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When buying the dip doesn’t work: An analysis of the dot-com crash

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Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#71

Post by JKCalhoun »

01100011 wrote: post #43

SNL skit from the dot-com era: https://twitter.com/WallStreetSilv/status/152279877872567500... Does anyone have a solid understanding of how QE affects the economy? From what I've read, QE basically stays locked in the financial system as interbank cash. I think this can affect short term interest rates, and therefore affect lending(and money creation by the big banks), but otherwise that money doesn't really drive i…

Why would $5.4T in stimulus that, as far as I know, came and went a year ago be causing ongoing inflation?

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#72

Post by _uy6i »

tyre wrote: post #16
fny wrote: post #10

Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic ever since the financial crisis. What made this period so unique? Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. At ever dip, it was an op…

> The COVID fiscal canon blew growth and inflation skyward. This is not true and has wrongly given credit to people who have said, since 2020, that COVID relief would cause inflation. Our current inflation is driven by supply chain issues (unrelated to COVID relief) and rising oil (unrelated to COVID relief.)

This may be the case for many goods (e.g. cars, furniture, dishwashers, beef) - but definitely not assets (e.g. homes, bonds, stocks, art)

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#73

Post by bushbaba »

bagacrap wrote: post #56
refurb wrote: post #36

Earlier quoted context omitted.

My grandfather had $3M invested in the market in 2007. Lost $1M at the bottom in 2008, but didn't do anything other than rebalance. Now worth $8M. Either you fret over every price move and likely buy/sell at the worst times, or you invest with a long-term vision and stop tracking the price moves everyday.

yes but in that case the Fed rode to the rescue and delivered the greatest bull market in US history. There's absolutely no way the next decade looks like the last so this is a poor comparison. As far as rebalancing --- you may have noticed stocks and bonds falling in unison this year, so rebalancing is not much help.

Why not l? If the market returns don’t keep up at 6-7% annualized government pensions will run out of cash.

If rates go up drastically, government debt payments go up.

The game must go on! *until the us empire collapses, taking down with it the western world

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#74

Post by bushbaba »

tsimionescu wrote: post #58
chii wrote: post #31

Earlier quoted context omitted.

> [0] Another mantra: it's not. it's the best indicator so far.

Given that global warming will cause the global economy to contract one way or another within the next 100 years (either we willingly contract to soften the blow, or keep going and producing more greenhouse gases until a massive crash), I really don't think this is the right time to think in these terms.

Wouldn’t global warming increase asset price in many areas.

Food will be more expensive. Housing more expensive.

Green Energy is more expensive. Just look at Germany and California electrical rates.

I don’t see how it’ll reduce prices

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#75

Post by tedunangst »

rfreiberger wrote: post #41
mwattsun wrote: post #25

I lived through the dot-com crash and got out safely after hearing something so ludicrous that I had to ask myself "How insane does this industry have to be for someone to think they can build a high growth internet company out of home cement delivery?" My memory may be playing tricks, but it was something like that. After 2008 I became interested with crashes throughout history. There are so many fascinating little…

One of the big wake up calls I had during that time was a friend telling me about Webvan. At the time I was younger and not investing so the conservation was mostly around how great the food was, cheaper than up scale stores and they delivered. The echo that reflected much of the dot com era was as he mentioned "how do they make money doing this". The wild part is the wages they paid was higher than other delivery dr…

Funny that webvan is always cited as an example of a startup that could never work, but really just an early example of do something that doesn't scale and just keep doing it until you somehow make money. But VCs weren't yet ready for the unicorn burn.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#77

Post by landemva »

refurb wrote: post #36
nathanvanfleet wrote: post #18

Sad to think that investing in the stock market, which I have only been able to financially over the last 5 years might have been much riskier than I might have previously thought. What I previously thought as "okay I just leave it in the stock market for a bit of time to recoup" is something I am now realizing would likely have to be 10+ years. It's kind of funny because I was getting shaky about having money in the…

My grandfather had $3M invested in the market in 2007. Lost $1M at the bottom in 2008, but didn't do anything other than rebalance. Now worth $8M. Either you fret over every price move and likely buy/sell at the worst times, or you invest with a long-term vision and stop tracking the price moves everyday.

>>> Now worth $8M.

That is the price. Worth and value are different than price.

If that $8M now buys about the same amount of blueberries or house as $3M in 2007, then it kept pace. Except for paying the capital gains on $5M.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#78

Post by hn_throwaway_99 »

mwattsun wrote: post #25

I lived through the dot-com crash and got out safely after hearing something so ludicrous that I had to ask myself "How insane does this industry have to be for someone to think they can build a high growth internet company out of home cement delivery?" My memory may be playing tricks, but it was something like that. After 2008 I became interested with crashes throughout history. There are so many fascinating little…

> After 2008 I became interested with crashes throughout history. There are so many fascinating little details that added up to one giant mess.

I would recommend looking into Jeremy Grantham. Not saying he's right about everything, but he really views himself as a "bubble historian" and he's got some great commentary on bubbles and crashes.

Interestingly, his experience during the dot com bubble and crash is pretty fascinating. He saw the bubble pretty clearly, but he got out early which caused his investors to withdraw something like half of his assets under management. He was eventually proven right of course, and his strategies did very well during the crash.

Which also points out why diversifying can be emotionally difficult. If you're well diversified you should expect to do worse than the market when it's booming, and better than the market when it's crashing (i.e less volatility). The problem with that for money managers is that it's very easy for clients to feel "Hey, the market is exploding, and I'm paying this person who is underperforming the market!", and then, when the market falls, even if the manager overperforms the market (but still has negative returns) "I'm paying this person but he's doing worse than if I just kept my assets in cash!"

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#79

Post by JKCalhoun »

yowlingcat wrote: post #7

Buy the dip is always trumped by "don't try to catch a falling knife." If you can't tell the difference (I am not professionally trained to) then it may not be worth the effort.

I assume catching a falling knife is at least preferable to buying the peak. :-)

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#80

Post by xeromal »

chii wrote: post #64
xeromal wrote: post #60

Earlier quoted context omitted.

I think their analogy is that your investment in the Prussian/Holy Roman Empire/Carthage stock market can still end up ruined regardless of time.

And yes, that's true. Geographic concentration is a real risk. if you purchased a world wide index, you will not suffer from such risk.

Yeah, that definitely is the best way barring the existence of aliens. :)
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