conceding defeat

[kev374]

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.

[earlyretirement]

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.

[moneymaker]

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.

[kev374]

[quote=earlyretirement]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.[/quote]

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!

[no_such_reality]

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.

[kev374]

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-markets-dominate-bear-markets-in-length-returns/

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).

[Myriad]

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.

[gzz]

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.

[Hobie]

[quote=earlyretirement]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.[/quote]

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.

[(former)FormerSanDiegan]

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

[moneymaker]

Agreed!

[ltsddd]

[quote=moneymaker]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.[/quote]

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

[moneymaker]

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.

[gzz]

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.

[Coronita]

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-trader-bets-it-all-on-apple-getting-crushed-after-earnings-2017-01-30
““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-trader-loses-massive-bet-or-did-he-2017-02-01

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!!!!

[Author]

Posts