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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

#251

Post by nly »

scrivna wrote: post #120
rubidium wrote: post #100

Earlier quoted context omitted.

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.

The UK is at more or less the same price as it was in 2000. France same as 2008. Meanwhile SPY is up 2.75x in that period. The US seems to be the anomaly. Value doesn’t always go higher. Maybe the USA is special, maybe not.

The UK FTSE all share total return index, which accounts for reinvested dividends, is at 8430 today and was at 2870 in May 2000. That's an annualized return of exactly 5%/year

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

#252

Post by srean »

mercy_dude wrote: post #133
dannyw wrote: post #114

Earlier quoted context omitted.

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.

That depends on whether you want to sell your bonds or hold on to them and enjoy the coupon payments. If its the latter the falling price of the bond is not relevant to you. You can still get hurt by inflation, default, changes in tax laws etc. If you have the spare cash, you could buy the older bond issues on the dips induced by rising interest rates. That's a pretty decent strategy because these old bonds are those that are going to mature sooner, lower the time left, less sensitive are their resale value to further interest rate hikes. This leaves you with the option of selling them without much financial harm in case you are in a situation that you have to.

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

#253

Post by srean »

refurb wrote: post #250
srean wrote: post #244

Earlier quoted context omitted.

This a very popular idea but I don't fully accept it. Goals and desires are not static. They are path dependent and adaptive. I want a funding scheme that's able to fund that.

So you want high returns with little to no risk? Doesn’t exist. Sorry bud.

You think you are entitled to returns just because you took a risk ? Sorry bud, sad to break it to you but it does not work that way.

That's the idea that I am criticizing. Risk might be necessary, but never sufficient.

BTW I don't think, you think that way, but neither should you. Gratuitous condescension poisons the well.

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

#254

Post by carnitine »

gabereiser wrote: post #126
zmgsabst wrote: post #90

Earlier quoted context omitted.

That’s ironic. If you’d sold your S&P500 on Monday and bought back on Friday, you’d have gained 2.7 shares per 100 sold. If you’d sold your S&P500 a month prior and bought back on Friday, you’d have gained a 8 shares per 100 sold. If you’d sold your S&P500 six months prior and bought back on Friday, you’d have gained 14 shares per 100 sold.

You just described a hobbyist. Institutions don’t sit on cash for that long, nor do they buy S&P in any significance. [0] Berkshire Hathaway - https://www.dataroma.com/m/holdings.php?m=BRK

Interesting that you cite BRK, who famously have been sitting on ~150bn in cash recently. Professional investors absolutely sit on cash all the time.

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

#255

Post by kzrdude »

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.

Past 100 years also tell us that there will be world wars, empires will go bust and some nations/people will be uprooted and have to migrate. That's a lot of uncertainty to bear, of course, and history does not predict what happens in the future. It just tells us something will hit us and we probably won't see it coming (paraphrasing Dan Carlin).

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

#256

Post by nly »

newshorts wrote: post #88
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…

Don’t worry friend, it’s about the savings rate, not the savings return. Just keep putting a little in here and there. Don’t put in anything you can’t afford to lose and it’ll turn out alright

If person A invests monthly and achieves a 7%/yr return, how much more does person B have to invest every month to get the same pot after 30 years?

50% more

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

#257

Post by adg001 »

chii wrote: post #29
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…

> dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns. 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. The only concern is low interest rates, which makes the hurdle for any i…

> 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.

Make no confusion, please. Quantitative easing was intended to give credit institutions greater ability to lend money to entrepreneurs, so as to boost real economy. When capitals are invested in financial products the entities closing their positions (e.g., selling stocks) and, in turn, getting the cash are not necessarily credit institutions (i.e., they are typically fund managers and private investors) – which is to say they pocket the money.

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

#258

Post by refurb »

srean wrote: post #253
refurb wrote: post #250

Earlier quoted context omitted.

So you want high returns with little to no risk? Doesn’t exist. Sorry bud.

You think you are entitled to returns just because you took a risk ? Sorry bud, sad to break it to you but it does not work that way. That's the idea that I am criticizing. Risk might be necessary, but never sufficient. BTW I don't think, you think that way, but neither should you. Gratuitous condescension poisons the well.

I never said I "think [I am] entitled to returns just because [I] took a risk". There is no entitled, it's simply a trade-off.

It's a basic precept of investing. In a very simplified way - higher returns require higher risk of invested capital - why else would you invest in something higher risk unless the return justifies it? And likewise, people will accept lower returns if they know the risk is low.

Nobody is doing payday loans at prime because the risk isn't justified by the return.

When you start looking at portfolio allocation across multiple investments, it gets more complicated because you can actually achieve the same return at lower risk through diversification across classes of assets.

But to answer your original question - the only way to guarantee short-term and long-term positive returns (as you put it "if my goals change, I don't want to lose money") is to invest in low risk investments. Low risk investments mean low returns.

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

#259

Post by nly »

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…

Companies like COST can increase the prices of their goods and services to maintain margin during inflationary periods (where their own costs go up).

With your government bond you're at the mercy of the Fed

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

#260

Post by baq »

chii wrote: post #248
baq wrote: post #226

Earlier quoted context omitted.

No technology can work around limits given by thermodynamics.

We are far from the limits of thermodynamics. You'd have to wait till nearer to the heat death of the universe for that to have an effect on the economy.

Define far. Gasoline engines eg are within 2x of Carnot limit. Not much room for improvement.
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