OT - Dow plunges 1,175 - worst point decline in history

[Tony T]

Originally Posted by Gummee

there's 2 thoughts:

1. stocks are on sale, buy more (see also: dollar cost averaging)

2. it's only a loss if you sell when you're low. Otherwise, it's all paper losses

M

So no one who's holding from 2009 has a gain?

[saab2000]

Originally Posted by Tony T

So no one who's holding from 2009 has a gain?

Everyone who has held since 2008-2009 time period is way, way ahead.

[Mr. Pink]

Originally Posted by Gummee

there's 2 thoughts:

1. stocks are on sale, buy more (see also: dollar cost averaging)

2. it's only a loss if you sell when you're low. Otherwise, it's all paper losses

M

Over the past ten years I have heard so many times about so many people who were "wiped out" by '08, they lost everything, they'll never retire, and all that has been used as a poor excuse by writers with an agenda to go after Wall Street (not that they don't deserve criticism) and, especially, the entire 401k and IRA industry. I think, wait, what, how did that happen? Of course, we're listening to people whine that, as usual for most, made awful financial decisions, the top of the list was to sell low after buying high. Happens all the time. Probably today.

[echappist]

Originally Posted by Mr. Pink

Over the past ten years I have heard so many times about so many people who were "wiped out" by '08, they lost everything, they'll never retire, and all that has been used as a poor excuse by writers with an agenda to go after Wall Street (not that they don't deserve criticism) and, especially, the entire 401k and IRA industry. I think, wait, what, how did that happen? Of course, we're listening to people whine that, as usual for most, made awful financial decisions, the top of the list was to sell low after buying high. Happens all the time. Probably today.

mostly agree. I know someone who screamed and yelled to make her husband sell shares in 2008, only to regret it later.

That said, if you are in the withdrawing phase, then a 50% dip in equities is going to hurt a bit (though still shouldn't wipe out one's nest egg). assume a 700k bond 300k stock portfolio, with a drawing rate of 4%, one is now at 850k (or possibly 800k, if the bond market takes a tumble as well). The safe withdrawing rate of 4% used to mean 40k/year; now it's 32k/year.

[Mr. Pink]

Originally Posted by echappist

mostly agree. I know someone who screamed and yelled to make her husband sell shares in 2008, only to regret it later.

That said, if you are in the withdrawing phase, then a 50% dip in equities is going to hurt a bit (though still shouldn't wipe out one's nest egg). assume a 700k bond 300k stock portfolio, with a drawing rate of 4%, one is now at 850k (or possibly 800k, if the bond market takes a tumble as well). The safe withdrawing rate of 4% used to mean 40k/year; now it's 32k/year.

Well, thank the lord for points on the card and AirB&B.

[NewDFWrider]

Originally Posted by echappist

mostly agree. I know someone who screamed and yelled to make her husband sell shares in 2008, only to regret it later.

That said, if you are in the withdrawing phase, then a 50% dip in equities is going to hurt a bit (though still shouldn't wipe out one's nest egg). assume a 700k bond 300k stock portfolio, with a drawing rate of 4%, one is now at 850k (or possibly 800k, if the bond market takes a tumble as well). The safe withdrawing rate of 4% used to mean 40k/year; now it's 32k/year.

Perhaps the better way to line things up is to budget out, say, 5 years of expenses and then keep that money in cash (or CD's) while remaining more invested in equities. That way, you aren't forced to withdraw annually when your portfolio is down, as you can wait it out for a year or two. (I think another Paceliner does this, as he referenced it in another thread about paying off a mortgage early).

[93KgBike]

[RC.]

Originally Posted by echappist

actually, more like Mr. Jack Bogle

I've learned an immense amount from both of them!

[MattTuck]

Originally Posted by MattTuck

We're going back below 1500 on the S&P500 (not today, or tomorrow though). This is the economic equivalent of a guy going on a solo break away at Roubaix, using all his reserves, pushing past his limits to gain a temporary advantage. He will hit a wall with 50K still left to race.

Originally Posted by echappist

last time the S&P was at that level was in early 2013... 2500 or even 2000, i could see; but 1500 (unless temporary)? then again, the S&P does generally take a 30-40% hit on bad bear markets, so...

---------------------------------------------

otoh, treasury yields haven't budged yet (i'd expect at least the long term to go down, as people flock to "safety", thus driving up prices and lowering yield). any more astute followers of the market have an explanation for that?

I'll revise my prediction. We're going down to 1500 for S&P500 in 2008 dollars, which is about 1800 today.

As for treasury yields, I'm not sure why anyone would buy those bonds. We are borrowing so much money, there is no way that you're going to get paid back. Yes, I can see in the short term, flight to safety... but god, just look at the numbers around the debt, deficit, interest payments, and rising rates... it is not good.

[echappist]

Originally Posted by MattTuck

I'll revise my prediction. We're going down to 1500 for S&P500 in 2008 dollars, which is about 1800 today.

As for treasury yields, I'm not sure why anyone would buy those bonds. We are borrowing so much money, there is no way that you're going to get paid back. Yes, I can see in the short term, flight to safety... but god, just look at the numbers around the debt, deficit, interest payments, and rising rates... it is not good.

but that would imply you would believe the Federal Gov't to default on those bonds?

would be a scary prospect

i mean, if this were any other debt-issuing country, I'd believe it, but we are currently the scarred (but good apple) amongst a barrel of rotten apples. where else is that money going to go? Responsible countries like Singapore doesn't issue nearly as much debt...

[MattTuck]

Originally Posted by echappist

but that would imply you would believe the Federal Gov't to default on those bonds?

would be a scary prospect

i mean, if this were any other debt-issuing country, I'd believe it, but we are currently the scarred (but good apple) amongst a barrel of rotten apples. where else is that money going to go? Responsible countries like Singapore doesn't issue nearly as much debt...

Governments have ways of defaulting without actually defaulting. Inflation being the obvious one. If you buy a 30 year US bond, the payments in 2048 will be denominated in 2048 dollars, not 2018 dollars.

I mean, looking at the trends and sizes of these imbalances, I just don't see how we make good on all the checks our government has written.

[GregL]

Originally Posted by MattTuck

I mean, looking at the trends and sizes of these imbalances, I just don't see how we make good on all the checks our government has written.

Statistically, many of our current elected officials (off BOTH major political parties) won't be alive when these checks are cashed. They're just concerned with today's battles and don't care about the future. A sad state of affairs for our country and our future.

Greg

[54ny77]

ask two economists a question on directional trends/predictions and you'll get at least 4 answers!

meanwhile, in the real world, what would are you willing to commit your own $ to? inverse treasury etf's? any that you like? on a related note, a buddy made a large amount of $ during the crisis on levered inverse financial etf's, once it became clear that once a layer or two was peeled off the systemic onion, things weren't going to play out very well.

Originally Posted by MattTuck

I mean, looking at the trends and sizes of these imbalances, I just don't see how we make good on all the checks our government has written.

[MattTuck]

Originally Posted by 54ny77

ask two economists a question on directional trends/predictions and you'll get at least 4 answers!

meanwhile, in the real world, what would are you willing to commit your own $ to? inverse treasury etf's? any that you like? on a related note, a buddy made a large amount of $ during the crisis on levered inverse financial etf's, once it became clear that once a layer or two was peeled off the systemic onion, things weren't going to play out very well.

The issue with any of those engineered ETFs is the decay over time. I've made a little money over the years by getting the timing right on a couple of big moves using options, but in general I am pretty bad at it. It becomes even harder with those types of ETFs because holding them for even a few weeks or a month can see significant decay of your investment, if the underlying index doesn't do what you think it is going to. So I would be aware of that risk with those products.

In the long term, I think we're going to see interest rates go up, and inflation go up. In fact, I'm not so sure that a portion of the stock market (and pretty much all asset classes) gains of the last decade aren't just due to inflation expectations about the future. Gold is sort of an odd ball in this regard, and I don't have a good explanation for that.

If I had any advice beyond investing in a globally diversified, market weighted portfolio, I'd think really hard about the sustainability of various sectors of the economy. In the words of someone, "unsustainable trends eventually end".

I might stay in cash and wait until prices come down (in other words, rates go up), and focus on buying stuff that produces good cash flow yield.

[54ny77]

that's all you got?

man, i could've gotten that from a cab driver.

Originally Posted by MattTuck

I might stay in cash and wait until prices come down (in other words, rates go up), and focus on buying stuff that produces good cash flow yield.