This morning on CNBC I have heard two references to feeling down because stock prices are dropping today. This is developing into a pet peeve of mine. I've been working in the business in varying capacities since 1984 and I've noticed anecdotally that every so often the stock market goes down. Yes, it is true.
It turns out there is something to my casual observation. Stocks have a down year 28% of the time.
Ok, I'll ease up on the sarcasm and just say that stock declines are a normal part of the process and we are guaranteed, guar on teeed, to have down years and bear markets in the future. We know they are coming but we also know that the market will have more up years than down. That is just how it is.
Do you get emotional about about the sun rising in the morning or setting at night? No because both are guaranteed to occur. It is the same with up and down markets. I just mentioned this a few days ago, having the outcome of your day determined by how stocks do seems like no way to live.
50 comments:
"We know they are coming but we also know that the market will have more up years than down. That is just how it is."
Therefore just buy, hold, and rebalance and forget about all the noise.
Roger,
Thank you for 200 DMA lesson. I appreciate your time.
Max
if you are inclined to absorb the full brunt of down a lot with with no attempt to protect your assets then so be it. I am not.
NP Max
Roger don't forget it is all a matter of perspective. To someone who just escaped death, damn right a sunrise or sunset is an emotional event! (I know, I know, it was only a rhetorical question, but it serves my point) The good folks who mention feeling down today do so at the risk of exposing their bias and lack of practical market experience. But hey, they look good on camera!
Paul, you are on the verge of lifting the conversation to a meta-physical level which will leave me very far behind wondering what just happened.
No worries - that's all I've got today!
Roger. I believe you have stated on numerous occasions that you expect one more nauseating puke down before the next cyclical bull starts. If memory serves me correctly, I believe this is the 4th time since March 2009 that the SPX will have corrected between 5%-10%. What magnitude do you anticipate for the final significant puke down? Thank you.
Hey Paul, may feelings exactly. Classic Loss Aversion Bias
"Psychologically, the possibility of a loss is on average twice as powerful of a motivator as the possibility of making a gain of equal magnitude; that is, a loss-averse person might demand, at minimum, a two dollar gain for every one dollar placed at risk. In this scenario, risks that don't pay double are unacceptable."
From Behavioral Finance and Wealth Management by Michael Pompian
Investor - know thyself!
subjectively I would say to a level that scares the hell out of a lot of people.
that might be 15-20% from the peak. i am sticking with the belief, as opposed to changing my mind, and will either be right or wrong but I absolutely still think it will happen.
I do not think we get down to the march low again.
"I do not think we get down to the March low again"
March of what year;-)
It's just another Irish Coffee day
...this time with whipped cream.
thanks for your blog:-)
"march of what year?"
bazinga
Roger,
If one understands the social security system then one understands that it is a ponzi scheme.
If one believes that the social security system is a "generational bond" then the social security system is a ponzi scheme that is still very effective on that individual.
SEG
i tend to believe that SS is not intended to deceive people with mal intent.
Bernie Madoff did not originally have mal intent. He started as a legitimate investment then things just got twisted and it ended up a ponzi scheme.
SEG
1: A ponzi scheme isn't something that accidently happens. Its not like Madoff was sipping his coffee one morning looking at his books and said "Oh man I'm running a ponzi scheme when did that happen!?"
2: Anon 9:08. One could buy hold and forget all the noise and wait for the sun to rise again. Others might take steps like having flashlights and checking that the furnace is in proper condition to ease the comfort of the time until morning.
Social Security takes thousands of dollars from Roger and his wife every year. Social Security promises to pay Roger and his wife thousands of dollars every year in retirement. Roger realizes he will never see a dime of his money back.
That defines a ponzi scheme, whether that was the original intent or not is not at issue here. The suckers brought into the ponzi scheme late (younger people) never see there money again even though it paid some money out to people who got in early (like my parents).
Sorry but no matter what the intent was it has gotten twisted and is now a ponzi scheme.
SEG
Social Security.
Let's call it what it is. Income redistribution. Class warfare. No one should be surprised. That was the original intent, even more so today.
Another view of social security. Its a way to subsidize cheap labor. No need for big fat cat owners of businesses to provide pensions. Much, much cheaper to pay 7.65% tax (cuz you get a credit for other 7.65%) on your first $106,000 or so. A great way to exploit workers without them even knowing it. Come on, wake up people. This is still the rich guy screwing the little guy.
We tend to believe that competition is good and offers benefits. However, it also works in reverse (for an individual). At one time, many companies offered a pension. If that were still true today, then a pension, plus SS, plus what money I saved for retirement, would have provided a rather comfortable retirement. But....companies found they could eliminate pensions (and new companies never had to start one). And our friend "competition" allowed other companies to follow suit. So today, very few companies offer a pension. Companies have lowered their costs by using 401k's instead. ...and in addition..because profits are larger due to a lower cost structure, the CEO can receive a bonus. Yea for capitalism.
I terminated my defined benefit plan for employees because the rules were too burdensome, and the liability too great. I was at personal risk for the plan being underfunded. A catch 22, be too conservative, and pony up big $. Take on a little risk that goes the wrong way, pony up big $. Hire a consultant to do it, pony up big $. Thank the the do gooders in congress. Easier to have profit sharing plan, then don't have to do anything. This is a case of the government bureaucrats screwing the little guy.
I went to college thanks to Social Security that provided to an orphan. I am glad that I paid Social Security while I was working in the USA even if I never see a dime. But, I think I will collect, when on pension.
Let me tell you is the worst in the USA - The worst program is the judicial system and women organizations that pray on innocent men, while calling wolf.
I am 98% cash. Now must think what companies to buy when we reach support.
Thank God, I own a manual transmission Turbo Diesel red Alfa Romeo. I told you Fiat did not make such bad car, but must be a good driver, since you cannot rely on automatism.
Again I like quote what are the bust words I have read in this blog -
"Sometimes this reaches the point of chaos (bifurcation) and an entirely new agreement will need to be established." – By RW. Viva RW. In Italy you write WW RW.
RW, Roger, you guys have thought me allot. – Thanks
Best,
Jeff from Milan, Italy
sorry, Best words instead of bust words
Jeff
sorry, Best words instead of bust words
Jeff
Roger,
I think there was mal intent.
Congress has let knowingly let social security benefits rise faster than the rate of inflation even though the number of people paying into the system has been decreasing dramatically compared to the number of pensioners.
They have knowingly done this and also knowing you and many others will not get your social security pension. They knew exactly what they were doing and lied through there teeth to get re-elected.
You and many others are the ponzi's in this scheme.
WHat if the market retreats to just below the 200 day MA and then rallies all the way back...Then you get all the downside and miss the upside...just saying....
Just fyi. I'm not aware of any contract that says the government will pay me money out of the social security fund.
I may be wrong, but I don't think anyone else here is, either.
I get tired of the "class warfare" and "the government is stealing money from me" and "it's income redistribution" arguments. I'd imagine EVERYONE hates paying social security taxes - until for whatever reason, they or someone they love has financial problems or a financial catastrophe and needs it to get by.
but man, 26 comments? Heh.
Dollar strength is not good for commodities or equities but combine it with strength in the Yen as has been the case recently and the bad news doubles: There is a lot of hot money in the carry trade and it doesn't take long for it to evaporate so a few more days of strength in the two main carry currencies could turn this correction into a rout even if more positive economic data are released tomorrow as I expect.
Heavy selling at the close today and my buy-list is ready but we're not there yet; let's see if we get an oversold bounce like last time (I will remain hedged regardless you may be sure).
I still expect the US equity markets to perform relatively better than most foreign markets in the intermediate term but that's not really saying much I'm afraid. Interesting times, a little too interesting.
OT: It is not clear to me what folks believe they are arguing regarding SS only than it appears increasingly tendentious. Set aside for the moment the tens of millions of citizens in this country with little to show for a lifetime of work or the increase in money velocity supporting them contributes to the economy and simply consider: (a) no one qualified to receive SS benefits has been denied them in the program's history that I've heard of, (b) any expectation that Roger or anyone else will not receive SS in future is therefore probably speculative, and (c) a Ponzi scheme means what it means but begging the question with additional assertions about Ponzi or SS can add nothing to argument because there was never any connection between claim and observable data established in the first place.
Color me clueless here but I'd rather analyze my next short-sale candidate.
Steven: "Just fyi. I'm not aware of any contract that says the government will pay me money out of the social security fund.
I may be wrong, but I don't think anyone else here is, either."
I believe it's law and there is a fund. It's just a ledger balance item, but it's real.
anon 1:40, i thought i was cynical, well that label is now off of me
anon 1:47, literally hundreds of posts in the archives of this blog detailing moving in small amounts to try to minimize getting whipsawed.
did you think you were the first person to think of that? I'll repeat, hundreds of posts.
RW,
the buy list is not for today. But what if we get to S&P703, like I said on 22 jan, 2010. On panic must be ready with a list of names and low prices. I think that you purchased Ford close to the bottom.
The sovereign dept problem is bigger than the subprime problem. The implications are larger. It is not only Greece that has a problem, but, also Portugal, Spain, Italy and many other countries that have to get their Kensian programs to get the world economies going.
Best,
Jeff from Milan, Italy
I think Rogers 200 dma is to simplistic, but it is a whole lot better than no plan or doing nothing. This is especially true for this coming decade IMO.
Hopefully in 2020 we may be able to go back to buy and hold, but not now.
SEG
Isn't it about time for an ETF (say based on SPY/EFA) that attempts to minimize drawdowns using 50dma/200dma. Makes life much easier for the DIY crowd ;-).
http://www.pacificviews.org/weblog/archives/001096.html
A pretty good read on SS for anyone interested.
I agree with Larry regarding ss. Perhaps we can call it a legal Ponzi scheme, splitting the difference, and move on.
I agree with Roger that there is intentional malicious intent regarding ss. Perhaps Congress should just be afforded special student status and each be given the courtesy of a little yellow bus.
Let me tell you is the worst in the USA - The worst program is the judicial system and women organizations that pray on innocent men, while calling wolf.
Amen Jeff from Italy although I think you mean prey NOT pray. :)
Apologize for the hijack, but men in the US along with some other Western European nations really need to wake up.
Here is a website Jeff you might enjoy as much as the O'Neill book:
http://www.the-spearhead.com/
Send me an e-mail at MDCigan@gmail.com, and I can e-mail you some reading material that completely unplugs you from the Matrix that most men are completely ignorant of.
About social security being wealth re-distribution:
1: If this were true why do they wait until you are in your 60s to give it back?
2: Isnt also only the first 100k or so taxed? Those making above that are paying a lower % of their overall income.
About competition and pensions: Competition between companies isnt about doing a good job and providing the best service possible. Its about doing just slightly better to be noticed by a customer to be the better choice.
As some have mentioned, if nobody provides a pension then they dont have to worry about that. I'm surprised some companies still have a pension at all.
It sounds like a good deal if you only lose 28 percent of the time and win 72 percent of the time. But the deal does not sound so good if you can lose 25 to 70 percent of your money when you do lose, especially when most of the time an investor is investing is in a rising market. Its like accumulating money at about 9 percent a year on a mountain top and then every few years the wind blows away half of it.
Sure, you can sell short to protect, but then that would put you at risk of not gaining so much when the market goes up.
I would love to know what Roger's long term record compared to the S&P, and what a person's actual return would be if an investor invested a steady amount yearly over that time period. And I really do not know why he wouldn't publish such figures. (Actually I do know why).
Despite my cynicism, reading Roger's blog has helped me become a better investor.
you can contact my firm for a compliance approved performance report.
Roger,
"anon 1:40, i thought i was cynical, well that label is now off of me"
With all due respect the congress of the US has enormous resources of the federal government at its resource. The inflation plus 1% has be law for decades. The decrease in people paying into the system has been known for decades.
Congress does not live in a cabin in AZ (thank god they do not deserve it). Congress has knowingly let social security become this problem tearing apart our society as witnessed by the various posts. They do not give a damm that it has become a ponzi scheme.
"you can contact my firm for a compliance approved performance report."
With all due respect, I have read your blog for a long time and have no idea how to contact your firm. You need to make that a little easier in case I want to invest with you in the future.
So Rhianni32, you saying rich people get the bigger bang for the buck with social security?
This is getting a bit nasty.
Roger provides a daily blog and articles, interviews and other assorted sundries for many media outlets. He provides thoughts and ideads of a general nature which are informative and tactful. He also tries to have a sense of humor (I like it, anyway) in the mundane world of investing, where most simply stroke their own egos.
I wonder how many critics understand how difficult and time-consuming it is to run a daily blog, let alone prepare for other media and satisfy clients?
Criticism always comes when one publicly exposes their thoughts. It is easy to hide behind the label "anonymous" while sliging darts.
Roger knows my response to this situation:
Don't get into a pissing match with a skunk.
I will remain ANONYMOUS.
Roger,
I hope I did not appear nasty. I truly gained a greater understanding of investing from your blog. And using your principles I totally avoided the last collapse (but never completely recovered from the previous bubble collapse). My disgust is solely with the corporate/government/fed partnership.
I am interested in your firm's record, but does it give a year by year performance record?
What is your firm's name, anyway?
Thanks
Anonymous 5:24
Completely off topic, but I was informed by WSJ today that my renewal rate for print and online would be $116.55 per quarter, almost double what I pay now. And no, I am not a first year subscriber paying a teaser rate. If there are any other WSJ readers here, could you tell me how much you pay?
Customer service basically said if it is too much, too bad. I was told by others to just let the subscription lapse and they'll be calling in a few days with a much lower rate.
my online rate skyrocketed in Sept when my renewal was due
I am assuming you paid it since you cite Zweig's column. I'm guessing it is a legitimate expense for you. Did you ask for a lower rate or just pay it?
sigh. we need watchdogs. I love the journal...print is better for me, but man-o-man $466.20/yr is pretty steep. Is News Corp in trouble or what?
online was $199 for the year
MikeC,
i have read the link that you provided. However, I have a gripe with: the judicial system and women organizations that pray on innocent men, while calling wolf.
Not women themself. I have am married and have many long lasting women friends that help me during the the worst time of my life. What I am saying is that men during divorces because of NOW and the judicial system get the bad end of it. Many are forced to become homeless, become scapegoat from crimes that never commited. It is the system that stinks that should provide protection to all people. But with the lobby of women organizations men have become prey. I am not talking about the women-Men Relations and selling them self and all of that. I am 55 and have my life under control. However SS is an ok program. A system taht prey on a section of society is harmfull.
Thanks MikeC,
Jeff from Milan, Italy
The term bang for their buck is so vague and open to interpretation.
I only mean what I typed.
"Isnt also only the first 100k or so taxed? Those making above that are paying a lower % of their overall income. "
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