Will there be a crash to crazy asset valuation?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
newyorker
Posts: 1635
Joined: Sun May 17, 2020 7:59 am

Will there be a crash to crazy asset valuation?

Post by newyorker »

I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
User avatar
ApeAttack
Posts: 915
Joined: Wed Dec 23, 2020 7:28 pm
Location: Gorillatown, USA

Re: Will there be a crash to crazy asset valuation?

Post by ApeAttack »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
All of those things will eventually crash (again and again and again). So select an asset allocation of diversified stocks and bonds that will allow you to not panic when the inevitable market crash happens.

Don't put your money into cars and watches to avoid item #3.
May all your index funds gain +0.5% today.
User avatar
firebirdparts
Posts: 4411
Joined: Thu Jun 13, 2019 4:21 pm
Location: Southern Appalachia

Re: Will there be a crash to crazy asset valuation?

Post by firebirdparts »

Nobody knows nothing. Pick an asset allocation and be ready to ride through the storm on that horse.
This time is the same
Leesbro63
Posts: 10638
Joined: Mon Nov 08, 2010 3:36 pm

Re: Will there be a crash to crazy asset valuation?

Post by Leesbro63 »

Could be that stocks and real estate don’t crash, but stay about the same for years.
mptfan
Posts: 7217
Joined: Mon Mar 05, 2007 8:58 am

Re: Will there be a crash to crazy asset valuation?

Post by mptfan »

How do you define "crash"?
TheoLeo
Posts: 576
Joined: Mon Apr 02, 2018 11:39 am

Re: Will there be a crash to crazy asset valuation?

Post by TheoLeo »

Whatever I would predict, the exact opposite would start to unfold tomorrow.
User avatar
JonnyDVM
Posts: 2999
Joined: Wed Feb 12, 2014 5:51 pm
Location: Atlanta, GA

Re: Will there be a crash to crazy asset valuation?

Post by JonnyDVM »

I joined this forum almost a decade ago. There are constantly posts about a crash coming in overpriced equities and overpriced real estate. Eventually the pessimistic predictions will be right. The vast majority of the time they have been wrong.

I think back on how many lives have undoubtedly been negatively affected by bad advice given here about waiting to buy a house until the RE market cools off and shake my head. At least the advice on the stock market is generally sound in that trying to time and predict it is futile. It’s quite possible the market will move sideways for years. Or it could continue to go up or down. No one can predict this. What we can predict with almost certainly, is that in the long run the market will return more than you put in it.
I’d trade it all for a little more | -C Montgomery Burns
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: Will there be a crash to crazy asset valuation?

Post by anon_investor »

TheoLeo wrote: Sun Jun 13, 2021 7:02 am Whatever I would predict, the exact opposite would start to unfold tomorrow.
So what is your prediction? :twisted:
TheoLeo
Posts: 576
Joined: Mon Apr 02, 2018 11:39 am

Re: Will there be a crash to crazy asset valuation?

Post by TheoLeo »

anon_investor wrote: Sun Jun 13, 2021 7:11 am
TheoLeo wrote: Sun Jun 13, 2021 7:02 am Whatever I would predict, the exact opposite would start to unfold tomorrow.
So what is your prediction? :twisted:
I predict a continued bull run. I am sorry.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: Will there be a crash to crazy asset valuation?

Post by anon_investor »

TheoLeo wrote: Sun Jun 13, 2021 9:15 am
anon_investor wrote: Sun Jun 13, 2021 7:11 am
TheoLeo wrote: Sun Jun 13, 2021 7:02 am Whatever I would predict, the exact opposite would start to unfold tomorrow.
So what is your prediction? :twisted:
I predict a continued bull run. I am sorry.
Time to sell to cash! :twisted:

I can never time the market either, which is why my IPS says to invest on pay day don't wait to try to time the market.
User avatar
Watty
Posts: 28859
Joined: Wed Oct 10, 2007 3:55 pm

Re: Will there be a crash to crazy asset valuation?

Post by Watty »

newyorker wrote: Sun Jun 13, 2021 12:37 am If so, what is the best way to hedge against it?
Diversification.

The problem is that even if you are generally right about your feeling it can play out in unexpected ways or the timing could end up being different than you thought.
User avatar
Forester
Posts: 2400
Joined: Sat Jan 19, 2019 1:50 pm
Location: UK

Re: Will there be a crash to crazy asset valuation?

Post by Forester »

Whatever you own, whatever your portfolio is, a decade+ is needed for those assets to grow into the valuations. Compare to the year 2000, US stocks are similarly expensive, there's no refuge in ex-US, gold is not cheap, commodities are not cheap, bonds are already at negative real rates. The US 5yr real rate is -1.67%, about the same as the German 5yr. The US 60/40 was exactly flat after inflation 2000-2010 and that was with bonds starting the decade at 6.5%. The 2020s are probably a write-off, anyone who wants to retire today needs a few years of cash built up.
Amateur Self-Taught Senior Macro Strategist
Robot Monster
Posts: 4215
Joined: Sun May 05, 2019 11:23 am

Re: Will there be a crash to crazy asset valuation?

Post by Robot Monster »

newyorker wrote: Sun Jun 13, 2021 12:37 am Do you guys predict...
My own personal opinion:

Don't invest according to what you predict the weather will be. Invest so your portfolio is resilient to any weather. This means diversification, and taking no more risk then you need to in order to meet your financial goals.

I realize this is contrary to the 100% stock people's thinking, with feelings more akin to Ray Dalio's statements like, "you'd be crazy to invest in bonds". Addressing this I would like to link to a post by Kevin M. link
Explorer
Posts: 769
Joined: Thu Oct 13, 2016 7:54 pm

Re: Will there be a crash to crazy asset valuation?

Post by Explorer »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
The way I am hedging is to reduce equity % of my holdings since every asset class is going up. Stay within a band of equity % you are comfortable with depending on your perspective of where the market is going or could be going.
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Will there be a crash to crazy asset valuation?

Post by Nathan Drake »

Forester wrote: Sun Jun 13, 2021 9:44 am Whatever you own, whatever your portfolio is, a decade+ is needed for those assets to grow into the valuations. Compare to the year 2000, US stocks are similarly expensive, there's no refuge in ex-US, gold is not cheap, commodities are not cheap, bonds are already at negative real rates. The US 5yr real rate is -1.67%, about the same as the German 5yr. The US 60/40 was exactly flat after inflation 2000-2010 and that was with bonds starting the decade at 6.5%. The 2020s are probably a write-off, anyone who wants to retire today needs a few years of cash built up.
ExUS, EM, and SCV do not need a decade to grow into these valuations as they are fairly valued or low valued, particularly relative to even lower interest rates
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
User avatar
nisiprius
Advisory Board
Posts: 52211
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Will there be a crash to crazy asset valuation?

Post by nisiprius »

Jenga is a commercial tabletop game in which people build a tower of nicely-made wood blocks until it becomes unstable and falls. Theoretically if you imagine no external forces and geometrically perfect blocks there is no reason in Newtonian physics why it should ever fall. That means that it is fairly hard to develop any quantitative theory of how high a Jenga tower can be.

We also can sense when the tower is starting to become unstable, and say "it can't go on much longer, it is certain to fall over soon." Yet the whole pleasure of the game is that the exact moment of collapse is quite unpredictable, and people are constantly being surprised when several people in a row are able to continue adding blocks well past the point where it looked ready to fall... or, when it suddenly falls unexpectedly, possibly due to a stray air current or vibration or an accidental nudge by a clumsy player.

The point is to see how you can know, at the same time, "it must fall soon," and yet understand that betting money on the exact point would be essentially gambling.

It's the same thing with the stock market... or any asset bubble. Just because you think you see that it is ready to collapse,

a) you may be wrong--and if you keep an actual record of what you think you will be astonished at just how often you are wrong but forget about it later;

b) it's not good enough to be vaguely right; in order to benefit much, you need to have surprisingly precise timing on when to buy, how long to hold, and when to sell.

Yes, I think it is unmistakable that the United States is in the grip of a gambling mania. It's obvious in the case of "meme stocks" like GME or AMC; to a lesser extent in sliver-thin actively-managed ETFs like ARKK. It is even more obvious in the case of SPACs which are literally companies like the company in the 1720 bubble "for carrying out an undertaking of great advantage, but nobody to know what it is."

What is even more manic is the way new fads keep popping up every couple of months. Just when you think you've seen it all, up come NFTs, which are speculations in something so tenuous that it is extremely difficult to describe accurately what it is that you own when you own one.

The rise and fall of fads is so sudden that I may already be ludicrously out of date in the last couple of paragraphs. Nobody's posted in the ARKK thread for a couple of weeks, and nobody's mentioned NBA Top Shots in the forum recently that I've noticed. Some of the meme stocks are in play again, though.

But I am doing nothing at all about it. For one thing, it's hard to gauge the size of the mania. I suspect that it isn't that big. I've posted pointing out what a tiny bit of the stock market AMC is; it can grow by ten or go to zero and you wouldn't be able to see it in a chart of the Total Stock Market index fund. I'm intrigued by the theory that it is a pandemic thing. The pause in sport created a pause in sports betting and drove small bettors into the arms of Robinhood for their gambling fix. Maybe.

Anyway, I am convinced that whatever you think about the height of the stock market and the possibility that "sooner or later a crash is coming," it is best not to do anything at all about it.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
zaboomafoozarg
Posts: 2431
Joined: Sun Jun 12, 2011 12:34 pm

Re: Will there be a crash to crazy asset valuation?

Post by zaboomafoozarg »

JonnyDVM wrote: Sun Jun 13, 2021 7:05 amI joined this forum almost a decade ago. There are constantly posts about a crash coming in overpriced equities and overpriced real estate.
Whoa, this just reminded me that I joined a decade ago yesterday!

Back in 2011, many people were sure that stocks were overpriced and going to crash lower than 2009.

Ironically right after I made my first large taxable purchase in July 2011, they crashed 20% in a month.
muffins14
Posts: 5528
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Will there be a crash to crazy asset valuation?

Post by muffins14 »

For the upcoming watch crash I am hoarding cash, which I will use to buy up all the watches at a discount and then hoard them for the next watch frenzy. Also buying an apartment in Geneva so I have insider information on the watch market
Crom laughs at your Four Winds
User avatar
JoMoney
Posts: 16260
Joined: Tue Jul 23, 2013 5:31 am

Re: Will there be a crash to crazy asset valuation?

Post by JoMoney »

A crash will come eventually, we don't know when, Boglehead's don't make predictions as to the timing of these things. Just have an asset allocation or enough 'safe' money set aside that you'll be able to "stay the course" through whatever stock market gyrations occur.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Will there be a crash to crazy asset valuation?

Post by Lee_WSP »

It could just go sideways for a decade. We just don't know. All we can say with any certainty is that it's very expensive relative to the past.
dharrythomas
Posts: 1223
Joined: Tue Jun 19, 2007 4:46 pm

Re: Will there be a crash to crazy asset valuation?

Post by dharrythomas »

It may crash or returns may be low for an extended time while earning catch up and inflation does its bit. Bonds will not be a haven if interest rates rise.

I don’t know how it plays out. I do know that I can’t time it. Try to find the asset allocation that you are least uncomfortable with and try to stick to it, making any adjustments on the margin. Broadly diversified balanced funds, like LifeStrategy and Target Retirement, will mask some of the turbulence.

Good luck.
User avatar
Cheez-It Guy
Posts: 4007
Joined: Sun Mar 03, 2019 3:20 pm

Re: Will there be a crash to crazy asset valuation?

Post by Cheez-It Guy »

Let me just go on record to say I predict a crash coming in the future. . .
Johnathon Livingston
Posts: 163
Joined: Sun May 09, 2021 6:10 pm

Re: Will there be a crash to crazy asset valuation?

Post by Johnathon Livingston »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
I think the bottom will fall out of collectibles and other products that are overpriced right now. I don’t buy that stuff to begin with but in general I’m not making any big purchases until inflation subsides.

I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.

I think speculation is driving investment in American technology growth companies, but these companies have an amazing track record and actually make something. While money has flowed out of growth stocks, they have flowed into value stocks. So, the money hasn’t left the stock market, it’s just been moved around. If you buy the whole market, then you’ve done very well this year while growth stocks bounce around and growth funds take a hit.

Some are concerned that the Fed is letting inflation get out of control by not raising rates because the Fed has become politically motivated and is trying to help underprivileged people by easing the federal government’s spending. That could lead to an inflation frenzy that causes the Fed to have to make a hard correction, and that whole situation could send the US into a recession. That would send the world into a recession. Then we’d have a crash. But, the mainstream view is that inflation is temporary and is more or less offsetting the low inflation from a year ago. Most believe it will all pass.

There is also concern about a housing bubble forming and even an ETF and index investment bubble forming. Ie ETFs could become illiquid and index investments can result in overvaluing crummy companies. I don’t buy any of that, but do think a contraction in real estate is possible.

At the end of the day, you just have to stay the course.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
Just keep DCAing. It's not protection per-se but we get to load up shares on the cheap should there be a crash. This is the value of DCAing over lump summing.
am
Posts: 4233
Joined: Sun Sep 30, 2007 9:55 am

Re: Will there be a crash to crazy asset valuation?

Post by am »

Cheez-It Guy wrote: Sun Jun 13, 2021 10:50 am Let me just go on record to say I predict a crash coming in the future. . .
You are right. When? It doesn’t matter either because we always make it out of crashes better then before.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

am wrote: Sun Jun 13, 2021 11:36 am
Cheez-It Guy wrote: Sun Jun 13, 2021 10:50 am Let me just go on record to say I predict a crash coming in the future. . .
You are right. When? It doesn’t matter either because we always make it out of crashes better then before.
Nikkei 1989: "Hello"
User avatar
ClevrChico
Posts: 3259
Joined: Tue Apr 03, 2012 8:24 pm

Re: Will there be a crash to crazy asset valuation?

Post by ClevrChico »

Definitely, and the best you can do is stay the course.

Collector cars are going to be interesting as boomers downsize. Car ownership itself could change a lot too. With remote/hybrid work we could easily go to one car. The only thing stopping us is that our super low monthly cost of ownership is about the price of a couple Uber rides.
Robot Monster
Posts: 4215
Joined: Sun May 05, 2019 11:23 am

Re: Will there be a crash to crazy asset valuation?

Post by Robot Monster »

Marseille07 wrote: Sun Jun 13, 2021 11:53 am
am wrote: Sun Jun 13, 2021 11:36 am
Cheez-It Guy wrote: Sun Jun 13, 2021 10:50 am Let me just go on record to say I predict a crash coming in the future. . .
You are right. When? It doesn’t matter either because we always make it out of crashes better then before.
Nikkei 1989: "Hello"
Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
Northern Flicker
Posts: 15363
Joined: Fri Apr 10, 2015 12:29 am

Re: Will there be a crash to crazy asset valuation?

Post by Northern Flicker »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
Here is a graph of the total return of an S&P500 fund since August 1976. Is being at an all-time high the exception or the norm?

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
You should ALWAYS plan around a crash happening tomorrow that takes 2-10 years to recover. Because it might.

This is always true.

If you're not retiring for 15+ years, you might still be mostly in stocks even assuming a crash tomorrow. Because you have time to wait for the stock market to recover.

If you're closer to retirement, you should have more in bonds/CDs/cash, because you might need to start withdrawing money before the stock market fully recovers.

Once you're prepared mentally and financially for a crash happening tomorrow, you no longer have to worry about it.

Trying to predict a crash is very hard. Trying to hedge at some times, and not other times is a bad idea. Always be prepared. Then you don't have to worry about it anymore.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
nisiprius
Advisory Board
Posts: 52211
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Will there be a crash to crazy asset valuation?

Post by nisiprius »

If you put money into an interest-earning bank savings account and make no transactions*, it will be at an all-time high every month, with no exceptions.

*(except whatever you need to do every few years to prevent it from being considered "dormant")
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
HomerJ
Posts: 21281
Joined: Fri Jun 06, 2008 12:50 pm

Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

Here's the thing.

You know the 10% nominal long-term return of the stock market?

That INCLUDES the crashes. Read that again.

In the past, you didn't have to avoid the crashes to become wealthy over the long-run with money in the stock market.

So far, buy and holding THROUGH the crashes (which is far easier than timing the market and making changes all the time) made you rich.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: Will there be a crash to crazy asset valuation?

Post by anon_investor »

Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
Time to buy international? :twisted:
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

anon_investor wrote: Sun Jun 13, 2021 12:41 pm
Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
Time to buy international? :twisted:
I'm not sure...in 2008, international crashed harder than the US even though we were the epicenter.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: Will there be a crash to crazy asset valuation?

Post by anon_investor »

Marseille07 wrote: Sun Jun 13, 2021 12:44 pm
anon_investor wrote: Sun Jun 13, 2021 12:41 pm
Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
Time to buy international? :twisted:
I'm not sure...in 2008, international crashed harder than the US even though we were the epicenter.
I think the Nikkei did return to its highs, it only took 30 years, not sure if that factors in dividends though.
Northern Flicker
Posts: 15363
Joined: Fri Apr 10, 2015 12:29 am

Re: Will there be a crash to crazy asset valuation?

Post by Northern Flicker »

Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
That is not correct. It may have taken from 1929-1955 for prices to recover, but if you include dividends (which were significantly higher back then) it did not take anywhere close to that long to be made whole after 1929, assuming you were able to stay invested. Of course many people were not able to stay the course, buying stocks on margin and/or lost their jobs, and thus had to liquidate their positions and spend the proceeds. This highlights the benefits of diversification in bonds (anti-leverage).
Last edited by Northern Flicker on Sun Jun 13, 2021 12:52 pm, edited 1 time in total.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

anon_investor wrote: Sun Jun 13, 2021 12:48 pm I think the Nikkei did return to its highs, it only took 30 years, not sure if that factors in dividends though.
Their ATH is something like 39K. They recently hit 30K...still quite a way to go. Now, if you're talking about real returns I'm not sure.

Also keep in mind, the BOJ had been buying ETFs (think of it like the Fed buying SPY) to support the pricing. They're now decreasing their holdings. When will they ever get to 39K is anyone's guess at this point.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

Northern Flicker wrote: Sun Jun 13, 2021 12:50 pm
Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
That is not correct. It may have taken from 1929-1955 for prices to recover, but if you include dividends (which were significantly higher back then) it did not take anywhere close to that long to be made whole after 1929, assuming you were able to stay invested. Of course many people were not able to stay the course, buying stocks on margin and/or lost their jobs, and thus had to liquidate their positions and spend the proceeds. This highlights the benefits of diversification in bonds (anti-leverage).
Not sure what you mean by not correct. I was speaking nominally about the index itself, which you agreed took 26 years.
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: Will there be a crash to crazy asset valuation?

Post by anon_investor »

Marseille07 wrote: Sun Jun 13, 2021 12:51 pm
anon_investor wrote: Sun Jun 13, 2021 12:48 pm I think the Nikkei did return to its highs, it only took 30 years, not sure if that factors in dividends though.
Their ATH is something like 39K. They recently hit 30K...still quite a way to go. Now, if you're talking about real returns I'm not sure.

Also keep in mind, the BOJ had been buying ETFs (think of it like the Fed buying SPY) to support the pricing. They're now decreasing their holdings. When will they ever get to 39K is anyone's guess at this point.
My mistake. The OP probably should sure up his/her EF and keep buying equities.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

anon_investor wrote: Sun Jun 13, 2021 12:54 pm My mistake. The OP probably should sure up his/her EF and keep buying equities.
Since the OP is doing 2k/day DCA, keeping it up provides adequate protection. If you include EF into your AA, then we can see that DCA is a form of rising glidepath where they rebalance cash into equities. A crash happening here actually benefits them.
Topic Author
newyorker
Posts: 1635
Joined: Sun May 17, 2020 7:59 am

Re: Will there be a crash to crazy asset valuation?

Post by newyorker »

Thank you for lots of helpful responses. I guess i am at 80/20 right now in terms of my allocation. 20 in cash (CD)

I never understood why people buy bond. The return is super low and it tanks along with stock too. Isnt it better to put money into CD or high interest savings acct and buy stocks when it drops? Or am I not thinking correctly?
User avatar
anon_investor
Posts: 15122
Joined: Mon Jun 03, 2019 1:43 pm

Re: Will there be a crash to crazy asset valuation?

Post by anon_investor »

Marseille07 wrote: Sun Jun 13, 2021 12:57 pm
anon_investor wrote: Sun Jun 13, 2021 12:54 pm My mistake. The OP probably should sure up his/her EF and keep buying equities.
Since the OP is doing 2k/day DCA, keeping it up provides adequate protection. If you include EF into your AA, then we can see that DCA is a form of rising glidepath where they rebalance cash into equities. A crash happening here actually benefits them.
The risk is a crash results in a job loss, the the EF is really needed.
Northern Flicker
Posts: 15363
Joined: Fri Apr 10, 2015 12:29 am

Re: Will there be a crash to crazy asset valuation?

Post by Northern Flicker »

Marseille07 wrote: Sun Jun 13, 2021 12:51 pm
anon_investor wrote: Sun Jun 13, 2021 12:48 pm I think the Nikkei did return to its highs, it only took 30 years, not sure if that factors in dividends though.
Their ATH is something like 39K. They recently hit 30K...still quite a way to go. Now, if you're talking about real returns I'm not sure.

Also keep in mind, the BOJ had been buying ETFs (think of it like the Fed buying SPY) to support the pricing. They're now decreasing their holdings. When will they ever get to 39K is anyone's guess at this point.
You again are using a price index, whixh is not representative of return of the asset. If that is down 25% over about 30 years, then the dividend stream would only have needed to be about 0.7% over the period to make the total return whole in nominal terms. I don't know the average dividend yield over that period, but it is about 1.8% today, and likely was higher over a substantial part of the last 30 years.
Last edited by Northern Flicker on Sun Jun 13, 2021 1:05 pm, edited 1 time in total.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

anon_investor wrote: Sun Jun 13, 2021 12:59 pm
Marseille07 wrote: Sun Jun 13, 2021 12:57 pm
anon_investor wrote: Sun Jun 13, 2021 12:54 pm My mistake. The OP probably should sure up his/her EF and keep buying equities.
Since the OP is doing 2k/day DCA, keeping it up provides adequate protection. If you include EF into your AA, then we can see that DCA is a form of rising glidepath where they rebalance cash into equities. A crash happening here actually benefits them.
The risk is a crash results in a job loss, the the EF is really needed.
Absolutely. I didn't mean to say they should deplete the EF completely. I'm keeping 5% for fixed income myself.
Northern Flicker
Posts: 15363
Joined: Fri Apr 10, 2015 12:29 am

Re: Will there be a crash to crazy asset valuation?

Post by Northern Flicker »

Marseille07 wrote: Sun Jun 13, 2021 12:53 pm
Northern Flicker wrote: Sun Jun 13, 2021 12:50 pm
Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
That is not correct. It may have taken from 1929-1955 for prices to recover, but if you include dividends (which were significantly higher back then) it did not take anywhere close to that long to be made whole after 1929, assuming you were able to stay invested. Of course many people were not able to stay the course, buying stocks on margin and/or lost their jobs, and thus had to liquidate their positions and spend the proceeds. This highlights the benefits of diversification in bonds (anti-leverage).
Not sure what you mean by not correct. I was speaking nominally about the index itself, which you agreed took 26 years.
It is not correct to exclude dividends from a statement about the nominal return of US stocks.
Last edited by Northern Flicker on Sun Jun 13, 2021 1:05 pm, edited 1 time in total.
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: Will there be a crash to crazy asset valuation?

Post by rockstar »

newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
Or these could be the new prices given the cost to borrow. Money is cheap these days. No one knows.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

Northern Flicker wrote: Sun Jun 13, 2021 1:03 pm It is not correct to exclude dividends from a statement about the return of US stocks.
Let's agree to disagree. I'm of the opinion that there are multiple ways to look at the return of US stocks. I don't go around judging what's correct and what's not.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

Northern Flicker wrote: Sun Jun 13, 2021 1:01 pm You again are using a price index, whixh is not representative of return of the asset. If that is down 25% over about 30 years, then the dividend stream would only have needed to be about 0.7% over the period to make the total return whole in nominal terms. I don't know the average dividend yield over that period, but it is about 1.8% today, and likely was higher over a substantial part of the last 30 years.
Dividend was 6~8% I believe. You can also consider deflation that followed. As I said above, I'm of the opinion that there are multiple ways to look at this. I don't find it constructive to judge some views as correct or incorrect.
Bryzzo2016
Posts: 78
Joined: Thu Aug 31, 2017 11:15 pm

Re: Will there be a crash to crazy asset valuation?

Post by Bryzzo2016 »

Impossible to time. I happened upon some extra money in a traditional IRA back in January with the meme stock run-up. I got out at the right time...put 20% of it into VTI right away but been sitting on most of the rest watching stocks continue to rise :-/.

My plan each month is to procrastinate one more month. Might just DCA back in over next year or two.
Post Reply