Are You Still In?

[RV_]

Ed,

I did read it, thanks so much for posting it! Great short read and makes perfect sense to me. I was doing a hobby consult for a start up out in Santa Clara and making a little in early 2000 while fulltiming until the tech bubble burst in June. But I wasn't invested and the company just went away and went back to a private website for the owner. I didn't lose a job I needed I was retired and RVing. And I paid off my 5 acres and house back in 2005 and actually was working ans making great money and sunk a lot of it into funds in the 2008 and 2009 and 2010 time frame before the prices started to come back. I banked with USAA and they have my funds and they are doing fine. I still had mid 5 figures in the performance index account and was happy with the liquidity AND 4 % until the interest went down to nothing. That was when I realized that Tesla was about to IPO, something I had very much wanted to see. I called USAA and found that every 10k I had in their previously great account was making only 108, so I was looking and was liquid all through when 2008-now happened.

 

 

So the article did not apply to me, I did not get financial PTSD. Here's an excerpt from it:

 

"Another habit that Statman sees at play is the confirmation bias. It's often used as a way to help explain the widening political divide in the U.S. between Democrats and Republicans.

 

Say you believe that the federal government's debts will cause the U.S. to go the way of Greece. Instead of looking for information that challenges this view, you stick to news reports that confirm your opinions.

 

"If you have evidence that goes against your beliefs, you dismiss it," he says.

 

Statman says it seems some people are looking to confirm a "doom and gloom" view of the U.S. economy. Point out that the economy grew at a 3 percent rate in the last quarter of 2011 and they'll change the subject.

 

Their view, he says, is: "This country is going down the tubes."

 

Boy have I seen a lot of that going on!

 

No matter how bad folks feel about it the market always swings in short cyclical three to five year peaks and troughs, and longer term Secular bull and Bear markets historically. We are about due for the bear market to turn Bull once more, if it hasn't already.

Edited March 14, 2012 by RV

[mcbockalds]

An article worth reading. Explains why some people are so afraid to accept the reality that the US economy is improving.

 

http://finance.yahoo.com/news/why-americans-avoiding-stocks-ask-225638447.html

 

A very humorous article. He says, "But everyday investors refuse to jump in. They pulled $19 billion from funds that invest in U.S. stocks in December, according to the Investment Company Institute, and $2 billion more in January." He fails to say what the ICI goes on to say - that these unfortunate Americans were putting those funds into the bond market. Talk about bad timing, chasing returns. In other words they were not afraid of investing out of fear or bad psychology, but were just bad market timers. I still have to wonder about these articles that start with the premise that hordes of Americans are sitting on the sidelines with cash in their sweaty little palms - how do these authors think the DOW got to 13000+ with investors sitting out? Makes little sense to me.

 

Do you suppose the author would accuse the guys mentioned in the quote below of fear and bad psychology?

 

"Since the dot-com crash of 2000, when the Dow peaked at 11,722, to today with the market hovering around 13,000, Wall Street’s lost an inflation-adjusted return of about 20% of your retirement money. And economist Gary Shilling sees no growth through the next decade ... Nouriel Roubini warns of a decade of dark days ... Pimco’s Bill Gross sees a long “new normal” of lower returns … GMO’s Jeremy Grantham predicts “Seven Lean Years” … Martin Weiss warns that a “historic world-changing event is about to crush the U.S. economy and stock market.” Still, Wall Street lives in a fantasy land, ignores warning signs, pushing mega-IPOs, risky junk."

 

Perhaps a few behavioral economists might be inclined to agree with the outspoken, Paul Farrell when he asserts that "Wall Street addicts" are the problem. Perhaps the few average American investors who are sitting on the sidelines because they happen to agree with the economists mentioned above deserve more credit than condescending, psychological fluff masquerading as behavioral economic analysis.

 

Cheers John

[RV_]

John,

Why don't you tell us what you really think? I believe that come December 22 the sun will rise and so will I.

[TheDuke]

So you or someone you like is saying that if you stayed in the market since 2000, that you have lost 20 percent of your retirement money? What inflation figure is being used? How much would you have lost if you got out of the market the day after it crashed and stayed out?

How about 2008 when it dropped to around 8000. If you stayed in since then, how much of an inflation loss would you have taken? How much again if you stayed out since then?

I think the part about listening only to those you agree with is pertinent here.

As usual, past performance is not a measure of future performance.

[mcbockalds]

So you or someone you like is saying that if you stayed in the market since 2000, that you have lost 20 percent of your retirement money? What inflation figure is being used? How much would you have lost if you got out of the market the day after it crashed and stayed out?

How about 2008 when it dropped to around 8000. If you stayed in since then, how much of an inflation loss would you have taken? How much again if you stayed out since then?

I think the part about listening only to those you agree with is pertinent here.

As usual, past performance is not a measure of future performance.

The quote is from Paul Farrell , someone I have read about 2 or 3 times. So, no, it is not someone "I like." I have made a similar calculation in a post somewhere on this forum, but haven't tried to find it so I don't remember what annual inflation rate I used. Farrell's comment is based on using a 3% annual inflation rate which is at the high end (not including Shadow Statistics which claims 5%+). If you use 2.5% for the average annual inflation rate you get a 15% inflation adjusted loss instead of 20%

 

This does not mean that everyone who stayed fully invested in stocks from 2000 until now has lost 15% in real terms. (Note also that this calculation completely leaves out dividends.) Some have, some have lost more and some have lost less and the really great stock pickers have made money. What the numbers really say is that if you start with the DOW at 11,700 in the year 2000 and calculate its growth just due to inflation at an average annual rate of inflation (2.5% or 3% or ?) until 2012, you get 15,350 - when using 2.5% - and you get 16,195 - when using 3%. The DOW at 13,000 has not even kept up with inflation, simple as that.

 

The purpose of the quote was to highlight the economists mentioned, not to highlight the part about real losses on the DOW. But since you have commented on that, it is a good lesson for all of us about real and nominal values. It is also a good lesson about our - including mine - tendency to always calculate our percentage gains, but seldom our percentage losses and we seldom do those calculations in real, inflation adjusted values. Nominal returns look so much better than real returns. In other words, talking about "behavioral, psychological" economics, we are most inclined to do the numbers in a way that makes us feel good.

 

I have no answers for your other questions ... I assume you did not really expect any.

 

PS Farrell mentioned Wall Street addicts and here is a telling letter about Goldman Sachs.

 

Cheers John

Edited March 15, 2012 by mcbockalds

[Jack Mayer]

The way I figure it is to look at what I started with in 2000 when I went fulltime. In essence I have not made any (real, earned income) money in all that time....so it is easy to look at what I have now, and all my withdrawals over that time to support my lifestyle. Looked at that way gives you a "personal" look. I have been invested most of that time. I do own real estate as well....so I have to factor that out.

 

But looked at that way I am doing just fine, thanks. I have about what I started with after all that time and expenditures. Good enough for me. I still moved 25% out, though.

Edited March 15, 2012 by Jack Mayer

[StarDreamers.us]

A bit of advice I was given when I bought my first stock. "Don't ever invest more than you can afford to lose".

 

Safe Travels!

[ed6713]

NEW YORK (CNNMoney) -- Stocks finished higher Thursday, with the S&P 500 topping the 1,400 mark for the first time in nearly four years, as investors considered a batch of better-than-expected economic news.

 

Reports showed that jobless claims are at their lowest level in four years, manufacturing activity continues to expand and inflation remains tame.

 

"The economic data has dramatically improved over the last couple of months," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "The jobs numbers are gradually getting better, and that's the most important factor for the economy and stock market."

 

But the day's gains were slight after investors had already pushed stocks up more than 2% this week.

 

The Dow Jones industrial average (INDU) rose 59 points, or 0.4%, logging its seventh straight day of gains and finishing at its highest level since December 2007.

 

The S&P 500 (SPX) gained 8 points, or 0.6%, ending above the 1,400 level for the first time since June 2008. The Nasdaq (COMP) added 16 points, or 0.5%, closing at the highest level since November 2000.

 

 

[RV_]

Jack I like that perspective. Mine isn't gloomy, another's experience may be, and neither invalidates the other. I did earn a lot of income after I decided to go back to work in 2005. I did almost 5 years and retired again. My company was expanding and I did not want to take another division and end up working 18 a day six days a week. All during the 2007/8/9 time frame I was buying and discussed that here a few times back then. It was a great sustained buying opportunity. When I left my position and the buying opportunity was over as far as I was concerned, I was left with my operating expenses in the performance index account, and a local biz checking account so my people could cash their paychecks locally, and earning nothing in either account. Now those funds would have earned me quite a bit if I were to sell now. I agree that the primary rule is to never invest more than you can afford to lose, and to buy low and sell high. Another one is that no money is lost, or made, until the stock is sold, ad the money is in the bank or another vehicle with little risk. My SH wanted to sell when it crashed and I was buying more. I finally got through that, and am not ahead or behind because I am still in. Ahead or behind will be tallied on the sale of part or all the shares I own at present. Holding and not selling any and I am again neither ahead nor behind, merely speculating. It ain't a profit or loss until the stock is sold. What confounds folks is when to sell. When to hold. Like the song says, you never count your money when you're sitting at the table, there'll be time enough for counting when the dealings done.

Edited March 16, 2012 by RV

[mcbockalds]

Like the song says, you never count your money when you're sitting at the table, there'll be time enough for counting when the dealings done.

 

Nicely sung.

 

And you previously said ... "John, Why don't you tell us what you really think? I believe that come December 22 the sun will rise and so will I. "...Yes, as the Brits might say, that article did "get up my nose!"

 

Cheers John

[RV_]

Which article John? The one about the world ending December 21st, or the one about cherry picking commentary that agrees with a belief? Just kidding! I know what you meant.

 

I really think there is a lot to be said for his premise that there is a PTSD like experience which for some can be as bad as a combat trauma. In personality studies and theories from Piaget and his maturational theories to Hirschberg's motivation and hygiene, the premise most accepted and validated by observation is the personality is pretty much crystallized by age 27 and only a SEVER TRAUMATIC EMOTIONAL EVENT can change a person's basic "bent" if you will. PTSD is that trauma from war and the activities associated with participation in the atrocity of killing for non warrior personalities. I thought that the article was dead on in a correlation between the trauma of the markets that were the investor's friend for so long, turning on them suddenly, and leaving some who thought themselves set for life destroyed or set back quite a bit. It just makes sense. Same as relieving cognitive dissonance or the severe stress experienced when our beliefs and our behaviors are in contradiction. We humans have only two choices: Change the belief or change the behavior. Smokers change the belief that they will get cancer or some other disease. Those who quit smoking changed the behavior. Both relieved the cognitive anxiety/distress/dissonance of their belief and behavior being contradictory. I see the same thing in the irrational sell offs when the least little thing scares one person that their money might be in jeopardy and that one person leads all the others like lemmings to sell. That article I posted earlier explained a lot to me about the market too. When anybody has lost a great deal, which is relative to each, it will leave a lasting lesson that may be withdraw to some, and just change approach to others.

[ed6713]

The long term danger of abandoning the stock/bond markets. Even for us old guys. And girls.

 

http://money.cnn.com/2012/03/16/pf/expert/retirement-asset-mix.moneymag/index.htm?iid=HP_LN

 

ed

All in. But in a moderately conservative way.

[Jack Mayer]

Just because I may not be "all in" to the market does not mean I'm not invested in "something". The market is not the only investment vehicle.... "Just saying".....

[Guest cindona]

Too bad there's not a 'like' button on here, because I would 'like' Jack's last comment.

[Jack Mayer]

Cindy!! Glad to see you back here....see what you started! And I miss your blog....

[ed6713]

A person can be fully invested but without a major concentration in any one asset or asset type. You could roll the dice on flybynight.com or go with the quality of Apple, or get just as diverse as you want.

 

One of my personal, long term favorites is PRPFX.

 

https://www.google.com/finance?client=ob&q=MUTF:PRPFX

 

From the prospectus:

 

In pursuit of its investment objective, the Portfolio invests a fixed “Target Percentage” of its net assets in each of

the following investment categories:

 

Investment Category Target Percentage

 

Gold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20%

Silver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%

Swiss franc assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%

Stocks of U.S. and foreign real estate

and natural resource companies. . . . . . . . . . . . . . . . 15%

Aggressive growth stocks . . . . . . . . . . . . . . . . . . . . . . 15%

Dollar assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35%

Total 100%

 

 

 

 

There are some very diverse, and conservation, ETF's like XLU (utility companies) or VDC (Consumer staples) to name just two. You're fully invested in stocks, but not in any given stock.

 

So just because someone is "all in" that doesn't mean "all in" in flybynight.com. It means, to me at least, that I don't have much cash parked in the bank.

 

Ed

 

All in. In a moderately conservative way.

[mcbockalds]

 

 

I really think there is a lot to be said for his premise that there is a PTSD like experience which for some can be as bad as a combat trauma. .

 

RV, really good explanation of PTSD. I have no problem with the theory of PTSD, although my comment about the author’s “condescending, psychological fluff” makes it sound like I do - I don't. My problem is with the author’s “fluffy” use of the theory and his “doffing his hat” at behavioral finance/economics and with his first premise, where he says, “So why are Americans still too scared to get back in the stock market?”

 

To support this premise he goes on to say, “everyday investors refuse to jump in. They pulled $19 billion from funds that invest in U.S. stocks in December, according to the Investment Company Institute, and $2 billion more in January....Investors seem more than happy to miss the party.”

 

Read that quote again and think about it, do you see the flaw? It simply makes no sense. If people are pulling money OUT of stock funds in December and January, that means they already were IN stock funds. His obvious nonsensical statement is rather telling, but his “fluff” does not end there.

 

After he points out the tremendous gains in the S & P 500 since March 2009 (and since this past Oct. too), he quotes a wealth manager, who says, "Now, people call and ask, 'When is it going back down?' DeMatteo says. "There's a sense of doom." And then the author asks, “What are they thinking? It's a question fit for a shrink.” But wait a minute! Excuse me, but after this tremendous 2 1/2 year bull run is it not a reasonable question? Is it not a reasonable possibility that sane people might be wondering when the market might see a correction or even the next bear market? Of course it is. But, no, not for our author, because he is apparently too caught up in his own story with his questionable premises.

 

So I ask, might PTSD apply to those people who never got back in the stock market? It sounds like a good possibility to me too. BUT so does another possibility…the possibility that this stock market recovery is another bubble, thanks to the FED’s continued easy money policies that in fact lead to the 2007 bubble. The economists that I quoted in my earlier post (Bill Gross, etc.) seem to think so. And be they right or wrong I don't think they need a shrink to point out the error of their ways.

 

Finally, I wish I could ask the author, "with the benefit of hindsight, would you prefer to have bought into this stock market back in 2009 when the DOW was at 7,000 or today at 13,000+?" Perhaps the question will help him see why some people are calling DeMatteo and asking, “When is it going back down?” And maybe some of those people calling DeMatteo are actually shrinks...experts in PTSD...and even smart enough to remember, "buy low and sell high."

 

Cheers John

[notop]

This is my favorite advisor. Not recommending his current job selling for AssetBuilder but instead his previous work as a syndicated author. Poke around and look at his articles on lazy portfolios. His ideas are basically solid. http://assetbuilder.com/blogs/scott_burns/postlist.aspx?groupid=6

ps: I have told my wife that if anything should happen to me that she should strongly consider letting Asset Builder handle her assets. jmo.

[notop]

I have a problem with PTSD in general. Mankind has been engaged in war since the beginning of recorded history. Not continuously, but too often. Gruesome wars with mostly hand to hand combat were the rule for centuries. It is only in the modern era that we have been able to inflict damage from afar. Seemingly each combat situation had seen less and less "eye to eye" combat. Did the millions of participants in WWI suffer from widespread PTSD? WWII? Korea? It wasn't until Viet Nam that PTSD became prevalent. Do not know why and not going to pretend to explain. Just understand that throughout history men (and some women) have gone off to war. Survivors came home and continued on with productive lives. Enabling PTSD only makes it worse.

[RV_]

Bob,

Excerpt:

"In fact, throughout our history, PTSD has been called a number of other different names, including:

• battle fatigue or gross stress reaction for soldiers who came down with PTSD after World War II
• combat fatigue or shell shock for soldiers who experienced PTSD symptoms after World War I
• soldier's heart for soldiers who developed the symptoms of PTSD after the Civil War.

Unfortunately, before the medical community recognized PTSD as a viable emotional disorder, most leaders and doctors thought it was simply nothing more than cowardice or personal weakness."

http://www.psychiatr...ory-of-ptsd.php

 

Your problem with PTSD is based on what personal experience? Your medical degree is in which specialty?Your service time in what branch? I have 27 years some in the medical Corps most in Combat Arms and no, I do not have any form of PTSD. My disabilities are hearing neck and back damage. I am just a sheepdog.What are you? My theory is that it happens when a sheep has to be put in the role of a sheepdog and thinks all are feeling like he does. Sheep are the bulk of society, and wonderful people who make the civilized part work. There are wolves and sheepdogs and they know who they are, only the sheep are confused. Maybe you have read Col Grossman's treatise on it? http://www.mwkworks....dsheepdogs.html

Edited March 17, 2012 by RV

[notop]

just a plain ol helicopter pilot, US Arm 1969-1973. CW2, 282nd AHC, Da Nang 1970-1971. Observation remains that prior to Viet Nam PTSD was not a wide spread problem despite much larger "exposure" and much harsher conditions. I just wish they would quit their whining.

[Barbaraok]

Bob,

Yes, in each of the conflicts you mentioned, men came back with different types of problems that wedidn't understand as we do today. My dad (WWII) had horrible nightmares, he was back on the ship and could see periscopes in front of them. We knew not to touch dad when he was sleeping, he came awake 'swinging'. The nightmares lowly lessened, but it wasn't until I was in college that he really began talking about what he had seen.

My BIL was wounded in VietNam and had horrible nightmares for years.

How dare you complain that they are 'whining'. Most go on with their lives and have had to work it out without help. I wish my dad could have had some help so that he wouldn't have had to go through the nightmares, etc.

 

 

Barb

 

 

 

Edited March 17, 2012 by Barbaraok

[RV_]

Bob we will just have to disagree.

[notop]

I did not mean to imply that there were not problems. Just that they were man enough to handle it, even if it took years. And it often did. Some even went round the bend. But society did not rationalize it back then. You were supposed to gut it up and move on. Almost all did. As did your Father and mine.

[RV_]

Edited March 17, 2012 by RV