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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

#211

Post by jrumbut »

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…

> 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.

I am wondering where you previously got your information?

At one point ten years was considered about the minimum time window for investing in stocks.

To give an example, an old rule of thumb was to have 100 minus your age percent of your retirement savings in stocks and the rest in less volatile investments such as bonds (so a 50 year old would be half and half between stocks and bonds).

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

#212

Post by chewz »

vitus wrote: post #2

> Buying the dip isn’t some secret strategy. Time is the secret strategy. Ah yes, the good ol' "time in market beats timing the market". Of course, that assumes that markets trend upwards in the (very) long term. Which... if past performance is any indicator of future performance [0], the past 100 years provide a fairly compelling narrative. [0] Another mantra: it's not.

> Ah yes, the good ol' "time in market beats timing the market"

> Of course, that assumes that markets trend upwards

Market will trend upward only with positive demographics... Next 100 years might be rather disapointing for passive investing and "time in the market" types.

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

#213

Post by baq »

JumpCrisscross wrote: post #62
bagacrap wrote: post #52

Earlier quoted context omitted.

I've had this same thought, but everyone seems to be sitting in cash? No one wants to invest unless everyone else invests. Seems the emperor is suddenly naked.

> everyone seems to be sitting in cash? What is this based on? Every indicator suggests we’re still in a risk-on mode as an economy. It’s why we have inflation.

Don’t know which indicators you’re looking at, but the bond market disagrees.

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

#214

Post by kortilla »

kmonsen wrote: post #138
landemva wrote: post #115

Earlier quoted context omitted.

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 alread…

This is simplistic thinking in line with the “what if the government budget was a household budget” memes that float around.

> theory is that in good times you put on the brakes so there is something in the tank you can spend during bad times

The government is not a squirrel with acorns. It can spend during both good and bad times, as the past 30+ years have shown. The only backpressure is inflation. Nobody seems to actually care about debt, despite the hand wringing.

> 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.

Yes there is, they just adjust the tax rates down further. There is no floor other than zero.

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

#215

Post by chewz »

MichaelMoser123 wrote: post #199
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. COVID is going on for two years now. What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices (most of the wheat and fertilizers come from that part of the world) that all that stuff trickles down, as they don't know how to fix the metrics now (i guess no one was prepared for such a turn of events...) Most of the met…

> What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices

Green transformation is the real cause of high energy and food prices. EU's Fit for 55 gave Putin green light to invade Ukraine...

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

#216

Post by mwattsun »

sharkweek wrote: post #37
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…

Have you seen the movie Margin Call? There’s a great scene where the CEO of a Goldman-style bank is recapping the last 100+ years of global financial collapses and he mentions, “we just can’t help ourselves.” https://youtu.be/LtFyP0qy9XU One of the best banking movies I’ve ever seen. Jeremy Irons absolutely nails his role.

I watched on your recommendation and it's a damn fine movie. Thanks.

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

#217

Post by baq »

adastra22 wrote: post #188
grey-area wrote: post #176

Earlier quoted context omitted.

GDP rising exponentially is also clearly unsustainable. We have IMO reached a paradigm shift in central bank policy after decades of low rates and low inflation. The recent past is not a good guide to the near future in markets.

The entirety of human history since prehistoric times to the present gives evidence contrary to your claim. Human societies have experienced exponential growth since forever, with only occasional brief temporary setbacks. Even the Black Death is a blip on the exponential curve of economic progress.

Past performance is not a predictor of future results. If we continue to grow GDP (~energy consumption) at about 1%/y, we’ll boil oceans in 400 years. That’s what exponential growth means.

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

#218

Post by baq »

ArnoVW wrote: post #189
pl-94 wrote: post #156

Earlier quoted context omitted.

The GDP is itself exponential. A growth of +2% a year is an example of an exponential curve. Sure there are "limits to growth" (see Meadows et al.) but it's not clear whether those limits are reached yet.

Unless we find a way to 'produce' (the P in GDP) without increasing entropy by digging up stuff (oil, metals, whatever) and then releasing them into our ecosystem once we're done with them, those limits seem to be pretty close though. That's not just me thinking that. That's the Club of Rome, in the 70's. https://en.wikipedia.org/wiki/The_Limits_to_Growth Their conclusion at the time: "the most probable result will b…

And the most sobering thing - we’re still on track for the base case…

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

#219

Post by FredPret »

hn_throwaway_99 wrote: post #92
vitus wrote: post #2

> Buying the dip isn’t some secret strategy. Time is the secret strategy. Ah yes, the good ol' "time in market beats timing the market". Of course, that assumes that markets trend upwards in the (very) long term. Which... if past performance is any indicator of future performance [0], the past 100 years provide a fairly compelling narrative. [0] Another mantra: it's not.

> the past 100 years provide a fairly compelling narrative. In the US. The Nikkei is down over 25% from its peak 32 years ago .

Japan and the US got into a trade war; it’s a special situation for them. Absent getting a bloody nose from an economic giant, they would have done well

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

#220

Post by pfortuny »

ArnoVW wrote: post #189
pl-94 wrote: post #156

Earlier quoted context omitted.

The GDP is itself exponential. A growth of +2% a year is an example of an exponential curve. Sure there are "limits to growth" (see Meadows et al.) but it's not clear whether those limits are reached yet.

Unless we find a way to 'produce' (the P in GDP) without increasing entropy by digging up stuff (oil, metals, whatever) and then releasing them into our ecosystem once we're done with them, those limits seem to be pretty close though. That's not just me thinking that. That's the Club of Rome, in the 70's. https://en.wikipedia.org/wiki/The_Limits_to_Growth Their conclusion at the time: "the most probable result will b…

As long as the Sun shines on (and this is essenty “for ever”), there is an increasing accumulation of energy in the planet: that is where the possibility of exponential “growth” comes.
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