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the point is that it was an example and when the next correction comes, there were will many more just like him. There is and endless supply of stories just like that one.
and he didn't have to sell squat to lose that, all the market did was make a correction and the value of his holdings decreased accordingly.
when the market crashed in 1929, it wiped out almost everyone overnight and thanks in part to the policies of the US government it look over a decade for the nation to recover (which was largely due to WWII).
Add to that the reality of life once the market comes to terms with the insurmountable US Debt and it will be like nothing ever seen in the history of mankind...
you are not even seeing the big picture but hey, don't say I didn't try to tell you....
There are a whole lot of bad things lining up that is going to literally wipe out the planet economically...if you think you are going to outsmart it, you are sorely mistaken...
Crap load of US debt national debt running to nearly 200 Trillion when you include unfunded liabilities? check? Lets not even mention all of the other countries like Japan, Greece, France, etc
When, not if, the US defaults, everyone that is tied into our money is going to really pay the price and IMHO it will be what collapses the whole global economic system we have going on. Other countries know what's up and that is why you are seeing more and more people divest themselves of US currency and moving away from it.
From inception to about 1980ish you had a relatively steady upward climb in the market and things were relatively good if you invested in stocks and held on to them. Then the speculation started and it was no longer acceptable to have a profit year after year but you stock became tied to what some moronic analyst though your growth should be for the year. As a result of this moronic game, for the last 35 years the market has exploded upwards at a rate that cannot be maintained along with severe swings that are not good for anyone.
On 1-2-00 DJIA was 68.13
On 1-2-80 DJIA was 824.57
it took 80 years for the market to see roughly a 12x increase in value
it has only taken 35 years to see a staggering 21.6x increase in value
(DJIA closed at 17,823.07 yesterday)
So, like I mentioned before, how are you going to handle the beating the market is about to give everyone? The Feds have exasperated the situation by pumping all sorts of worthless money into it.
EVERYONE is going to get seriously impacted by this and you are going see money disappear like no tomorrow
So what is the solution? How do I prepare? Because even if I go to all cash and in 5 years I am the only one in my town with cash, how does that help me? How do I defend my pile of cash when the mob comes for it? No amount of guns in my house will protect me from the impending riots.
^ honestly I don't think there is really anything you can do to prepare other than to make sure your house/cars are paid off and that you have some means of batering if your money is worthless. Also move as far away as you can from any major metro area....
Plenty of people allow themselves to believe that they have not made a loss until they sell and crystallise that loss. If you are among them, then ask yourself this: Are your paper profits unreal too? If your answer is no, then you are suffering from a mental disease highly detrimental to your wealth - SELF-DELUSION.
It is simply not consistent to treat unrealised losses any differently from unrealised profits. The only reason investors do so is that they cannot bear to admit to themselves that they have in fact suffered a very real loss. Typically, they feel a loss equals a mistake, and they are unable to own up to their mistakes.
Example
UK growth fund manager John Carrington recalls meeting a prospective new client who handed him a portfolio littered with lossmakers to manage. When he asked why they were still being held after many unprofitable years, the client replied that, as a businessman, he had never sold anything at a loss, and he was not about to start now. Recognising that the man was beyond help, Carrington refused the account.
Another give-away sign of self-delusion is the belief that you have not "really" made a loss because eventually the share price will recover and you will get out even. This is usually accompanied by the fear that the price of your winners will fall back and your gains will be wiped out. These twin feelings are very dangerous. They will pressure you into selling your winners too soon, and clinging on to your losers for dear life. That way lies ruin.
"Paper" profits and losses are as "real" as the "bricks and mortar" equity in your house. You may feel that this too is unreal, because in some sense you cannot get at it. But in fact you can, and you will when you next move house. You will exchange that equity for cash to be used in your new purchase. That will be just as "real" a transaction as exchanging money for a loaf of bread.
Shares are exchangeable in just the same way. You swap them for cash whenever you deal. Companies often swap them for other shares when they make acquisitions. The current price of your shares is exactly like the exchange rates that apply to money itself. It is also the only honest way to measure the true worth of your portfolio.
The Myth of Paper Losses. Don’t believe it’s only a loss if you sell it
Why this is important: When investors don’t recognize that a loss is a loss, they may be underestimating the risk of their portfolio as a whole and they may be postponing important adjustments to their portfolio and lifestyle.
As already discussed, a loss is a loss. A paper loss is a loss that has not been recognized by selling the investment. Novice investors are sometimes prone to denying reality by not recognizing a loss. Also, financial advisors, when facing angry clients, might be tempted to encourage the belief that paper losses are nothing to be concerned about. It may not be a loss for income tax purposes until you sell it, but it is definitely a loss in terms of calculating your net worth.
Living under this illusion can be a problem because it may cause you to delay making important decisions. Often, the right thing to do is to take corrective action as soon as things start to go wrong. A saying in the industry suggests that your first loss is often your best loss.
Like all myths, this one has some grounding in reality. The value of an investment fluctuates every day and a small loss may indeed be recovered the following day. That the investment may rebound tomorrow does not, however, indicate that a real loss has not occurred today.
When you call a loss a loss, you recognize your mistake. Being aware of a mistake is more likely to lead you to corrective action.
Unfortunately, investors, like most people, don’t like to recognize mistakes and often will grasp at any straw to avoid facing reality. I know of one investor who had almost 50% of his assets invested in Cisco when it was trading at $65 per share. When Cisco dropped to $15 per share, common sense suggested that he should reduce his retirement spending plans. Yet, he clung to the belief that it was only a paper loss and, since paper losses don’t matter, he continued with a higher level of spending than was sustainable in view of his reduced circumstances. By clinging to this false hope, he further damaged his future financial security.
The stock market shows you the true value of your investments. When value increases, they are bid higher. When value decreases, they are marked down. This is the way the industry reports gains and losses. It should also be the way you recognize a loss when it has occurred.
Bottom line: If something was worth more when you purchased it than it is today, you have lost money.
What you can do now: Forget the idea that a paper loss is less serious than a realized loss. Start measuring your net worth based on the true value of what you have today, not on some fantasy that distinguishes between paper losses and real losses.
If you sell, it's a real loss. If you don't sell, it's a paper loss until it's a paper gain and then you can sell and get a real profit.... or continue to hold and enjoy a historical total average annual ~9% paper gain for the Dow, ~10% for the S & P 500
Market investing takes intestinal fortitude and a long term outlook. As I said before, if you are putting money into the market that you need to survive, then you're not very smart.
There are a whole lot of bad things lining up that is going to literally wipe out the planet economically...if you think you are going to outsmart it, you are sorely mistaken...
Markets go up and markets go down, and some people;
Hehe, OK. Waiting for the impending financial doomsday so you can tell us "I told you so".
Waiting for the DOW to drop 4100 points, because that's what it will take to "be like nothing ever seen in the history of mankind..."
So, I guess you are all in cash, earning what? 2%? and barely keeping up with inflation?
lol you just don't get it, so I am not going to continue to try and explain it.
You cannot run your household like the Feds run the government financially and when the Feds default, it is going to be one scary mess and whatever you have in cash or stocks isn't going to be worth squat.... We have already seen local cities go bankrupt so what makes you think the Feds can't? When that happens and the market corrects, it is going to make the 1930's look like child's play...
Last edited by YeuEmMaiMai; 01-01-2015 at 02:40 PM.
I'll share a few perspectives on this latest round of discussion:
1. investing in stock really should be a mid to long term investment; however, we know people are investing in stock that really have 'short-term' time horizons too. As NfnSquared stated, you get a paltry return on money investing in CD's or other safer investments for short term investments. Thus, people are likely to use stock as a way to capture dividend yield and hopeful appreciation to get the return on their money.
That's the problem that can make a mild bump in the market (1000 points at these levels) become a bigger correction.
2. The other point I want to make is types of accounts we all hold. If you're young and have a 401k/IRA, there is a time horizon that works well with NFSquared's opinion regarding paper losses. If you're older or have a taxable account, I would argue that a loss is a loss. Losers have a way of staying losers for a long time and the money held up with a loser could be better used with a new position in a winning stock instead.
3. YeuEmMaiMai's points about a pending fiscal crisis are very appropriate since a debasing of the dollar would have impacts we can't predict. This is where having a 10-20% holding in precious metals is a decent hedge- especially at today's prices.
One New Year's day ritual I do is take screen snapshots of all my accounts holdings (brokerage, commodity, 401k, bank) and place snippets (windows snipping tool is great for doing this) in a Word document. It's kind of low tech, but is great for seeing how your accounts are fairing year to year in an easy way. This is a nice solution for those accounts that are now paperless with no statements to refer to. I have been doing this since 2008 and wish I had started earlier in my investing career.
Happy New Year- time to go walk on the beach on this nice sunny Carlsbad weather!
1. Where are your retirement contributions being invested right now?
2. Where are your other savings being invested right now?
I'm 100% in the broad market and have been for 28 years now, just in case you were wondering
I have some gold, 401K, savings and all of my things that I rely on are paid off. My gold isn't paper saying I "own" gold either, it's physically mine.
I invest roughly 13% of my income into 401K, put about $3-500 a month into savings to cover unexpected expenses like sending my wife to Vietnam for her brothers death (2K14) buying and repairing/maintaining the Subaru (2K14) and the Acura (2K14,11, 09).
I have no illusions about what is coming and trust me it is NOT going to be something that you are going to want to endure.
I have some gold, 401K, savings and all of my things that I rely on are paid off. My gold isn't paper saying I "own" gold either, it's physically mine.
I invest roughly 13% of my income into 401K, put about $3-500 a month into savings to cover unexpected expenses like sending my wife to Vietnam for her brothers death (2K14) buying and repairing/maintaining the Subaru (2K14) and the Acura (2K14,11, 09).
I have no illusions about what is coming and trust me it is NOT going to be something that you are going to want to endure.
But what is your 401K invested in right now? According to you, it sure shouldn't be stocks...Hope you are taking your own advice because of the impending financial doomsday
it's not going to matter what you are invested in, when this goes down, the ENTIRE GLOBE is going to be brought to chaos.
so my question stands, since your stocks and paper is worthless when this happens, what do you fall back on? You are going to need tangible assets that you own in order to get by....
On the other hand, YeuEmMaiMai should be fully invested in gold
Thanks for the article posting. I read this and agree that stocks have been the best investment of the 3 alternatives. The problem with going back 200 years is the world (and US in particular) was much different then. We had currency that was backed by gold or silver. Now we have FIAT currency and gobs of government debt, so bonds probably won't be the place to be this next decade and possibly longer. This is especially true for recent bond holdings. Stocks will appreciate but a lot of the appreciation will occur because of inflation and not 'real' growth. The 1970's show this with the SP500 in the days of 5-10% TBond interest rates- there were some hiccups in the mid-70's in that environment.
Meanwhile gold did a major move from $20 to $35 and beyond. People don't realize that gold was $20/oz once upon a time and now it's $1183- that's a pretty good appreciation for 50 years. So I would argue that gold is not that bad of an investment. I got into gold in 1979 with $199 Krugerands, sold in 1981 near $800, and got back in this last decade. I would expect more dramatic returns this next time around because economic conditions favor holding 'hard' assets like gold.
The first two trading days have been pretty lame, but so was the first week in 2014 and the month of January last year. I don't think the markets are going to crash in dramatic fashion like 1987 or 1929 this time. I think there will be a general Bear market where prices trend lower for a substantial period of time.
We're more likely to have a fiscal crisis in U.S. and how that ripples into the stock market is anyone's guess. Look what is happening to Russia and the Ruble now? Does anybody think the U.S. could withstand having to pay 14% on a 10 year bond which is what Russia is paying now? Russia has a lot less debt than the U.S. does and could change course by leaving Ukraine to get their sanctions lifted.
Just having the U.S. pay 5.83% like what Mexico does would hurt when the U.S. is 'addicted' to 2% like it is now- 14% would kill the U.S. in one year's time. If 5,20, and 30 year bond rates doubled from current rates, the U.S. would go bankrupt because the income would not be able to service the 18T in outstanding debt.
Keep in mind this debt has doubled since 2006 and was only 4.1T when Clinton took office in 1992. We are now past 100% debt to GDP and the 2015 GDP is probably going to fall from 2014 levels- that is not a good picture.
Is the sky falling? No, but we are going to experience things that probably won't be very pleasant. We can see what the Greeks have experienced and brace for some of that stuff coming our way.
^ Ok I read the link- it would be nice to actually see the data that Ibbotson & Associates used to come up with the 4.5 year recovering. 30 stocks in which some companies leave the Dow30 and then get replaced make it hard to compare things very well. The article hints at 'deflation' being factored in and deflation might have been used in reaching this 4.5 year assessment. The bottom line was that people were hurting longer than 4.5 years although the bulk of pain was felt that first few years.
It's still very interesting looking at recent history and noting that the Nasdaq has taken so long to recover from the bubble in 2000- more than 15 years and counting. The more applicable SP500 took 7 years to recover the first time, cratered in 2009, then recovered again 4 years later.
Everybody will need to reach their own conclusion as to if the market it near a high or fairly valued. There are a number of indicators I use point to a 'toppy' market so it seems less risky to have some cash on the sidelines at this point. The SP500 is already down 1.5% and its been only 7 trading days so far this year. I think the SP500 (2028.26) is going to trend down to the 200 day EMA of 1959- that would be a safer time to add new positions than now when there is still 3% downside risk left. Just seems like there is more downside risk than upside gain at the moment.
All indices were lame for the month of January. It looks like the 200 day moving average support levels will be tested.
Dow: 17164.9
Nasdaq: 4635.24
SP500: 1994.99
The Dow is down -3.7% for January or 658.2 points. 2014 had a worse point drop for the Dow at -877 so we'll need to wait how things will go. Last year, February was a +622 gain month.
As predicted, the GDP report for 2014 came in unexpectedly lower than expectations at 2.6% when expectations were above 3%.
The markets are up significantly in the last 6 weeks since my last posting but are down
from previous highs 3 weeks ago as follows:
Dow: 17,749.3 (down from January 1st)
Nasdaq: 4871.76
SP500: 2053.4 (down from January 1st)
While I don't anticipate a 'crash' going forward, I would expect more of the same action we have been seeing the last couple weeks- lots of choppy and volatile trading.
The markets seem to think there will be a Fed interest rate increase and are trending lower because of that idea. The Dollar is strengthening as well because of the dream of higher interest rates.
Eventually the charade of raising interest rates will be exposed at the next Fed statement. I think the phrase 'patient' will still be in the statement which should tell the markets that there will be a reprieve from higher rates. Once that happens, the market might rebound a little to the upside possibly. I think it will be crappy U.S. economic data which will continue downward pressure on U.S. markets even when the risk of increasing rates dissipates.
Art Cashin, of UBS, says the markets declined nine out of ten times a horse won the Triple Crown.
9% average loss.
http://video.cnbc.com/gallery/?video=3000386530
The Nasdaq Composite index surpassed the 15-year all-time high it set during the peak of the dotcom bubble on Thursday as more data showed the U.S. economy was gathering steam.
The index (.IXIC) hit 5,137.36, topping the previous high of 5,132.52 it touched on March 10, 2000. The S&P and Dow were at their highest levels since early June.
The Fed said on Wednesday that the U.S. economy was likely strong enough to withstand an interest rate increase later this year but cut its economic growth forecasts for 2015 because of a weak start to the year.
Even though a majority of Fed officials continue to see higher rates by the end of 2015, they expect rates to rise slightly less by the end of 2016 and 2017 than they did in their March forecasts.
Fed Chair Janet Yellen reiterated that the central bank remains data-dependent, which could prompt investors to keep a sharper eye on economic data in coming months, especially monthly the employment reports.
"Today's markets are higher on a combination of the data and the Fed signaling that it will begin raising rates this year but at a shallower pace," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
"I think investors are getting comfortable with the Fed's plans and anyway the first hike will be mostly symbolic."
U.S. consumer prices in May recorded their largest increase in more than two years as gasoline prices surged, while factory activity in the U.S. mid-Atlantic region expanded in June at a much faster pace than expected.
Other data showed the labor market continued to tighten as first-time applications for unemployment benefits declined to a near 15-year low last week.
At 11:35 a.m. ET the Dow Jones industrial average (.DJI) was up 205.53 points, or 1.15 percent, at 18,141.27, the S&P 500 (.SPX) was up 20.95 points, or 1 percent, at 2,121.39 and the Nasdaq Composite was up 68.09 points, or 1.34 percent, at 5,132.97.
All of the 10 major S&P 500 sectors were higher with the health index (.SPXHC) leading the gains with a 1.3 percent rise.
Greece continues to weigh on investors' minds as the country drifts closer to a default.
Euro zone officials have not discussed the debt restructuring proposed by Greece because they want Athens to first implement the reforms it promised in exchange for loans it got from the euro zone, the head of euro zone finance ministers said.
Advancing issues outnumbered decliners on the NYSE by 2,278 to 662. On the Nasdaq, 1,988 issues rose and 683 fell.
The S&P 500 index showed 34 new 52-week highs and 2 new lows, while the Nasdaq recorded 123 new highs and 22 new lows.
12-31-2014, 08:53 PM
