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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

#221

Post by baq »

throwaway2037 wrote: post #125
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…

There is an saying: The stock market is not the economy. The US economy is still growing faster enough for corporations to fight off the effects of inflation. (People / workers are a different social and economic issue.) The Fed will continue to raise rates and wind down its balance sheet in an orderly manner. Eventually, after enough rate rises, inflation will slow, and the economy will reach a new equilibrium betwe…

Inflation will already slow (oil stopped going up), GDP prints are coming in negative, rates are only now accelerating while economy is slowing down. How this doesn’t end in a recession is beyond me. Mortgage workers have been laid off already due to that. Real economy is next on a lag due to demand destruction.

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

#222

Post by id »

SapporoChris wrote: post #197
astrange wrote: post #158

Earlier quoted context omitted.

Do Japanese people have to buy Japanese stocks just because it's the same country?

No, Japanese can invest in other markets using international brokers. I don't know details on the fees and currency conversions. Investing in a foreign exchange is always at a slight disadvantage because of currency conversions and fees. For a US centric view: https://www.investopedia.com/articles/investing/032615/how-t...

US stocks are traded on foreign exchanges. Even if you insist on buying on a US exchange, the currency conversion is not very expensive. If you're a buy and hold investor, it won't matter at all.

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

#223

Post by Ekaros »

hn_throwaway_99 wrote: post #78
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 f…

I kinda loved some near ending scene of Big Short. The investor is talking with the fun manager and saying "Market is at all times low and you are buying". Kinda hammering home that they don't really know and are just following the general sentiment...

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

#224

Post by mach1ne »

chii wrote: post #148
hn_throwaway_99 wrote: post #86

Earlier quoted context omitted.

> i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere. But just look at housing, which has exploded well beyond the rate of inflation since the Great Recession bottomed out, and especially in the past couple years. Yes, if money is plowed into housing, the homeo…

> if money is plowed into housing, the homeowner has more cash when they sell. but it's not expensive _everywhere_. It's expensive in some of the most desirable places. And housing has some issues unrelated to the market - such as NIMBYs stopping new constructions.

>but it's not expensive _everywhere_. It's expensive in some of the most desirable places.

The fact that the median and average house prices have exploded signifies that the housing market is in a bubble. It's not relevant that house prices have not increased equally everywhere. Ultimately, after the bubble eventually bursts, it will leave a lot of people indebted to banks with their real ownings not matching the debt. This translates to a decrease in consumer consumption, meaning slower economic growth. Resources of the society will be more directed towards customers who have more wealth, meaning those who weren't part of the housing crash. Likely customers from abroad.

Obviously we're talking about percentages, but that's how economy works and that translates to very real changes in a many people's lives.

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

#225

Post by Ekaros »

gonehome wrote: post #171
jokethrowaway wrote: post #161

Earlier quoted context omitted.

While I can see luxury food delivery kind-of working (wealthy workers in the office ordering lunch, wealthy home workers ordering lunch, fitness nuts who want calories and good food without cooking), Juicero was just plain ridiculous. Competition from local supermarket is too strong. I can get freshly squeezed juice from the store machine anytime I want for cheap.

Plus juice is kind of a crappy high sugar project that’s bad for you? Relatedly, I have no idea how “Joe and The Juice” stores remain in business. They’re in super valuable real estate in cities across the country and as far as I can tell never have anyone in them.

Do they? How long have the same ones been around 5 or 10 years yet?

On other their products likely have such margin it might be possible with enough sales. The components aren't too expensive, there isn't massive number of labour and equipment isn't that big of investment either likely...

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

#226

Post by baq »

chii wrote: post #66
tsimionescu wrote: post #58

Earlier quoted context omitted.

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.

Why can't technological advancement stave off climate change damage? Why cant renewables replace fossil fuels, and continue human expansion? Why can't space exploration and settlement be where the future growth occurs?

No technology can work around limits given by thermodynamics.

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

#227

Post by refurb »

galaxyLogic wrote: post #160
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.

Problem with "long term investing" as I see it is that to realize the gains you must get out of the market at approximately the correct time. That is difficult psychologically because if you have been able to increase your worth by doing what you have been doing so far you are likely to keep on doing it. Then one day the next crash comes. All of a sudden having been a long term investor does not help so much any more…

You should clearly have a purpose for your investing goals and adjust your investing style based on risk.

So if your goal is retirement and you're 30, you can tolerate higher risk because if the market crashes, you've got 30 years to wait for it to recover. If you're 60 and retiring in a few years, your risk tolerance is low. And you can slowly adjust your portfolio in between.

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

#228

Post by baq »

bushbaba wrote: post #74
tsimionescu wrote: post #58

Earlier quoted context omitted.

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

Another way to look at it is that fossil fuels don’t have externalities priced in correctly. Nuclear is a safety and regulatory mess.

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

#229

Post by adastra22 »

baq wrote: post #217
adastra22 wrote: post #188

Earlier quoted context omitted.

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.

Most of that GDP growth will not be on Earth in 400 years.

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

#230

Post by baq »

dannyw wrote: post #116
onlyrealcuzzo wrote: post #65

Earlier quoted context omitted.

The historic average for interest rates is considerably higher than it is right now. Considering the amount of public debt outstanding - it's extremely unlikely we're returning to those levels of interest rates long-term (short-term I suppose anything can happen). Interest rates have a huge effect on P/E. I wouldn't expect CAPE to match historic trends if interest rates don't.

1. Nominal interest rates are pretty normal right now. 3.3% on a 10y, that's not bad in history. 2. The government's debt is fixed. Only new deficit is on higher rates. 3. Completely agree, my thesis is that interest rates are going to continue to go up (IMHO 4%, 4.5%)

US government can’t afford 4%. Rates will rise until something breaks, but 4% will be transitory if it gets there at all. My bet is things break sooner than that.
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