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Old 03-15-2017, 01:25 AM
 
Location: Myrtle Creek, Oregon
11,047 posts, read 11,455,634 times
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Quote:
Originally Posted by MrRational View Post
1) NOTHING is permanent
2) The dollar figure of those prices -over decades- have different value dollars.
It's true. The value of paper money has, historically, not held up. We have seen very little consumer inflation in the last few years, but we have seen massive asset inflation. How that will play out in the next downturn is anyone's guess. Certainly stocks are much more liquid assets than real estate. Farms produce commodities and houses can generate a revenue stream through rentals, but those are measured over months or years. Sale of stocks is the place to get immediate cash.

The incipient credit crisis in China will probably be the trigger for the next downturn. A crash in the Asian stock exchanges would bring them all down.
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Old 03-15-2017, 01:55 AM
 
64,577 posts, read 66,100,109 times
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Quote:
Originally Posted by Larry Caldwell View Post
I'm glad you have had more or less consistent gains, but you blindly assess your worth in terms of arbitrary markers, rather than evaluating your assets. Your house may have tripled in sale price, but it's still worth exactly the same as the day you bought it - it's a place to sleep and keep your stuff. Farm ground has substantially outperformed the S&P over the last 50 years, but the farm is no bigger than it was when you bought it. The supposed sale price is just a fiction until you sell, and then you are stuck with a bunch of worthless money in search of actual assets.

One way of expanding your assets is to leverage them. Take the example of a farmer who bought 1000 acres 20 years ago for $500/acre ($500,000). Thanks to mortgage payments he may only have $200,000 to pay, but farm ground is selling for $5,000/acre. Unfortunately, that doesn't pencil out, but if he puts his 1000 acres together with the 1000 acres next door he ends up with 2000 acres for $5,200,000, or $2600/acre. He can reasonably expect to be able to make the mortgage payment at that price, so the deal pencils out. He has made a mess out of his net worth, but doubled his assets. In 30 years, when he (or his kids) pay off the mortgage, the sale price will probably be a lot higher. Meanwhile, steadily inflating food costs for the extra 2 billion people 30 years from now will make the mortgage payments a lot more affordable.

Any time you start focusing on markers instead of assets you obscure the reality of investing. Bonds are an asset where the markers don't fluctuate as much as, say, stocks. When you have a good run in one asset, it's a good idea to take some winnings off the table and move them somewhere safer. Investment counselors call this "rebalancing." It's a common strategy. You should look into it. It's smart to keep some markers in an investment account, where you can quickly buy undervalued assets. During the last crash, smart investors substantially expanded their asset portfolio. I doubled my stock assets in three years during the last downturn. Other people took the opportunity to become first time home owners, or purchased multiple rental properties at depressed prices.

It's important not to get greedy. When the cards are running in your favor, there is a strong urge to keep increasing the bet, but the cards always turn. Keeping track of the math is a good idea too. Suppose you project stocks to run up another 20%, before making a 20% correction. Say 100 shares of your stock is worth $2000, plus 20%, leaves you with $2400. Then a 20% correction comes along and the stock drops $480, to $1920. Oop, you just lost 4% of your original investment. Not such a good deal, is it? Greed is a great motivator but a lousy paymaster. If you had just taken half your winnings off the table and bought back in after the correction, you would end up with 102 shares, a 2% gain in assets rather than a 4% loss in markers. Do you see how focusing on a fictitious market value obscures the reality of investing?
a house is a consumption item until the day comes you no longer use it . but it is still what it is worth .

if i take 500k cash and buy a house , i still have an asset worth 500k , it just isn't liquid while i use it .

don't confuse not caring what your investments are worth at any point in time with the reality that is what you are worth at any point in time .

it is all your money at any point in time . some things vary daily more than others but it is what it is .

like i said after 30 years of investing and gains i have no idea what you would call "my money " based on gains .

as far as holding cash and preparing for the next downturn ? as peter lynch said : " more money has been lost and given by preparing for the next crash or downturn than actually is gained or lost in any of them ."

it is okay to hold cash/very short term bonds if it is part of a strategy that is not based on market timing , my portfolio holds 20% always . no matter what the markets do .

it has a purpose . cash forms the other end of a barbell which turns the duration of long term treasury bonds in to the duration of an intermediate term bond fund , but with far better lifting ability when there is a flight to safety as well as a higher yield .

it can be used to tame extremely volatile assets as well . but betting on the fact at some far off point in time i will buy stocks cheap enough to make a difference is a roll of the dice . because if i get lucky once , odds are i give it back next time i attempt it .

in 30 years i have never held cash in preparation of a down turn . but i have held it at times for the reasons above and whether markets are up or down the cash position is the same . .

but the premise that if you don't sell your value's are not real is absurd . is working a commissioned job where pay is variable not real either ? i worked on commission only for decades . each day my pay was something different . it varied daily but it sure as heck was real .

leaving money in play is the same thing . selling only lets you convert from one asset to another . you may choose to convert from a more volatile asset to a less volatile one or the reverse but nothing changes in what is "your money" some just vary more than others but everything varies , even cash's purchasing power .

Last edited by mathjak107; 03-15-2017 at 02:16 AM..
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Old 03-15-2017, 03:04 PM
 
3,748 posts, read 7,210,050 times
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Quote:
Originally Posted by Larry Caldwell View Post
.....

Investing is a gamble, and the first rule of gambling is take your winnings off the table.
You won't get through to idiots who get their "investing" education by reading mutual fund prospectus. For you to make money in the stock market, some idiots behind you somewhere down the line will lose money. In a Vegas casino, the house always win. In the stock market, that's company insiders. I have been on both company insider and individual trader.
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Old 03-15-2017, 04:01 PM
 
64,577 posts, read 66,100,109 times
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well i am no company insider and i certainly made enough to retire on in those markets you call a casino doing nothing but staying the course and using plain ole funds


if those markets are what you call a casino i will take them any day .

in fact i bet looking at typical accumulation period , you can't find a 20 year period a 50/50 mix of diversified funds and bonds ever lost money for a single sole that was not self inflicted because of bad investor behavior . can those who visit casino's make that claim ?



.

Last edited by mathjak107; 03-15-2017 at 04:29 PM..
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Old 03-15-2017, 05:53 PM
 
4,725 posts, read 2,255,657 times
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Quote:
Originally Posted by Larry Caldwell View Post
but you blindly assess your worth in terms of arbitrary markers, rather than evaluating your assets. Your house may have tripled in sale price, but it's still worth exactly the same as the day you bought it - it's a place to sleep and keep your stuff. Farm ground has substantially outperformed the S&P over the last 50 years, but the farm is no bigger than it was when you bought it. The supposed sale price is just a fiction until you sell, and then you are stuck with a bunch of worthless money in search of actual assets.
He's not "blindly" assessing in terms of arbitrary markers, he's using fair market value of a tangible asset. Whether one is using that asset for something else doesn't affect the market value in relation to the asset side of his balance sheet, he can build a throne of gold bricks to sit on and that gold is still worth the market price for gold. The money you gain from sale of house isn't worthless, you can take it down the street and buy beer. That is how money works, and medium of exchange.

Quote:
Originally Posted by Larry Caldwell View Post
When you have a good run in one asset, it's a good idea to take some winnings off the table and move them somewhere safer. Investment counselors call this "rebalancing." It's a common strategy. You should look into it. It's smart to keep some markers in an investment account, where you can quickly buy undervalued assets.
You're attempting to lecture about the fundamental concept of rebalancing but you don't even understand it. It has to do with maintaining an asset allocation appropriate to your investment goals, not fleeing to safety after an asset class has a good run. It might mean moving assets from stocks to bonds, or bonds to stocks, or cash to stocks, or whatever but it not taking anything off the table. If my asset allocation is 70% stocks and 25% bonds and bonds have a good year I'm not automatically selling bonds to pull my chips off the table because stocks might have done better.

Rebalancing also isn't about "quickly buying undervalued assets" you're confusing rebalancing with market timing. Rebalancing can be done when an asset class has exceeded a threshold imbalance relative to desired allocation, but many do it on calendar event like annually. Rebalancing can also be done with a combination of the two for example annually or if has been six months and an asset class is more than 5% off desired allocation.

Quote:
Originally Posted by Larry Caldwell View Post
Keeping track of the math is a good idea too. Suppose you project stocks to run up another 20%, before making a 20% correction. Say 100 shares of your stock is worth $2000, plus 20%, leaves you with $2400. Then a 20% correction comes along and the stock drops $480, to $1920. Oop, you just lost 4% of your original investment. Not such a good deal, is it? Greed is a great motivator but a lousy paymaster. If you had just taken half your winnings off the table and bought back in after the correction, you would end up with 102 shares, a 2% gain in assets rather than a 4% loss in markers.
This is silly, it assumes people correctly project how much stocks will gain before the next correction, when the correction will come, and the depth of the correction.

Quote:
Originally Posted by Larry Caldwell View Post
Do you see how focusing on a fictitious market value obscures the reality of investing?
Why no, you talked a lot but didn't actually make a point other than that you believe in your market timing abilities.
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Old 03-15-2017, 05:58 PM
 
4,725 posts, read 2,255,657 times
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Quote:
Originally Posted by davidt1 View Post
For you to make money in the stock market, some idiots behind you somewhere down the line will lose money. In a Vegas casino, the house always win. In the stock market, that's company insiders. I have been on both company insider and individual trader.
Nonsense, you ignore the fact that the stock market has historically grown in real value.

Sure there are people who lose money in the stock market, but it doesn't take being an insider to make money. Can you tell me how many times in history someone who just plunked all their money into total stock market lost money after thirty years?
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Old 03-16-2017, 02:36 AM
 
64,577 posts, read 66,100,109 times
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the real deal is diversifying away from equity's and using asset classes with less long term growth potential like bonds has always led to lower returns than just staying put in 100% equity's .

with typical accumulation periods spanning decades owning other assets like bonds can make no logical sense financially .

when you own bonds you are owning an asset that will mitigate temporary losses in a down turn and yet over the long term permanently reduce your gain potential . for a long term investor there is really no logic to it since temporary short term drops are irrelevant .


bonds and cash are used when you have pucker factor issues or time constraints on the use of the money .
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Old 03-16-2017, 06:15 AM
 
4,829 posts, read 4,806,658 times
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Quote:
Originally Posted by C2BP View Post
Unless Congress agrees to raise federal debt limit this DEBT ORGY or PARTY is ending in just few days......on March 15th.

Could our phony economy collapse? Yes. I'm not sure why the FED is so eager to raise rates NOW -after waiting for 15 years to do it. I think there may be other issues (political?) that the FED is considering now. A recession now would take the wind out of the new administration? Of course, Trump is not going to take FED manipulation and sabotage quietly.
Why is it phony? People economic activities are very real, it is just that they engage in those activities to get a piece of new money FeDs can create by megatonnes until Sun explodes. Economics 101 seems doesnt work in the sense of top 1% investor class and corporations reinvesting the bulk of their loot into real economy, they bag the loot and engane in the activities to get more new money FEDs generously supply. Much of than money is "borrowed" and distributed by government to fund this or that. As inequality mushrooms investor class does not have many insentives to re invest, government and "debt" money become the drivers of free market economy, and then comes Trump and alt right lunatics determined to shrink the only engines remaining while pushing inequality to another level. That will not end up good rather sooner than later.

Last edited by RememberMee; 03-16-2017 at 06:30 AM..
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Old 03-16-2017, 10:07 AM
 
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Threads like this reek of stupidity quickly indeed.

If I bought XYZ stock for $10 a share and sell for $15. The person who paid $15 for my stock sold it for $20 a year later. The person who paid $20 for this stock will lose money if this stock declines in value. Nothing goes up forever. At some point down the line some fool will lose money.

How stupid does one have to be not to see something as simple as this?

Last edited by davidt1; 03-16-2017 at 10:25 AM..
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Old 03-16-2017, 12:18 PM
 
64,577 posts, read 66,100,109 times
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well your cash depreciates every year and at some point some fool will be holding something worthless ,. i will gladly take my chances on the 500 largest company's in america
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