conceding defeat

User Forum Topic
Submitted by kev374 on February 2, 2017 - 10:57am

So, since 2009 i've always been pessimistic about the markets - both the housing market and the stock market. Primarily this was due to what I considered immense fiscal irresponsibility of our government, reckless deficit spending, unfunded liabilities, malinvestment and rampant speculation in real estate etc.

However, looking at the staggering market runup of this bull market (holy crap batman 26% return in 2016 for the DJIA) I am finally thinking that I am wrong about all of this.

I think housing and stocks will continue to do well. I am finally entering the market, albeit at a much higher level. I've stayed out since 2009 due to fears of an imminent crash but even I have to admit that this run up in both housing and stocks is just stunning and a crash does not looks like it's in the cards as the rest of the world is in shambles and the US looks like it's the most rock solid.

Submitted by earlyretirement on February 2, 2017 - 11:03am.

Things don't move in straight lines forever. I give the market no more than 12 months then we will probably move into recession. I'm not sure of your timing.

Submitted by moneymaker on February 2, 2017 - 11:11am.

I'm a little more pessimistic, I give it 2 months, then the honeymoon will be over. On the bright side I am planning on taking advantage of currency devaluation in the UK in May after the Brexit actually starts.

Submitted by kev374 on February 2, 2017 - 11:16am.

earlyretirement wrote:
Things don't move in straight lines forever. I give the market no more than 12 months then we will probably move into recession. I'm not sure of your timing.

Yeah, that is what they said 5 years ago and that proved to be totally false. We may have a 20% correction 5 years from now but that means nothing if we have 5 more years of 10-20% annual gains.

I always feared corrections and was pessimistic about timing myself. However, timing means nothing in a long term window because corrections always have much higher gains in adjacent years.. and looking at historical charts it looks like bull markets are way longer than bear markets.

I stayed out of the market fearing a correction since 2011 and lost out on over $100,000 worth of profits that I could've realized. Bummer!

Submitted by no_such_reality on February 2, 2017 - 12:17pm.

You have to be careful looking at point in time snap shots. For 2016, the S&P returned a total of around 11%, the DJIA 16.5%.

Returns look so stunning right at this moment, because you've combined a recent bull run-up with a one year ago 10% correction in the month of January. In fact, 2015 was largely sideways, from Apr 2015 to Apr 2016 the total return on the DJIA was a whooping zero, in that time period it twice tested 10% losses.

Submitted by kev374 on February 2, 2017 - 12:27pm.

was getting data from this source:

http://www.1stock1.com/1stock1_139.htm

These are annualized returns since 1975. If you look at the data you see hardly any red but plenty of years with crazy high returns. So the corrections are small compared to the run ups. Infact, 2013 return was 26% and 2016 return was 23%. Since 2009 only 2015 has been negative.

Looking at this source and quoted:
https://www.validea.com/blog/bull-market...

On average, bull markets have returned 145% and lasted nearly 4 years. The longest bull market was during the 1990s, when the S&P 500 returned 526%. Unlike bull markets, bear markets, on average, are much shorter. The average bear market has seen losses of 23% and has lasted 14 months. Two out of the three worst bear markets have happened since 2000 (stocks fell 43% from 2000-early 2003 and the market declined 51% from 2008-2009).

Submitted by Myriad on February 2, 2017 - 12:49pm.

I think the issue is that you're looking at this in absolute terms while the general investing world works in relative terms.
2009 was the best time to get into markets and housing (S&P in Mar 2009 was 697) - it was just a matter of having the mental fortitude to make the decision. (Not to say I did what I should, but I guess it was good enough not to sell). If you looked at solid companies in 2011/2012 after the worst part, most of them were providing dividends in excess of 4% compared to 0% in short term bonds. That's a pretty good bet.

After the whole crisis in 2010 or so, what turned out was that yes the US has lots of issues (debt, unemployment, trade deficit, etc), but the US was the best of the worst. Europe and Japan were much worse and the only reason China didn't collapse was they spent 25% of GDP on stimulus.

Will we have recessions - yes, will the market fall 20% in the future - yes. But the market is still one of the better places to invest. If you compare to bonds - which drop when interests rates go up. Investment properties are still ok if you can cash flow them, but those are hard to find in SD.

Submitted by gzz on February 2, 2017 - 12:55pm.

I don't think stocks will be doing great the next few years, but 3% increases on top of 3% dividends easily beats a savings account.

Submitted by Hobie on February 2, 2017 - 4:13pm.

earlyretirement wrote:
Things don't move in straight lines forever. I give the market no more than 12 months then we will probably move into recession. I'm not sure of your timing.

I think you are joshing us!. I would have bet you feel just opposite and the market is going to take off as business grow and are more profitable.

Submitted by FormerSanDiegan on February 3, 2017 - 10:03am.

When bears capitulate and buy... it usually is a sign of nearing a top.

Submitted by moneymaker on February 3, 2017 - 10:13am.

Agreed!

Submitted by ltsdd on February 3, 2017 - 10:45am.

moneymaker wrote:
I'm a little more pessimistic, I give it 2 months, then the honeymoon will be over. On the bright side I am planning on taking advantage of currency devaluation in the UK in May after the Brexit actually starts.

My own crystal ball says right around 4th July this year is when there'll be a bloodbath.

Submitted by moneymaker on February 3, 2017 - 11:46am.

Just checked margin rates for short selling with Scottrade and they are like credit cards, ridiculously high. Ok so maybe not as high as credit cards but still higher than I think they should be. Well if I invest cash then the interest is a mute point I guess, have never done a short but am highly motivated to short a particular stock now so may pull the trigger, and no I don't have any inside info, just common sense.

Submitted by gzz on February 3, 2017 - 12:45pm.

The margin rate for short sales depends on the stock, but for most it is 0. The 7% rate you saw is for buying on margin which requires you to borrow cash.

All major brokers loan their customers shares as a free courtesy when available. You can call to confirm this if you want.

You also have to pay negative dividends if the stock you short pays them.

Submitted by flu on February 3, 2017 - 1:08pm.

Speaking of shorting the market...

This story (though it probably is fake), is a gentle reminder of the golden rule:
The markets can stay longer than you can stay solvent.

"Trader bets his $250k on apple getting crushed after earnings"

http://www.marketwatch.com/story/this-tr...
"“IT IS SIMPLY NOT POSSIBLE FOR APPLE TO SPIKE UP POST-EARNINGS,” Comeau wrote. “It didn’t happen to Google GOOG, +0.48% GOOGL, +0.42% , it didn’t happen to Western Digital WDC, -0.30% , Qualcomm QCOM, +0.91% or even Intel INTC, +0.16% or Microsoft (2%! Yay!) MSFT, +0.21% , despite excellent earnings (which Apple won’t have).”"

Disclaimer: it might be a fake

http://www.marketwatch.com/story/apple-t...

Personally, I am pretty happy those that were shorting AMD when the stock was around $2.50/share thinking it was going to go bankrupt anyday back then got their azz kicked bigtime. But that's a different story.... heh heh.

I know, I know..IT'S ALL RIGGED!!!!

Submitted by moneymaker on February 3, 2017 - 1:47pm.

Thanks gzz, I had forgotten about earnings being a negative thing on a short. I don't want to go public with the stock like Bill Ackman did, not a good idea to attract too much attention.
If I short a stock who would be the initiating party on a margin call?

Submitted by The-Shoveler on February 3, 2017 - 2:18pm.

flu wrote:

I know, I know..IT'S ALL RIGGED!!!!

Yep I am going with that, never been able to do well in the Stock market except index fund buy and hold 401K but even that I pulled out of last year (too Old need to be in preservation mode).

But One Day, One Day I will beat them dang it LOL.

Anyway I might go back in if we get a 35-40% crash but I don't see that occurring unless war or some other disaster, Hard to predict with Trump, could be really really good or really really bad I have no clue.

Submitted by flu on February 3, 2017 - 2:50pm.

The thing with Trump is that I am.trying to stay away from big name companies.It only takes one of his 144 characters Twitter rants to sink a stock a few percentage points.

Submitted by cvmom on February 3, 2017 - 8:24pm.

earlyretirement wrote:
Things don't move in straight lines forever. I give the market no more than 12 months then we will probably move into recession. I'm not sure of your timing.

I agree with this. Decided it was time to drop to 50% stocks (all index funds) when the Dow hit 20K. We are too close to retirement and need a good bit of our $ to be accessible, not locked up in a bear market waiting for a turnaround.

Submitted by flu on February 3, 2017 - 8:42pm.

Wait....Ah hem.. If you recall....

https://piggington.com/i_went_90_cash_today

Just a few weeks ago, when the Trump rally started, and some of us (me included ) were on the wrong side of the fence thinking that the market was going to correct because there was no longer a positive indication to keep driving markets higher and that Trump might cause serious damage to the stock market, folks were saying timing the markets don't work, why get out based on a whim....

But now, at dow 20k, people are now calling "peak" and getting out, thinking a correction is going to happen soon, and they want to avoid a correction...

Isn't this market timing too? And isn't the only difference between you folks now calling the top now and getting out and when I was doing it before Trump became president....the same exact thing that some of you say we shouldn't be doing? And the only thing different between us is that one of us was more correct out of luck than anything else? For argument saying let's say down goes to 25k (not saying it will)...Then, was your missed gain also due to poor market timing?

I'm not trying to bust anyone's chop here. Just trying to understand what the heck is the difference between someone calling "top" 2 months ago and getting out for the sake of asset protection "just in case" something bad happens, and someone calling "top" right now, with the exception that one of us guessed right?

I don't get it.

Submitted by The-Shoveler on February 4, 2017 - 7:54am.

flu wrote:

I'm not trying to bust anyone's chop here. Just trying to understand what the heck is the difference between someone calling "top" 2 months ago and getting out for the sake of asset protection "just in case" something bad happens, and someone calling "top" right now, with the exception that one of us guessed right?

I don't get it.

It's Rigged against us market timers LOL!!

I have been mostly out of the market for several years just due to the fact I am too close to retirement to be risk on.

If I was in my 30-40's I would just keep adding to my 401K index fund and keep my nose to the grind stone, try not to look at the market.

IMO Just looking at the demographics I think we are going to be in good times for a few more years at least, but there are no guarantee's that something crazy is not going to happen.

Submitted by ltsdd on February 4, 2017 - 8:14am.

All we need is for Greenspan to take a few minutes off from what he's been doing and utter just two words - irrational exuberance.

Submitted by flu on February 4, 2017 - 11:10am.

I still don't get the definition of what is market timing as used in this thread and the previous one.

It just seems like we're calling market timing as a decision that doesn't go the way you thought it would go and as a result of your incorrect guess, that was market timing , a poor decision..

Versus a decision you make to get out of the market in whole or part at a time when the market directions goes the way you guessed. Then that's not market timing.. that's just wise financial decision making for asset protection.

I guess I am dumb and just don't understand the difference.

I am at an autocross waiting in between runs , so I am bored and thought I'd camp out here today.

Submitted by ucodegen on February 4, 2017 - 11:33am.

flu wrote:

I'm not trying to bust anyone's chop here. Just trying to understand what the heck is the difference between someone calling "top" 2 months ago and getting out for the sake of asset protection "just in case" something bad happens, and someone calling "top" right now, with the exception that one of us guessed right?

I don't get it.


Umm.. so you are now calling to stay in the market? I'm just a little superstitious.. I remember the market seems to have a way of moving contrary to your suggestions-actions. Almost like it was rigged specifically against someone.

flu wrote:

It just seems like we're calling market timing as a decision that doesn't go the way you thought it would go and as a result of your incorrect guess, that was market timing , a poor decision..

Versus a decision you make to get out of the market in whole or part at a time when the market directions goes the way you guessed. Then that's not market timing.. that's just wise financial decision making for asset protection.

I guess I am dumb and just don't understand the difference.


Both are market timing. The first one is unsuccessful market timing, the second is successful market timing. -- also note the wording of 'goes the way you guessed'. It could also be determined on what 'inputs' contributed to your decision.

Submitted by FlyerInHi on February 4, 2017 - 2:54pm.

Does dood frank going away mean crazy financing is back? Another real estate bubble?

Kev, are you buying a house too?

Submitted by spdrun on February 4, 2017 - 5:14pm.

QM repeal (aka loans to skells) isn't going anywhere fast.

What he did away with are fiduciary requirements that investment managers put their clients' best interests first -- more likely to make a stock bubble.

Submitted by flu on February 4, 2017 - 6:23pm.

ucodegen wrote:

Umm.. so you are now calling to stay in the market? I'm just a little superstitious.. I remember the market seems to have a way of moving contrary to your suggestions-actions. Almost like it was rigged specifically against someone.

No, I'm not making any recommendations whatsoever.

It seems like people are doing using the same rational, logic, reasoning to get out of the market now as other people did a few weeks ago....

But then, at the same time, when those people (me included) did make that decision...and the markets went the other way, there was...

Quote:

It is not wise to go all cash. Don't time to market. Nobody can do it accurately. A smart thing to do is stay invested

and

Quote:

I disagree. Missing even just a few very good days in the market (which no one can accurately predict when they will be) can cause your returns to be significantly lower than buy-and-hold.

That's the confusing part....I wasn't even thinking about trying to "time" a peak value to get out. I was just thinking, you know I'm getting old. I've made a lot of money over the past 8 years from all sorts of things...Maybe it's time to pay off my house, my rental property loans, and move my kid's education fund more into cash... well, you know...just in case Trump wins and the world goes to shit. Because if I did that, even if everything else blows up... I still have my houses, still have my savings, and my kid's education is still funded for the next 4 years... And it seems like it's the same rational that people think right now, that dow is at 20k, a "gut" feeling and just as arbitrary as at any other point in time. That's why I left that thread after I made that tongue and cheek comment "you'd be singing a different tune if the markets actually went the other way".

I admit, looking at the subsequent 20+% gain in the market was hard to look at after a trump win. That sucks.. As I'm sure it will suck for those that do get out at 20k an dow marches forward...if that happens. (and that's a big if)...

Quote:

Both are market timing. The first one is unsuccessful market timing, the second is successful market timing. -- also note the wording of 'goes the way you guessed'. It could also be determined on what 'inputs' contributed to your decision.

Ok, maybe we're onto something here.

Examples might be: i"I'm going to try get out right before a crash, and then get back in and try to make a killing."

Or: "I'm going to get out to mitigate risk, just in case..."

Or something else....

Ok, maybe...Well, if that's the case, then I'm not sure it's necessary bad to stay in invested in the market of even to buy a primary house right now. It depends on the age of the person, where their net worth is at this current moment in time, and what there eventual financial goals are, and how far away are they from it.

In as much as a primary house purchase. I'm not sure if it's really a bad time to buy right now either. If the mortgage is still roughly the same as rent costs, and you can come up with the down payment, and the down payment isn't ridiculously large, why would it be a bad time to buy?

Submitted by AN on February 6, 2017 - 1:55am.

flu, I'll be the contrarian here and stick my neck out there. I forecast this market will go higher and housing will go higher and all the market timer this time will stop calling you a market timer :-). I also believe we'll see inflation again. So, I'm fully invested in the market. Been fully invested since the day after the election as I said I did.

Submitted by flu on February 6, 2017 - 3:43am.

AN wrote:
flu, I'll be the contrarian here and stick my neck out there. I forecast this market will go higher and housing will go higher and all the market timer this time will stop calling you a market timer :-). I also believe we'll see inflation again. So, I'm fully invested in the market. Been fully invested since the day after the election as I said I did.

You are probably right imho.

Submitted by poorgradstudent on February 9, 2017 - 11:06am.

FormerSanDiegan wrote:
When bears capitulate and buy... it usually is a sign of nearing a top.

Another sign is when you start seeing more and more commercials on TV targeting individual investors.

ETrade's first Superbowl commerical was... 2007.

Also when the mainstream news magazines start talking about the market it's another bad sign.

Submitted by kev374 on February 21, 2017 - 5:28pm.

so what is the consensus here? Or is there no consensus? Wait for the correction or invest now regardless?

How about a safer bond fund returning 3-5%, anything like that exist among Fidelity or Vanguard funds? Thinking maybe I will keep money in a bond fund until the correction and branch out into regular mutual funds. Is that a good plan?

Dow is not headed to 21K, I can't believe it, how high will it go? There are so many articles in the media saying a correction is imminent and that makes me really nervous.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.