risk if it's acceptable for the reward. And consider dividends over time as well.
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Let me ask a quick one. Is now a good time to buy a heap of vanguard or stick to dollar point?
Now is not a good time to invest if your reason is that you think you can predict what will happen.
Now is a good time to learn about investing and read some books.
Including about market history in which case you'll learn that markets can, and have, gone to zero.
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Including about market history in which case you'll learn that markets can, and have, gone to zero.
Name one.
That's not me being snide, that's an honest question. I honestly can't think of a single economic system in history in which every investment became worthless.
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Pre-revolutionary Russia is a classic example.
https://www.globalfinancialdata.com/GFD/Blog/the-russian-stock-market-before-revolution
If you scroll midway down there's a neat chart comparing US and Russian total returns from 1870 to 1914.
My understanding is that most stock markets of countries where the state seized control of assets (so parts of eastern europe, parts of asia, and probably Cuba) essentially went to zero in that any ownership in them became worthless.
Another interesting historical instance (though this isn't an example of a market going to zero) was when European governments tried to get post the civil war US government to honor Confederate bonds.
You're asking "for examples of where every investment became worthless" I'm meaning more just what we conventionally think of as investing in the stock market. I presume guns and/or social capital (maybe even real estate) were probably quite valuable in some of these instances.
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@dorster
That is simultaneously fascinating and totally not what the OP is talking about.
It is however an interesting thought experiment. Of the 505 stocks in the SP 500, how many of those companies would continue to operate their overseas holdings as publicly traded companies if the US nationalized the US holdings? Would anyone honor my stock?
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@dorster
That is simultaneously fascinating and totally not what the OP is talking about.
It is however an interesting thought experiment. Of the 505 stocks in the SP 500, how many of those companies would continue to operate their overseas holdings as publicly traded companies if the US nationalized the US holdings? Would anyone honor my stock?
Typically, even in banana republics, when a company gets nationalized there is at least a token payment to the shareholders. In your thought experiment, I suspect your stock would be worth whatever the ex-US holdings are worth, minus the token payment.
However, I think we are getting a little off into the weeds. In theory, the US stock market could go to zero, but the reason will be something so crazy none of us have thought of it. The only way to mitigate against something like that is build a bunker in the back yard and even that might not be enough.
If you own the broad market, you can be reasonably assured all those companies will be trying their damnedest to make about 7% profit every year. Actually, they will be trying to make more that that, but on average over time that is what they will actually make. If history is a good guide, of course. Stock prices can be whacky in both directions, either way too high or way too low, at any given time. And they can stay whacky for long periods of time. But over any reasonable length of time, stock returns fall into line with corporate profits, which are about 7% a year. We don't have control of the wackiness, but we do have control over the holding period, and the longer the holding period the safer it gets. That means the best time to buy stocks is today. Next best time is tomorrow.
I say this as a person who has been through not only the Great Recession and housing bubble, but the dot.com bubble, the Asian Contagion, the Russian currency crisis, and few other panics that almost everybody has forgotten about today. The short term shit like we're seeing this year is absolutely, completely meaningless to your long term goals.
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@dorster
That is simultaneously fascinating and totally not what the OP is talking about.
Pointing out that markets can go to zero is relevant to the OPs question because it highlights that it is the wrong question.
Learning the right questions helps you to become a better investor. So I stand by my original point.
The above link (and mention of the Russian stock market) was in response to @sol's question and to (maybe) quiet the haters.
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The above link (and mention of the Russian stock market) was in response to @sol's question and to (maybe) quiet the haters.
It seems a little misguided, though. The question was about how low index prices might fall in a coming recession, and you're talking about the demise of capitalism. These are totally different kinds of risks. I think the demise of capitalism scenario is about as likely as the nuclear winter scenario, and neither have any bearing on my estimation of what the index will be worth in ten years. Either it will be fine, or we'll all be dead. I don't build my investment strategy around the expectation of nuclear winter, either.
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It seems a little misguided, though. The question was about how low index prices might fall in a coming recession, and you're talking about the demise of capitalism. These are totally different kinds of risks. I think the demise of capitalism scenario is about as likely as the nuclear winter scenario, and neither have any bearing on my estimation of what the index will be worth in ten years. Either it will be fine, or we'll all be dead. I don't build my investment strategy around the expectation of nuclear winter, either.
I agree.
I'm not suggesting that anyone build their investment strategy around imminent nuclear winter or the demise of capitalism.
My point was that OP's premise of asking how low stocks may go so that they can successfully buy at the lowest point seemed flawed (to me). And I gave a kind of glib (but I believe historical) answer to the question: "sp 500 closes at 2,637, what could it drop to?!" as a way of pointing out that it's not a useful question.
What I am suggesting is that the OP does not build their investment strategy around short-term price speculation.
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The options market is pricing that a year from now we have a 68% chance of being between 3100 and 2200 (current price 2650), but keep in mind that there's a lot of uncertainty right now so that range is higher than usual. So if you trust those numbers you can assume that in a year you might be up $450 or down $450. It's more likely that we'll move less than that, and of course there's a possibility of staying flat.
Nice quantitative way to put the only way I could think to respond to the original question, which is basically, well X% chance its 10% more, y% chance its 20% more, etc.....
But if you want to retire next year then consider you could be down $450/share and is that acceptable? If not, get some fixed-return assets. Take the risk if it's acceptable for the reward. And consider dividends over time as well.
This reminds me of one thing I always liked about thinking thru the SWR considerations upon retirement. I always thought 5% was a pretty good SWR target. If you retire at a 4% SWR, and then the market drops 20% shortly thereafter (which we know there's always a fairly good chance of that), then you are sitting at a 5% SWR at that point, which kinda helps me visualize how very safe the original 4% was, especially given that the P/E ratios have correspondingly dropped as well.
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Ok...interesting. meaningful conversation ...as dalio says.
My portfolio generally focus on vanguard vwrl. Berk.b. bit of gold and a few flutters I.e tesla.. h20 etc. Rental property .
Now, slight direction change....does anyone hold diverse commodity etc/etfs?.....I find it hard to see value in them? Obviously useful for higher inflation periods.
Do most keep a portfolio fraction for commodity? I.e. 10 % ish.
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@dorster
That is simultaneously fascinating and totally not what the OP is talking about.
It is however an interesting thought experiment. Of the 505 stocks in the SP 500, how many of those companies would continue to operate their overseas holdings as publicly traded companies if the US nationalized the US holdings? Would anyone honor my stock?
What the fuck? There are 505 stocks in the S&P....500????
Checking...
Oh, it's because some companies have different classes of stock listed... phew. I thought I had a big misunderstanding of where I have quite a significant amount of money.
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Ok...interesting. meaningful conversation ...as dalio says.
My portfolio generally focus on vanguard vwrl. Berk.b. bit of gold and a few flutters I.e tesla.. h20 etc. Rental property .
Now, slight direction change....does anyone hold diverse commodity etc/etfs?.....I find it hard to see value in them? Obviously useful for higher inflation periods.
Do most keep a portfolio fraction for commodity? I.e. 10 % ish.
Commoditys are iffy for me as I don't understand them, but you have to see worldwide interplay vs the fundamentals of a corporation.
If you mean gold, I have my "WTF just happened more money there -- 30k. It was my deep emergency fund preFIRE.
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Ok...interesting. meaningful conversation ...as dalio says.
My portfolio generally focus on vanguard vwrl. Berk.b. bit of gold and a few flutters I.e tesla.. h20 etc. Rental property .
Now, slight direction change....does anyone hold diverse commodity etc/etfs?.....I find it hard to see value in them? Obviously useful for higher inflation periods.
Do most keep a portfolio fraction for commodity? I.e. 10 % ish.
Perhaps they reduce volatility in a stock heavy portfolio?, but I don't bother with commodities. I'm still too far from FI and too busy accumulating to care about volatility in something I don't plan to withdraw from for many years, and when I am FI I plan to have enough that between the 4% rule and a small buffer or 2 I still won't have to worry about volatility.
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and when I am FI I plan to have enough that between the 4% rule and a small buffer or 2 I still won't have to worry about volatility.
Can confirm. I'm retired now and am happily ignoring market volatility. If you're following the 4% rule you're going to have so much money that it just doesn't feel important anymore. I can make or lose an entire year's expenses in a day or two, but it's no big deal. I'm going to be tapping that nest egg for decades to come, not cashing it all out this week. Over a period of decades, the US market has always gone up regardless of your starting points.
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I just happened to stumble across this. Here's an analysis of what the S&P 500 could drop to when it reverts to norm.
https://www.equities.com/news/why-another-50-correction-is-possible
Given that valuations are at 30.5x earnings, and that profit growth tracks closely with economic growth, a reversion in valuations would entail a decline in asset prices from current levels to somewhere between 1350 and 1650 on the S&P (See table below). From the recent market highs, such would entail a 54% to 44% decline respectively.
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The market could go way up or down at any time, of course dips being much faster. We are beyond average for a bull market, but well short of some of the longer ones.
Here is some context https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=4ecfa978-d0bb-4924-92c8-628ff9bfe12d (https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=4ecfa978-d0bb-4924-92c8-628ff9bfe12d)
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Closing in on a 12-month low. Will it go lower? Will it rebound? Who knows?
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Going way lower!
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Closing in on a 12-month low. Will it go lower? Will it rebound? Who knows?
As of today the index is down 2.7% for the year, unless you count dividends which case you're close to even. Last year it was up 25%, and the year before that it was up 13%. So I'm totally happy with a zero for this year. It's about time to cool off a little, maybe come back down to earth a little and settle in around something closer to the long term average of 9%. Last year we made almost three years worth of average profits, right?
Right now, 2018 is looking an awful lot like 2015. 2015 was also a slightly down year, and people were crying foul about the coming recession then, too. Then something strange happened, the earnings reports were all weirdly positive (like today) and unemployment kept falling (like today) and the market gave us 13% in '16 and 25% in '17 before cooling off again this year. Just goes to show you how hard it is to predict the future.
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25% is alot. do you think 9% is possible over the next few years if we are nearing the end of the current cycle sol?
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25% is alot. do you think 9% is possible over the next few years if we are nearing the end of the current cycle sol?
Possible? Of course.
-25% and +25% are also possible. Nobody really knows. But the long term average is up, and I'm playing the long game. I expect to investments to last at least another 50 years, and over those kinds of time frames the markets have never gone down. What happens this year or next year is just noise.
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25% is alot. do you think 9% is possible over the next few years if we are nearing the end of the current cycle sol?
We could be in for another decade plus of negative real returns (dividends included and inflation adjusted), such as we experienced not all that long ago.
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could you explain what you mean by just noise?.
obviously buy regular and through ups and downs, since it makes no difference over 10-15+ year period.
but dont you expect there to be lesser growth over the next short while? Its not to be alarmed in anyway, all part of the cycle, but nice to understand it.
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could you explain what you mean by just noise?
I mean that the exact percentage returns of the index in any given year are basically random. They center around a positive 9% or so, but the deviations are huge in any given year. Don't count on any single year's return, because it could be just about any random number from the hat.
but dont you expect there to be lesser growth over the next short while?
No. Why do you?
The whole idea of "the business cycle" is mostly bogus. There is no characteristic frequency with which the economy naturally oscillates. It goes up and it goes down in response to geopolitical events, certainly, but those events don't regularly alternate between positive and negative impacts on a set time frame. Some bull markets last 10 months and some last 10 years, and you won't know which one it is until long after it's over.
If anything, the only observable trend I've seen in the stock market seems to have a period measured in decades. The 1930s and 40s were bad. Then the 50s and 60s were good. The 70s were bad, and then the 80s and 90s were good. By this sort of long term cycle, we're only halfway through our current period of expansion and should probably expect ten+ more years of green numbers before the next major downturn.
Remember that the stock market has averaged 9% returns through all kinds of crazy shit, including pandemics and global wars. An idiot president and a trade spat with China are just speed bumps, not the kind of thing that legitimately changes the course of the global economy. Factories are still churning out cheap plastic crap, consumers are still blowing their entire paychecks at Applebee's every weekend, resources are still abundant and our quality of life is still rising. I see no reason why the next "short while" should realistically be expected to be worse than the recent past.
You have to let go of the idea that stock market prices are the economy. The economy does it's own thing, and then a bunch of noisy rich people argue over how to price their expectations of future profits. If you're forecasting the short term stock market, you're just guessing about how they will argue and not about whether or not they are right.
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Good point actually.
I’m reading Dalio at moment on his estimate that the current global sceranio reflects similarities with the late 1930s situation. I find it fascinating.
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could you explain what you mean by just noise?.
obviously buy regular and through ups and downs, since it makes no difference over 10-15+ year period.
but dont you expect there to be lesser growth over the next short while? Its not to be alarmed in anyway, all part of the cycle, but nice to understand it.
"I mean that the exact percentage returns of the index in any given year are basically random"
these statements are why I try and stay away, but I made the mistake of lurking on a slow Friday.
yes, index returns in a year are random but you cannot ignore macro economics of slowing global growth, declining house and autosales, rising rates and world fed banks tightening.
you also cannot ignore that the 2009 mkt recovery was greatly enhanced by fed policy and debt and to expect that to be done again with the same results is not realistic.
you also cannot ignore that debtloads of people today are larger and wage growth is slower so that even if this is just a correction, expecting a economic recovery to spring back fast is not realistic.
I feel like neal boortz's book "somebody's gotta say it !"
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yes, index returns in a year are random but you cannot ignore macro economics of slowing global growth, declining house and autosales, rising rates and world fed banks tightening.
I'm not suggesting that these things are irrelevant to the economy, just that they are short term wiggles that don't really worry much. So far, nobody has been able to use such indicators to correctly predict market downturns with any regularity. Lots of folks have been calling the top every day for the past six years, over which the market has literally doubled in value. At this point, we could see a 50% decline tomorrow and they'd still be wrong.
I agree that the stock market will temporarily decline in price at some point in the future. But you don't know if it will go up 20% before it goes down 20%, and neither does anyone else.
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"I mean that the exact percentage returns of the index in any given year are basically random"
these statements are why I try and stay away, but I made the mistake of lurking on a slow Friday.
yes, index returns in a year are random but you cannot ignore macro economics of slowing global growth, declining house and autosales, rising rates and world fed banks tightening.
you also cannot ignore that the 2009 mkt recovery was greatly enhanced by fed policy and debt and to expect that to be done again with the same results is not realistic.
you also cannot ignore that debtloads of people today are larger and wage growth is slower so that even if this is just a correction, expecting a economic recovery to spring back fast is not realistic.
I feel like neal boortz's book "somebody's gotta say it !"
Who exactly? Maybe YOU (Cabaka) cannot ignore these things, but I certainly can ignore all of those things and have been... so far I continue to exist.
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@Cabaka
I shorted and lost in 2007/8. That adage that the market can remain irrational longer than you can remain solvent was still true then, it is probably still true today.
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I started investing in 1998. Dec 1998 to Dec 2018 Annualized S&P500 real return with dividends reinvested: 3.7% (Nominal return 6.1%).
Between ‘98 and now there’s been a drawdown of >35% and a drawdown of >50%.
I see no reason why the next 20 years should be much different, though (incredibly) we are starting at a lower CAPE.
To answer the OP, it could drop to 1300. Why not? No way to tell when it might, though.
I’m staying the course, of course. FIREd. 85% stocks.
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I started investing in 1998. Dec 1998 to Dec 2018 Annualized S&P500 real return with dividends reinvested: 3.7% (Nominal return 6.1%).
Between ‘98 and now there’s been a drawdown of >35% and a drawdown of >50%.
I see no reason why the next 20 years should be much different, though (incredibly) we are starting at a lower CAPE.
To answer the OP, it could drop to 1300. Why not? No way to tell when it might, though.
I’m staying the course, of course. FIREd. 85% stocks.
And if you had put in $1000 (subsequently matched to inflation) every month over that period, your return on your money would have been 6.35% real, and 8.75% nominal! Yay for periodic investing.
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You have to let go of the idea that stock market prices are the economy. The economy does it's own thing, and then a bunch of noisy rich people argue over how to price their expectations of future profits.
That's a pretty good quote there.
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I started investing in 1998. Dec 1998 to Dec 2018 Annualized S&P500 real return with dividends reinvested: 3.7% (Nominal return 6.1%).
Between ‘98 and now there’s been a drawdown of >35% and a drawdown of >50%.
I see no reason why the next 20 years should be much different, though (incredibly) we are starting at a lower CAPE.
To answer the OP, it could drop to 1300. Why not? No way to tell when it might, though.
I’m staying the course, of course. FIREd. 85% stocks.
And if you had put in $1000 (subsequently matched to inflation) every month over that period, your return on your money would have been 6.35% real, and 8.75% nominal! Yay for periodic investing.
And that small 20 year period included the 2000 dot-com bubble and the 2008 Great Recession!
2019 will be the first year I start socking away largish amounts of cash in retirement vehicles. I am (selfishly) hoping the market continues the downward trend for the next few years. Looking forward to buying index ETFs on sale!
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Including about market history in which case you'll learn that markets can, and have, gone to zero.
Name one.
That's not me being snide, that's an honest question. I honestly can't think of a single economic system in history in which every investment became worthless.
ohhh I smell a Gold Bug! How big is the hole in your backyard? :)
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I'm going to say it will drop to at least 2,599.95.
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I'm going to say it will drop to at least 2,599.95.
(https://media.giphy.com/media/65os7odbIW6pa/giphy.gif)
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And if you had put in $1000 (subsequently matched to inflation) every month over that period, your return on your money would have been 6.35% real, and 8.75% nominal! Yay for periodic investing.
Indeed. And you'd now have about $750K. In the 08/09 crisis you went from about $160k down to $80K.
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As of today the index is down 2.7% for the year, unless you count dividends which case you're close to even. Last year it was up 25%, and the year before that it was up 13%. So I'm totally happy with a zero for this year. It's about time to cool off a little, maybe come back down to earth a little and settle in around something closer to the long term average of 9%. Last year we made almost three years worth of average profits, right?
It hurts a little bit that I have started (heavily) investing in 2017 and I am now some 30K down, but I am in for the long ride and I actually find it hard to not take my emergency fund and buy some more stocks with it...
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It hurts a little bit that I have started (heavily) investing in 2017 and I am now some 30K down, but I am in for the long ride and I actually find it hard to not take my emergency fund and buy some more stocks with it...
Don't feel bad! I started in 2007. I bought all the way down and all the way back up. I only regret not buying more.
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At this rate we will see that 1999 soon!
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At this rate we will see that 1999 soon!
Then we can party like it's 1999!
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We sure as hell will!
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Party like it's 1999 = S&P 1400
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Party like it's 1999 = S&P 1400
snip.....[SP500].. -50% = 1318.5 ..Snip...
If we get there we can party on the way down AND the way up!
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I'm going to say it will drop to at least 2,599.95.
(https://media.giphy.com/media/65os7odbIW6pa/giphy.gif)
Did not pay off....
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Getting closer every day =)
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You'll be a smarter (and more successful) investor once you realize that the answer to your question is that the S&P could go to zero.
This is wrong, per my earlier post in this thread. Owing the assets of the largest 500 public U.S. companies is worth far more than $0, just by selling off the assets of those companies.
I realize this isn't a real-time response, but did want to point out that this is simply not true. The actual assets of the largest 500 public U.S. companies would go to their creditors (many assets are already encumbered as collateral for certain types of debt) / bond holders. Equity holders are typically unsecured, meaning we stockholders would get only whatever is left over after all creditors have been satisfied. This often amounts to a nice round figure of $0.
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Keep dropping. Let's buy more at 2016 prices.
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I'm calling the bottom at 2119, next year.
My prediction is worth exactly what you paid for it.
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Did not pay off....
I think you missed the joke. He said it would drop to at least the price it had already dropped to. He was guaranteed to be correct the moment he posted it.
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You'll be a smarter (and more successful) investor once you realize that the answer to your question is that the S&P could go to zero.
This is wrong, per my earlier post in this thread. Owing the assets of the largest 500 public U.S. companies is worth far more than $0, just by selling off the assets of those companies.
I realize this isn't a real-time response, but did want to point out that this is simply not true. The actual assets of the largest 500 public U.S. companies would go to their creditors (many assets are already encumbered as collateral for certain types of debt) / bond holders. Equity holders are typically unsecured, meaning we stockholders would get only whatever is left over after all creditors have been satisfied. This often amounts to a nice round figure of $0.
Yep, I once owned stock in United Airlines (technically still do) until they went through bankruptcy. Shares are now worth $0.
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Yep, I once owned stock in United Airlines (technically still do) until they went through bankruptcy. Shares are now worth $0.
One company going bankrupt is not the same as every company going bankrupt. In a bankruptcy, your assets get sold off to other companies, and those companies cannot all also go bankrupt at the same time. As long as we still have an economy of some sort, companies will still be producing value and the 500 biggest ones of them will still be in the index and that index will not be worth zero.
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Yep, I once owned stock in United Airlines (technically still do) until they went through bankruptcy. Shares are now worth $0.
One company going bankrupt is not the same as every company going bankrupt. In a bankruptcy, your assets get sold off to other companies, and those companies cannot all also go bankrupt at the same time. As long as we still have an economy of some sort, companies will still be producing value and the 500 biggest ones of them will still be in the index and that index will not be worth zero.
word!
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Did not pay off....
I think you missed the joke. He said it would drop to at least the price it had already dropped to. He was guaranteed to be correct the moment he posted it.
Realized while I was typing but felt like bumping the thread anyways