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The problem is that most of you mix economic activity with stock market performance and even with manipulated real estate market.
There is NO causal connection between economic activity, a company's fundamentals and the stock behavior. There is an IMPLIED connection only. The stock market is its own beast, driven by emotions, fears, BIG MONEY MANIPULATING. The stock is NOT the shadow of THE ECONOMIC RESULTS.
Just becuase stock market has been going up and real estate market has been purposely inflated it doesn't mean our economy is growing organically, that we had some real organic growth. We didn't.
You have to study the stock as an independent animal, with its own rules and life.
Just because many companies are meeting dumbed down RESULTS is not going to turn our economy around. Our economy has been DEAD since 2001!!!!! The sooner you all realize this, the better for you.
What the FED did with ZIRP was to allow a LOT of companies to continue existing even though they SHOULD NOT have been allowed to survive according to the main premise of capitalism -- which says falling fruit is a part of the plan. I hope there are still few Capitalists left on this forum that understand very well why I'm saying here.
SOCIALISM FOR THE CAPITALISTS. But we will see if they can adapt to a SHRINKING MARKET/RISING RATE scenario that is coming now.
True, but the world is full of idiots who can actually shape market directions through self-fulfilling prophecies. For decades morons who have been getting financial news from Kramer, NBC, WSJ, etc. have been conditioned to follow and regurgitate what they are told. Collectively that is what they know and see.
Seems like we have been in a secular bull market forever.. stock market has hit astronomical highs, unemployment is low, credit is super cheap, home prices have skyrocketed to the stars and people now have home equity that they are either eyeing or have already leveraged, people are having a good ole time.
How long will this party last?
How old can you be that the 'secular bull market' seems like forever?
There are always people who make poor choices at managing their money. If they were carrying substantial debt and were forced to sell assets during a downturn, it would be very difficult for them to recover. As long as you stayed away from the personal debt quicksand 10 years ago, you have done very well in the recovery.
The Trump administration is evidently doing away with the Fiduciary Rule which forced financial advisors to put their clients interests first before their own when it comes to earning returns. Once again, investors will be at the mercy of financial advisors who have their own interests first and foremost. The couple I was thinking about barely had high school educations. They thought they were getting sound advice but got suckered by an FA. They lost their life savings. Poor choice? Sure. But we live in a financial scam and if one does not know the system they are subject to getting hammered. How many Wells Fargo execs have been charged with crimes for opening up false accounts for over 2 million of their customers? What about VW owners who got scammed by a large corporation? At some point, there is a trust factor. Of course I trust no one apart from my wife. No doctors, bankers, real estate agents or anyone with a service to sell. Do your homework. Too often though it is difficult to find out the rules of a particular game.
The Trump administration is evidently doing away with the Fiduciary Rule which forced financial advisors to put their clients interests first before their own when it comes to earning returns. Once again, investors will be at the mercy of financial advisors who have their own interests first and foremost. The couple I was thinking about barely had high school educations. They thought they were getting sound advice but got suckered by an FA. They lost their life savings. Poor choice? Sure. But we live in a financial scam and if one does not know the system they are subject to getting hammered. How many Wells Fargo execs have been charged with crimes for opening up false accounts for over 2 million of their customers? What about VW owners who got scammed by a large corporation? At some point, there is a trust factor. Of course I trust no one apart from my wife. No doctors, bankers, real estate agents or anyone with a service to sell. Do your homework. Too often though it is difficult to find out the rules of a particular game.
It's almost impossible to lose your life savings unless you really don't have any. If your liabilities exceed your assets, you don't have any savings. The unrealized value of assets is just fiction. You may think your stocks have gained 100%, but unless you have doubled the number of shares you own it's just a fantasy. You may think your house has doubled in value, but unless you have sold it and have the money in hand, it's just a fantasy. Even bonds are at the mercy of interest rate fluctuations. If rates go up, you have to hold the bonds to maturity to get your money.
Investing is a gamble, and the first rule of gambling is take your winnings off the table. That doesn't mean leave the market, it means move some of your gains to a place where they won't be part of your loss. Then when the market tanks, which it always does, you can ride through the downturn without being forced to reduce your assets, and will be in a great position to purchase more assets. You don't need an investment advisor to explain this, you need an investment advisor to suggest places to put your money. Then you choose.
unrealized gains or losses are just that , a tax event . your value and your worth is exactly what it is at any given time whether you sell or not . news flash -it is all your money -there is no such thing as playing with the houses money .
the fact you close a position out each night and re-buy it in the morning does not change a thing vs keeping the money in play in the same investment over night . you can even sell one investment and buy an equivalent one and despite the fact a sale was involved nothing changed as far as your portfolio value being what it is
so selling creates a tax event but your worth and value invested does not change .
it is just variable each day .
you may have less value if you sell and put the money in something else with less growth potential like cash but that is an allocation choice and it has nothing to do with whether it is your money or the houses as you call it .
as far as take the winnings off the table ? what are winnings . i started investing in 1987 , today that is 7 figures . very little of it is my original money a few percent is my money by your logic when in reality it is all my money , the value changes that is all . .
even cash's value varies as inflation varies . what your cash is worth changes too as inflation can cause more or less of a real return loss on it . same with taxes making that a variable amount too . today it may have a 15% marginal tax rate . next year you may be in the 25% marginal bracket . is it all your money if the bank ave you the interest over time ? of course it is .
that money is as all yours as your bank account is . it is only the fact you choose to let it ride rather than close it out daily and reinvest it so the value varies.
when i set my draw rate for the year each dec 31 st it is based on that closing value , not whether i sold everything off or not .
Last edited by mathjak107; 03-14-2017 at 09:49 AM..
The last correction was 53% over a period of just 5 months not 12%... why do you think it will correct only 12% when it's doubled?
Nope.
The last correction was Nov 2015 to Jan 2016, down about 10.4%.
The correction before that was summer 2015, down about 11%.
Both times the serial doomsdayers were out in force screaming I-told-you-sos, declaring the good times having come to an end. Why do you think it will give back over 50% when corrections closer to 10% are far more common?
You may think your house has doubled in value, but unless you have sold it and have the money in hand, it's just a fantasy.
This may be logic, but nobody I know who owns a home thinks this way... even though your argument has historical precedent (the 2008 crash) everyone who is a homeowner that i've talked to thinks this time the gains are permanent. Most think that from this point gains are going to be smaller but they will be gains for sure.
Talk to people here in SoCal about home values receding and they will just laugh in your face, most cite economic indicators - unemployment is low, interest rates are still low and they seem to be very vehemently resisting upward pressures, inventory is still at historic lows and there still is a healthy influx of foreign capital into real estate.
Location: Was Midvalley Oregon; Now Eastside Seattle area
13,061 posts, read 7,497,585 times
Reputation: 9788
Quote:
Originally Posted by lieqiang
Nope.
The last correction was Nov 2015 to Jan 2016, down about 10.4%.
The correction before that was summer 2015, down about 11%.
Both times the serial doomsdayers were out in force screaming I-told-you-sos, declaring the good times having come to an end. Why do you think it will give back over 50% when corrections closer to 10% are far more common?
Whether true or not. I'm pretty much now in cash, Discetionsry trading accounts. Other retirement streams are not directly connected to the Markets, which was not true in 2007_2009. AGE 66/69". Retired. Pulling SS income.
YMMV
unrealized gains or losses are just that , a tax event . your value and your worth is exactly what it is at any given time whether you sell or not . news flash -it is all your money -there is no such thing as playing with the houses money .
the fact you close a position out each night and re-buy it in the morning does not change a thing vs keeping the money in play in the same investment over night . you can even sell one investment and buy an equivalent one and despite the fact a sale was involved nothing changed as far as your portfolio value being what it is
so selling creates a tax event but your worth and value invested does not change .
it is just variable each day .
you may have less value if you sell and put the money in something else with less growth potential like cash but that is an allocation choice and it has nothing to do with whether it is your money or the houses as you call it .
as far as take the winnings off the table ? what are winnings . i started investing in 1987 , today that is 7 figures . very little of it is my original money a few percent is my money by your logic when in reality it is all my money , the value changes that is all . .
even cash's value varies as inflation varies . what your cash is worth changes too as inflation can cause more or less of a real return loss on it . same with taxes making that a variable amount too . today it may have a 15% marginal tax rate . next year you may be in the 25% marginal bracket . is it all your money if the bank ave you the interest over time ? of course it is .
that money is as all yours as your bank account is . it is only the fact you choose to let it ride rather than close it out daily and reinvest it so the value varies.
when i set my draw rate for the year each dec 31 st it is based on that closing value , not whether i sold everything off or not .
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?
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