Yep.burritoLover wrote: ↑Sun May 22, 2022 6:42 amExcept Japan but of course that couldn't happen here cause 'Merica.
"experienced" investors: is this time different?
Re: "experienced" investors: is this time different?
A fool and his money are good for business.
Re: "experienced" investors: is this time different?
Yes, it IS different this time. It is always different. Each bear market has its own unique causes and each recovery from the lows is different. Yet, we can draw lessons from the past as history seems to rhyme, certain issues come up over and over again. As the good book says, there is nothing new under the sun. So you see certain patterns in history, you see eras that have much in common with each other but yet each era is still unique.latesaver wrote: ↑Sat May 21, 2022 8:39 pm Myself included (I am 42 years old), many forum members didn't live through the emotional investing "tolls" brought on by the 2000 dot com bust or the great recession of 2008/2009.
Some older BH's even saw the challenges presented by earlier time periods in the 60s and 70s.
For what it is worth, I don't consider those that survived the "crash" of March 2020 as battle tested.
For those that have actually lived and invested during these time periods (70s, 2000s, 2008/2009), i am curious to hear how you see the current investing landscape. There is no shortage of "wisdom" from younger (hindsight) professionals throwing out CAPE figures, soft new-economy stats, etc., but in this case I am more interested in hearing from experienced investors why they are staying the course.
We also have to be aware that sometimes terrible things do happen and terrible beyond what we dare think. The Roman Empire really did fall. If you were a Roman Citizen, "stay the course" made a lot of sense for a very long time but made little sense when the barbarians were at the gates of Rome.
For the record, I don't believe the barbarians to be at the gate and I don't expect civilizational collapse. Just saying that there are certain assumptions behind Bogleism and those assumptions won't hold true forever. For example, Japan has been in a bear market that has lasted over 30 years. The Japanese Market is still 20% or so below all-time highs set in 1989. The belief that markets always recover to new all-time highs has been seriously tested in Japan.
A fool and his money are good for business.
Re: "experienced" investors: is this time different?
Just curious: how bubblicious was Japan in 1989 vs America in 2021?
Re: "experienced" investors: is this time different?
My guess is that 1989 Japan beats 2021 America in that regard. There are differences between Japan and the U.S. and lessons from Japan may not apply here. All I am saying is that the unlikely CAN happen. I would bet that the Japanese people did not see that bear market coming. In retrospect, it is easy to see that they had huge bubbles in their Stock and Real Estate markets at the same time. Bubbles aren't so easy to see when you are in them.
A fool and his money are good for business.
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Re: "experienced" investors: is this time different?
I’m going to say “this time” is not a time (nothing important is happening) but it is different. Here are some differences which should impact economic efficiency, profitability, and investability:
1. Low birth rate
2. Conversion to “zero carbon” economy
3. Increased narcissism/decreased real community
4. Electronics as a low effort way to get brain chemicals (life in the matrix)
This is a reason why you might argue the current asset prices are high. There is a lot of capital available and not so much hope of using it to make a dramatically more prosperous society.
It’s going to get used deliberately to create a less consuming society.
1. Low birth rate
2. Conversion to “zero carbon” economy
3. Increased narcissism/decreased real community
4. Electronics as a low effort way to get brain chemicals (life in the matrix)
This is a reason why you might argue the current asset prices are high. There is a lot of capital available and not so much hope of using it to make a dramatically more prosperous society.
It’s going to get used deliberately to create a less consuming society.
This time is the same
Re: "experienced" investors: is this time different?
It is different.
2008 was a liquidity crisis, and the entire credit rating system had not performed. Therefore, the market had to do a massive re-risking of assets. 2000 was intense primarily in the tech sector, and in 1987 most of us did not have a lot of money at risk in the stock market. I remember being shook up by it, and it was good for me to witness high volatility. This is probably why I have a sleep well at night portfolio in retirement.
Today, we have much different dynamics driving the price and availability of energy, which is the underpinning of GDP. We also have the aging of the baby boomers, and large waves of seasoned employees now retiring. This should sustain inflationary pressures, as the younger workforce demands higher wages. The cost to ensure a business is also higher for numerous reasons, including changes in the weather, proximity of more businesses to coastal areas, greater litigation, etc. - which is also an inflationary effect. Relocalization of some businesses that to the USA is also a supply chain disruptor and inflationary.
Personally I am not nearly as affected by all of this as I was during my accumulation years. I hold 15% in equities now, and 8% cash - most of which is allocated to limit orders should the stock market drop further. Of the bond portfolio, 2/3 is in inflationary protected assets (Tips and I bonds). The rest is in two year T-notes, MYGA, EEs or defined maturity ETFs where all bonds mature in the same year. I hold to maturity, I do not hold funds with bonds of mixed duration.
What are you getting back into the market, I do tend to buy ETFs or mutual funds by sector, and set limit orders where the P/E drops below 10-year medians. That way I am not aiming for rock bottom and the order is likely to fulfill. Not very boglheads of me I know. I tend to sell when PEs get wildly out of whack, which is why I sold Walmart when it got ludicrous.
I invest this way because Benjamin Graham's book Security Analysis was permanently imprinted on me. I can buy and hold a long time, but valuations matter to me.
2008 was a liquidity crisis, and the entire credit rating system had not performed. Therefore, the market had to do a massive re-risking of assets. 2000 was intense primarily in the tech sector, and in 1987 most of us did not have a lot of money at risk in the stock market. I remember being shook up by it, and it was good for me to witness high volatility. This is probably why I have a sleep well at night portfolio in retirement.
Today, we have much different dynamics driving the price and availability of energy, which is the underpinning of GDP. We also have the aging of the baby boomers, and large waves of seasoned employees now retiring. This should sustain inflationary pressures, as the younger workforce demands higher wages. The cost to ensure a business is also higher for numerous reasons, including changes in the weather, proximity of more businesses to coastal areas, greater litigation, etc. - which is also an inflationary effect. Relocalization of some businesses that to the USA is also a supply chain disruptor and inflationary.
Personally I am not nearly as affected by all of this as I was during my accumulation years. I hold 15% in equities now, and 8% cash - most of which is allocated to limit orders should the stock market drop further. Of the bond portfolio, 2/3 is in inflationary protected assets (Tips and I bonds). The rest is in two year T-notes, MYGA, EEs or defined maturity ETFs where all bonds mature in the same year. I hold to maturity, I do not hold funds with bonds of mixed duration.
What are you getting back into the market, I do tend to buy ETFs or mutual funds by sector, and set limit orders where the P/E drops below 10-year medians. That way I am not aiming for rock bottom and the order is likely to fulfill. Not very boglheads of me I know. I tend to sell when PEs get wildly out of whack, which is why I sold Walmart when it got ludicrous.
I invest this way because Benjamin Graham's book Security Analysis was permanently imprinted on me. I can buy and hold a long time, but valuations matter to me.
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Re: "experienced" investors: is this time different?
The difference this time is it never mattered to me in the past because using the money was always something in the far unimaginable future. Now it's not. Ten years of a down market might make a difference to my plans. As far as external forces and market shifts, I figure I'll read about it in 20 years when still nobody really knows what happened and we'll still be having theory threads about it. Right now I don't know anything and know less each day, so cutting spending and planting a bigger garden are the actionable things today.
I'm not smart enough to know, and I can't afford to guess.
Re: "experienced" investors: is this time different?
The market is down even more in real terms due to high inflation.
Unfortunately I don't see this period of inflation or shortages as transitory, not any more. That is already impacting businesses and consumers. I've reduced my consumption, even though I have a high income and net worth, and the ability to ratchet down my savings rate if necessary. I'm not alone.
It's been a while since we had inflation. Most of us either weren't alive or don't remember it.
Every crash is different. We look at what happened in 2008, with the real estate market crashing and financial institutions failing; that's not happening this time, at least so far. We look at what happened in 2001, with overvalued tech companies failing; that's not happening this time either. Each crisis is different, and we don't see it until the crisis is in full-swing.
In 2001 and 2008, I felt like we were running on fumes. It feels that way now.
Unfortunately I don't see this period of inflation or shortages as transitory, not any more. That is already impacting businesses and consumers. I've reduced my consumption, even though I have a high income and net worth, and the ability to ratchet down my savings rate if necessary. I'm not alone.
It's been a while since we had inflation. Most of us either weren't alive or don't remember it.
Every crash is different. We look at what happened in 2008, with the real estate market crashing and financial institutions failing; that's not happening this time, at least so far. We look at what happened in 2001, with overvalued tech companies failing; that's not happening this time either. Each crisis is different, and we don't see it until the crisis is in full-swing.
In 2001 and 2008, I felt like we were running on fumes. It feels that way now.
Re: "experienced" investors: is this time different?
Good post.MarkRoulo wrote: ↑Sat May 21, 2022 10:53 pm
I don't have any specific suggestion about what you should do (buy more, flee into cash, ...) that is different from any of these other downturns. But ... one thing that MIGHT be different about the environment is that we weren't dealing with inflation in the dot-com crash, the 2008 collapse or the 2020 drop.
We *were* dealing with inflation in 1980-2 (and 1973-4) so this isn't "new," but it will be something that a lot of folks haven't experienced. Imagine that the stock market is doing whatever it is doing (going up, going down, fluctuating, whatever ...) AND your take home pay is dropping by 5% a year in real terms. That's not the same thing as your 401(k) dropping.
During the drops in the past 20-ish years "hang on and wait it out" worked fine. And this may well work fine for this one, too. For your investments. But you may also have to deal with a drop in take home pay in real terms this go-around. And the fun created by rising interest rates. That could be quite different that what we saw in 2000, 2008, 2020 (though not in 1980-2). So maybe keep this in mind when looking back at the earlier stock market drops.
About a year ago, I studied the 1973-1974 Bear Market. It was a long lasting grind. Some facts that stuck with me:
U.S. stocks fell nearly 50 percent.
U.K. stocks fell nearly 75 percent.
Dip buyers should note that it ended with over 10 straight down days. Losing 15-20 percent or so in the final month of so a two year bear. Again, a grind.
Military conflict of oil producers (then Arab / Israeli) and a Fed that seemed clueless (at least to some) are two parallels to today. We are less oil dependent today, but more dependent on the world for other good. Money supply growth was large in the 1970s, but is gigantic by comparison today. Debates on is the current (1970s or today) inflation supply side (oil / supply chain) OR the result of monetary policy existed in both periods. Today, we have the benefit of knowing what worked last time to stop inflation (via Volcker).
I think this was my favorite article on it:
https://www.kiplinger.com/article/inves ... arket.html
Last edited by steve r on Sun May 22, 2022 11:18 am, edited 1 time in total.
"Owning the stock market over the long term is a winner's game. Attempting to beat the market is a loser's game. ..Don't look for the needle in the haystack. Just buy the haystack." Jack Bogle
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Re: "experienced" investors: is this time different?
Generally, yes. The risks are just being realized; it could go either way and in various magnitudes. Given that we have almost no information about the market, we cannot outguess it. Only our goals matter here (which I have said from the beginning). I both accept that a constant allocation is best when goals support it or if there is too much incomplete information to conclude otherwise. I do not have a constant allocation because I have goals that neither support it nor lack the information to conclude that. I trimmed risk in 2020 and 2021 for bonds and stocks respectively; I do not need to take a lot of risk because my portfolio's value is ahead of schedule. When it is otherwise, then that is when I take more risk.Youngblood wrote: ↑Sun May 22, 2022 10:04 am+1secondopinion wrote: ↑Sun May 22, 2022 1:53 amI think too many underestimated what was going to happen in 2020 prior to the crash. I think too many underestimated what actually occurred. I think too many are underestimating the repercussions of it. 2020 was a battle; the next few years are the war.latesaver wrote: ↑Sat May 21, 2022 8:39 pm Myself included (I am 42 years old), many forum members didn't live through the emotional investing "tolls" brought on by the 2000 dot com bust or the great recession of 2008/2009.
Some older BH's even saw the challenges presented by earlier time periods in the 60s and 70s.
For what it is worth, I don't consider those that survived the "crash" of March 2020 as battle tested.
For those that have actually lived and invested during these time periods (70s, 2000s, 2008/2009), i am curious to hear how you see the current investing landscape. There is no shortage of "wisdom" from younger (hindsight) professionals throwing out CAPE figures, soft new-economy stats, etc., but in this case I am more interested in hearing from experienced investors why they are staying the course.
Given your statement, what did you do and what are you doing now? Staying the course?
I maybe only have about 6 years of stock investing, but I spend a lot of time thinking about the connection of risk as it applies to goals. I do not to know how I would psychologically handle 2008 or 2000 or the 70s or now; my goals are more important than psychological whims. If one can disconnect emotion from investing, then a lot of long-term good can come of it.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Re: "experienced" investors: is this time different?
My recollection is that Japan markets were quite a bit more overvalued by conventional means (P/E, etc) than the US market has been any time recently (ever?). They also had a huge real estate bubble going along with their stock market bubble. Huge.
And their economy was nowhere near as large as the US economy, despite the heights their stock market was hitting.
And the Yen was not the world's reserve currency ...
And I believe some economists opined that their corporate and political structures made it harder/slower for companies to fold/make big layoffs etc versus the US economy -- the sort of housecleaning that pretty much has to happen when things are bad.
So I don't really think the two situations are comparable.
Re: "experienced" investors: is this time different?
The following is nothing original but I follow the Bogleheads basic principles with a twist based on my experience:latesaver wrote: ↑Sat May 21, 2022 8:39 pm Myself included (I am 42 years old), many forum members didn't live through the emotional investing "tolls" brought on by the 2000 dot com bust or the great recession of 2008/2009.
Some older BH's even saw the challenges presented by earlier time periods in the 60s and 70s.
For what it is worth, I don't consider those that survived the "crash" of March 2020 as battle tested.
For those that have actually lived and invested during these time periods (70s, 2000s, 2008/2009), i am curious to hear how you see the current investing landscape. There is no shortage of "wisdom" from younger (hindsight) professionals throwing out CAPE figures, soft new-economy stats, etc., but in this case I am more interested in hearing from experienced investors why they are staying the course.
1. Think long term
2. Trust only that the worldwide economies via stocks will grow over time (by definition, DO NOT trust any human being, or talking heads and their expert "forecasting").
3. Learn from mistakes because you will probably make them (I made massive mistakes).
4. Have your spouse on board with all of your decisions and explain the risks that both of you are making. It's your spouse's money too.
5. Setting up a diversified portfolio is pretty simple but the psychology of sticking to your well-thought-out plan during rocky markets is tough.
6. Speaking of psychology (or soft skills), once you experience watching your portfolio decline and watching then it recover when the market recovers without panicking, you will have experienced your "risk tolerance." If you panicked, you took on too much risk. For me, I had to experience a massive loss and after 20 years, it was the best experience to learn how to invest with confidence that I ever had. I know my risk tolerance and it had payoffs ever since.
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
Re: "experienced" investors: is this time different?
Entering my ninth decade, my view is that this is and is not different. Primarily, it does not appear to be different in the sense that there are periodically substantial market corrections that lead to questions like this one, increased anxiety, multiple "experts" predicting when and how the market will turn upward, etc.
I do feel it is different psychologically in that we have the epidemic confounding issues. When it hit, there was widespread expectation and a general consensus that the economy and stock market would suffer a downturn. Companies decreased production, people spent less, focused more on the early epidemic, etc. Government infusions of cash, and the internet provided changes that were either unique or unusual. People spent less on such things as travel, eating out, even non-emergency healthcare but also looked for something comforting. On-line shopping exploded, home updates did as well, landscape projects exploded and investors developed a reasonably clear perspective of some areas of the economy that would tank such as airline travel, others that would explode such as Netflix, Amazon and others.
Rather than tanking, the overall economy did well. As things began to change due to political, personal and scientific reasons, a variety of other things became more pronounced such as supply shortages, businesses wanting to raise prices to recoup what for many receiving governmental assistance were questionable losses, etc. The net result in this opinion was that those driving investment funds and companies at the decision level were surprised at how wrong they had been and are not allowing it to be repeated, are much more leery, had been predicting that it was time for the market to turn down prior to the epidemic, etc. Confusion continues with some of the "experts" saying the market is oversold, others that we have not reached a point of capitulation.
Meanwhile, we ask whether this is different and make our decisions based on our conclusions. These opinions are simply conclusions of one person, and the result is having concluded that holding on for the long term is wisest. That conclusion combines with the realization and accompanying anxiety that some define the long term as longer than my own mortality. We shall see!
I do feel it is different psychologically in that we have the epidemic confounding issues. When it hit, there was widespread expectation and a general consensus that the economy and stock market would suffer a downturn. Companies decreased production, people spent less, focused more on the early epidemic, etc. Government infusions of cash, and the internet provided changes that were either unique or unusual. People spent less on such things as travel, eating out, even non-emergency healthcare but also looked for something comforting. On-line shopping exploded, home updates did as well, landscape projects exploded and investors developed a reasonably clear perspective of some areas of the economy that would tank such as airline travel, others that would explode such as Netflix, Amazon and others.
Rather than tanking, the overall economy did well. As things began to change due to political, personal and scientific reasons, a variety of other things became more pronounced such as supply shortages, businesses wanting to raise prices to recoup what for many receiving governmental assistance were questionable losses, etc. The net result in this opinion was that those driving investment funds and companies at the decision level were surprised at how wrong they had been and are not allowing it to be repeated, are much more leery, had been predicting that it was time for the market to turn down prior to the epidemic, etc. Confusion continues with some of the "experts" saying the market is oversold, others that we have not reached a point of capitulation.
Meanwhile, we ask whether this is different and make our decisions based on our conclusions. These opinions are simply conclusions of one person, and the result is having concluded that holding on for the long term is wisest. That conclusion combines with the realization and accompanying anxiety that some define the long term as longer than my own mortality. We shall see!
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Re: "experienced" investors: is this time different?
deleted
Last edited by AerialWombat on Mon May 23, 2022 2:41 am, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
Re: "experienced" investors: is this time different?
From an investing standpoint, I personally found the 2000 to 2003 market harder to handle than the 08/09 market, simply because the former was a 3 year bear. After a year or two, you really start thinking, "when will this end?" 08/09 did demonstrate nicely that leverage is sometimes a really bad idea.secondopinion wrote: ↑Sun May 22, 2022 11:10 am
Stuff deleted ...
I maybe only have about 6 years of stock investing, but I spend a lot of time thinking about the connection of risk as it applies to goals. I do not to know how I would psychologically handle 2008 or 2000 or the 70s or now; my goals are more important than psychological whims. If one can disconnect emotion from investing, then a lot of long-term good can come of it.
For the financial crisis, by the end of 08 my not especially informed opinion -- but as individuals, we have to go on what we believe -- was that the world financial structure was not going to collapse and that "all" we had to deal with was a recession. Major recessions are bad, but we've had them before. My assumption was that we would weather said recession and that the markets would recover*.
Neither of these two bear markets featured a sharp rise in inflation nor were bonds so little help in stabilizing, as they are now. I am hoping most (I think there will be more) of the damage has been done to bonds and that inflation will start to moderate. Once inflation moderates, then we are back to more or less a poor stock market, which, well, I assumed would happen at some point. If we continue to have high inflation, that is scary, because you start needing pretty high nominal returns on your investments and your salary may or may not be keeping up.
But I don't know what will happen. I have a globally diversified portfolio. Only about 10% of it is in inflation-indexed bonds, which in 20-20 hindsight is less than I might have wanted . Otherwise, I'm about as well positioned as I know to ride out the future.
People who have been investing for decades should not be that alarmed yet since the last decade+ of real returns have been so good.
* I did not suffer a job loss during these events; if you didn't have a job, you were not happy, but we are talking about investing versus job status
Re: "experienced" investors: is this time different?
Maybe there will be upside/“bull market” surprises. Supply chain reopens, prices stabilize or even become competitive. Ukraine war grinds to a halt and oil drops. New cars start arriving and used car prices drop. Real estate quits “exploding” in price but doesn’t crash. Seniors feel better getting 3% on safe savings instead of zero. Reopening demand picks up and corporate profits remain strong. Politics doesn’t end up too one sided.
Just maybe.
Just maybe.
Re: "experienced" investors: is this time different?
You've really articulated a problem I see in myself here. I like to keep an eye on my own behavior and responses during stress to see why and how I'm behaving and then re-calibrate. I've noticed a lot of hubris and anticipation in myself at this downturn, planning on how well I'm going to do as I buy in on the way down. And that worries me, because I know that cleverness never pays off, and things never go the way you think they will, especially when you're planning on easy success. I have no idea what is going to happen, or how to prepare for it, but I don't wonder that there is something here that people are downplaying or outright missing.CraigTester wrote: ↑Sun May 22, 2022 9:30 am As I think further about comparing to past times, what's different is I don't remember ever seeing people sort of giddy about the prospect of a crash...
Rubbing their hands together, ready to pounce, just like in 2020....
IMHO, this dynamic is why the bubble has grown so large this time - everyone saw the same movie.
And this this is what scares me so terribly.... The Fed will be in no position to act this time because they didn’t reload their weapons when they had the chance.
60% AVGE | 20 Year TIPS LMP | 5% Cash
Re: "experienced" investors: is this time different?
White Coat Investor wrote this post during the COVID crash in 2020: "It's Not Different This Time". Read the comments and look how scared people were. It's easy to forget how we all felt in March 2020, when the entire world economy shut down and we couldn't even buy toilet paper. Yet the market bounced back. It always bounces back.
Re: "experienced" investors: is this time different?
I agree. The saying that comes to mind is 'the market trades to maximize pain'. It all comes down to the same reason you'd 'basically stay the course' with an allocation you can live with come what may (though determining what that is, can be the rub) in the first place. It's because you can't predict. That extends IMO to policing yourself not to think downturns are necessarily great buying opportunities. Rebalancing periodically to a fixed % is a valid operating rule IMO (though not the only valid one and maybe not valid without any limit*) but if you're getting all happy at the great buying opportunity you might be kidding yourself. If that were really obvious if wouldn't be crashing. Very hard to establish you are really 'the stronger hands' into which stocks will flow and which will be rewarded, especially at only 20% down.Phyneas wrote: ↑Sun May 22, 2022 11:57 amYou've really articulated a problem I see in myself here. I like to keep an eye on my own behavior and responses during stress to see why and how I'm behaving and then re-calibrate. I've noticed a lot of hubris and anticipation in myself at this downturn, planning on how well I'm going to do as I buy in on the way down. And that worries me, because I know that cleverness never pays off, and things never go the way you think they will, especially when you're planning on easy success. I have no idea what is going to happen, or how to prepare for it, but I don't wonder that there is something here that people are downplaying or outright missing.CraigTester wrote: ↑Sun May 22, 2022 9:30 am As I think further about comparing to past times, what's different is I don't remember ever seeing people sort of giddy about the prospect of a crash...
Rubbing their hands together, ready to pounce, just like in 2020....
IMHO, this dynamic is why the bubble has grown so large this time - everyone saw the same movie.
And this this is what scares me so terribly.... The Fed will be in no position to act this time because they didn’t reload their weapons when they had the chance.
*I do not plan rebalance with underlying to a fixed % stock *absolutely no matter what* though I have puts that would so automatically to some extent. But it gets into a different discussion.
Re: "experienced" investors: is this time different?
Young person chiming in here in my 30s. My friends and I are all “buying the dip”. Mentality we have is politicians have proved time and time again they will do what is needed to bail out the stock market. So it will either go back up or never recover and watch the country implode as our entire economy is built on the stock market, in which case cash on the sidelines is useless anyway.freyj6 wrote: ↑Sat May 21, 2022 10:10 pmHaha I love this.
One thing that I find particularly interesting right now, although it probably isn’t one of the major variables, is the “buy the dip”sentiment being so strong among the younger generation. So many people seem so sure that everything, regardless of how speculative, goes back up.
It’ll be interesting to see if/when this sentiment changes, or we run out of willing and able buyers.
Re: "experienced" investors: is this time different?
The market has come back, but not sure it "always bounces back." Sometimes, as in 2000 and 2008 it seems more like crawling, clawing, dragging itself back from the abyss.Afty wrote: ↑Sun May 22, 2022 12:00 pm White Coat Investor wrote this post during the COVID crash in 2020: "It's Not Different This Time". Read the comments and look how scared people were. It's easy to forget how we all felt in March 2020, when the entire world economy shut down and we couldn't even buy toilet paper. Yet the market bounced back. It always bounces back.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Re: "experienced" investors: is this time different?
It reminds me a lot of the dotcom bubble and crash with speculative assets getting hit very hard. That said, one could argue that the bear market lasted through to 2009, so it might not be that different if it morphs into a recession/economic crisis. But who knows? All I can say is that 2022 is echoing 2000 so far.Normchad wrote: ↑Sat May 21, 2022 8:41 pm It’s a walk in the park compared to 2008.
We have full employment right now. Everybody has gobs of cash. This whole thing would feel very different is folks were losing their jobs.
Remember, we are just back to where we were like 14 months ago….
I don’t sense a feeling of “fear” or “despair” in people, like I did in the past.
The question isn't at what age I want to retire, it's at what income. |
- George Foreman
Re: "experienced" investors: is this time different?
Yes this so far looks more like the dot.com bubble/crash than it does 2008. That one had limited impact on the real economy too, would be nice if that also repeated. Then again inflation didn't, 'couldn't' in the eyes of some IMO recency biased voices on this forum, go up like it has recently in any of the three most recent cases of relatively serious stock market trouble (dot.com, 2008/9 or Covid economy stage 1). So nothing is ever entirely the same. On the previous post about fear and despair I'm not sure how much there is, but you need fear and despair to have a *bounce* that lasts as opposed to market gradually clawing its way back to a previous level eventually. As one indicator the VIX peaked above 80 and was above 40 for some weeks in 2020, just under 30 last Friday.Harmanic wrote: ↑Sun May 22, 2022 12:25 pmIt reminds me a lot of the dotcom bubble and crash with speculative assets getting hit very hard. That said, one could argue that the bear market lasted through to 2009, so it might not be that different if it morphs into a recession/economic crisis. But who knows? All I can say is that 2022 is echoing 2000 so far.Normchad wrote: ↑Sat May 21, 2022 8:41 pm It’s a walk in the park compared to 2008.
We have full employment right now. Everybody has gobs of cash. This whole thing would feel very different is folks were losing their jobs.
Remember, we are just back to where we were like 14 months ago….
I don’t sense a feeling of “fear” or “despair” in people, like I did in the past.
Re: "experienced" investors: is this time different?
Hmm. As a less-young person I think that politicians lack the power to always do what is necessary to bail out the stock market. They may well try .... but that does not mean they will succeed.JoeNJ28 wrote: ↑Sun May 22, 2022 12:16 pmYoung person chiming in here in my 30s. My friends and I are all “buying the dip”. Mentality we have is politicians have proved time and time again they will do what is needed to bail out the stock market. So it will either go back up or never recover and watch the country implode as our entire economy is built on the stock market, in which case cash on the sidelines is useless anyway.freyj6 wrote: ↑Sat May 21, 2022 10:10 pmHaha I love this.
One thing that I find particularly interesting right now, although it probably isn’t one of the major variables, is the “buy the dip”sentiment being so strong among the younger generation. So many people seem so sure that everything, regardless of how speculative, goes back up.
It’ll be interesting to see if/when this sentiment changes, or we run out of willing and able buyers.
As a recent counter-example, governments may want to keep interest rates low* -- and governments across the developed world have been doing so for years -- but we are seeing interest rates spike now and the rise in rates is likely to continue.
Governments generally don't like higher inflation .. yet it is now happening.
Now, buying the dips is not necessarily a bad strategy. If a country has a growing economy, its stock market (assuming appropriate support for capital markets) will grow, over time.
Assuming the government can and will always bail out the stock market .... I think that is a bad strategy.
* consider interest on the national debt
Re: "experienced" investors: is this time different?
The extremely high inflation is what's different this time. We had high inflation in 2007-2008 which was very un-nerving. I think inflation peaked at around 5.6% back then. Now we are north of 8% so it is scary to watch gas prices keep going higher with no idea when they will slow or revert down again. The federal reserve is there to reverse high inflation and I am pretty confident they will do so.Wanderingwheelz wrote: ↑Sun May 22, 2022 7:34 am What makes this period different for experienced investors is where interest rates were a few months ago when the market peaked.
What is also different this time is that my wife and I went to Wendy's yesterday aftenoon and there was a sign up that they had closed at 3pm due to staffing shortages. So there is no unemployment problem - in fact just the opposite.
And back in 2008 the market was down maybe 20-25% before the news that the banking system may collapse. That is what tanked the market another 20% in a quick crash. We have many issues today - war in Ukraine is one - but I dont think the war in Ukraine would cause too much worry if inflation was 2.5%.
Once inflation is slowed, as long as we can do it relatively quickly, we should be in a much better place. Back in 2008 when the market was dropping so were oil and gas prices which was a silver lining. Up to now, the market is down and gas is up. But realize this will change bevaior. I started to think that I can ride the bus to work and will save 50% over the cost of driving my car. Or perhaps ride my bike to work. There comes a point when consumers change behavior not because they cannot afford it, but because it hurts a little to keep paying the price they are not used to.
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Re: "experienced" investors: is this time different?
I don't think it's accurate to say that those who survived March 2020 aren't "battle tested." Sure, in retrospect we see that the stock market didn't stay down and quickly bounced back, but no one actually knew that was going to happen. It was practically a Black Swan event. So if you didn't freak out and sell in March 2020, I think that says something about your temperament as an investor.
As for myself, I had barely started investing in January 2020 when I opened a Roth IRA. I watched the market collapse just months later giddy with excitement as I invested more at lower prices. Maybe I'm just different.
As for myself, I had barely started investing in January 2020 when I opened a Roth IRA. I watched the market collapse just months later giddy with excitement as I invested more at lower prices. Maybe I'm just different.
Re: "experienced" investors: is this time different?
TN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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Re: "experienced" investors: is this time different?
I agree that inflation is a big problem, but my point was that the fed can’t act in the same manner they have acted in the past when stocks get uncomfortably low- rates had nowhere left to go once they reached zero. One thing I’ve noticed this weekend living in a tourist town is the number of cars that have adults in the back seat. It’s crazy how many cars are full-some with three across. I’ve even seen a few with people unbelted in the cargo area of SUVs. That tells me that consumers are adjusting by filling a car rather than taking two or three like they would have done before. People are adjusting to higher prices- gas in that particular case.MichRoots wrote: ↑Sun May 22, 2022 12:57 pmThe extremely high inflation is what's different this time. We had high inflation in 2007-2008 which was very un-nerving. I think inflation peaked at around 5.6% back then. Now we are north of 8% so it is scary to watch gas prices keep going higher with no idea when they will slow or revert down again. The federal reserve is there to reverse high inflation and I am pretty confident they will do so.Wanderingwheelz wrote: ↑Sun May 22, 2022 7:34 am What makes this period different for experienced investors is where interest rates were a few months ago when the market peaked.
What is also different this time is that my wife and I went to Wendy's yesterday aftenoon and there was a sign up that they had closed at 3pm due to staffing shortages. So there is no unemployment problem - in fact just the opposite.
And back in 2008 the market was down maybe 20-25% before the news that the banking system may collapse. That is what tanked the market another 20% in a quick crash. We have many issues today - war in Ukraine is one - but I dont think the war in Ukraine would cause too much worry if inflation was 2.5%.
Once inflation is slowed, as long as we can do it relatively quickly, we should be in a much better place. Back in 2008 when the market was dropping so were oil and gas prices which was a silver lining. Up to now, the market is down and gas is up. But realize this will change bevaior. I started to think that I can ride the bus to work and will save 50% over the cost of driving my car. Or perhaps ride my bike to work. There comes a point when consumers change behavior not because they cannot afford it, but because it hurts a little to keep paying the price they are not used to.
I wouldn’t place too much weight on Wendy’s being short staffed since it’s well documented that few people want to return to their former crappy job at a fast food restaurant. I’d be more concerned for America if Wendy’s was receiving 3 applications for each vacant job.
Being wrong compounds forever.
Re: "experienced" investors: is this time different?
That is true. Even so, a market crash that wanders off into a long period of stagflation or Japan like behavior can not only try one's shock resistance but also one's patience or even one's ability to come to terms with the fact that one is not going to get what one hoped for.roth evangelist wrote: ↑Sun May 22, 2022 1:10 pm I don't think it's accurate to say that those who survived March 2020 aren't "battle tested." Sure, in retrospect we see that the stock market didn't stay down and quickly bounced back, but no one actually knew that was going to happen. It was practically a Black Swan event. So if you didn't freak out and sell in March 2020, I think that says something about your temperament as an investor.
As for myself, I had barely started investing in January 2020 when I opened a Roth IRA. I watched the market collapse just months later giddy with excitement as I invested more at lower prices. Maybe I'm just different.
Re: "experienced" investors: is this time different?
In my opinion, only if the investor was unemployed in a recession/crash, then, the investor could claim to be battle tested. I was laid off in July 2020. I was unemployed for more than 1 year for the Covid crash.roth evangelist wrote: ↑Sun May 22, 2022 1:10 pm I don't think it's accurate to say that those who survived March 2020 aren't "battle tested." Sure, in retrospect we see that the stock market didn't stay down and quickly bounced back, but no one actually knew that was going to happen. It was practically a Black Swan event. So if you didn't freak out and sell in March 2020, I think that says something about your temperament as an investor.
As for myself, I had barely started investing in January 2020 when I opened a Roth IRA. I watched the market collapse just months later giddy with excitement as I invested more at lower prices. Maybe I'm just different.
I rebalanced in March 2020 while knowing that I would be laid off by the end of June 2020.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: "experienced" investors: is this time different?
I’m curious as to how you expect to deploy your physical gold & silver in the event of an economic catastrophe.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Trade for food?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: "experienced" investors: is this time different?
No one knows if this time is different. No one ever knows. There will be one or two people who end up being right about something and we’ll have to see them quoted for the next 15 years. I think that will be the same this time.
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Re: "experienced" investors: is this time different?
It is a very challenging investing environment at the moment.
Re: "experienced" investors: is this time different?
Why do you think that someone prepared by having physical gold and silver would not stored sufficient food and water too?delamer wrote: ↑Sun May 22, 2022 1:31 pmI’m curious as to how you expect to deploy your physical gold & silver in the event of an economic catastrophe.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Trade for food?
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: "experienced" investors: is this time different?
I will be 69 next month so I have seen all of the previous referenced market declines and they were all a bit different just as this one is.
For me, the biggest difference is that this recent decline comes in my deaccumulation phase. For retirees without pensions, like me, this decline is exceptionally scary. That said, my plan is to rebalance and maintain my chosen allocation.
If I were 42 as the OP is I would be happily buying all the way down and all the way back up as I did during all of the previous declines. That strategy is what allowed me to accumulate enough to retire.
For me, the biggest difference is that this recent decline comes in my deaccumulation phase. For retirees without pensions, like me, this decline is exceptionally scary. That said, my plan is to rebalance and maintain my chosen allocation.
If I were 42 as the OP is I would be happily buying all the way down and all the way back up as I did during all of the previous declines. That strategy is what allowed me to accumulate enough to retire.
Re: "experienced" investors: is this time different?
I think people who found it frightening almost certainly learned something worthwhile. Maybe not so much for people who were not very worried.roth evangelist wrote: ↑Sun May 22, 2022 1:10 pm I don't think it's accurate to say that those who survived March 2020 aren't "battle tested." Sure, in retrospect we see that the stock market didn't stay down and quickly bounced back, but no one actually knew that was going to happen. It was practically a Black Swan event. So if you didn't freak out and sell in March 2020, I think that says something about your temperament as an investor.
As for myself, I had barely started investing in January 2020 when I opened a Roth IRA. I watched the market collapse just months later giddy with excitement as I invested more at lower prices. Maybe I'm just different.
Seeing your portfolio drop for a couple of months is not the same as seeing it drop for over a year and stay down for 2, 3 or 4 years.
The initial shock may be similar, but the way it feels month...after month...after month...is definitely not the same. Resilience is finite and some people just don't have enough to last that long.
I'd have to say that many who experienced the blip in 2020 are not yet battle tested. But some probably are.
Link to Asking Portfolio Questions
Re: "experienced" investors: is this time different?
I think when the Fed flat out tells you interest rates are going up even at the expense of JOBS that is "different" than the last 20-30 years.
This means a bear market in Bonds is a near certainty (can't say how long or how deep but I can say what direction bonds are going). That is "different".
I think there is no "Fed Put". That is "different".
There are other different things as well.
What is not different is that basic economic forces will remain in play. But the playing field has shifted and that should perhaps change ones approach.
I have been 100% stocks (except for a few deviations into real estate and O&G) since the 90's. Rode the market down 40% 2-3 times never blinked.
I am now waiting for the entry point into bonds in a few years and am putting any new money into 6 month T-Bills.
This means a bear market in Bonds is a near certainty (can't say how long or how deep but I can say what direction bonds are going). That is "different".
I think there is no "Fed Put". That is "different".
There are other different things as well.
What is not different is that basic economic forces will remain in play. But the playing field has shifted and that should perhaps change ones approach.
I have been 100% stocks (except for a few deviations into real estate and O&G) since the 90's. Rode the market down 40% 2-3 times never blinked.
I am now waiting for the entry point into bonds in a few years and am putting any new money into 6 month T-Bills.
Last edited by atlguy on Sun May 22, 2022 1:53 pm, edited 1 time in total.
Re: "experienced" investors: is this time different?
I honestly don’t know what having physical gold/silver prepares you for, other than for bartering for goods if the economic and supply distribution systems collapse.KlangFool wrote: ↑Sun May 22, 2022 1:40 pmWhy do you think that someone prepared by having physical gold and silver would not stored sufficient food and water too? I am curious why do you think that?delamer wrote: ↑Sun May 22, 2022 1:31 pmI’m curious as to how you expect to deploy your physical gold & silver in the event of an economic catastrophe.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Trade for food?
KlangFool
Sufficient food for how long? Barring owning a farm and having a well, most us can’t store enough water/food for more than a few months. If you are the exception and can be self-sufficient for a year or more, great.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: "experienced" investors: is this time different?
No, you don't get to say "It always bounces back".Afty wrote: ↑Sun May 22, 2022 12:00 pm White Coat Investor wrote this post during the COVID crash in 2020: "It's Not Different This Time". Read the comments and look how scared people were. It's easy to forget how we all felt in March 2020, when the entire world economy shut down and we couldn't even buy toilet paper. Yet the market bounced back. It always bounces back.
You have to say "So far, the U.S. stock market has always bounced back..."
Which is a hopeful statement, but nothing is guaranteed.
I don't rebalance on the way down, because I'm keeping my 50% in bonds/CDs/cash as a hedge in case the stock market DOESN'T bounce back (or takes a really long time to bounce back).
(New money, 401k paycheck money, goes 100% into the stock market though every two weeks).
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: "experienced" investors: is this time different?
LOL... the market can be down for more than 5 years without one needing gold coins and a 10-year supply of food and water buried in your bunker as well.KlangFool wrote: ↑Sun May 22, 2022 1:40 pmWhy do you think that someone prepared by having physical gold and silver would not stored sufficient food and water too?delamer wrote: ↑Sun May 22, 2022 1:31 pmI’m curious as to how you expect to deploy your physical gold & silver in the event of an economic catastrophe.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Trade for food?
KlangFool
A long market downturn doesn't equal "Mad Max times"
And you don't have room to store "sufficient food and water too", in any case, so quit being silly Klang.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: "experienced" investors: is this time different?
I agree. I could bounce back in ten years, or it could bounce back in less. Nobody knows.HomerJ wrote: ↑Sun May 22, 2022 1:59 pmNo, you don't get to say "It always bounces back".Afty wrote: ↑Sun May 22, 2022 12:00 pm White Coat Investor wrote this post during the COVID crash in 2020: "It's Not Different This Time". Read the comments and look how scared people were. It's easy to forget how we all felt in March 2020, when the entire world economy shut down and we couldn't even buy toilet paper. Yet the market bounced back. It always bounces back.
You have to say "So far, the U.S. stock market has always bounced back..."
Which is a hopeful statement, but nothing is guaranteed.
I don't rebalance on the way down, because I'm keeping my 50% in bonds/CDs/cash as a hedge in case the stock market DOESN'T bounce back (or takes a really long time to bounce back).
(New money, 401k paycheck money, goes 100% into the stock market though every two weeks).
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Re: "experienced" investors: is this time different?
I was unemployed due to COVID; I had a ticking time bomb set in March 2020 yet I bought heavy into stocks (more than just rebalancing). I did not know if I was to unemployed in weeks or months. It ended up being mid-2021 fortunately, but I knew it was coming; I was the last of an shutdown acquired subsidiary to be laid off. Watching the company go from peak to shutdown is gut wrenching when it was pretty much on my shoulders to stay until it was all over. I stayed in a riskier portfolio anyway.KlangFool wrote: ↑Sun May 22, 2022 1:19 pmIn my opinion, only if the investor was unemployed in a recession/crash, then, the investor could claim to be battle tested. I was laid off in July 2020. I was unemployed for more than 1 year for the Covid crash.roth evangelist wrote: ↑Sun May 22, 2022 1:10 pm I don't think it's accurate to say that those who survived March 2020 aren't "battle tested." Sure, in retrospect we see that the stock market didn't stay down and quickly bounced back, but no one actually knew that was going to happen. It was practically a Black Swan event. So if you didn't freak out and sell in March 2020, I think that says something about your temperament as an investor.
As for myself, I had barely started investing in January 2020 when I opened a Roth IRA. I watched the market collapse just months later giddy with excitement as I invested more at lower prices. Maybe I'm just different.
I rebalanced in March 2020 while knowing that I would be laid off by the end of June 2020.
KlangFool
If that does not test someone (knowing that employment that pays enough was very sparse in my area, that I could not truly afford to get COVID, and the main company expressed zero interest to keep me despite my skills they seriously acknowledged), then I really do not know how much more there is to try it without going through prolonged unemployment.
To be honest, the saving grace was my emergency fund; I could stay put without being that worried. My emergency fund is more than just cash; it is more than this.
But yes, it does take a trial to really test the situation.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: "experienced" investors: is this time different?
Well, just to be a contrarian, may I say that some things are different from 2000 and 2008 in a positive way that bodes well for US markets in my humble opinion.
I’m making no predictions, but
-in 2000 and 2008 the Euro currency was very new and fragile. Now we know it has succeeded.
-By 2008 NATO was starting to be viewed as a relic. Now it’s more united and about to be larger than ever, with even Switzerland abandoning neutrality.
-In 2000 and 2008 there was a European sovereign debt crisis that now is resolved.
-In 2000 and 2008 WFH was not broadly scalable.
-20+ years without a major foreign terror attack on US soil.
-Banks now have regular stress testing and massive deposits.
-Companies are able to charge more (much as I detest inflation) and with higher wages consumers are paying more.
-And most importantly, a huge generation is now entering its prime earning and consuming years, whereas in 2000 and 2008 Generation X, a smaller generation by numbers, was at its peak. We also have significant improvements in energy self sufficiency since then.
So I think there is some basis for optimism about an eventual market recovery, despite all the bad news. I also think a flight to quality away from crypto, NFTs and meme stocks will mean a flight to US equities in the near to medium term.
I’m making no predictions, but
-in 2000 and 2008 the Euro currency was very new and fragile. Now we know it has succeeded.
-By 2008 NATO was starting to be viewed as a relic. Now it’s more united and about to be larger than ever, with even Switzerland abandoning neutrality.
-In 2000 and 2008 there was a European sovereign debt crisis that now is resolved.
-In 2000 and 2008 WFH was not broadly scalable.
-20+ years without a major foreign terror attack on US soil.
-Banks now have regular stress testing and massive deposits.
-Companies are able to charge more (much as I detest inflation) and with higher wages consumers are paying more.
-And most importantly, a huge generation is now entering its prime earning and consuming years, whereas in 2000 and 2008 Generation X, a smaller generation by numbers, was at its peak. We also have significant improvements in energy self sufficiency since then.
So I think there is some basis for optimism about an eventual market recovery, despite all the bad news. I also think a flight to quality away from crypto, NFTs and meme stocks will mean a flight to US equities in the near to medium term.
Last edited by AnnetteLouisan on Sun May 22, 2022 2:29 pm, edited 2 times in total.
Re: "experienced" investors: is this time different?
This is true.Normchad wrote: ↑Sat May 21, 2022 8:41 pm It’s a walk in the park compared to 2008.
We have full employment right now. Everybody has gobs of cash. This whole thing would feel very different is folks were losing their jobs.
Remember, we are just back to where we were like 14 months ago….
I don’t sense a feeling of “fear” or “despair” in people, like I did in the past.
Today I checked the one-year return in our brokerage account and was shocked—shocked that it had fallen only 2.4%. Given all the histrionics on the news, I was braced for a deeper drop.
We have a long way to go before “blood in the streets.” I’m not discounting the nervousness that’s out there or suggesting there’s nothing to be concerned about. But yes, 2008 felt a lot different.
Investors who are not heavily margined and maintain an appropriate asset allocation are likely to ride this out.
With regard to asset allocation, one point investors might consider is whether that should be influenced by the Federal Reserve’s policy. “Don’t fight the Fed” seemed to support a stock-heavy allocation during these past lengthy periods of ample (read: historic and unprecedented) amounts of Fed liquidity.
Does a “new normal” of an inflation-fighting, interest-rate-raising Fed warrant a more cautious allocation to equities? Or shall we consider whatever the is Fed doing as just more “noise” to be ignored?
Re: "experienced" investors: is this time different?
Small business owner here, been investing for 35+ years. Instead of a market lens, I'm going to give a small business owner perspective.
My business is in the computer hardware automation market. It's been an incredible couple of years as "AI" systems (market term, not mine) has driven demand for our computer products to the highest point in our history. My customer base grew to include tens of dozens of automated guided vehicle, unmanned drone, and automated machine vision companies. Many of them are businesses smaller than mine, which gave me pause from a credit perspective. But all of them had been injected with legitimate loads of money from angel/VC firms looking for plays in the "AI" space, so our order volume was robust, if not astounding. Six months ago, my backlog to deliver product was approaching 12-months. We couldn't hire people fast enough to keep up with demand. We went from 12 outstanding job openings to over 40. Obviously, nice problem to have, until we started losing employees who were jumping ship to higher paying jobs. We raised salaries for key employees, and raised beginning salaries to attract new employees. (This of course eats at my bottom line, but with such high order volume, it was a price we had to pay.)
At the beginning of March, we started to have order cancellations. At first, most of the cancelations were a result of our long lead times. But in the middle of April, a terrifying cascade of cancellations have come pouring in. Discussions with customers tell me that the easy VC/Private Equity money for capex is drying up. Today, many of these smaller companies are already under duress to mitigate cash burn. In turn, I'm grateful that we haven't hired all 40 of those new jobs, because I have a strong conviction that things are slowing down rapidly. I've pulled down our job requisitions. I'm taking a hard look at our cost position, because we are already faced with a new slower business reality.
What's been different about business this time is the sheer velocity at which things have slowed down. Granted, I'm in a market niche, so I'm hopeful that what I'm experiencing isn't endemic throughout the entire economy, but it does have me more worried than at any time during dot-com, 9/11, financial crisis, and COVID markets. Add high inflation and low rates, the FED has no choice but to raise. I fear that this is going to dry up business very quickly, and force me to reduce head count.
Easy, low-rate debt has been flowing through the economy for years now. Much of it is being put to good use via debt-financed investments to buy things like my products. I think those days are over for the foreseeable future, as the Fed starts the hiking cycle. What affects hiring, will ultimately affect the market.
Graphs like this (https://www.longtermtrends.net/market-c ... indicator/) make me feel we've got much more to fall.
That graph and behavior like NFTs convinced me, for the first time in my life, to sell and go to cash (which I thankfully did in September last year out of sheer luck).
I don't intend to stay in cash (especially at this inflation rate). But I do think we have more to fall. The FED has telegraphed two addition 50 basis point rate hikes. My plan is to make large reinvestments when those hikes are complete.
My business is in the computer hardware automation market. It's been an incredible couple of years as "AI" systems (market term, not mine) has driven demand for our computer products to the highest point in our history. My customer base grew to include tens of dozens of automated guided vehicle, unmanned drone, and automated machine vision companies. Many of them are businesses smaller than mine, which gave me pause from a credit perspective. But all of them had been injected with legitimate loads of money from angel/VC firms looking for plays in the "AI" space, so our order volume was robust, if not astounding. Six months ago, my backlog to deliver product was approaching 12-months. We couldn't hire people fast enough to keep up with demand. We went from 12 outstanding job openings to over 40. Obviously, nice problem to have, until we started losing employees who were jumping ship to higher paying jobs. We raised salaries for key employees, and raised beginning salaries to attract new employees. (This of course eats at my bottom line, but with such high order volume, it was a price we had to pay.)
At the beginning of March, we started to have order cancellations. At first, most of the cancelations were a result of our long lead times. But in the middle of April, a terrifying cascade of cancellations have come pouring in. Discussions with customers tell me that the easy VC/Private Equity money for capex is drying up. Today, many of these smaller companies are already under duress to mitigate cash burn. In turn, I'm grateful that we haven't hired all 40 of those new jobs, because I have a strong conviction that things are slowing down rapidly. I've pulled down our job requisitions. I'm taking a hard look at our cost position, because we are already faced with a new slower business reality.
What's been different about business this time is the sheer velocity at which things have slowed down. Granted, I'm in a market niche, so I'm hopeful that what I'm experiencing isn't endemic throughout the entire economy, but it does have me more worried than at any time during dot-com, 9/11, financial crisis, and COVID markets. Add high inflation and low rates, the FED has no choice but to raise. I fear that this is going to dry up business very quickly, and force me to reduce head count.
Easy, low-rate debt has been flowing through the economy for years now. Much of it is being put to good use via debt-financed investments to buy things like my products. I think those days are over for the foreseeable future, as the Fed starts the hiking cycle. What affects hiring, will ultimately affect the market.
Graphs like this (https://www.longtermtrends.net/market-c ... indicator/) make me feel we've got much more to fall.
That graph and behavior like NFTs convinced me, for the first time in my life, to sell and go to cash (which I thankfully did in September last year out of sheer luck).
I don't intend to stay in cash (especially at this inflation rate). But I do think we have more to fall. The FED has telegraphed two addition 50 basis point rate hikes. My plan is to make large reinvestments when those hikes are complete.
Re: "experienced" investors: is this time different?
First, it's a matter of opinion that physical gold and silver will provide serious ballast in the event of a economic meltdown. I don't believe that it will.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Second, my opinion that "the government cannot bail out the market this time" does not mean the market will not recover. It means I think it a fantasy that the federal government can do any of the following:
1) Always keep stock prices moving up.
2) Always avoid severe recessions (recall back in the 90s when people were muttering about the business cycle being repealed ....)
3) Always control inflation
etc etc. Smart moves by the US government can reduce the pain of some economic events. Dumb ones can make it worse. But the government is neither all powerful or all knowing.
Again, my main point was simply to say that assuming there is a magic federal government good fairy that is always willing and able to keep stock market prices moving upward is .... wrong.
Re: "experienced" investors: is this time different?
Its different every time.
Notable differences include
1)World trade.
2)Number people engaging in tax loss harvesting / day trading.
3)The decline of London's influence.
4)Bankers moving away from NYC into the bay and Florida.
5)Wage inequalities between top earners and median earners.
6)The demise of unions.
7)The dominance of 401k plans.
8)Lower capital gains tax.
9)The demise of manufacturing in the US.
10)The lack of support for public infrastructure.
11)The widespread use of the internet.
12)A significant proportion of the US population that has never served in the military.
13)The dominant industries. Late 80's recession was due to fall of USSR & defense cuts & Japanese firms & oil bust. 2000's due to dotcom & over leverage in network hardware. 2007, construction/housing/finance industry bust. Now we are facing with paying for all the bills we racked up paying for Covid mitigations (e.g., business software, IT infrastructure, and operational shutdowns).
14) And most importantly, information and markets are moving way faster. ETFs weren't widespread in 2007. People can liquidate their 401ks instantaneously now.
My main point in this is that an individual shouldn't rely too heavily on past experiences (especially charts) to think they can weather a new storm.
Notable differences include
1)World trade.
2)Number people engaging in tax loss harvesting / day trading.
3)The decline of London's influence.
4)Bankers moving away from NYC into the bay and Florida.
5)Wage inequalities between top earners and median earners.
6)The demise of unions.
7)The dominance of 401k plans.
8)Lower capital gains tax.
9)The demise of manufacturing in the US.
10)The lack of support for public infrastructure.
11)The widespread use of the internet.
12)A significant proportion of the US population that has never served in the military.
13)The dominant industries. Late 80's recession was due to fall of USSR & defense cuts & Japanese firms & oil bust. 2000's due to dotcom & over leverage in network hardware. 2007, construction/housing/finance industry bust. Now we are facing with paying for all the bills we racked up paying for Covid mitigations (e.g., business software, IT infrastructure, and operational shutdowns).
14) And most importantly, information and markets are moving way faster. ETFs weren't widespread in 2007. People can liquidate their 401ks instantaneously now.
My main point in this is that an individual shouldn't rely too heavily on past experiences (especially charts) to think they can weather a new storm.
Last edited by sandan on Sun May 22, 2022 2:45 pm, edited 2 times in total.
Re: "experienced" investors: is this time different?
delamer,delamer wrote: ↑Sun May 22, 2022 1:52 pmI honestly don’t know what having physical gold/silver prepares you for, other than for bartering for goods if the economic and supply distribution systems collapse.KlangFool wrote: ↑Sun May 22, 2022 1:40 pmWhy do you think that someone prepared by having physical gold and silver would not stored sufficient food and water too? I am curious why do you think that?delamer wrote: ↑Sun May 22, 2022 1:31 pmI’m curious as to how you expect to deploy your physical gold & silver in the event of an economic catastrophe.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Trade for food?
KlangFool
Sufficient food for how long? Barring owning a farm and having a well, most us can’t store enough water/food for more than a few months. If you are the exception and can be self-sufficient for a year or more, great.
A) Do you prefer to be someone that can last at least a few months versus less than a week?
B) Or, you believe that it won't matter anyhow.
C) The choice is yours. I made mine.
"most us can’t store enough water/food for more than a few months."
D) Most people are not prepared anyhow.
E) Many can't. They are living paycheck to paycheck.
F) Most that can, "Don't worry, be happy!".
G) So, what do you choose? Why do you think you need more than a few months?
In many crisis, you have to survive in order to wait for recovery and succeed. Those that are not prepared do not last long enough to survive. If someone does not have enough to last one week, it won't matter if the crisis only lasted one month.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: "experienced" investors: is this time different?
TN_Boy,TN_Boy wrote: ↑Sun May 22, 2022 2:30 pmFirst, it's a matter of opinion that physical gold and silver will provide serious ballast in the event of a economic meltdown. I don't believe that it will.KlangFool wrote: ↑Sun May 22, 2022 1:12 pmTN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Second, my opinion that "the government cannot bail out the market this time" does not mean the market will not recover.
1) Good. Now, I understand your point of view.
2) My preparation including the possibility that the market never recover.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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Re: "experienced" investors: is this time different?
Right. I have heard stories in 2020 that highlighted major problems (besides to COVID) in preparation, yet the actual problem lasted maybe a few weeks. I never ran into those problems; no takeout meals for over a year and watching your employer company get taken apart until I was the last person employed in the subsidiary was bad enough.KlangFool wrote: ↑Sun May 22, 2022 2:39 pmdelamer,delamer wrote: ↑Sun May 22, 2022 1:52 pmI honestly don’t know what having physical gold/silver prepares you for, other than for bartering for goods if the economic and supply distribution systems collapse.KlangFool wrote: ↑Sun May 22, 2022 1:40 pmWhy do you think that someone prepared by having physical gold and silver would not stored sufficient food and water too? I am curious why do you think that?delamer wrote: ↑Sun May 22, 2022 1:31 pmI’m curious as to how you expect to deploy your physical gold & silver in the event of an economic catastrophe.KlangFool wrote: ↑Sun May 22, 2022 1:12 pm
TN_Boy,
My preparation does not assume that. I believe that if we have a recession with market down turn lasting more than 5 years, it is not longer a money problem. I have some physical gold and silver to prepare for that.
And, if you do not believe that the government cannot bail out the market this time, may I ask how much physical gold/silver did you bought? Or, what is your preparation for that scenario?
KlangFool
Trade for food?
KlangFool
Sufficient food for how long? Barring owning a farm and having a well, most us can’t store enough water/food for more than a few months. If you are the exception and can be self-sufficient for a year or more, great.
A) Do you prefer to be someone that can last at least a few months versus less than a week?
B) Or, you believe that it won't matter anyhow.
C) The choice is yours. I made mine.
"most us can’t store enough water/food for more than a few months."
D) Most people are not prepared anyhow.
E) Many can't. They are living paycheck to paycheck.
F) Most that can, "Don't worry, be happy!".
G) So, what do you choose? Why do you think you need more than a few months?
In many crisis, you have to survive in order to wait for recovery and succeed. Those that are not prepared do not last long enough to survive. If someone does not have enough to last one week, it won't matter if the crisis only lasted one month.
KlangFool
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.