Talking stocks, trading, and investing in general

[otc]

Partial shares win in your situation

 

[jbarwick]

If y'all are into podcasts, the recent The Meb Faber Show had an episode with a guy named Raoul Ray is worth a listen. Said most of the world is in a recession and that the US could not hold out forever. Then went into how bonds are approaching negative so an allocation there is somewhat worthless. Then hit the eyeroll topic of gold and bitcoin.

I honestly don't know what to think in this situation. I wasn't an investor in 08 so it has only been rosy for me. At what point does the feeling of, this will be a quick drop vs. a long drawn out process go away? I mean you had those periods in the 60s-70s where the market was flat. What the hell do you do for 10 years?

 

[Piobaire]

You keep with your long term plan and particularly for you younger guys. It's older guys like me that are at risk for SORR but I've been planning on how to guard for that for years now. Then when things pick up again you've purchased a lot of shares at low cost basis.

 

[Omega Male]

SORR?

 

[Piobaire]

Sequence of return risk.

 

[stimulacra]

If payments didn't change that means there was a huge interest rate delta. Also, if you're ten years into a 30, then re-fi into 15, you only knock five years off...

Our PMI payments went away since the house appreciated significantly enough during the re-appraisal. Also I think we were rounding up payments to help pay it down early before to refi.

We were five years into a 30-year. (bought in 2005, refi in 2010).

It didn't have a noticeable impact on our monthly budget once all the paperwork got done. Seemed like a no brainer.

 

[Piobaire]

The loss of PMI payments certainly explains that and thus the mystery is solved.

 

[stimulacra]

I mean you had those periods in the 60s-70s where the market was flat. What the hell do you do for 10 years?

From what I've read, bonds were real popular back then. More so than today.

Gold really took off after 1971 when the US got rid of the gold standard and became a floating currency.

There's a good episode of PBS' Firing Line from 1970 where Harry Browne (Permanent Portfolio) and Eliot Janeway debate the economic outlook of the decade to come. Browne makes a pretty compelling case for gold as an asset class (at the time) and predicted that the US dollar will be heavily devalued in the decade to come. His prediction became true enough that during Carter's presidency they had to issue US treasuries that were nominated in Deutschmarks and Swiss francs.

Within the stock market itself, small cap value and mid cap value performed very well despite the rest of the market being flat. Guess that was the heyday of value investing.

 

[Piobaire]

When interest rates were double digits in the 80s can you imaging the folks that bought 30 Treasury?

 

[Omega Male]

My father-in-law is visiting and we were just talking about that today on our morning constitutional. Current deficit path in a higher rate environment. Doubleplus ungood.

 

[stimulacra]

When interest rates were double digits in the 80s can you imaging the folks that bought 30 Treasury?

I think it peaked at 15.2% in 1981… so I guess those folks were sitting pretty till 2011.

 

[stimulacra]

Archived NYT article from 1982. What's crazy to read is that at the time, it was clear from being a no-brainer.

RECORD SET ON 30 YEAR U.S. BONDS

RECORD SET ON 30 YEAR U.S. BONDS (Published 1982)

nyti.ms

Illustrating the slowdown in inflation, the Consumer Price Index rose only 9.6 percent in 1981, down from 12.5 percent in 1980, and is expected to increase 7 percent this year.

 

[patrickBOOTH]

I've read a couple pieces recently about how inflation isn't going to be as strong as it once was because of technology. There were a few reasons why that escape me, but if that's true it is scary that all of these tricks used by the fed could be less useful in the future. I mean if the whole world has zero interest rates or lower and the economies are still puttering, what's a fed to do?

 

[jbarwick]

They could buy stocks like the Japanese central bank

 

[Piobaire]

They could send out monthly Amazon gift cards to every Amazon account and thus stimulate the economy back to health.