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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

#131

Post by h-w »

alar44 wrote: post #47
refurb wrote: post #33

Earlier quoted context omitted.

Your strategy sounds like "pick winning stocks"? A strategy which has been show to produce (on average) worse returns than index investing. Index investing has produced a ~200% return in the past 15 years (from 2007 peak to now). Not sure what you mean by "a chance of seeing a profit in your lifetime".

Parent has literally no idea what he's talking about. Investing in indexes has always worked. Always. Over all time periods. Since they existed.

Well indexes are a relatively new product (less than 100 years old).

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

#132

Post by icelancer »

pdevr wrote: post #28

Index investing will work, if you live for a long time. The problems are, we do not live infinitely, and the average person does not have the stomach to see their investment going down for years, unless that investment is small enough to tolerate (in which case it is not enough to make a big difference, for most people). What I think will work - not claiming that it will actually work - based on history: Invest in co…

>> Index investing will work, if you live for a long time.

Maybe. Those who own the Nikkei index are still waiting.

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

#133

Post by mercy_dude »

dannyw wrote: post #114
mercy_dude wrote: post #112

Earlier quoted context omitted.

> You can get 3.1% on a 10y treasury risk free right now I am a noob of how yields work and the math behind the 2.5% . I don’t buy treasury directly but through VUSTX and VUTY. I am actually DOWN, not up. At least that’s what my Schwab portal shows. I have COST on the other hand, bought prepandemic. I am up at least 20%.

The yield is for new buyers. Your bonds, bought when yield are lower, is worth less.

OK, so it could happen if I buy now it would be worth even less due to yields go higher which seems to be the trend.

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

#134

Post by icelancer »

pdevr wrote: post #99
anonporridge wrote: post #49

Earlier quoted context omitted.

Index investing has really only existed in common practice since the 1970s. You can simulate back further and do imaginary index investing, but we really only have 50 years of actual history with it. It's a very young experiment. One thing that a lot of people are worried about is if the surge of people and money getting blindly pumped into broad basket index funds as if it was a savings account (because those have n…

This, pretty much. Whenever a new trend comes up, be it Bitcoin or index investing (both of which are poles apart in terms of risk), passionate people will defend them passionately. Good on you all. I posted it hoping to see HNers' original or novel thoughts about this (along with the expected defending of index investing).

It's pretty tough to figure out if there's over-exposure in index investments, and tougher still to untangle the expected fallout of that problem, if it exists. Some people have talked about it, and have been shouted down of course.

I've done a decent amount of reading on the topic and think I'm barely knowledgeable about the surface of it. I guess that's how it always is, though.

People burying their heads in the sand and thinking that index investing has no hidden black swans are the ones to be most scared of, though.

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

#135

Post by [deleted] »

alar44 wrote: post #47
refurb wrote: post #33

Earlier quoted context omitted.

Your strategy sounds like "pick winning stocks"? A strategy which has been show to produce (on average) worse returns than index investing. Index investing has produced a ~200% return in the past 15 years (from 2007 peak to now). Not sure what you mean by "a chance of seeing a profit in your lifetime".

Parent has literally no idea what he's talking about. Investing in indexes has always worked. Always. Over all time periods. Since they existed.

[deleted]

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

#136

Post by throwaway2037 »

mercy_dude wrote: post #112
adam_arthur wrote: post #104

If interest rates continue to increase, the market is in for a very rough time. COST is about 40 PE right now which implies 2.5% trailing yield. You can get 3.1% on a 10y treasury risk free right now. Of course equities have growth potential, but also risk, typically the spread between risk free rate and equity yields is much higher. Plenty of 30-40 PE companies at index level with close to 0 growth. Companies like N…

> You can get 3.1% on a 10y treasury risk free right now I am a noob of how yields work and the math behind the 2.5% . I don’t buy treasury directly but through VUSTX and VUTY. I am actually DOWN, not up. At least that’s what my Schwab portal shows. I have COST on the other hand, bought prepandemic. I am up at least 20%.

Tip: Don't buy bond funds (mutual and ETFs). Buy the bonds directly, then hold to maturity. This will give you the yield-to-maturity that you are seeking.

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

#137

Post by argomo »

rubidium wrote: post #100
slaw wrote: post #83

Earlier quoted context omitted.

Past performance is not indicative of future results. Japan stock market JP225 didn't recover yet from 1990 crash.

Yea so buy land if you’re so paranoid about becoming Japan. It’s an island nation with a very unique history. Not a great counterpoint to current US and global economics.

As the saying goes, there are four types of economies: developed, undeveloped, Argentina, and Japan.

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

#138

Post by kmonsen »

landemva wrote: post #115
kmonsen wrote: post #108

Earlier quoted context omitted.

Mostly we spent it on tax cuts for the rich instead. You don't cut taxes in good times, that more than offset the minor rate hikes.

Spent what? I don't see economic growth as a reason to expand government spending, though many disagree. The economy was good, unemployment was low, rates were rising. USA was still spending it's treasure protecting Afghanistan poppy fields.

Right, so the theory is that in good times you put on the brakes so there is something in the tank you can spend during bad times. Spending can take many forms, but the traditional ones are lower interest rates and tax cuts.

The issue is that we lowered taxes significantly in the middle of good times. It's like feeding ice cream to kids already on a sugar high.

There is no room to lower taxes anymore as we are already running a significant deficit, and there is a recession coming where we are going to need to juice the economy.

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

#139

Post by [deleted] »

daniel-cussen wrote: post #6
daenz wrote: post #5

>Why has this strategy been so profitable and painless? Well, because stocks have been in a bull market for thirteen years. If "buy the dip" works for a bull market, does "short the peak" work for a bear market?

I would say so. I predicted this bull-to-bear market transition to the day (it started on Sep 27 when the Fed announced rate hikes) and yeah, everything's the opposite.

[deleted]

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

#140

Post by phendrenad2 »

astrange wrote: post #98
john_moscow wrote: post #87

Earlier quoted context omitted.

This is a good point, but there is a counter-argument as well. America is currently divided into the rank-and-file class vs. the stockholder class. The governments' actions so far have been heavily benefitting the latter. Workers get a $1000 cheque, stockholders get a 20% net worth increase. Mom'n'pop shop closes due to lockdowns, Walmart eats up their niche due to being exempt. Taking too much money out of the econo…

Workers (well, unemployed ones) got $2400 a month. "We just got a $2000 check" is a meme from people who weren't unemployed and are looking for more free money.

What percentage of the population is unemployed?
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