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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

#291

Post by matwood »

throwaway898989 wrote: post #205
galaxyLogic wrote: post #160

Earlier quoted context omitted.

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…

if you have a large enough sum of money (i.e., $50m USD ) you can stay invested all the time and withdraw a small sum of money each year like $300k With $50m if your portfolio averages 4% a year you would be clearing $2m then pulling out $300k for 1.7 gain. You only pay tax on the income withdrawn

The real baller move for someone worth 50M+ with rates as low as they have been, is take out loans against the 50M to live off of. Pay back the loans with rates less than the annualized market returns. Also limits/pushes out cap gain taxes.

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

#292

Post by trashtester »

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 .

Yet, when including dividends (reinvested), the annualized return from 1990 to 2021 was 1.765%, (in Yen, adjusted for Japanese CPI).

https://dqydj.com/nikkei-return-calculator/

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

#293

Post by matwood »

SturgeonsLaw wrote: post #196
jokethrowaway wrote: post #162

Earlier quoted context omitted.

I was pissed because I didn't invest in my portfolio to buy a house during the pandemic and missed out on pandemic gains - but checking how much money my portfolio lost, I made more money to keep those in cash.

It was hard to predict that real estate would see pandemic gains. It's an asset that people need to leave their homes to inspect, and comes with face-to-face time with multiple parties. In a locked down society, there were plausible reasons to assume that the real estate market would be dampened.

Predictions are always hard. I bought my house during the last housing 'crash'. It was my first house so I didn't have one to sell, so it was easier. But, I was being told by friends and online that things could drop more, wait, etc... At the end of the day, I needed a place to live, I could afford it, and my job was reasonably secure.

Now people ask how I timed it perfectly and the fact is I didn't. I simply made personal financial decisions based on my situation at the time.

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

#294

Post by MuffinFlavored »

adam_arthur wrote: post #145
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 math is a 100 PE implies a 1% yield. The company could distribute 1% of its value each year to the shareholders in perpetuity. Many started using FCF and PS ratios in recent years, but often this hides the actual profitability of the business. For example, FCF measures typically do not add back equity compensation.. which is obviously highly misleading for tech companies that issue a lot of stock If a 100 PE comp…

you wouldn’t buy an S&P509 ETF until at least how much of a pullback, 30%?

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

#295

Post by mkr-hn »

wcoenen wrote: post #233
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.

> The entirety of human history since prehistoric times Extrapolating from the past doesn't always work. There are real limits. Take the rate of energy consumption of human civilization for example, which is currently about 17 terawatt[1]. Thermodynamics tells us that after doing useful work, practically all of that energy ends up as waste heat. (A small fraction is stored, e.g. aluminium stores some energy. I assume…

People always talk about compound interest. Not enough people talk about compound waste heat.

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

#296

Post by martincmartin »

lvl102 wrote: post #278

Random thoughts: (1) People were deeply and extremely risk-averse coming out of the 2008 crisis. And now we are _starting_ to see the other end of that spectrum. However, we are still far from the heights/throes of the dot-com boom. Those were some insane times when nothing even mattered. (2) But keep in mind, the main driver of global economy is still increasing standard of living and middle class. And that’s far fr…

If current pace of inflation persists, then you want to be in equities chasing cash flow in enterprises with pricing power. What you don’t want is to stay in cash.

And if inflation ebbs, you want the opposite.

Both outcomes are possible. So it's best to hold a well diversified portfolio and not try to time the market. Just rebalance once a year.

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

#297

Post by jseban »

PretzelPirate wrote: post #283
jseban wrote: post #269

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. And buying stocks is financing real projects, and you only get those returns if they manage to do something actually useful, this is helping to finance and promote economic activity, how is that taking money…

If someone buys stocks from a third party in the open market, are they financing real projects? It really feels like it’s all speculation since the value of my shares doesn’t actually entitle me to that portion of the company’s profits, unless I can sell back directly to the company.

It's speculation on the future development of the company's performance, you aren't entitled to a share in the profit, but you often get one anyway in the form of dividends.

If you buy a stock on the open market you don't actually fund starting a real project, but you fund the continuing development and improvement of that project, it's driven by the fact that they have shareholders to answer to, and you are entitled to voting rights.

It has to have some amount of speculation, that's the driving force behind it, otherwise the whole thing would just stagnate and you have no incentive to improve a company and it will just get looted by its employees. In the big picture it just help collectively push for more efficient ways of working, and stop inefficient work.

It's not pure speculation in the sense that you are not betting on a random event like tomorrows weather in a zero sum game.

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

#298

Post by ProjectArcturis »

lvl102 wrote: post #278

Random thoughts: (1) People were deeply and extremely risk-averse coming out of the 2008 crisis. And now we are _starting_ to see the other end of that spectrum. However, we are still far from the heights/throes of the dot-com boom. Those were some insane times when nothing even mattered. (2) But keep in mind, the main driver of global economy is still increasing standard of living and middle class. And that’s far fr…

I think the NFT bubble and other crypto stuff is at least as crazy as anything from the dot-com bubble.

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

#299

Post by ProjectArcturis »

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 are you buying that you've lost "much worse" than 10%? There's no guarantee each individual stock will go up over time.

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

#300

Post by adam_arthur »

nly wrote: post #259
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

They can also lose earnings if the consumer weakens, which looks pretty likely to me, given consumer credit data.

https://fred.stlouisfed.org/series/CCLACBW027SBOG

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