“Once the bullies shove you into a locker and hold your head down in the toilet, you learn to take a different hallway to homeroom.”
http://www.businessweek.com/articles/2012-05-24/u-dot-s-dot-stock-outflows-a-12-year-grudge
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What about the demographic shift concerning the baby boomers? Could this be driving the Mutual fund redemption trend? The Dumb money may be the upcoming generations that are reluctant to enter the markets that hammered their parents and do not have the numbers to replace the boomers in any event.
Just a thought.
My 401-k is in cash. Waiting for QE 4.
U.S. Stock Outflows: a 12-Year Grudge
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I check ICI flows just about every week.
It looks like the "dumb" money finally figured out it's dumb.
It looks like the "dumb" money finally figured out it's dumb.
What about the demographic shift concerning the baby boomers? Could this be driving the Mutual fund redemption trend? The Dumb money may be the upcoming generations that are reluctant to enter the markets that hammered their parents and do not have the numbers to replace the boomers in any event.
Just a thought.
My 401-k is in cash. Waiting for QE 4.
Ironically, when the market goes higher, those with the stubbornness to stay in until they get even finally get out. I suspect that trend is mostly over.
These articles always carry the veiled or not-so-veiled threat that bondholders risk getting caught out by inflation. But they never explain the mechanism that brings the inflation.
Paper, I agree with your demographic double whammy. Those over 50 will be hesitant to put a lot of money in stocks. For those under 30, I think they are much less likely to take "succeeding" as seriously as the Boomers.
These articles always carry the veiled or not-so-veiled threat that bondholders risk getting caught out by inflation. But they never explain the mechanism that brings the inflation.
Paper, I agree with your demographic double whammy. Those over 50 will be hesitant to put a lot of money in stocks. For those under 30, I think they are much less likely to take "succeeding" as seriously as the Boomers.
I am a boomer: I’ve been retired for five years. I am not (at least in my own mind) inclined to take undue risk. (I am a very sick man – No, that’s a different piece of literature.)
Since we boomers haven’t a clue as to how much medical science will improve our longevity, to take all one’s money out of the market and put it in something ‘safe’ that pays less than 2% for the next 10 years, is the height of folly, unless you already have more than enough to last a lifetime.
I, like most other boomers who have given this some attention in the past, have enough to supplement my income for a ‘lifetime’, but since I don’t quite know the length, judging how much each year to supplement has been problematic. What I do know is that if I can augment that amount, faster than inflation, I will be ahead of where I would be in a portfolio of safe bonds. Why do you think that I hammer so much about dividends from stable companies, companies with histories/policies of increasing dividends, and DRIPs. I don’t invest in the market for ‘kicks’: I don’t do it in lieu of going to Atlantic City. I do it to decrease my level of risk, not increase it.
That is why I talk about options as a method of augmenting my yearly returns. I don’t buy an option with the hope that the stock will shoot up in time to double or triple my money. The odds are too long for that. It is nice when that happens, but experience has said it doesn’t happen enough to warrant the risk, so I rather sell puts on stocks I would own, and then sell calls when I own them. Yes, I realize that selling the call means foregoing the gain beyond some point, but I look at the odds of that happening against the certainty of the extra premium.
If the younger generation chooses to put their money in a bank/money market for fear that the market goes up and down, then they are not much different than my parents and grandparents who were jaded for a lifetime by the Great Depression. I have lived through a number of panics in my lifetime, experiencing them firsthand in the market since the early 80’s. There has yet to be one that I didn’t come out of better off staying in the market, than fleeing not to return. (This is not to say that there is not a time to sell some particular investment- even Buffet will sell on occasion, and I sell a lot more than he does.)
"...to take all one’s money out of the market and put it in something ‘safe’ that pays less than 2% for the next 10 years, is the height of folly..."
Strong language, Shap. It could be that your methodology will be spot on for years to come. It is also possible that stocks will erode in price over time, much more so than the accumulated dividends.
Point is this. Your investing consciousness was formed in a period of both rising demographics and rising leverage. Of course, you and others did well in that run. Doesn't mean it will still be successful in the current environment. How well, really, have folks been rewarded who invested in stocks from 2000 until now?
Not that I would recommend a portfolio like I have for young people or even older people. But their fears and the hesitancy to invest in stocks are rational.
Also, I believe you are sophisticated and disciplined about how you sell options. In my opinion, the average retail investor will always leave money on the table when attempting such a strategy. If a supercomputer offers me $1 of premium for my shares at $45,50, they are more likely than not to go above $45.50. That I've learned the hard way (because I'm not sophisticated).
Strong language, Shap. It could be that your methodology will be spot on for years to come. It is also possible that stocks will erode in price over time, much more so than the accumulated dividends.
Point is this. Your investing consciousness was formed in a period of both rising demographics and rising leverage. Of course, you and others did well in that run. Doesn't mean it will still be successful in the current environment. How well, really, have folks been rewarded who invested in stocks from 2000 until now?
Not that I would recommend a portfolio like I have for young people or even older people. But their fears and the hesitancy to invest in stocks are rational.
Also, I believe you are sophisticated and disciplined about how you sell options. In my opinion, the average retail investor will always leave money on the table when attempting such a strategy. If a supercomputer offers me $1 of premium for my shares at $45,50, they are more likely than not to go above $45.50. That I've learned the hard way (because I'm not sophisticated).
MP, I just looked up my portfolio from 2000. Taking the total from that date and discounting the cash added between then and now, I am up 87%. That covers the time period of the crash after 2000 and the more recent one, and I haven't even discounted for the small amounts that I have withdrawn in the last five years. Yes, it is strong language; there is a steep penalty to pay for missing large time periods.
Shap, you nd I had a similar echange several months ago.
MP's talking benchmark, you're talking individual prowess.
I'm with MP on the secular aspect, this isn't 1982, it may not be 1966, but a glance at a 100yr chart is food for thought in terms of caution.
MP's talking benchmark, you're talking individual prowess.
I'm with MP on the secular aspect, this isn't 1982, it may not be 1966, but a glance at a 100yr chart is food for thought in terms of caution.
My understanding of the market is still in the learning process, probably always will be.
I believe SP is right for the long term as long as you understand the value of what you are investing in.
Does it really matter what someone is willing to offer if it’s below the value for the long term?
Yeah, like the housing market and the banks dumping houses for less than the cost of building them, I know a few that have the cash that used to build, now buying for 25% of that cost and renting.
And thanks to the banks qualifying very few for a loan there is no shortage of renters at an inflated cost.
Value does not flee the market it just changes hands.
To say that investing in bonds is "folly." History hasn't proven it. And there's plenty of return in a 10 year that goes from 1.7% yield to 0.9% yield, as ours is likely to do.
Ok guys what about the expected generational bull market around 2025-30?
This is a large part of my retirement planning (thats tongue in cheek). I would be 63 in 2030 That would be about perfect-you would have to have the n-ts to hang in there at that age. I do believe a portion (40%) of your investments need to be in the market at all times-regardless of age.
I believe SP is right for the long term as long as you understand the value of what you are investing in.
Does it really matter what someone is willing to offer if it’s below the value for the long term?
Yeah, like the housing market and the banks dumping houses for less than the cost of building them, I know a few that have the cash that used to build, now buying for 25% of that cost and renting.
And thanks to the banks qualifying very few for a loan there is no shortage of renters at an inflated cost.
Value does not flee the market it just changes hands.
Even the 10 year bond beat the S & P total return over the last 10 years. It isn't to say that you aren't a savvy investor or that you won't continue to succeed. It's just that we now live in a period dominated by a debt overhang. Are the Japanese crazy to buy JGB's that pay less than 1%? Not when their stock market went down 26% in the last 10 years. It isn't to say that ours won't go up 20% in the next 10 years. I don't know. And the 22 year old should probably be allocating across bonds and stocks, and he should buy a house as quickly as he can.spshapiro said: Yes, it is strong language; there is a steep penalty to pay for missing large time periods.
To say that investing in bonds is "folly." History hasn't proven it. And there's plenty of return in a 10 year that goes from 1.7% yield to 0.9% yield, as ours is likely to do.
Ok guys what about the expected generational bull market around 2025-30?
This is a large part of my retirement planning (thats tongue in cheek). I would be 63 in 2030 That would be about perfect-you would have to have the n-ts to hang in there at that age. I do believe a portion (40%) of your investments need to be in the market at all times-regardless of age.
The possibility of our 10yr going from 1.7 to .9%, is largely based on the premise that the world will flee to our debt in a crisis. But hasn’t it already? How do you think that our debt got to be presently 1.7%; certainly it isn’t due to our ability to deficit spend. Yes, I guess it could sink a little lower; Greece could declare a “default”, instead of just acting that way. But all this is of fairly short term. After our election, do you mean to say that we will not, restore some expiring tax breaks, we will not rise the deficit, we will not have a higher budget deficit next year than this? No matter who is elected.
There still may be some capital gains to capture holding Treasuries, but what will the capital loss be if the 10 year goes to 5%? Who would want to hold the 1.7% paper, if the new paper was paying only 3%? The economy in this country is growing; yes, very, very slowly, but still growing. A large portion (but not all) of the world is growing as well. Some parts even faster than us. As long as we keep growing, the tendency will be for our bond rates to increase over time. We have no crystal ball to prove today what the rate will be 5 or 10 years from now, but unless you can make the case for a prolonged worldwide recession, the odds are stacked in my favor.
Look, I am clearly not saying no bonds, no time. In fact, I have a small position in GE 7yr. 5.625%, and some Asian bonds, but this is less than 3% of my total portfolio. At 22, with your whole working life in front of you, to put yourself in a 1.7%, with a minimal chance for an appreciable capital gain, and forgo a major name stock which pays a 3-5% dividend, and has a history of increasing the dividend, and with an assortment of ways to augment that (capital gains/options, etc.), well, I don’t know quite what else to call it. I don’t put myself out there as an expert. I’m not the best stock picker since Lynch or Buffet. What I’m saying is that you don’t need to be in that class, and still do better, than bonds offer at this time. I have said here before, that one of my biggest mistakes was selling my bonds in the 80’s. A heavy bond portfolio at that time paying double digit returns, was stupid to sell for the short term capital gains, but I did. My only desire is to give somebody a moment to think twice, before taking this route.
Well said Shap.
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