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Yes, but look at the amount of capital in the global bond markets. Where exactly are they going to go to seek returns as interest rates tick up? Equities are the prettiest pig in the beauty contest.
Stock Market 2022 except we just talk about stocks
- Thread starter ambiturner
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deleted1116990
Ask anybody who lived in the 1970s where they invested their money when interest rates were 16% and the stock market traded sideways for a decade.
In other words, you answered your own question. We know where rates are going, because we know where rates have to go to combat runaway inflation.
if going to 100% cash at any point ever "felt right", you should probably stop making investment decisions based on the feels
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deleted1116990
I think there are far dumber things than realizing a gain during a bear market rally and holding a large cash position or short term treasuries in this environment.
Actually, I have a modest speculative short position. We will see.
There have been thousands of similar posts on this forum the last 15+ years and almost nobody got it right. I'm not sure any did. Good luck on being the first!
Although I will also assume you are young enough without enough money invested for it to hurt too much long term.
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Heard about a guy who took his cash out right before the covid drop and put it all back in when it started to rally. 7 figures of earnings in a month. But you don't really hear about the losers.
fortunately on this forum posts are archived forever. So the people that put the specifics in writing can be reviewed 10 years later. I mean we had the guy that put everything into silver with his charts with hand drawn arrows going up. Then there was the poster here that put everything into shorting the S&P in April 2020.
I'm not going to bring up their specific screw ups right now because the point isn't to embarrass. But you can find all kinds of detailed specific predictions from way back.
As for someone making 7 figures in 2020 when the market quickly recovered, they would have needed to invest somewhere between $5-10M of cash to make that happen and flawless timing. But if you had $10M of cash laying around, you probably shouldn't be shoving it all in the market at once on a hunch.
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deleted1116990
I understand your argument completely. I have tax advantaged accounts that I regularly contribute to and never touch. It's my taxable savings that causes consternation. When you end up with a significant amount of cash holdings, it is difficult to move it all into something like an S&P fund at once and forget about it forever in an environment like this. Doing that in 2018 or early 2020 would have been a lot more palatable. In the meantime, modest option trading/speculation, and low interest capital preservation seems to make more sense with the intention of buying more reasonably priced equities and real estate in the near future.
I made a sizeable purchase at the lows of the winter correction with an intention to hold long term, but IMO the correction has been completely out of proportion and will bring an opportunity to buy back the position significantly cheaper.
Buffett Indicator Shows Stock Market is Overvalued
The Buffett Indicator is currently 57.84% higher than its historical average, signifying that the stock market is Overvalued.
www.currentmarketvaluation.com
time in the market more important than timing the market.
Perhaps the tale of the world's worst investor is up your alley. He only invested cash at market peaks and still got a 9% annualized return over decades.
Saying I should have put money in the market in 2018 or 2020 is easy because you are using hindsight. Doesn't help going forward.
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deleted1116990
Or the 1970s stock market and 2000s real estate market are calling to say that...
Those who don't learn from history are doomed to repeat it.
I'd rather not lump sump invest all of my money and have to wait 10-15 years for it to start to appreciate in value. Or at least try and minimize that risk.
Would you seriously recommend someone lump sum invest all of their savings into the S&P500 or a house given all that's going on right now just based on Bogleheads dogma? Really?
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Consumer defensive are usually a decent bet if one thinks there will be a recession. BTI, K, MO, PM, GIS, KO, WBA
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Statistically that is the right call.
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Wow
Less than a year of inflation over 5%, coming on the heels of a global pandemic that completely screwed up supply chains, with all kinds of latent/deferred demand, and you're sure we have "runaway inflation" ...
Might be worth tempering what you "know" about the future.
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They should absolutely lump sum all their savings ... into whatever their chosen asset allocation happens to be.
Which is probably not 100% S&P500 or real estate.
from 1970-1980, total return of S&P 500 by year
1970: 4.0%
1971: 14.3%
1972: 19.0%
1973: (14.7%)
1974: (26.5%)
1975: 37.2%
1976: 23.8%
1977: (7.2%)
1978: 6.6%
1979: 18.4%
1980: 32.4%
That's a pretty good decade of performance in the market. The problem in the 1970s was inflation decreasing purchasing power, not stock market poor performance. And going to cash was not a solution then just as it isn't now.
I'm not telling you anything based on bogleheads dogma, I'm simply stating facts. You can use them as you wish. I'm just pointing out that being 100% cash is always wrong, and being net short on the market is probably a worse idea. You can dollar cost average your money back in however you want. Personally I'd put at least 25% into the market per month til you get back up to your desired long term allocation.
You think you learned from history, but you are positioning yourself to repeat it by failing to correctly learn.
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deleted1116990
Your YOY returns are picking changes between specific points in time. It was an overall sideways market. Look at the chart compared to the 2010s. If you had $100 invested on average throughout 1972, you would have $100 on average throughout 1978 (it would actually be worth less than this due to "runaway" inflation during this time). I don't know what to tell you if you are calling the 1970s a "pretty good decade" of stock market performance or if you think our inflation issue is a minor transitory thing to not really worry about. I guess the people in the 70s making nearly 20% on their cash in CDs at local banks were fools.
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deleted1116990
I "know" we increased the M2 money supply by 26%, the largest one year increase since we were fighting world war 2. That seems, um, significant.
So at what point would it become "runaway" for you and not just some little thing that we shouldn't bother reacting to in terms of our personal investment strategy?
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I think you need to post some graphs with maybe some lines crossing and some arrows, maybe, um, red ones and green ones.
For starters, I'd need more than 12 months of ~5% inflation to call it "runaway"
... the 1970s had annual inflation in the 5-15% range for essentially the whole decade.The simple obvious answer right now is that current inflation is a result of surging demand in the face of pandemic-related supply disruptions, and not simply monetary policy or your M figures. I'm not saying we should just blow off government stimulus or printing as irrelevant, but at this point there's N O T H I N G to indicate that A N Y of the current price hikes relevant to anyone's life are a result of too much money helicoptering down into the hands of eager consumer spenders.
But regardless, no, I'm not going to "react" to a few months of 5% inflation by changing my personal investment strategy: mostly US and international equities, with some bonds, real estate, and a very small % of cash and physical PMs.
Edit - Actually, my primary investment this month is renovating the house we bought in December, which is turning out to be way more expensive than I'd initially planned, mainly because skilled labor is so unbelievably busy/scarce and some materials are on a 12+ week backorder because DEMAND is so high and SUPPLY is so low. But I guess it'd be more sexy to say the bill for my new kitchen cabinets is high because of M2 ...
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deleted1116990
I think you need to post some graphs with maybe some lines crossing and some arrows, maybe, um, red ones and green ones.
For starters, I'd need more than 12 months of ~5% inflation to call it "runaway"
The simple obvious answer right now is that current inflation is a result of surging demand in the face of pandemic-related supply disruptions, and not simply monetary policy or your M figures. I'm not saying we should just blow off government stimulus or printing as irrelevant, but at this point there's N O T H I N G to indicate that A N Y of the current price hikes relevant to anyone's life are a result of too much money helicoptering down into the hands of eager consumer spenders.
But regardless, no, I'm not going to "react" to a few months of 5% inflation by changing my personal investment strategy: mostly US and international equities, with some bonds, real estate, and a very small % of cash and physical PMs.
Edit - Actually, my primary investment this month is renovating the house we bought in December, which is turning out to be way more expensive than I'd initially planned, mainly because skilled labor is so unbelievably busy/scarce and some materials are on a 12+ week backorder because DEMAND is so high and SUPPLY is so low. But I guess it'd be more sexy to say the bill for my new kitchen cabinets is high because of M2 ...
I'm not sure what world you're living in where you can just blow off the seriousness of current events, but ok. If you want to continue to rely on the same assumptions that have worked in prior decades when we didn't have this situation going back to the Volcker era, good luck I guess.
Inflation is far higher than 5%. That is asinine and not correct. It is actually 8%, which is at its highest point in 40 years, and that is being generous. If you calculate the CPI the way it was done historically, inflation would be at its highest point in the history of our country.
The term "runaway" seems to have triggered you (I'm guessing for a political reason?). That term refers how quickly it is getting out of control. Not how long it has been out of control.
Your comments about inflation are basically the "this is fine" house on fire dog sipping coffee meme.
In what way are YOY returns cherry picking anything? They are literally the way you best describe stock returns for given years. You cherry pick out a 5 year stretch that includes the only 3 negative years of the 1970s is about the least honest argument one could make. You ignore the positive returns right before it and the positive returns right after it.
Since you want to start in 1972, here's a long term look at it for you. Annualized total return going forward from March of 1972...
10 years: 4.77%
20 years: 11.33%
30 years: 11.95%
So if you were investing for the long term in 1972 you would have been hard pressed to make a better decision than invest in the stock market despite bad returns over the upcoming short term.
As for CDs, please compare what you can get on a CD right now to current levels of inflation and let me know if you think it will hold up your value over time.
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Username checks out
Your arguments have been made daily since the housing crash 15 years ago.
If you go back 10 years in this forum, you'll even find me making some of those arguments.
I'm not blowing off the seriousness of current events. I'm just solidly with Mman on this - whatever events are going on, the best answer is probably a diversified portfolio with a significant tilt toward equities.
If inflation really is the crisis you think it is, then the best hedges are probably (1) fixed long term low interest comfortably-serviceable debt on a real asset, like a house you live in or rent out, and (2) partial ownership of companies that sell goods and services at a profit, i.e. equities. Maybe there's a role for a small percent in PMs, I tend to think yes, but I have a less strong opinion on that than I used to.
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deleted1116990
My dude, I am not making this up. The decade was literally referred to in the vernacular as the "sideways seventies."
CDs were a better investment than stocks (and especially bonds) during this period. Go ask your parents. I guess there were some stocks that did better. But on the whole, the stock market, especially the dow, sucked. At some point, it made sense to re-evaluate the economic climate and start investing more in stocks and bonds again.
You don't like looking at the market from 1972 to 1978? Ok. Look at the stock market from 1966 to 1982:
Was the 1966-1982 Stock Market Really That Bad? - A Wealth of Common Sense
“Investment success accrues not so much to the brilliant as to the disciplined.” – William Bernstein In January of 1966 the Dow Jones Industrial Average hit a level of 990. It would continue trading in a range of roughly 600 to 1,000 over the following 17 years. It once again reached 990 in...
awealthofcommonsense.com
Awesome!
The significantly below-the-mean rates and significantly above-the-mean annual return on equities we've had over the past decade is probably not going to continue indefinitely.
Telling somebody to lump sum invest into the S&P 500 right now is not good advice. I believe we will see at some point soon a capitulation down day - the kind that triggers circuit breakers and the plunge protection team that will provide me with an opportunity to re-enter the market with a sizeable initial sum and then dollar cost average after that with a strategy chosen for an inflationary period. This will additionally add the unique opportunity to establish a leveraged position, which would be incredibly foolish right now, but potentially extremely profitable during a major market correction. I could be wrong. I don't think I am.
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Username checks out
Your arguments have been made daily since the housing crash 15 years ago.
If you go back 10 years in this forum, you'll even find me making some of those arguments.
I'm not blowing off the seriousness of current events. I'm just solidly with Mman on this - whatever events are going on, the best answer is probably a diversified portfolio with a significant tilt toward equities.
If inflation really is the crisis you think it is, then the best hedges are probably (1) fixed long term low interest comfortably-serviceable debt on a real asset, like a house you live in or rent out, and (2) partial ownership of companies that sell goods and services at a profit, i.e. equities. Maybe there's a role for a small percent in PMs, I tend to think yes, but I have a less strong opinion on that than I used to.
I agree. If we knew the future, it'd be easy to jump in and out of equities at the right time. But it's unknowable my you and me and even the most expert of experts. So all we can do is pick an asset allocation we are happy with in good times or bad and roll with it. I mean maybe you tilt a little this way or a little that way if the winds are blowing a certain direction, but you should never make massive changes.
This was from 2012...
Since they are a banned user they probably won't get embarrassed by dragging it up.
My dude, I am not making this up. The decade was literally referred to in the vernacular as the "sideways seventies."
CDs were a better investment than stocks (and especially bonds) during this period. Go ask your parents. I guess there were some stocks that did better. But on the whole, the stock market, especially the dow, sucked. At some point, it made sense to re-evaluate the economic climate and start investing more in stocks and bonds again.
You don't like looking at the market from 1972 to 1978? Ok. Look at the stock market from 1966 to 1982:
Was the 1966-1982 Stock Market Really That Bad? - A Wealth of Common Sense
“Investment success accrues not so much to the brilliant as to the disciplined.” – William Bernstein In January of 1966 the Dow Jones Industrial Average hit a level of 990. It would continue trading in a range of roughly 600 to 1,000 over the following 17 years. It once again reached 990 in...
Awesome!
The significantly below-the-mean rates and significantly above-the-mean annual return on equities we've had over the past decade is probably not going to continue indefinitely.
Telling somebody to lump sum invest into the S&P 500 right now is not good advice. I believe we will see at some point soon a capitulation down day - the kind that triggers circuit breakers and the plunge protection team that will provide me with an opportunity to re-enter the market with a sizeable initial sum and then dollar cost average after that with a strategy chosen for an inflationary period. I could be wrong. I don't think I am.
I'm posting facts. You not liking them does not make them incorrect. Also posting inflation adjusted returns highlights my point that inflation was the problem, not the return of the market. I actually remember a little bit of the 1970s.
Please go back in history and find a point in time in which a long term investor made a mistake by lump sum investing into the US equities market. Cherry pick any point you want and show me the 30 year returns (real and nominal) from that date.
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Aye, there's the rub ...
"I believe"
"at some point soon"
If there's a pair of phrases that have kept more fearful people out of bull markets than those, I don't know what they are.
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deleted1116990
I've already showed you. I just showed you a period of time for 14 years where the S&P 500 only kept up with inflation. That's what gold does. An investor would have been better off parking his cash in a CD in the 70s and earning 15% percent on it then moving to stocks and bonds when those became more attractive and CDs less attractive. So you can invest in stocks, which have basically unlimited risk, or invest in a CD, which is basically risk-free and returns 15%. Ok. You took way, way more risk and barely kept up with inflation for over a decade. Well done.
Why is it so hard to understand that it is not preferable to buy high even if you intend to hold for a long time?
The are other things besides broad market index funds that could potentially have more attractive valuations at the moment. That is possible.
Buying stocks is risky.
Selling stocks is risky.
Holding stocks is risky.
Don't kid yourself. There is a non-zero chance your funds could drop 50% and not recover to their present value for 20 years. The "sure thing" mentality of index fund investors is slightly annoying, especially considering how much of this is coming from people who by chance started investing circa 2010 and got rich by passively investing in the longest bull market in the history of the country.
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Where is @doze?
He is usually all over these threads.
He is usually all over these threads.
do you need your savings in the next 10 years? 14 years? If so, don't put it all in stocks. If you are saving for the long term, put it in stocks. It's basically that simple.
Which 30 year period in the past provided bad returns?
Also, at what point in the 1970s were people getting 15% putting money in CDs? In the 1970s you were looking at 5-10% max in CDs. CD rates didn't really go up until the early 1980s.
You want to know what is risky? Not holding stocks because you think you can time it out to make a cheaper purchase in the future. We have posters on this forum 11 years ago that swore it was going to crash and you had to wait for it to get cheaper. 11 years later it still hasn't gotten cheaper.
I don't know anything about the short term direction of the market. I can promise you with near certainty it will be up a lot 30 years from now and you would not have any regret about any dollar invested in the market today. Fortunately you are young without a lot of money at stake so lessons are cheaper to learn now. Since I don't have the ability to see the future, I hedge my bets and come out ahead no matter which way the market moves.
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Right now my bank is offering 0.6% on $100K minimum 24-month CDs. For a 7-year CD the rate is a generous 0.95% ...
For all the discussion of runaway inflation in the 70s, when you could get 15% on a CD, clearly we're not there yet. Not even close.
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Who is offering a 15% CD right now?
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Maybe some banks in Ukraine.
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Apparently Bitcoin brokerages offer like 8% per year to “stake” your Bitcoin. But good luck ever seeing your money again if the broker goes under
I would say that anybody who guarantees returns above like 10% is running a ponzi
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lol were they in Congress?
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for investors . holding money in cash is usually not a good idea. if cash is not being used, value is decreasing due to inflation.
also idk why you bought may OTM puts
also idk why you bought may OTM puts
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stocks are still very strong. i dont see much slowing down in next 12 months unless more news come up. stocks all the way right now
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deleted1116990
The same reason anybody would buy-to-open OTM options. Speculation. In this case based on numerous factors telling me things were way overvalued and tech was way overbought.
I continue to hold cash and rent. I am not a buyer right now. I could buy stocks now and buy a house now and probably be fine in 30 years on both, yes. However, I think a little patience will provide much better entry points for what will amount to a very large purchase of both in comings months to years.
For a thread that is supposed to be about trading stocks, if you just want to talk about only buying and holding VTI at any price no matter what's going on in the world (which may be a fine strategy, and it is basically what I do in my tax-advantaged accounts), this is going to be a pretty boring conversation.
Doubled my money on these puts as of today. A 100% return in this market is nice, and I would usually bank half and let the other half ride, but I see a lot more downside. There could be a spectacular crash, or we could have a 5 year mostly flat market that slowly reverts back to the mean. Or we could continue to have exponential tech growth and TSLA could go to 10,000. I think the latter is far less likely but we will see.
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i agree with downside
these annual threads are mostly for talking about stocks, not trading them. I mean you can feel free to post whatever you want, but if somebody wants to point out potential flaws in logic don't be surprised.
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deleted1116990
Considering that there is not much else (literally anything else) you can do with stocks besides buy and sell them (trading), that is kind of a bizarre statement. You can't drive a stock, live in a stock, wear a stock, admire it's beauty, eat a stock, go on a date with a stock, etc. What else is there to talk about? There was a time you could hang a certificate on your wall, but that is long gone.
I get your point but geez, when you are in Vegas do you also go around to the blackjack tables and tell strangers "Hey buddy I see you are holding an A, 7, and the dealer is showing a face card up. Basic strategy says the correct play is to invest your money in VTI."
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A great analogy that trading stocks especially options/puts is like playing cards in Vegas. The House typically wins in Vegas and the market typically beats most traders. But, for those willing to hold their cards longer term the odds then favor the player.
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Annualized total Returns:
these threads have been happening on this forum for over a decade, I don't know what to tell you. Invest your money however you like. Post however you like. But don't get offended by someone else's take on it.
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deleted1116990
I sold my SPY puts on Friday for a 300% gain.
Massive flight to the dollar and treasuries yesterday. Even from gold. Yet markets still propped up at the end of the day. That cannot be natural.
Still holding QQQ puts, now well ITM. NASDAQ down almost 4% today and almost 20% for the month. Holy crap.
I get things wrong a lot but so far it has been very satisfying to call, what I thought was very obvious, last months bull trap. I would not be moving large sums into this market right now.
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Stock market sentiment is very negative right now. Traders are selling on even good news. so, when a company misses Wallstreet estimates it gets crushed.
The S and P 500 is making a double bottom right now and likely will go lower. Sentiment is very bearish and SPY puts may indeed make you money this week. I do think we will get another bear market rally after the Fed raises rates next week.
I am expecting a negative return in stocks for 2022 but hopeful only down 5% for the year instead of 15%. I don't want to inject politics into this post but the elections of 2022 will impact the stock market as gridlock will place a floor underneath equities.
I am prepared to ride out the bear market until the next Presidential election cycle when I believe the market will turn positive again.
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Long Term investors are getting a chance to buy Large Cap Tech at a discount. As stocks fall in value there are some good long term buys out there:
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I didn’t buy any tech today (aside from activison—spread becoming wide enough to justify risk)
but I did go on a “buying spree” of sorts. Mostly financials, insurance companies industrials, and energy. I will have to wait to sell anything until next year, because as a med student, I will pay a much lower capital gains rate than I would now.
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what spread are you referring to
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will you buy more future spy otm puts? i do think spy still has a lot of room to fall
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Microsoft is planning to takeover the company for 95. Stock is currently trading at 77. If the deal goes through, it would be roughly 23% return for investors at these levels.
A high amount of risk is being priced in, as many believe that the deal will not go through. I am willing to take this risk, since the compensation for taking the risk is attractive enough for me, but also am being cautious and setting limits on the percentage of my portfolio that I will allocate to the stock
I think that the downside in the stock if the deal doesn’t go through is substantial but not extreme.
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deleted1116990
NASDAQ continuing to get crushed AH. I am not sure what this means to the overall economy with tech earnings playing out like this this week. Probably not good.
Agree, likely good long term buying opportunities, but I don't think we are there. At least I am not comfortable buying right now.
We know the problem of getting market timing wrong.
The other problem is what happens when you get market timing right and sell at highs you still need to figure out when to buy at lows. I sold and went all to cash last year. I bought back in with probably 25% of my cash and rode the bull rally back up a few months ago with shares and selling cash covered puts. I sold the shares and bought out the puts a little early, but made a profit, and have been all cash and a few puts since. The problem of getting the market timing correct is when to go back in and how. I guess a good problem to have. My portfolio is worth more than it was at the end of 2021, which puts me in a small club right now. Not a lot more but I'm not down.
Not right now. If there's a bounce and premiums become more reasonable then I may pick up some more with expirations later in the summer.
For an options play right now, I'm looking at selling cash covered puts on GDX. The sell off in gold seems overdone. Holding gold and GDX for a few years probably wouldn't be a horrible problem to be stuck with if you get assigned.
