Investing good/bad time

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The stock market tends to run concurrent with business/confidence cycles. Those are typically 7-8 years long and then multiples of those. A major inflection point of those cycles just occurred in October 2015. 70% of the trading going on with stocks is between big bank and hedge fund high frequency trading computers. Yes, the stock market was at all time highs this year. Thank the computer algo's for that as well as the FED's injection of $3 TRILL on its balance sheet, and the willingness to help prop the market via TBTF banks whenever needed. It's just a matter of how long they can keep this party going.

Timing is important, even in stocks. After the 1929 crash it took 25 years for the stock market to regain its old highs. After the 1966 peak it took about 16 years. Current investors in both stocks and housing think that the 1982-2008 period is the new "norm." Be careful with that notion. Massive US depressions have occurred routinely approx every 120 years (1774, 1894, 2014???). Did we just have one...or was 2008-2012 just the warm up act? I don't know. Personally, I think the FED & Co. just delayed the normal cycle...for now. Major inflationary periods (boom) need to get washed out from time to time with major deflation (bust). Hard to say what the modern high tech age definition of a bust is? Is it losing your cable TV for a week? Or Starbucks running out of your favorite blend? Or even worse, Walmart no longer offering 5 qt jugs of your favorite synthetic.
 
IMO the markets are a gamblers game. the winners are the insiders that manipulate it. I have seen people lose their entire life's savings playing it. Can you make money yes but diversify into things with intrinsic value. Property, coins and yes gold/silver. I don't have a bomb shelter or solar/wind farm in my yard either.
 
I'd agree. Buy what's out of favor and is historically very cheap. Compare stocks to many commodities we all routinely use. They are at 10-30 year extremes across the board. That tells me stocks are priced dearly, while commodities are priced like trash. That doesn't mean they can't get more extreme. I'd sort of expect oil to drop yet again and for natural gas to get to $2.00 or even lower (17% lower from here).

The world is going through a major revaluation of currencies, assets, etc. It's going to take a number of years more before all the carnage is complete. It really began in earnest in 2008. Most people don't even see this going on. The S&P 500 falling below the 2009 low at some point wouldn't surprise me. The current 16 year widening wedge in the S&P looks very similar to what the DOW did back in 1966-1973. When those patterns appear after very long up-trends, the probability of them taking out the previous major low is increased. If the current pattern is to break higher, some type of boost to business confidence or economic paradigm needs to show up. Right now, we have the Tech Wars. Is that enough to take things to the next level? Cold fusion? Aliens visit and dump great technologies upon us? I don't see a new paradigm out there at the moment....other than computer algo's running themselves up.
 
The stock market has had sharp bottoms every 7-8 yrs or so (or half of that). Witness 1958, 1962, 1967, 1970, 1974, 1982, 1987, 1991, 1995, 2003, 2009, 201X? The previous 2 of these were pretty deep cuts. We're not far from the next one. 2016? 2017? The easy money was made from 2011-2015. It's not likely the following 4 years will be so easy. I'd be looking at companies that have been hammered to stupid levels or are recession resistant such as consumer staples.

Energy and mining companies are 2 of the most beaten down over the past 4-9 years. Biotech had an amazing run. What are the odds that continues for the next 2-4 years? To make matters tougher, bonds are near 30 year highs while the US dollar is near 7-1/2 year highs. Everything that Joe the investor would normally consider seems to be near 6-8 year highs. Even some prime real estate locations. What can go wrong with that?
 
Originally Posted By: surfstar
^wow. Three posts with lots of words, but no substance.

We should all buy gold, right?


If all you saw were words then you clearly have no understanding of cycle theory, TA, Edwards and Magee charting, and numerous other factors that influence markets. What do you think the computer algo's are programmed for? The biggest US banks consistently make money every quarter with their HFT. Ask them how they do it. Last quarter JPMorgan had a $4 TRILL otc commodity derivative's position. That was 93% of the total US market and it was a 17X increase of what they previously held. This past quarter they dumped it. Any effect one way or the other?
 
Substance? if you aren't blind you'd see the political whores scrambling around for control of the incestuous relationships with their chosen business segments using BORROWED money. In this mixed economy Future market segments can win or lose depending on who is in what office. If you want to gamble on that outcome more power to you. I may not get rich "owning things" but I wont be broke either.

BTW good luck in Cali with that bunch ...it is going down down down.
 
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If you want to keep it simple, just buy VOO and check it once a year. Now is an OK time. Keep some cash for emergency.
 
If it was me. I would put a 1/3 in cash, a 1/3 in a dividend index fund and a 1/3 in the a S&P 500 index fund.
Rebalance as the holdings vary in time.
 
Originally Posted By: 69GTX
Timing is important, even in stocks. After the 1929 crash it took 25 years for the stock market to regain its old highs.

This shows a real lack of financial literacy. The number might have taken that long to recover, but the break-even point for investors was 4.5 years. You have to include reinvested dividends in a calculation like this. That 25 year number is fear-mongering.

There's a lot of fluff above that I'm not going to read, but if you can't get that number right, I don't expect the rest is very useful.

Nobody can predict the future. Trying to trade with retirement savings isn't appropriate. Best practices suggest making regular deposits throughout your career into low-cost index funds.
 
DCA for 25-30 years and reinvent the dividends, you will be fine.

32 years at my employer and I got a ton of company stock that was DCA over 3 decades.
 
Just open a Vanguard account and you can do automatic / no cost..... weekly, biweekly or monthly purchase of their ETF's and mutual funds.

For rock bottom low fees and convenience, set up the auto purchase and you'll do very well.

OT: I'm in the process of transferring almost all my money our of TDameritrade and into Vanguard.
 
Originally Posted By: lawman1909
I have a few decades before retirement so not worried at all.

That's a good attitude. Make regular deposits and don't panic when the market moves around. When you get within ten years or so of retirement, start moving slowly into more conservative investments, like bonds. In the meantime, you should be mostly in equities. If your employer offers a 401k/403b, that's a handy way to invest. I have a tax-deferred plan like that, and a Roth IRA at Vanguard.
 
Originally Posted By: Bandito440
This shows a real lack of financial literacy. The number might have taken that long to recover, but the break-even point for investors was 4.5 years. You have to include reinvested dividends in a calculation like this. That 25 year number is fear-mongering.

There's a lot of fluff above that I'm not going to read, but if you can't get that number right, I don't expect the rest is very useful....


It's just as flawed to say that the GD low of 1932 was "effectively" recovered in 4.5 years using various "adjustments" to make that point. You're effectively saying the average guy was as well off in 1937 as they were in 1929 due to "wealth effects" from deflation. The stock market (Dow Ind) almost quintupled in that time from approx 40 to 190. It needed to double yet again from 1937 to reach the 1929 highs. The compounded dividend rate needed to achieve that additional doubling is 16.65% over 4.5 years. That didn't happen...not even close.

The typical company stock dividends in the 1920's ranged from 3-12%. And those dividends were crushed by over 50% into the 1932 low. Your theory also assumes everyone held their high dividend stocks from 1932 to 1954...just like "everyone" held their stocks during the 2007-2009 crash all the way through the recent 2015 high. It just doesn't happen like that for the majority. The dividend/capital gain analysis also forgets to include taxes which makes it even harder to get back to the 1929 high.

Dow 1930's

Benito's article about stocks regaining the Great Depression lows in only 4.5 yrs.

Note that the NY Times article above is factoring in a number of irrelevant issues to come up with their 4.5 yr assumption...from deflationary price effects to changes in the DOW index. What happens to stock market returns since 1913 (when the CPI first shows up) if we factor those out of the analysis from 1913-2015? You rarely seen inflation adjusted stock charts being presented to the average guy...and for good reason.

When your 401K stocks bottomed in March 2009, where you thinking how rich you really were because price deflation had occurred for the past 18 months? No, I don't think so. And in analyzing the stock market from 1932-1954, or any extended period, the Dow gets to toss out all the losers and bankrupt companies along the way. If that wasn't done, the time to reach the 1929 would be further extended. I would agree that the above NYT article is a good fluff piece. The BLS uses the same type of "adjustment" analysis to help keep their CPI lower (quality effects, substitution effects, imputed rents, quality factors, geometric averaging in a consumer analog world, etc.).

In reality, 1937 was a high for stocks. Since this discussion assumes everyone holds for the long term, then you saw another decline from 1937-1942, bringing the recovery point to at least 10 years....not 4.5 years. Another question is who really owned the bulk of stocks from 1932-1937. I don't think it was guy in the street who was happy to just have a job to make ends meet, but rather sharp big money interests that bought hand over fist in 1932. No, the average guy was not as well off in 1937 (8 years after the peak). We have a parallel argument today in 2015 (8 years after a stock market peak). Are we better off today as in 2008? Clearly NOT. Is the stock market higher? Yup. So everything must be great.
 
Originally Posted By: Mr Nice
DCA for 25-30 years and reinvent the dividends, you will be fine.

32 years at my employer and I got a ton of company stock that was DCA over 3 decades.



This? Not always.

My previous employer was a solid, well-respected and "fairly" well diversified Fortune 500 industrial company. They had been in business since the 1880's. I had 13 years with them...when they declared Chapter 11 bankruptcy in 2002. I lost a big chunk of my 401K when they reorganized and came back out in 2003. 9-11 put a huge hit on their Airline industry investments. And the 2000-2003 recession hampered their entertainment investments/concessions. You're never guaranteed anything. Just because something has worked well for the past 30 years, doesn't guarantee the same for another 30 years. There's never been a period for stocks like 1982-2015. Don't expect that to continue on the same, or even close to the same for years to come. Maybe we'll luck out with a final blow off in 2016 or 2017. Enjoy it for now.
 
Originally Posted By: 69GTX
Are we better off today as in 2008? Clearly NOT. Is the stock market higher? Yup. So everything must be great.

Wait, what? We're not better off now? I am. Perhaps your investing strategy needs improvement.
 
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