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comment by kleinbl00
kleinbl00  ·  2509 days ago  ·  link  ·    ·  parent  ·  post: The deck is stacked: Putting risk and reward into perspective (PDF)

    Sure, but that's only true for investors for whom there exists a bad time to buy.

This is the problem in a nutshell: who are these investors? They aren't pension funds. Pension funds are being creamed right now because their structure is all based on 7% return and they're making 2% if they're lucky. They aren't baby boomers. They were looking at the exact same scenario and it took them 8 years to get back to where they were before the crash - that's why all the Gen Y kids have no jobs; the boomers aren't retiring to make room. They aren't endowments - you can't keep a university running at 1.5% and safe investments.

Take a look. The Dow is flat from 2007 to 2012. The Dow is effectively flat from 2014-2016. Go further back: the Dow is flat from '98 to '08.

Now check this out. This is from backintheday:

Now roll this in with it:

The dow might have been flat from '66 to '82... but you could make 8 to 20% on interest. Now? Now your return is shit and... well, here's another quote:

    stocks are expected to outperform cash in the long run

...not saying much.

You're right - short-term valuations aren't relevant to long-term investing. but long term valuations are getting punished, too. If your time window is now "I'll make my money back in ten years" then you're no longer making money, are you? You're no longer making any real passive income through investment at all. And if you've only got ten years (or less) until retirement, you're pretty well fucked.

Seen this one?

They call '92 to 2002 the "lost decade" but they're at about 2 1/2 decades now. If your money was in the Nikkei in '92 you haven't gotten it back yet. There's a maxim: real estate always goes up. But it hasn't been true in Detroit and it wasn't true for way too many years in way too many places. And it's easy to make the argument that the market's all better from the crash of 2008 but it's easier to make the argument that it just hasn't crashed fully.

There's an old saw that if you missed the ten best days in the market since ninteen diggity two you lose like nine tenths of your investment or some shit. But if you can manage to miss the ten worst days?

You make three times as much.

And all this is based on the idea that the market will always be the same because the market has always been the same. But interest rates haven't been at zero (or below!) for years at a time. They didn't get below 2% during the goddamn Depression. So there's wisdom in assuming that the more things change, the more they stay the same... but there's also wisdom in questioning conventional wisdom.





user-inactivated  ·  2509 days ago  ·  link  ·  
This comment has been deleted.
kleinbl00  ·  2509 days ago  ·  link  ·  

I, too, have read Malkiel. I, too, have browsed the Bogleheads forums. I, too, can repeat the maxims and even believe in them.

But I also went foreign markets in November 2004 and cash in October 2007. There's "not timing the market" and there's going inside when you hear thunder and see storm clouds.

The point of the article is that the downside of avoiding the storm is no longer outmatched by the upside of risking the rain. Nasdaq was at like 5400 when I went to cash. It's at like 6100 now. But when I backtest where my portfolio was then with where it is now, I'm at like half a percent? Three quarters a percent? Yet I made six percent the year the S&P made nothing.

I don't understand this market. I think it's batshit crazy. I've chosen to opt out until it makes sense again and the article, admittedly, reinforces my experience. So while I understand the dogma, I cannot confidently endorse it at the moment and the article puts numbers to my instincts.