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double00

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Like I said, you can always pick arbitrary points... I literally conceded that in my post. The point is, on average, over the normal investor's lifetime, they will see gains. Sure, throwing a ton of money in before a black swan event will have large short/medium-term losses. I don't think anyone is arguing it is a sure thing or there aren't periods where you could lose money.
sure. so why bother with any point-to-point analysis, you concede the evidence and then cite it anyway.

whether equities make sense vs alternative would come down to terms of the investor, i know that's rote but so is 'equities gain over the long term'
 

Texasmade

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As someone that likes watches, seeing investment bros get into hoarding as an alt investment makes me mad.
 

Piobaire

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gnatty8

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Sure, a 40% "correction" could come, but that would make it among the worst bear markets in 100 years.

View attachment 1596290

There's always a time frame problem in any of these discussions, but an investor buying at the bottom in 2009 to now would have made 400% in a decade. There was a 28% drop, so they still would have been up 288% at the 2020 trough.
View attachment 1596291

You do you, but I rather risk buying and losing 40% overnight than sit out and risk missing out on huge gains while I wait for that inevitable drop.

I agree, it would be a humdinger, and probably sets the worst of the worse case scenarios, but

[EDIT] by the way, I pulled this from the interview with Grantham linked below, in case it comes across as mine, but since I don't write that well anyway, that risk was probably always pretty low lol

So, I am not at all surprised that since the summer the market has advanced at an accelerating rate and with increasing speculative excesses. It is precisely what you should expect from a late-stage bubble: an accelerating, nearly vertical stage of unknowable length – but typically short. Even if it is short, this stage at the end of a bubble is shockingly painful and full of career risk for bears.

I am doubling down, because as prices move further away from trend, at accelerating speed and with growing speculative fervor, of course my confidence as a market historian increases that this is indeed the late stage of a bubble. A bubble that is beginning to look like a real humdinger.

The strangest feature of this bull market is how unlike every previous great bubble it is in one respect. Previous bubbles have combined accommodative monetary conditions with economic conditions that are perceived at the time, rightly or wrongly, as near perfect, which perfection is extrapolated into the indefinite future. The state of economic excellence of any previous bubble of course did not last long, but if it could have lasted, then the market would justifiably have sold at a huge multiple of book. But today’s wounded economy is totally different: only partly recovered, possibly facing a double-dip, probably facing a slowdown, and certainly facing a very high degree of uncertainty. Yet the market is much higher today than it was last fall when the economy looked fine and unemployment was at a historic low. Today the P/E ratio of the market is in the top few percent of the historical range and the economy is in the worst few percent. This is completely without precedent and may even be a better measure of speculative intensity than any SPAC.

Full piece here. Of course, there's a good chance he's wrong and things are indeed different this time for some reason, but when I look at valuations over cycles (i.e. CAPE for example), either we are in for decades of very low returns or we are in for a massive correction, but we cannot have neither.
 
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Piobaire

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Let's make SPY 420 happen on 4/20.
 

gnatty8

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And I just don't see the 40% thesis. Or even the 25% thesis.

February/March 2020? Sure. I'd question it, but I can at least see the thesis. Global pandemic is about to cripple international trade, drive everyone out of work, and kill a bunch of people.

But today? After we've started to figure out how to live and work with it and have come up with functional vaccines? What's going to cause the drop?

At this point it might as well have been sitting in 2017 and saying "I think a crash is coming". It would take some unexpected event out of left field--another pandemic that's worse, war breaks out, lithium ion batteries suddenly all stop working.
But that's just it. Feb/March was panic, fear and flight to safer assets. Yes, we are coming towards a light at the end of the tunnel, but from a long term perspective what does that mean? It doesn't somehow manage to magically elevate growth around the world above pre-Covid levels. On the contrary, long term growth rates may be less now than they were pre-Covid for many reasons. What has had me concerned was the question of just what I was buying when I invested an incremental dollar in equity markets, especially U.S. equity markets. I don't invest in stock for the benefit of being sent notices of shareholder meetings. Hell, we don't even get those fancy stock certificates you used to see in the 30s. No, I am buying an asset that is supposed to pay me a cash return, either in the form of dividends or capital gains through share buybacks or outright sales, because someone believes those dividends will grow at some rate in the future that makes them worth more than they are now. There are hundreds of metrics people will look at to inform them on markets and relative value. My favorite is Shiller's cyclically-adjusted PE or CAPE ratio. Right now, this metric sits at about 37. It has only been that high in one other period in the last 100 years, and that was in the run up to the tech bubble in 2000, after which the S&P lost 44% of its value. Before the meltdown that kicked off the Great Depression it was 33. Generally, CAPE will reach higher points when the economy is doing great. I don't think we can describe today's economy in those terms, and the deferred taxes that will come in the form of higher taxes down the road to pay for all these stimulus and infrastructure bills will have to have some impacts. At least infrastructure, if done right and not just pork disguised as infrastructure, will yield societal returns that could be greater than their cost. Stimulus is literally like loading our mortgage, car payments, and grocery bills on to our credit cards. It has little lasting impacts except the debt that needs to be sold to finance them. Here is a good recent read, and it highlights one of the points that have made me grit my teeth whenever I see another high being set. Namely, the market can be ridiculously overvalued and can continue to rise, significantly, for months if not years. I am not so silly as to believe one can pick tops and bottoms. I doubt it is even possible to choose the right quarter in which these will fall, but I am convinced we are in for a huge correction in 2021, and just don't want the prospect of multi years of 2 to 3% returns simply because I got greedy and ignored the fundamentals.
 

Piobaire

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You make a compelling case.
 

UnFacconable

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I’m in the same camp as @gnatty8. My justification is a bit different and has to do with a variety of personal circumstances as well (eg when some cash came in, what my short term cash needs could be, what my private investments look like, etc.) but I see tons of irrational exuberance. I’m fairly close to the venture world which is known for some crazy valuations but even those are beginning to pale in comparison to the public comps. I am regularly talking to people who think the public comps are 3-4x private markets. That’s not normal.

What I am not capable of accounting for is the impact of the Fed essentially propping up the market plus all of the stimulus we have seen. I took a defensive posture and my public portfolio performed accordingly. Fortunately, my private portfolio has been gangbusters.

I don’t know when to re-enter the market but I do concede it’s likely not going to be below March 2020 levels. I never dreamed we would see such decisive and effective action from the Fed or the federal government so those definitely blew up my thesis and complicate the re-entry analysis.
 
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brokencycle

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sure. so why bother with any point-to-point analysis, you concede the evidence and then cite it anyway.

whether equities make sense vs alternative would come down to terms of the investor, i know that's rote but so is 'equities gain over the long term'
Since 1973 (because that is the data set I could find easily), there hasn't been a single year where you wouldn't have positive returns over 15 or 20 years with an S&P index fund. While the difference between the worst case scenario and the best case scenario is large, I still rather take the worst case scenario than sitting out. To each their own.

1618869641855.png
 

BlakeRVA

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Do people sitting out save the same % as if they were investing? Through many anecdotal conversations with peers, I can say those who haven't prioritized investing almost never save as much as peers who do.

However, for those who have prioritized and actively invested before, since you've pulled money out, have you continued to save the same %? Do you have a separate account that's identical as if it were invested or was some pissed away on dinners, hobbies, vacation etc?
 

double00

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Since 1973 (because that is the data set I could find easily), there hasn't been a single year where you wouldn't have positive returns over 15 or 20 years with an S&P index fund. While the difference between the worst case scenario and the best case scenario is large, I still rather take the worst case scenario than sitting out. To each their own.

View attachment 1596382
you seem to be making the case that index funds make the most sense over say the first third of investment career
 

jbarwick

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If you sit in cash and wait for a drawdown, write down a number and tell someone who has an interest in stocks about it so they remind you when it hits otherwise you will sit in cash like y’all did last year...

The fed and politicians will have a hard time not sending checks during another recession that hits jobs again. Scared of debt? Countries are still buying US debt...what are you gonna buy, negative yielding other debt?
 

gnatty8

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Do people sitting out save the same % as if they were investing? Through many anecdotal conversations with peers, I can say those who haven't prioritized investing almost never save as much as peers who do.

However, for those who have prioritized and actively invested before, since you've pulled money out, have you continued to save the same %? Do you have a separate account that's identical as if it were invested or was some pissed away on dinners, hobbies, vacation etc?
Actually I still invest close to 20% of my income into equity indexes on the margin, it’s a poor man’s hedge that my view on valuations may be wrong.
 

Piobaire

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SPY 420 and 4/20!
 

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