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1992 marked the start of one of the biggest bubbles in stocks in US history. Predicting another such bubble in this environment makes no sense at all.
But the focus on how much the stock market appreciations shows what a Ponzi scheme it is..... Ponzi Schemes always collapse.
What are you suggesting ... that people should have stayed out of the market for eight years from 1992-2000? If you did then you missed out on a 250 percent rate of return on your money.
Same for 2003-2007 with 80 percent appreciation.
So ... what do you recommend, cash investments at 4 percent a year?
With every comment you make its clear you don't understand the stock market. For you, its little different than Vegas. Whether lay offs are good or bad depends on the reason for the lay offs. If you are laying off workers because of increased work productivity or new technology that is good for your bottom line. If you are laying off workers because you need to cut costs because profits are dropping like flies, that is a bunch different situation.
"The news" isn't important, its what happens to profits that matter.
Clearly you don't understand the market either. Companies were profitable before the "downsizing" trend ... they just thought it would increase profits further. Ultimately, it didn't ... causing more harm than good ... which is why it became a passing fad.
That's why you've got to assess market psychology as much as anything else. The real danger of the market dropping by huge amounts was when everybody was in denial about how bad the recession was going to be.
Now we've had complete market capitulation with the big sell offs where everybody thinks the sky is falling. That's your classic bottom signal. Sure .... we'll probably test the lows a few more times but that's it.
What are you suggesting ... that people should have stayed out of the market for eight years from 1992-2000? If you did then you missed out on a 250 percent rate of return on your money.
I'm suggesting that was one of the biggest bubbles in history and suggesting that its going to repeat itself makes little sense.
Quote:
Originally Posted by sheri257
Same for 2003-2007 with 80 percent appreciation.
Which is all gone....
Quote:
Originally Posted by sheri257
Clearly you don't understand the market either. Companies were profitable before the "downsizing" trend ... they just thought it would increase profits further. Ultimately, it didn't ... causing more harm than good ... which is why it became a passing fad.
Again, the difference is the story behind the down sizing. Also, you're going to have a hard time showing it "caused more harm than good". Equity prices at the end of the day need to be justified by dividends. When they aren't there is a bubble. Just as when real estate prices aren't justified by rents, there is a bubble.
Quote:
Originally Posted by sheri257
Now we've had complete market capitulation with the big sell offs where everybody thinks the sky is falling. That's your classic bottom signal. Sure .... we'll probably test the lows a few more times but that's it.
Firstly, this isn't true. Most don't think the sky is falling, rather they are in denial about how severe the recession is going to be. Try talking to the average guy walking down the street.
Secondly, these sorts of things are extremely vague. Certainly market sentiment is more negative now than it was 1 year ago, but that in no sense means it can't get more negative. I still little point in using this as a bottom signal when it requires that you know that this is the bottom in negative market sentiment. You are merely replacing one guess with another that only has a rough correlation to the other.
Yah, if someone's strategy was "be 100% in S&P 500 index fund, buy and hold it forever without ever considering selling a single share or even looking in its direction" a lot of it is gone.
Yah, if someone's strategy was "be 100% in S&P 500 index fund, buy and hold it forever without ever considering selling a single share or even looking in its direction" a lot of it is gone.
And that's what most investors are taught..buy and hold.
The majority of people in 401K's are NOT savvy in the market.
Alot of people don't trade, they invest with a buy and hold strategy.
Heck..most people don't even rebalance their 401K's or keep the correct ratio of equities to bonds according to their age or retirement plans.
Yah, if someone's strategy was "be 100% in S&P 500 index fund, buy and hold it forever without ever considering selling a single share or even looking in its direction" a lot of it is gone.
We are talking about gains in the equity markets, so not so sure what your point is here.
We are talking about gains in the equity markets, so not so sure what your point is here.
Sheri asked whether you were suggesting that people should have stayed out of the market from 1992 to 2000. And if people should have stayed out of the market from 2003 to 2007. The market (S&P 500) was up about 85% in four and a half years during that time (14.65% average annual return).
So then your answer was "which is all gone."
...which sounds like you're saying people shouldn't have been in the market at all during that time "because it was a bubble."
So then I said "Yah, if someone's strategy was "be 100% in S&P 500 index fund, buy and hold it forever without ever considering selling a single share or even looking in its direction" a lot of it is gone."
My point is, bubble or not, an investor does not need to twist in the wind, subject to whatever the whims of the market are. An investor who didn't touch anything is back down to 2003 levels, but an investor who paid even a little bit of attention has come out well ahead from the beginning of 2003 through to today's early close.
I'm not sure how you aren't sure what my point is. S&P 500 index fund is a decent reflection of gains in the equity markets. ARE you suggesting people should have stayed out of the market? ARE you suggesting people should stay out of the market now and forevermore? If we see 12,000 in mid 2010 and by the end of 2011 we're back down at 8200 again will you say it was just a bubble again and that people should have stayed out of the market? If we see 17,000 in 2015 but by 2017 it's back at 9000 should people have stayed out of the market?
Or are you simply forecasting that we're going to languish between 8200 and 9200 for years to come? Or crash down to 5000? I'm just trying to understand what it is you're saying. We all know it went down, that doesn't mean it wasn't a great time to be in the market. Bubbles are profitable for a lot of people, is there something inherently unethical about this fact or something?
If you are a "value" investor or long term buy and hold investor, your return on equities since 1998 would have been "0" except for dividends. Congratulations
And that's what most investors are taught..buy and hold.
The majority of people in 401K's are NOT savvy in the market.
Alot of people don't trade, they invest with a buy and hold strategy.
Heck..most people don't even rebalance their 401K's or keep the correct ratio of equities to bonds according to their age or retirement plans.
I understand that, and I wish it were different. It really wasn't that hard to see coming. I'd love to see people more involved and savvy. There is a lot of money involved.
One of my engineer colleagues at work had basically everything he had in an aggressive growth fund, no bonds, no money markets, no international. Followed it all the way down, sold it to cash last week when we went below 8000. He's in cash now. That was his retirement, and he's 61. And we work for a brokerage firm. But he kept it to himself.
I know from your prior posts that you lament the destruction of defined benefits, while I appreciate the much better disclosure and control of defined contributions. We won't agree, but I can't argue that you're wrong when you say that people are told to buy and hold and leave it be. That's a good strategy for a purely fixed income investment or maybe someone starting to contribute at 22 who plans to retire at 72. It doesn't hold up well for equity funds and maybe 2008 will be a paradigm shift causing people to go more conservative, pay more attention, and protect gains more proactively. Jeff Macke on CNBC says that 2008 is the year Buy and Hold went to die.
...
One of my engineer colleagues at work had basically everything he had in an aggressive growth fund, no bonds, no money markets, no international. Followed it all the way down, sold it to cash last week when we went below 8000. He's in cash now. That was his retirement, and he's 61. And we work for a brokerage firm. ...
Very sad reality. If you are arguing FOR 401Ks, and I tend to agree with you, is that this colleague DID NOT PAY ATTENTION. Every time I have used the "fund selector" that EACH 401k I have participated in (and there have been lots) there are LOTS of details about how you are SUPPOSED to allocate funds and REBALANCE as needed.
I further offer as refutation of any one that thinkgs traditiona defined benefit plans are MAGIC the current crisis of the Big 3 -- last hold out in the defined benefits due to the UAW AND the good ol' State and Federal governments which are ALL facing MASSIVE SHORTFALLS in their pensions DESPITE having armies of skilled pension managers.
The same folks that decry the "printing of money" on these boards don't want to accept the fact that the ONLY way defined benefits ever make sense is when FDRs can make promises out of thin air and the Treasury is order to play like Dorothy in the Wizard of Oz and "pay no attention to the man behind the curtain". The Wizards at the Fed are NEEDED to keep increasing the money supply to make fools believe their pensions are 'real' when they are just INFLATED dollars, and the system would be FORCED to be exactly the same even if they moved pallets of gold from Fort Knox to Paris, Hong Kong, Zurich and Mumbai -- the backing is IRRELEVANT...
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Picture of some one I have no sympathy for
