"experienced" investors: is this time different?

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HomerJ
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Re: "experienced" investors: is this time different?

Post by HomerJ »

ClassII wrote: Sun May 22, 2022 12:28 am
HomerJ wrote: Sun May 22, 2022 12:19 amThis time may be different, but I don't know why CraigTester "fears it's exactly the same". The "same" was very good to long-term investors.
It's all fun and games until someone gets laid off. I used to work for a guy who's grandfather made a kajillion dollars during the Great Depression. All he had to do was buy up a ton of real estate! Helped of course that he had money all the way through the 20s and 30s when everyone else lost everything. Smart guy for sure but also extremely lucky he a) had the business acumen b) had the money when nobody else did and c) didn't manage to step on any land mines along the way.

I remember being in Miami in 2009 and a brand new high-rise right on the water was selling condos for $80k. Man I wish I had bought back then but I was dead broke and living paycheck to paycheck simply happy to have a job. I had friends moving back with their parents, leaving the career they worked hard for in college for good, even had one die in an accident working construction to keep food on the table. The deals were there, I saw them right before my eyes but I was in no position to reach out and grab them.

Its a great thing that so many here are ready to scoop up some amazing deals. Truly you could end up like my boss' grandfather BUT don't think that recessions are for other people. There's a reason everything goes on fire sale.
"Long-term investing" is not about "scooping up deals".

I'm talking about 401k money, money you had saved. $100,000 in your retirement accounts dropped to $50,000... and then recovered to $100,000 after a few years, and then grew to $400,000 today. Giving you a 9.2% return a year from 2007 to today.

And you didn't have to do anything.

That 9.2% a year return INCLUDES the crash. You didn't have to avoid it to get rich anyway.

So yes, "more of the same", please. A crash that recovers in a few years and then grows 400% over the next 10 years is nothing to fear.

What one should fear is something "different".

No idea why CraigTester fears a repeat of the past. Doing absolutely nothing, buy and hold, stay the course, made us rich.

(Note I don't think this time will be an exact repeat of the past - I just think his comment makes no sense)

Edit: Also, yes if you got laid off and had no emergency fund, and had to pull money from your retirement fund, then you didn't do as well. But that is why we stress having a solid emergency fund, and not being 100% in stocks with money you might need in the short-term. Everyone should always have a plan for a possible loss of a job.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Zhuang
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Re: "experienced" investors: is this time different?

Post by Zhuang »

HomerJ wrote: Thu May 26, 2022 7:44 pm
ClassII wrote: Sun May 22, 2022 12:28 am
HomerJ wrote: Sun May 22, 2022 12:19 amThis time may be different, but I don't know why CraigTester "fears it's exactly the same". The "same" was very good to long-term investors.
It's all fun and games until someone gets laid off. I used to work for a guy who's grandfather made a kajillion dollars during the Great Depression. All he had to do was buy up a ton of real estate! Helped of course that he had money all the way through the 20s and 30s when everyone else lost everything. Smart guy for sure but also extremely lucky he a) had the business acumen b) had the money when nobody else did and c) didn't manage to step on any land mines along the way.

I remember being in Miami in 2009 and a brand new high-rise right on the water was selling condos for $80k. Man I wish I had bought back then but I was dead broke and living paycheck to paycheck simply happy to have a job. I had friends moving back with their parents, leaving the career they worked hard for in college for good, even had one die in an accident working construction to keep food on the table. The deals were there, I saw them right before my eyes but I was in no position to reach out and grab them.

Its a great thing that so many here are ready to scoop up some amazing deals. Truly you could end up like my boss' grandfather BUT don't think that recessions are for other people. There's a reason everything goes on fire sale.
"Long-term investing" is not about "scooping up deals".

I'm talking about 401k money, money you had saved. $100,000 in your retirement accounts dropped to $50,000... and then recovered to $100,000 after a few years, and then grew to $400,000 today. Giving you a 9.2% return a year from 2007 to today.

And you didn't have to do anything.

That 9.2% a year return INCLUDES the crash. You didn't have to avoid it to get rich anyway.

So yes, "more of the same", please. A crash that recovers in a few years and then grows 400% over the next 10 years is nothing to fear.

What one should fear is something "different".

No idea why CraigTester fears a repeat of the past. Doing absolutely nothing, buy and hold, stay the course, made us rich.

(Note I don't think this time will be an exact repeat of the past - I just think his comment makes no sense)

Edit: Also, yes if you got laid off and had no emergency fund, and had to pull money from your retirement fund, then you didn't do as well. But that is why we stress having a solid emergency fund, and not being 100% in stocks with money you might need in the short-term. Everyone should always have a plan for a possible loss of a job.
Agree 100%! The key is you have to stay the course during the market downturns. Do NOT touch your investments. Use cash to cover the expenses. The reason causing the downturns might be different this time. Market will recover as always!
m@ver1ck
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Re: "experienced" investors: is this time different?

Post by m@ver1ck »

This time is different for me.
Last time around, I changed jobs 2008 June - and did a 401K rollover. As luck would have it, they liquidated some funds as part of the rollover, and I never got around to buying in again for a while, but eventually went all in.
Clearly it was just 200K to 300K total.

This time around I’m staying the course, and am still 100% equities - but I know I shouldn’t be.

The crash also allowed me to buy a house for the first time - bought in 2010 October.

I’ll go 80/20 once the market ‘recovers’.

However I wonder if I should start putting new money in bonds - now that interest rates are reasonable - there’s the opportunity of buying cheap stocks that I’ll be forgoing….

Now - being 100/0 means no dry powder and no rebalancing..
Leesbro63
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

m@ver1ck wrote: Thu May 26, 2022 11:09 pm

I’ll go 80/20 once the market ‘recovers’.
What if it’s 1929 or 1966 and it takes a generation for equities to “recover” to new (real) all time highs.
andypanda
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Re: "experienced" investors: is this time different?

Post by andypanda »

Of course this time is different. I'm a lot older than when I was investing in the '60s...
m@ver1ck
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Re: "experienced" investors: is this time different?

Post by m@ver1ck »

Leesbro63 wrote: Fri May 27, 2022 5:38 am
m@ver1ck wrote: Thu May 26, 2022 11:09 pm

I’ll go 80/20 once the market ‘recovers’.
What if it’s 1929 or 1966 and it takes a generation for equities to “recover” to new (real) all time highs.
I’ll take my chances. And the 20% won’t make or break anything.
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Raraculus
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Re: "experienced" investors: is this time different?

Post by Raraculus »

I'm not an experienced investor. Yes, I had a 401(k) during the GFC years of 2007-08. But, it was small and the losses were small. Had I known back then, I would have bought a lot more stocks!

Now, in 2022, I think it's different this time around, principally for one reason: Stock buybacks. I feel that businesses will take advantage of stock weakness and embark on stock buyback programs aggressively. This keeps a floor in place for the overall stock market, limiting further losses.

I'm staying the course. I did so in 2020, and will continue to do so. :beer
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Mel Lindauer
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Re: "experienced" investors: is this time different?

Post by Mel Lindauer »

Random Musings wrote: Sat May 21, 2022 9:50 pm Bear markets are all a little different, but what stands out compared to the 2000-2002 and 2008-2009 bear markets is that bonds are not providing ballast to a portfolio and inflation is having more of an impact on real returns.

RM
I was about to post the same thought that even high-grade short term bonds are taking a beating at the same time that equities are. The ballast just isn't there this time, so it takes even more courage to hang in there when everything's going down at the same time. And other than I Bonds, cash is losing spending power to inflation by leaps and bounds.

However, having said all of that, I'm still a firm believer that we'll work though all of this and look back at some point from a much higher vantage point.
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corpgator
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Re: "experienced" investors: is this time different?

Post by corpgator »

Raraculus wrote: Tue May 31, 2022 7:47 pm I'm not an experienced investor. Yes, I had a 401(k) during the GFC years of 2007-08. But, it was small and the losses were small. Had I known back then, I would have bought a lot more stocks!

Now, in 2022, I think it's different this time around, principally for one reason: Stock buybacks. I feel that businesses will take advantage of stock weakness and embark on stock buyback programs aggressively. This keeps a floor in place for the overall stock market, limiting further losses.

I'm staying the course. I did so in 2020, and will continue to do so. :beer
This is definitely already happening. Apple $90b on 4/28, Google $70b on 4/26, Microsoft is ramping their buys each month after announcing $60b last year, Facebook is still buying as well. Plenty of other smaller companies doing buybacks with all the cash sitting around.
Leesbro63
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

Mel Lindauer wrote: Tue May 31, 2022 11:45 pm
Random Musings wrote: Sat May 21, 2022 9:50 pm Bear markets are all a little different, but what stands out compared to the 2000-2002 and 2008-2009 bear markets is that bonds are not providing ballast to a portfolio and inflation is having more of an impact on real returns.

RM
I was about to post the same thought that even high-grade short term bonds are taking a beating at the same time that equities are. The ballast just isn't there this time, so it takes even more courage to hang in there when everything's going down at the same time. And other than I Bonds, cash is losing spending power to inflation by leaps and bounds.

However, having said all of that, I'm still a firm believer that we'll work though all of this and look back at some point from a much higher vantage point.
I agree that there’s nowhere to hide. Speculating and market timing are the only alternatives. And the odds of those working out well are low.
GAAP
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Re: "experienced" investors: is this time different?

Post by GAAP »

Every time is different -- and every time is the same. You left out 1987, which was my first exposure to "fun" -- and my first lesson in staying calm.

The biggest difference for me is that now I'm retired -- but I'm not doing anything different because of current events. I certainly see the price changes, but I don't pay a lot of attention. My AA is 75/25, entirely with global equity and fixed income. I already know that I can survive these drops, and ones that are much worse, so there isn't really any reason for me to worry.
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

Markets are reacting to the possibility that this is the start of a period like the stagflationary 1970s.

If inflation remains persistently high, then continued tightening isn't likely to be good for financial assets (as easing is what makes asset prices rise), while inflation impacts asset value. This has been forecast for some time, by those looking at the implications of global debt and money supply.

The solution is generally to hold more in real assets. Or financial assets whose earnings are tied to the prices of real assets.
smectym
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Re: "experienced" investors: is this time different?

Post by smectym »

Leesbro63 wrote: Fri May 27, 2022 5:38 am
m@ver1ck wrote: Thu May 26, 2022 11:09 pm

I’ll go 80/20 once the market ‘recovers’.
What if it’s 1929 or 1966 and it takes a generation for equities to “recover” to new (real) all time highs.
I wouldn’t implicitly equate 1929 to 1966.

The 1929 crash—which actually was a series of crashes and failed rebounds that extended well into the 30s— led to a prolonged severe general deflationary economic depression that wiped out the wealth and incomes of many millions of people. It never let up, really, and almost seemed like it was going to be “permanent”— or lead to revolution —until World War II “changed everything.”

The 1966–1982 stretch was was one of general economic prosperity in the United States, though marred by high inflation, and the emergence of the political instability that we see even more starkly today.

Stocks, though, meandered and failed to establish any directionality for a long period of time. So, you could have money in the market and years would go by and you really wouldn’t have made any money; you might not have lost much money; but it was kind of a “so what” situation. “Why be in the market?” “Stocks are dead” etc.

But you had a job, your friends had a job, your parents had a home with the mortgage nearly paid off, and so on. Far from a depression scenario.

Then in the mid-1980’s, action in stocks and retail interest began to pick up. “Money” magazine is born! The birth of the 401(k), the rise of the PC and tech, etc….once again “changed everything.”
Leesbro63
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

smectym wrote: Thu Jun 02, 2022 10:31 pm
Leesbro63 wrote: Fri May 27, 2022 5:38 am
m@ver1ck wrote: Thu May 26, 2022 11:09 pm

I’ll go 80/20 once the market ‘recovers’.
What if it’s 1929 or 1966 and it takes a generation for equities to “recover” to new (real) all time highs.
I wouldn’t implicitly equate 1929 to 1966.

The 1929 crash—which actually was a series of crashes and failed rebounds that extended well into the 30s— led to a prolonged severe general deflationary economic depression that wiped out the wealth and incomes of many millions of people. It never let up, really, and almost seemed like it was going to be “permanent”— or lead to revolution —until World War II “changed everything.”

The 1966–1982 stretch was was one of general economic prosperity in the United States, though marred by high inflation, and the emergence of the political instability that we see even more starkly today.

Stocks, though, meandered and failed to establish any directionality for a long period of time. So, you could have money in the market and years would go by and you really wouldn’t have made any money; you might not have lost much money; but it was kind of a “so what” situation. “Why be in the market?” “Stocks are dead” etc.

But you had a job, your friends had a job, your parents had a home with the mortgage nearly paid off, and so on. Far from a depression scenario.

Then in the mid-1980’s, action in stocks and retail interest began to pick up. “Money” magazine is born! The birth of the 401(k), the rise of the PC and tech, etc….once again “changed everything.”
I don’t disagree. But it doesn’t change my concern that market timing is generally a fool’s errand.
balbrec2
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Re: "experienced" investors: is this time different?

Post by balbrec2 »

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.
Experienced investors know that they know nothing.
Guessing is worse.
Stay the course
Wannaretireearly
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Re: "experienced" investors: is this time different?

Post by Wannaretireearly »

Logan Roy wrote: Thu Jun 02, 2022 6:24 pm Markets are reacting to the possibility that this is the start of a period like the stagflationary 1970s.

If inflation remains persistently high, then continued tightening isn't likely to be good for financial assets (as easing is what makes asset prices rise), while inflation impacts asset value. This has been forecast for some time, by those looking at the implications of global debt and money supply.

The solution is generally to hold more in real assets. Or financial assets whose earnings are tied to the prices of real assets.
REITs? Healthcare fund perhaps? Always been tempted, but never strayed into these lanes
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Valuethinker
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Re: "experienced" investors: is this time different?

Post by Valuethinker »

smectym wrote: Thu Jun 02, 2022 10:31 pm
Leesbro63 wrote: Fri May 27, 2022 5:38 am
m@ver1ck wrote: Thu May 26, 2022 11:09 pm

I’ll go 80/20 once the market ‘recovers’.
What if it’s 1929 or 1966 and it takes a generation for equities to “recover” to new (real) all time highs.
I wouldn’t implicitly equate 1929 to 1966.

The 1929 crash—which actually was a series of crashes and failed rebounds that extended well into the 30s— led to a prolonged severe general deflationary economic depression that wiped out the wealth and incomes of many millions of people. It never let up, really, and almost seemed like it was going to be “permanent”— or lead to revolution —until World War II “changed everything.”

The 1966–1982 stretch was was one of general economic prosperity in the United States, though marred by high inflation, and the emergence of the political instability that we see even more starkly today.

Stocks, though, meandered and failed to establish any directionality for a long period of time. So, you could have money in the market and years would go by and you really wouldn’t have made any money; you might not have lost much money; but it was kind of a “so what” situation. “Why be in the market?” “Stocks are dead” etc.

But you had a job, your friends had a job, your parents had a home with the mortgage nearly paid off, and so on. Far from a depression scenario.

Then in the mid-1980’s, action in stocks and retail interest began to pick up. “Money” magazine is born! The birth of the 401(k), the rise of the PC and tech, etc….once again “changed everything.”
I think this is an excellent summary of the differences.
Stocks, though, meandered and failed to establish any directionality for a long period of time. So, you could have money in the market and years would go by and you really wouldn’t have made any money; you might not have lost much money; but it was kind of a “so what” situation. “Why be in the market?” “Stocks are dead” etc.
Shades of Japan post the end of the bubble & the subsequent crash. I suspect European stock markets might be in a similar position (I'd have to check but I believe they are below the 2000 level; I know the FTSE100 is (in nominal terms) although total return looks a bit better (4% ish dividend yield).

It is worth mentioning that '73-74 saw an absolutely brutal bear market. From memory about -35% in nominal terms, but much more in real terms (double digit inflation).

Britain in the same time period saw an 80%+ fall in the index in real terms. Beyond brutal. The impact of energy crisis + runaway inflation (+20% inflation) + political instability (a coal miner strike brought the economy down to 3 day working week and power rationing, then the government fell in the subsequent election).
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

Wannaretireearly wrote: Wed Jun 08, 2022 12:09 am
Logan Roy wrote: Thu Jun 02, 2022 6:24 pm Markets are reacting to the possibility that this is the start of a period like the stagflationary 1970s.

If inflation remains persistently high, then continued tightening isn't likely to be good for financial assets (as easing is what makes asset prices rise), while inflation impacts asset value. This has been forecast for some time, by those looking at the implications of global debt and money supply.

The solution is generally to hold more in real assets. Or financial assets whose earnings are tied to the prices of real assets.
REITs? Healthcare fund perhaps? Always been tempted, but never strayed into these lanes
Possibly REITs, but possibly not residential(?). I think real estate did well in the 70s, but of course there's the threat now that if we're behind the curve on inflation, and have to tighten too fast, you'll start triggering mortgage defaults, and a repeat of 2008. One thing that sticks in my mind about real estate is that, long-term, prices should only rise with inflation. If they outpaced inflation for multiple centuries, property would simply be unaffordable for everyone. So I imagine there's some mean reversion to come at some point. But maybe student housing, maybe healthcare property, and warehouses(?).

Healthcare's seen as a fairly defensive sector. Bridgewater have a large position in J&J. I don't really know the characteristics of the sector well enough. I quite like Energy, Infrastructure and Utilities, but there's certainly a chance of being quite behind the curve on Energy now.
Valuethinker
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Re: "experienced" investors: is this time different?

Post by Valuethinker »

Logan Roy wrote: Wed Jun 08, 2022 4:02 pm
Wannaretireearly wrote: Wed Jun 08, 2022 12:09 am
Logan Roy wrote: Thu Jun 02, 2022 6:24 pm Markets are reacting to the possibility that this is the start of a period like the stagflationary 1970s.

If inflation remains persistently high, then continued tightening isn't likely to be good for financial assets (as easing is what makes asset prices rise), while inflation impacts asset value. This has been forecast for some time, by those looking at the implications of global debt and money supply.

The solution is generally to hold more in real assets. Or financial assets whose earnings are tied to the prices of real assets.
REITs? Healthcare fund perhaps? Always been tempted, but never strayed into these lanes
Possibly REITs, but possibly not residential(?). I think real estate did well in the 70s, but of course there's the threat now that if we're behind the curve on inflation, and have to tighten too fast, you'll start triggering mortgage defaults, and a repeat of 2008. One thing that sticks in my mind about real estate is that, long-term, prices should only rise with inflation. If they outpaced inflation for multiple centuries, property would simply be unaffordable for everyone. So I imagine there's some mean reversion to come at some point. But maybe student housing, maybe healthcare property, and warehouses(?).
Actually property rises closer to real GDP growth.

BUT over time the benefits of being "downtown" have shrunk - modern technology (and I include things like electric motors in factories replacing centralised belt drives driven by 1 engine) has allowed businesses & employees to decentralise.

There is this breakpoint in US residential real estate - about the early 1970s. It is hypothesised that the growing political power of NIMBY movements led to a permanent reduction in available new housing in high demand areas. Hence real housing prices in a number of places (LA, SF Bay, NY, Boston, Washington DC) have well outpaced inflation.

Residential REITs tend to focus on apartment buildings. These tend to be somewhat countercyclical because when the economy is down, people rent not buy. And rents tend to rise with inflation if not faster.

One thing about REITs. They are interest rate sensitive:
- the companies borrow a lot, that's how they make their returns. So higher interest rates hurt their business model
- a greater proportion of return comes from income as opposed to capital growth, than for stocks in general

Overall REITs are held to be a good sector in inflationary times:
- rents grow with inflation (with a lag)
- although buildings depreciate, the replacement cost of buildings rises - which makes buildings already extant more valuable
- inflation lowers the value of borrowings

2008/9 was a very extreme correction following a period of massive speculative excess. Although there were some regional crashes (New England early 90s, Texas in the 80s) in earlier times, this was a national (& global) crash.

Covid-19 underpins the risk of structural change. Probably city center offices are just fundamentally less valuable than they were, because employees are going to spend fewer days at work, and companies will have less permanent desking (we have none, except for CEO & a few assistants).

Healthcare's seen as a fairly defensive sector. Bridgewater have a large position in J&J. I don't really know the characteristics of the sector well enough. I quite like Energy, Infrastructure and Utilities, but there's certainly a chance of being quite behind the curve on Energy now.
[/quote]
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

Valuethinker wrote: Wed Jun 08, 2022 4:17 pm
Logan Roy wrote: Wed Jun 08, 2022 4:02 pm
Wannaretireearly wrote: Wed Jun 08, 2022 12:09 am
Logan Roy wrote: Thu Jun 02, 2022 6:24 pm Markets are reacting to the possibility that this is the start of a period like the stagflationary 1970s.

If inflation remains persistently high, then continued tightening isn't likely to be good for financial assets (as easing is what makes asset prices rise), while inflation impacts asset value. This has been forecast for some time, by those looking at the implications of global debt and money supply.

The solution is generally to hold more in real assets. Or financial assets whose earnings are tied to the prices of real assets.
REITs? Healthcare fund perhaps? Always been tempted, but never strayed into these lanes
Possibly REITs, but possibly not residential(?). I think real estate did well in the 70s, but of course there's the threat now that if we're behind the curve on inflation, and have to tighten too fast, you'll start triggering mortgage defaults, and a repeat of 2008. One thing that sticks in my mind about real estate is that, long-term, prices should only rise with inflation. If they outpaced inflation for multiple centuries, property would simply be unaffordable for everyone. So I imagine there's some mean reversion to come at some point. But maybe student housing, maybe healthcare property, and warehouses(?).
Actually property rises closer to real GDP growth.

BUT over time the benefits of being "downtown" have shrunk - modern technology (and I include things like electric motors in factories replacing centralised belt drives driven by 1 engine) has allowed businesses & employees to decentralise.

There is this breakpoint in US residential real estate - about the early 1970s. It is hypothesised that the growing political power of NIMBY movements led to a permanent reduction in available new housing in high demand areas. Hence real housing prices in a number of places (LA, SF Bay, NY, Boston, Washington DC) have well outpaced inflation.

Residential REITs tend to focus on apartment buildings. These tend to be somewhat countercyclical because when the economy is down, people rent not buy. And rents tend to rise with inflation if not faster.

One thing about REITs. They are interest rate sensitive:
- the companies borrow a lot, that's how they make their returns. So higher interest rates hurt their business model
- a greater proportion of return comes from income as opposed to capital growth, than for stocks in general

Overall REITs are held to be a good sector in inflationary times:
- rents grow with inflation (with a lag)
- although buildings depreciate, the replacement cost of buildings rises - which makes buildings already extant more valuable
- inflation lowers the value of borrowings

2008/9 was a very extreme correction following a period of massive speculative excess. Although there were some regional crashes (New England early 90s, Texas in the 80s) in earlier times, this was a national (& global) crash.

Covid-19 underpins the risk of structural change. Probably city center offices are just fundamentally less valuable than they were, because employees are going to spend fewer days at work, and companies will have less permanent desking (we have none, except for CEO & a few assistants).
I don't think it would be possible for property prices to rise with real GDP growth for long. If we're just looking at the past century, we're looking at an expansion period in a long-term debt cycle. But records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today. What's happened in LA, NY, London is typical later-stage debt cycle behaviour.

Certainly the thinking behind REITs in this environment would be inflation-linked cashflows. Big box and last mile distribution REITs for example, as people who work from home tend to do more online shopping.
LFS1234
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Re: "experienced" investors: is this time different?

Post by LFS1234 »

Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

LFS1234 wrote: Wed Jun 08, 2022 7:48 pm
Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
JBTX
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Re: "experienced" investors: is this time different?

Post by JBTX »

Logan Roy wrote: Wed Jun 08, 2022 9:45 pm
LFS1234 wrote: Wed Jun 08, 2022 7:48 pm
Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
Basically this graph tells me that gold is a good hedge against inflation, as long as you live 800 years. There is a 500 year span where it lost value almost the whole time. Then it suddenly popped back up. This tells you nothing about what gold may do for the rest of our investible lifetime.

I’m not saying don’t own gold. I have a small stake in GLD. But have realistic expectations of what it can and can’t do.

https://www.fuqua.duke.edu/duke-fuqua-i ... gold-hedge
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

JBTX wrote: Thu Jun 09, 2022 12:14 am
Logan Roy wrote: Wed Jun 08, 2022 9:45 pm
LFS1234 wrote: Wed Jun 08, 2022 7:48 pm
Logan Roy wrote: Wed Jun 08, 2022 4:52 pm ...records from Islamic history show the price of a high-end home in 700CE was remarkably similar, in gold dinars, to what it is in gold today.
Please provide a source for this.

If a study showing this exists, it should provide fascinating reading. I would love to see the comps, in detail; both ancient and modern.
It's one of a hundred old aphorisms for how the real value of gold hasn't changed much. And that property's always been just about affordable. Google seems as good as useless. Sheer number of sites promoting gold may have scrambled its ability to identify quality articles, but if you can find the right combination of key words.?

Image
Basically this graph tells me that gold is a good hedge against inflation, as long as you live 800 years. There is a 500 year span where it lost value almost the whole time. Then it suddenly popped back up. This tells you nothing about what gold may do for the rest of our investible lifetime.

I’m not saying don’t own gold. I have a small stake in GLD. But have realistic expectations of what it can and can’t do.

https://www.fuqua.duke.edu/duke-fuqua-i ... gold-hedge
Well the point about real gold prices is more an indirect example of how the cost of things like property haven't really drifted much when measured in something relatively stable. If property prices had increased at 1% above inflation since ancient Greek times, (top of the head estimate) an average home would be worth about 18 billion times an average annual salary(?).

So the 75-100 year debt cycle that dictates so much of our financial experience shouldn't be assumed to be a perpetual trend, because most generations will experience a moment of deleveraging when it becomes apparent it isn't.

On the topic of gold, if we did the same with cash (especially post-gold-standard), we'd find an asset that's essentially useless at telling us the historic value of things. An asset class in a state of evaporation. An interesting point with gold is, in inflation-adjusted terms, it's still off the high it reached near the beginning of 1980, while inflation spent the next 40 years going from double-digits to nearly zero. Yet it's still been the most effective diversifier of stocks, at allocations of up to 20-30%, in risk and non-risk-adjusted terms. But I think the comparison for gold is cash. It's whether gold's a better store of value.
Goldwater85
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Re: "experienced" investors: is this time different?

Post by Goldwater85 »

This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
Ed 2
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Re: "experienced" investors: is this time different?

Post by Ed 2 »

Mel Lindauer wrote: Tue May 31, 2022 11:45 pm
Random Musings wrote: Sat May 21, 2022 9:50 pm Bear markets are all a little different, but what stands out compared to the 2000-2002 and 2008-2009 bear markets is that bonds are not providing ballast to a portfolio and inflation is having more of an impact on real returns.

RM
I was about to post the same thought that even high-grade short term bonds are taking a beating at the same time that equities are. The ballast just isn't there this time, so it takes even more courage to hang in there when everything's going down at the same time. And other than I Bonds, cash is losing spending power to inflation by leaps and bounds.

However, having said all of that, I'm still a firm believer that we'll work though all of this and look back at some point from a much higher vantage point.
Same. Actually, I didn’t have a chance to invest in bonds for all this years, so I can’t see the big impact in my portfolio. I always had IBonds and cash around up to 10% and everything else in equity. Just small positions in municipal California bonds . So, for me this bear is just the same as previous ones. The only difference is my age , but I digress)) . Investing is all about discipline in my opinion. DCA in the equity working good for me all the time.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
garlandwhizzer
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Re: "experienced" investors: is this time different?

Post by garlandwhizzer »

I am an experienced investor which means that when it comes to investing that I've been burned every way that is possible to be burned. No one is a seer about the market's future, certainly not me.

Having said that, I currently see more potential for serious risks to the economy and the markets than I have perceived since 2007-9 and more than I have perceived at any time before that since 1982. Inflation can be scary and once established in the public mind set it, can become self-sustaining in a self-reinforcing wage price cycle. It will be harder to kill inflation, bring it back to acceptable levels, than many anticipate, years not months IMO. It may reset, like PE ratios have, to a higher set point than we've been used to after the dust has settled. The great resignation, tight labor market with rising wages, help wanted signs everywhere, severe supply chain disruptions, commodity inflation, the Ukraine War, ever reducing globalization and on-shoring rather than offshoring of production and jobs both here and in China, the two biggest economies in the world, and rising tariffs on cheap imported goods--all of these things are inflationary and happening now. We don't know how long they'll last or whether they will fully normalize to how things were before the inflation genie got out of the bottle.

Inflation risk will be high for a good while and the only way to kill it is to reverse the factors above. That may happen, and if so, both the economy and the markets will emerge unscathed. Monetary policy is, however, a very blunt tool to kill inflation and it is the only tool we have. Rates have to rise so hight that it hits consumers hard in the pocketbook, hard enough to substantially reduce aggregate demand, which generally means a recession. It's a very tricky tightrope the FED must navigate. They can err in either direction, too aggressive or not aggressive enough. We did not do it well in the 1970s. I hope we do better this time.

In response to all this risk, I have made only very modest portfolio allocation shifts. I do not believe that wholesale shifts in preparation for a scary future are likely to be helpful. Simple reason: we don't know accurately whether it will be scary or not. As always, it's best to be prepared for everything.

Garland Whizzer
Leesbro63
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Re: "experienced" investors: is this time different?

Post by Leesbro63 »

smectym wrote: Thu Jun 02, 2022 10:31 pm
The 1966–1982 stretch was was one of general economic prosperity in the United States, though marred by high inflation, and the emergence of the political instability that we see even more starkly today.

Stocks, though, meandered and failed to establish any directionality for a long period of time. So, you could have money in the market and years would go by and you really wouldn’t have made any money; you might not have lost much money; but it was kind of a “so what” situation. “Why be in the market?” “Stocks are dead” etc.

But you had a job, your friends had a job, your parents had a home with the mortgage nearly paid off, and so on. Far from a depression scenario.

Then in the mid-1980’s, action in stocks and retail interest began to pick up. “Money” magazine is born! The birth of the 401(k), the rise of the PC and tech, etc….once again “changed everything.”
I've been thinking about this quote and it's fascinating. That, as Bogleheads, we consider 1966 to have been the worst time to retire in terms of stock and bond returns for that retiree during his retirement. And yet, yeah, it was a time of general economic prosperity, albeit with high inflation and lots of political and social turbulence. What can we learn from this? I dunno. Maybe it just reinforces Jack Bogle's thinking that nobody knows nuthin'. Or maybe it's that we'll muddle through just as prudent retirees did then. I dunno.
sailaway
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Re: "experienced" investors: is this time different?

Post by sailaway »

Leesbro63 wrote: Fri Jun 10, 2022 5:55 am
smectym wrote: Thu Jun 02, 2022 10:31 pm
The 1966–1982 stretch was was one of general economic prosperity in the United States, though marred by high inflation, and the emergence of the political instability that we see even more starkly today.

Stocks, though, meandered and failed to establish any directionality for a long period of time. So, you could have money in the market and years would go by and you really wouldn’t have made any money; you might not have lost much money; but it was kind of a “so what” situation. “Why be in the market?” “Stocks are dead” etc.

But you had a job, your friends had a job, your parents had a home with the mortgage nearly paid off, and so on. Far from a depression scenario.

Then in the mid-1980’s, action in stocks and retail interest began to pick up. “Money” magazine is born! The birth of the 401(k), the rise of the PC and tech, etc….once again “changed everything.”
I've been thinking about this quote and it's fascinating. That, as Bogleheads, we consider 1966 to have been the worst time to retire in terms of stock and bond returns for that retiree during his retirement. And yet, yeah, it was a time of general economic prosperity, albeit with high inflation and lots of political and social turbulence. What can we learn from this? I dunno. Maybe it just reinforces Jack Bogle's thinking that nobody knows nuthin'. Or maybe it's that we'll muddle through just as prudent retirees did then. I dunno.
How true is this idea of prosperity across the country? The end of this time period is also the beginning of the rust belt. National unemployment was rising by the mid 70s.
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cashboy
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Re: "experienced" investors: is this time different?

Post by cashboy »

great thread that shows BH at its best.

i have 'investing experience', but i am not sure if i can say i am an "experienced" investor. :happy

my take on the OP question:

is that it can certainly 'feel different' to me as I am going through an event like the current correction (since the variables behind the event might be different) and it is happening in 'real time'. so, I could say 'this time is somewhat different' (to some degree).

but after the event has ended, and I look back, I usually see that the 'end result' (market rising again after the correction 'bottom' has been found) is the same as 'most' other events - making it less different than I might have felt initially. so, I can then say that, based on history, 'this time is most likely not different'.
Three-Fund Portfolio: FSPSX - FXAIX - FXNAX (with slight tilt of CASH - Canned Beans - Rice - Bottled Water)
seychellois_lib
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Re: "experienced" investors: is this time different?

Post by seychellois_lib »

Goldwater85 wrote: Thu Jun 09, 2022 8:47 pm This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

seychellois_lib wrote: Fri Jun 10, 2022 6:40 pm
Goldwater85 wrote: Thu Jun 09, 2022 8:47 pm This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Just my 2c, but I don't think 2-3% real on bonds will be possible until we've inflated away an awful lot of debt. With global debt where it is today, 2-3% real would (presumably) make refinancing that debt rather difficult. So I think it's a fairly good bet that we'll want to have negative real yields for quite a substantial part of this century.
Goldwater85
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Re: "experienced" investors: is this time different?

Post by Goldwater85 »

seychellois_lib wrote: Fri Jun 10, 2022 6:40 pm
Goldwater85 wrote: Thu Jun 09, 2022 8:47 pm This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Chips, energy, drought, avian flu, those are all factors but the real issue is COVID lockdowns. Demand went from humming to enormously impaired overnight, and businesses frantically cut supply to survive. They went far below a capacity that made sense in an economy that wasn’t dealing with this exogenous blow. It’s going to take a while to rebuild that capacity now that demand has rebounded (see, e.g., airlines).

I agree though. Long term, an aging population is going to result in deflationary pressure and lower interest rates. You’ll have lower or no population growth in the age brackets that consume lots of things.
trirunner
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Re: "experienced" investors: is this time different?

Post by trirunner »

Goldwater85 wrote: Sat Jun 11, 2022 11:48 am
seychellois_lib wrote: Fri Jun 10, 2022 6:40 pm
Goldwater85 wrote: Thu Jun 09, 2022 8:47 pm This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Chips, energy, drought, avian flu, those are all factors but the real issue is COVID lockdowns. Demand went from humming to enormously impaired overnight, and businesses frantically cut supply to survive. They went far below a capacity that made sense in an economy that wasn’t dealing with this exogenous blow. It’s going to take a while to rebuild that capacity now that demand has rebounded (see, e.g., airlines).

I agree though. Long term, an aging population is going to result in deflationary pressure and lower interest rates. You’ll have lower or no population growth in the age brackets that consume lots of things.

will it be deflationary though, if you have fewer workers to produce fewer goods and more non-workers to compete for the goods?
Booogle
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Re: "experienced" investors: is this time different?

Post by Booogle »

Normchad wrote: Sat May 21, 2022 8:41 pm It’s a walk in the park compared to 2008.
But we are just getting started.

Stagflation is coming.
Goldwater85
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Re: "experienced" investors: is this time different?

Post by Goldwater85 »

trirunner wrote: Sat Jun 11, 2022 11:50 am
Goldwater85 wrote: Sat Jun 11, 2022 11:48 am
seychellois_lib wrote: Fri Jun 10, 2022 6:40 pm
Goldwater85 wrote: Thu Jun 09, 2022 8:47 pm This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Chips, energy, drought, avian flu, those are all factors but the real issue is COVID lockdowns. Demand went from humming to enormously impaired overnight, and businesses frantically cut supply to survive. They went far below a capacity that made sense in an economy that wasn’t dealing with this exogenous blow. It’s going to take a while to rebuild that capacity now that demand has rebounded (see, e.g., airlines).

I agree though. Long term, an aging population is going to result in deflationary pressure and lower interest rates. You’ll have lower or no population growth in the age brackets that consume lots of things.

will it be deflationary though, if you have fewer workers to produce fewer goods and more non-workers to compete for the goods?
The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
trirunner
Posts: 216
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Re: "experienced" investors: is this time different?

Post by trirunner »

Goldwater85 wrote: Sat Jun 11, 2022 12:11 pm
trirunner wrote: Sat Jun 11, 2022 11:50 am
Goldwater85 wrote: Sat Jun 11, 2022 11:48 am
seychellois_lib wrote: Fri Jun 10, 2022 6:40 pm
Goldwater85 wrote: Thu Jun 09, 2022 8:47 pm This time is different, at least for anyone born after 1955 or so.

The classic economic downturn is caused by supply outstripping demand and is deflationary. Business activity slows as businesses sell down their inventories. People are laid off and reduce spending, further decreasing demand and increasing excess supply. Eventually the excess supply is worked off and things start humming along again.

This downturn looks like it will be caused by supply shocks. With prices higher due to limited supply, consumers focus purchasing core items, damaging demand for other goods. Persistent demand for core, inelastic items drives up their prices more, further limiting demand for other goods.

This type of downturn has rarely happened in the 20th-21st century U.S. Maybe because the primary way it has historically comes about is heavy wartime damage to domestic infrastructure. The 1970s are the main data point, but they’re a single data point.

So yes, I think this time is different, which will make it interesting. But that’s not actionable from an investment perspective.
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Chips, energy, drought, avian flu, those are all factors but the real issue is COVID lockdowns. Demand went from humming to enormously impaired overnight, and businesses frantically cut supply to survive. They went far below a capacity that made sense in an economy that wasn’t dealing with this exogenous blow. It’s going to take a while to rebuild that capacity now that demand has rebounded (see, e.g., airlines).

I agree though. Long term, an aging population is going to result in deflationary pressure and lower interest rates. You’ll have lower or no population growth in the age brackets that consume lots of things.

will it be deflationary though, if you have fewer workers to produce fewer goods and more non-workers to compete for the goods?
The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
Goldwater85
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Re: "experienced" investors: is this time different?

Post by Goldwater85 »

trirunner wrote: Sat Jun 11, 2022 12:14 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:11 pm
trirunner wrote: Sat Jun 11, 2022 11:50 am
Goldwater85 wrote: Sat Jun 11, 2022 11:48 am
seychellois_lib wrote: Fri Jun 10, 2022 6:40 pm
I am thinking along the same lines and came to the same conclusion. I saw the 70s as an adult albiet protected by the fact i spent that time overseas working as a defense contractor with a huge tax break.

Having said this, I wonder, due to the supply side element, if we might see relief before rates go through the roof. I remember 18% mortgages! You definately got a serious slowdown out of that. Seems to me folks here are freaking out about 5.5%. That may just be the beginning. I am expecting a 2% to 3% real return on bonds. If 8% inflation persists for a few more months we may have to go to 10 or 11% nominal. That is why I think the bond market has a ways to go. If this plays out, hold on to your hat!

However, if stunted supply can be worked out would this not provide some pricing relief on the supply side? I get the war damage point but that is not where we are ( with exception of ukraine). We are short chips and fossil fuels in particular. But these will be addressed in due course withe appropriate policy action.
Chips, energy, drought, avian flu, those are all factors but the real issue is COVID lockdowns. Demand went from humming to enormously impaired overnight, and businesses frantically cut supply to survive. They went far below a capacity that made sense in an economy that wasn’t dealing with this exogenous blow. It’s going to take a while to rebuild that capacity now that demand has rebounded (see, e.g., airlines).

I agree though. Long term, an aging population is going to result in deflationary pressure and lower interest rates. You’ll have lower or no population growth in the age brackets that consume lots of things.

will it be deflationary though, if you have fewer workers to produce fewer goods and more non-workers to compete for the goods?
The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
China’s industrial revolution, the ‘90s tech sector, even Walmart’s expansion. But those are all examples of ‘good’ deflation fueled by productivity growth, not demand destruction.
trirunner
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Re: "experienced" investors: is this time different?

Post by trirunner »

Goldwater85 wrote: Sat Jun 11, 2022 12:45 pm
trirunner wrote: Sat Jun 11, 2022 12:14 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:11 pm
trirunner wrote: Sat Jun 11, 2022 11:50 am
Goldwater85 wrote: Sat Jun 11, 2022 11:48 am

Chips, energy, drought, avian flu, those are all factors but the real issue is COVID lockdowns. Demand went from humming to enormously impaired overnight, and businesses frantically cut supply to survive. They went far below a capacity that made sense in an economy that wasn’t dealing with this exogenous blow. It’s going to take a while to rebuild that capacity now that demand has rebounded (see, e.g., airlines).

I agree though. Long term, an aging population is going to result in deflationary pressure and lower interest rates. You’ll have lower or no population growth in the age brackets that consume lots of things.

will it be deflationary though, if you have fewer workers to produce fewer goods and more non-workers to compete for the goods?
The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
China’s industrial revolution, the ‘90s tech sector, even Walmart’s expansion. But those are all examples of ‘good’ deflation fueled by productivity growth, not demand destruction.
Aging population doesn't have demand destruction, shrinking one does, and I don't see that any time soon.
Goldwater85
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Re: "experienced" investors: is this time different?

Post by Goldwater85 »

trirunner wrote: Sat Jun 11, 2022 1:00 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:45 pm
trirunner wrote: Sat Jun 11, 2022 12:14 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:11 pm
trirunner wrote: Sat Jun 11, 2022 11:50 am


will it be deflationary though, if you have fewer workers to produce fewer goods and more non-workers to compete for the goods?
The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
China’s industrial revolution, the ‘90s tech sector, even Walmart’s expansion. But those are all examples of ‘good’ deflation fueled by productivity growth, not demand destruction.
Aging population doesn't have demand destruction, shrinking one does, and I don't see that any time soon.
In aggregate, a typical 40 year old consumes more goods and services than a typical 80 year old. By increasing the ratio of 80 year olds to 40 year olds, you are reducing economic demand without necessarily shrinking the population.

US demographics are not Japan’s or even Europe’s, so maybe this doesn’t pressure prices into outright decreases. But expect this trend to at least reduce the rate of demand growth vs historical experience. This would reduce the need for additional capacity, which is at the core of business activity. In turn expect the need for equity and debt capital to expand capacity to be reduced, which lowers interest rates and expected returns on equity.

Not that countercurrents can’t push us the other way. Maybe AI leads to an explosion in productivity. Who knows?

But if long term interest rates do push substantially higher, I do intend to increase the duration of my portfolio. Mainly by adding equities. Lost COVID capacity gets built back out eventually. Maybe it takes 5 years to train up a bunch more pilots, but fairly certain we’ll see a 3.0% long bond again.
Logan Roy
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Re: "experienced" investors: is this time different?

Post by Logan Roy »

Goldwater85 wrote: Sat Jun 11, 2022 2:02 pm
trirunner wrote: Sat Jun 11, 2022 1:00 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:45 pm
trirunner wrote: Sat Jun 11, 2022 12:14 pm
Goldwater85 wrote: Sat Jun 11, 2022 12:11 pm

The effect has been pronounced in S. Europe and Japan. Although you’re right that the impact probably varies across sectors and the amount of the labor input is probably an important factor in that.

That’s long term. Short term it looks like $s chasing fewer goods and services.
I would argue China was the source of deflation around the world the last decade, now it's tapped out since china is aging fast, and I don't see another comparable source.
China’s industrial revolution, the ‘90s tech sector, even Walmart’s expansion. But those are all examples of ‘good’ deflation fueled by productivity growth, not demand destruction.
Aging population doesn't have demand destruction, shrinking one does, and I don't see that any time soon.
In aggregate, a typical 40 year old consumes more goods and services than a typical 80 year old. By increasing the ratio of 80 year olds to 40 year olds, you are reducing economic demand without necessarily shrinking the population.

US demographics are not Japan’s or even Europe’s, so maybe this doesn’t pressure prices into outright decreases. But expect this trend to at least reduce the rate of demand growth vs historical experience. This would reduce the need for additional capacity, which is at the core of business activity. In turn expect the need for equity and debt capital to expand capacity to be reduced, which lowers interest rates and expected returns on equity.

Not that countercurrents can’t push us the other way. Maybe AI leads to an explosion in productivity. Who knows?

But if long term interest rates do push substantially higher, I do intend to increase the duration of my portfolio. Mainly by adding equities. Lost COVID capacity gets built back out eventually. Maybe it takes 5 years to train up a bunch more pilots, but fairly certain we’ll see a 3.0% long bond again.
I generally go with the deflationary view – and a "1% everything" economy. That ageing and automation are these persistent deflationary forces (difficult to have sustained inflation without wage growth inflation), and the whole world becomes like Japan: fighting deflation, until the PE ratio of all financial assets matches inflation, which will be PE 100, and stays there, with no risk-adjusted real returns on anything.

However, if the global population peaks at 11 billion, by 2050, and AI accelerates Asia and Africa's ascents to the global middle-classes, that's less than 30 years to build this digital infrastructure that can support 11bn people in some high-bandwidth 'metaverse' existence, that retirees are probably going to consume more of than anyone. All against the backdrop of trying to get the world off fossil fuels. That strikes me as an extremely inflationary bottleneck to global development.
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Charles Joseph
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Re: "experienced" investors: is this time different?

Post by Charles Joseph »

What feels different this time for many (not all) investors is that when interest rates rise, stocks and bonds both tend to go down together. And that's what's been happening lately (and we might or might not be done with that yet).
"The big money is not in the buying and selling, but in the waiting." - Charles Munger
cp73
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Re: "experienced" investors: is this time different?

Post by cp73 »

Were not through with this one....but the closer you are to retirement the worse it effects you. Ive been retied since 2016. 2008 was bad especially knowing I was retiring within 10 years or so. In 2008 I thought I would work for a long time but things turned out fine. The one thing I have learned through them all to the 70s was the best thing you can do is nothing. When it tears at your stomach don't give in. Gut feelings are useless and usually wrong. Just stay the course. Any selling should have been done a year ago. It will come back. The question is when? The thing that is different is bonds are having their worse year every. My ballast portion of my portfolio is down 9%....Overall I am down 13% with a 45/55 (stock/bond) portfolio.
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HanSolo
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Re: "experienced" investors: is this time different?

Post by HanSolo »

Goldwater85 wrote: Sat Jun 11, 2022 2:02 pm In aggregate, a typical 40 year old consumes more goods and services than a typical 80 year old. By increasing the ratio of 80 year olds to 40 year olds, you are reducing economic demand without necessarily shrinking the population.
A competent businessperson can make a business successful across fluctuations in demand.

The ones who aren't that competent need to be replaced by the ones who are.
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KneeReplacementTutor
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Re: "experienced" investors: is this time different?

Post by KneeReplacementTutor »

Marseille07 wrote: Sat May 21, 2022 10:40 pm
freyj6 wrote: Sat May 21, 2022 10:10 pm Haha 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.
...Even the notion of rebalancing, held strongly by the Bogleheads, is essentially buying the dip phrased differently.
I think the difference between "buying the dips" and "rebalancing" is more than semantics. For instance, a "rebalance" is also triggered by increase in the value of a particular asset class in the absence of a "dip" in another.
seychellois_lib
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Re: "experienced" investors: is this time different?

Post by seychellois_lib »

cp73 wrote: Sat Jun 11, 2022 7:16 pm Were not through with this one....but the closer you are to retirement the worse it effects you. Ive been retied since 2016. 2008 was bad especially knowing I was retiring within 10 years or so. In 2008 I thought I would work for a long time but things turned out fine. The one thing I have learned through them all to the 70s was the best thing you can do is nothing. When it tears at your stomach don't give in. Gut feelings are useless and usually wrong. Just stay the course. Any selling should have been done a year ago. It will come back. The question is when? The thing that is different is bonds are having their worse year every. My ballast portion of my portfolio is down 9%....Overall I am down 13% with a 45/55 (stock/bond) portfolio.
Hear hear. Retired same year as you. In 2009 I did stupid... panicked and moved my 401 to cash just after the Lehman collapse. Two weeks later, thank my lucky stars, I came to my senses and reestablished my original equity positions. This one move saved my retirement (and , man did that take some cajones. At that time it seemed like the world was coming to an end). W

When Covid hit the only thing I did was move $50k cash from commercial MM to Treas MM. Otherwise I did a whole lotta nothing. Today, six years later, my portfolio is worth $150K more than it was when I retired. Like you, I am down about 11% in the current market (if you look at my allocation it is interesting how well our performance matches) but still well above where I was when I retired. I am extremely happy with the way things have gone so far. I never realized spectacular returns nor did I endure spectacular losses, it has been slow but steady growth interrupted by several downturns, the worst of which - so far - was Covid.

Having said the above, I did some equity selling (fairly small stakes) last year as the market reached new heights. I called this "down balancing", in other words I would rebalance and simultaneously take few equity chips off the table. I was pretty sure things were going to go South to some extent. Sure enough, South they went. Consequently I built a little stash of cash over time which i will be using to "up balance" periodically as the market sours. Up balancing is my term for doing a portfolio rebalance and simultaneously adding to the equity stake. Always with my desired equity to fixed allocation in mind (a very conservative but sleep enabling 40/60).

Turns out my fixed component is 70% short term treasuries, TIPS and treasury MM. and 30% bonds. For several years I have been leery of adding to longer term bonds thinking there was no way we could sustain these crazy low rates. It took longer than I thought it would, but the worm has turned. Now I am thinking it is time to start constructing a larger long term bond portfolio with a decent return. This could be the final tweak I need to make to the portfolio before basically going on autopilot with exception of periodic rebalancing up or down or sideways. I am thinking I might start making this move after the next fed meet during which I suspect we will see another rate increase barring some miracle on inflation. The assumption being the Fed will get inflation under control within a year or two and we emerge with a reasonable real return on the bond portfolio. If inflation is not brought under control we are doomed, so no sense worrying about it, although I do have a 2.7% fixed rate 30 mortgage which is only two years old so that and the house with 60% equity are pretty decent hedges against the worst case. Higher rates will pressure the house value but I am perfectly happy to have that happen if inflation is simultaneously brought down.

One thing I missed was a TIPS opportunity. I had a 12% gain on a 130K position and probably should have been thinking harder about this several months ago. My gain there is now zip. Oh well, you win some you lose some. All is well if you do a bit more of the former and a bit less of the latter. So far so good.
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Re: "experienced" investors: is this time different?

Post by DSBH »

seychellois_lib wrote: Sat Jun 18, 2022 10:15 am
cp73 wrote: Sat Jun 11, 2022 7:16 pm Were not through with this one....but the closer you are to retirement the worse it effects you. Ive been retied since 2016. 2008 was bad especially knowing I was retiring within 10 years or so. In 2008 I thought I would work for a long time but things turned out fine. The one thing I have learned through them all to the 70s was the best thing you can do is nothing. When it tears at your stomach don't give in. Gut feelings are useless and usually wrong. Just stay the course. Any selling should have been done a year ago. It will come back. The question is when? The thing that is different is bonds are having their worse year every. My ballast portion of my portfolio is down 9%....Overall I am down 13% with a 45/55 (stock/bond) portfolio.
Hear hear. Retired same year as you ...

Today, six years later, my portfolio is worth $150K more than it was when I retired. Like you, I am down about 11% in the current market (if you look at my allocation it is interesting how well our performance matches) but still well above where I was when I retired. I am extremely happy with the way things have gone so far. I never realized spectacular returns nor did I endure spectacular losses, it has been slow but steady growth interrupted by several downturns, the worst of which - so far - was Covid.
I did not think about it this way until I read your post. Very good perspective applicable to our situation with both of us retiring in 2017. Thanks!

FWIW at the end of last year our portfolio value was 37% more than when we retired, and as of today we're still 13% ahead, after almost 5 years of expenses including paying taxes for multiple large Roth conversions. And yes we'll stay the course.
John C. Bogle: "Never confuse genius with luck and a bull market".
traderjoe55
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Re: "experienced" investors: is this time different?

Post by traderjoe55 »

I am not old but I do read a lot.

Imo this time is different. Pretend you are in 2008/9 or 2020 with the fed against you instead of supporting you.

Read some stuff about the 1970s/80.

Best of luck.
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HomerJ
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Re: "experienced" investors: is this time different?

Post by HomerJ »

traderjoe55 wrote: Sat Jun 18, 2022 3:04 pm I am not old but I do read a lot.

Imo this time is different. Pretend you are in 2008/9 or 2020 with the fed against you instead of supporting you.

Read some stuff about the 1970s/80.

Best of luck.
People who stayed the course in the 1970s/80 did really well in the long run.

That's the point.... So far, stay the course has worked.

It may not work going forward... That's possible...

But, so far, just riding the market all the way down and all the way back up still made people rich over time.

The 9%-10% nominal average return INCLUDES the crashes... The people who stayed the course the 70s and early 1980s made HUGE gains on all that money they kept invested in the 80s and 90s.

Sure, if you could just get out during the bad years and only invest during the good years, you'd have even more...

But it's hard to time the market, if you do it wrong, you could end up with less.

Doing nothing, so far, still made people rich.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
CloseEnough
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Re: "experienced" investors: is this time different?

Post by CloseEnough »

cp73 wrote: Sat Jun 11, 2022 7:16 pm Were not through with this one....but the closer you are to retirement the worse it effects you. Ive been retied since 2016. 2008 was bad especially knowing I was retiring within 10 years or so. In 2008 I thought I would work for a long time but things turned out fine. The one thing I have learned through them all to the 70s was the best thing you can do is nothing. When it tears at your stomach don't give in. Gut feelings are useless and usually wrong. Just stay the course. Any selling should have been done a year ago. It will come back. The question is when? The thing that is different is bonds are having their worse year every. My ballast portion of my portfolio is down 9%....Overall I am down 13% with a 45/55 (stock/bond) portfolio.
Curious, if you are in retirement, and "the ballast portion" of your portfolio is down 9%, do you still withdraw from your portfolio? Or do you have other sources of income that allow you to "do nothing"?
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