Is the stock market getting too hot? Discuss...

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mathjak107
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Re: Is the stock market getting too hot? Discuss...

Post by mathjak107 » Wed May 16, 2018 5:00 am

stuper1 wrote:
Tue May 15, 2018 3:39 pm
What does William Bernstein think about long-term Treasuries and gold?
in deep risk the take away is that the wagering of equal amounts of dollars on outcomes that stand anything but an equal chance of happening is not the best way to invest money, which is an idea i totally subscribe to myself
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Re: Is the stock market getting too hot? Discuss...

Post by jhogue » Wed May 16, 2018 8:01 am

barrett wrote:
Mon May 14, 2018 12:22 pm
jhogue wrote:
Mon May 14, 2018 10:08 am
-What would you think of someone who was 100% in cash?

-What would you think of someone who was 100% in 30 year Treasury bonds??

-What would you think of someone who was 100% in gold???
I would consider 100% T-Bills super conservative but not insane if one were older and using a low withdrawal rate. Or were these question rhetorical?
barrett,
1. Nobody on this forum loves cash more than I do, but being 100% in cash long term is not really a safe long term investment strategy-- unless you are really old and have a really low withdrawal rate. If it was completely safe, we could just close down this forum and stick our stash under the mattress. To visualize the dangers of cash, we need go no further than Tyler's wonderful heat maps and drop in "100" for "T-bills/cash." It may surprise some people that cash can have years-long stretches of negative real returns.

I am aware that Harry Browne did advise people who were afraid of any kind of volatility to just put their savings in STTs. I think he was trying to helping successful (but fearful) savers take the first step to becoming successful investors.

2. The purpose of my questions is not so much rhetorical, as it is to prod investors who I believe are altogether unaware the dangers of a 100% stock portfolio. At the moment, it might look clever and smart. In the long run, it will certainly not be wise.
Last edited by jhogue on Wed May 16, 2018 8:16 am, edited 1 time in total.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Is the stock market getting too hot? Discuss...

Post by mathjak107 » Wed May 16, 2018 8:15 am

jhogue wrote:
Wed May 16, 2018 8:01 am
barrett wrote:
Mon May 14, 2018 12:22 pm
jhogue wrote:
Mon May 14, 2018 10:08 am
-What would you think of someone who was 100% in cash?

-What would you think of someone who was 100% in 30 year Treasury bonds??

-What would you think of someone who was 100% in gold???
I would consider 100% T-Bills super conservative but not insane if one were older and using a low withdrawal rate. Or were these question rhetorical?
barrett,
Nobody on this forum loves cash more than I do, but being 100% in cash long term is not really a safe long term investment strategy-- unless you are really old and have a really low withdrawal rate. If it was completely safe, we could just close down this forum and stick our stash under the mattress. To visualize the dangers of cash, we need go no further than Tyler's heat maps and drop in "100" for "T-bills/cash." It may surprise some people that cash can have years-long stretches of negative real returns.

I am aware that Harry Browne did advise people who were afraid of any kind of volatility to just put their savings in STTs. I think he was trying to helping successful (but fearful) savers become successful investors.
a more than 40 year bull market in bonds made investing very different . we had a few speed bumps along the way but basically it was one downward slide for decades .

it is a very different investing world today with not only various other ways of betting against the markets but in rising rates you have two powerful asset classes, gold and long term bonds making for very powerful strange bedfellows .

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Re: Is the stock market getting too hot? Discuss...

Post by jhogue » Thu May 17, 2018 7:40 am

mathjak,

I am not sure of the point of your last post and chart. Are you inferring that 30 year Treasury bond interest rates have no place to go but up?
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Is the stock market getting too hot? Discuss...

Post by mathjak107 » Thu May 17, 2018 7:44 am

they may hit a speed bump down like in the past but basically , yes , up towards historical averages is what cycles tend to do once they get so low.

interest rate cycles can run very long time frames if you bet to heavy on them .

while i hold quite a few bond funds , they are all less sensitive to interest rates . my floating rate one is up almost 2.50% , my corporate is down 2.70 and the others are pretty flat . tlt i think is down over 7% for comparison. that is a heavy drag along with gold on the most likely pony which is typically equities .

all i know is i can be down an awful lot and i likely would still be ahead of where i would have been playing around with tlt and gold all these years and i am 50/50 since we retired 3 years ago . i was 100% for decades prior .

all the back testing in the world does not mean a thing . all that counts is your balance over your time frame
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Re: Is the stock market getting too hot? Discuss...

Post by jhogue » Fri May 18, 2018 9:51 am

I don't see hard evidence that long term interest rates are rising significantly. Today (5/18/2018) Fidelity was showing 30 year T-bonds at 3.23%, an insignificant rise from the 2015 chart you posted.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Is the stock market getting too hot? Discuss...

Post by mathjak107 » Fri May 18, 2018 10:13 am

jhogue wrote:
Fri May 18, 2018 9:51 am
I don't see hard evidence that long term interest rates are rising significantly. Today (5/18/2018) Fidelity was showing 30 year T-bonds at 3.23%, an insignificant rise from the 2015 chart you posted.
they rose enough to pull tlt down 7% just the last few months . in fact with the 10 year bottoming below 2% compared to now on a percentage basis how much has that 10 year gone up ? 60-70%
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Re: Is the stock market getting too hot? Discuss...

Post by stuper1 » Fri May 18, 2018 10:36 am

Harry Browne -- agnostic about the future. Mathjak107 -- certain about the future.

Who am I going to believe?
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Re: Is the stock market getting too hot? Discuss...

Post by dualstow » Fri May 18, 2018 11:10 am

jhogue wrote:
Wed May 16, 2018 8:01 am
barrett wrote:
Mon May 14, 2018 12:22 pm
jhogue wrote:
Mon May 14, 2018 10:08 am
-What would you think of someone who was 100% in cash?
(snip>
I would consider 100% T-Bills super conservative but not insane if one were older and using a low withdrawal rate. Or were these question rhetorical?
barrett,
1. Nobody on this forum loves cash more than I do, but being 100% in cash long term is not really a safe long term investment strategy-- unless you are really old and have a really low withdrawal rate. If it was completely safe, we could just close down this forum and stick our stash under the mattress. To visualize the dangers of cash, we need go no further than Tyler's wonderful heat maps and drop in "100" for "T-bills/cash." It may surprise some people that cash can have years-long stretches of negative real returns.
...
I pretty much agree, but remember that cash is usually not defined as paper rectangles under the mattress, as that is very different from t-bills. And yes, I see the "to visualize the dangers" line above. O0
landline (n). a device for remotely swindling elderly people.
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Re: Is the stock market getting too hot? Discuss...

Post by jhogue » Fri May 18, 2018 12:25 pm

stuper1 wrote:
Fri May 18, 2018 10:36 am
Harry Browne -- agnostic about the future. Mathjak107 -- certain about the future.

Who am I going to believe?
Good question!
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Is the stock market getting too hot? Discuss...

Post by mathjak107 » Fri May 18, 2018 1:56 pm

am not certain about the future ever . but there are things that make sense and things that don't .

owning bonds is fine , since we don't know the future . but owning overly interest rate rate sensitive stuff is like betting on a high beta fund at this time .

i wouldn't do either .

my portfolio is dynamic and always has been so nothing is forever , there are better funds and investments at different times . there are times i certainly would hold high beta stock funds but now i hold funds lower in beta. same with my bond funds .

overall the models i use are doing fine , i posted the returns above . " the 25% income model is still down about .75% ytd . the growth and income model i run which is 60/40 is up 3% and the 100% equity growth model up 6% . but when coupled with the past years returns are very very good .
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Re: Is the stock market getting too hot? Discuss...

Post by mathjak107 » Mon May 21, 2018 5:37 am

stuper1 wrote:
Fri May 18, 2018 10:36 am
Harry Browne -- agnostic about the future. Mathjak107 -- certain about the future.

Who am I going to believe?
well i think your portfolio balance would be a whole lot higher at this point if you had gone with mathjak rather than harry . it reaches a point even the biggest drops would still leave you with a higher balance .

with an expected 800 billion dollars from the tax cuts expected to be put in corporate pockets , much of which is likely to see capital expenditures' propelling sales at other companies as well as stock buy backs i would say things do not look bad for equities.especially now that the tariff's are fading . but even then at the worst we were talking was only 80 billion in tariff damage against 800 billion in capital being injected.

i am not saying bet the ranch but i think once again equities will pull the portfolio's way a head. the weight of long term treasuries and gold will likely just pull equities back by the collar hurting things once again .


peter lynch said it best . " more money is given up or lost in anticipation or preparation for the next downturn than has ever been lost by markets in a down turn" poor investor behavior is what hurt people not markets and studies show risk adverse people stay no better in things like the pp . they just have lower trigger points to losses or reactions to being left behind when the bull is soaring and they are, MEH .. .

so as i always say it ends up having little logic mitigating these temporary dips with assets that hurt long term performance on long term money and yes even at 65 we have long term money we would not eat with for 20-30 years . 40-60% equities fills that bill very nicely if retired .


looking at the performance of the insight models shows ,

the insight growth and income model , 60/40 is up 7x since 1993 when it started out . 100k is now 700k .

the growth model , 80-100% equities has seen 100k in 1987 when it started grow to 2.80 million .

the very conservative income model , 25% equities has seen 100k in 1991 when it started grow to 410k

these are using plain ole fidelity funds .

will the past repeat ? no one ever knows but if you take any typical retirement or accumulation stage that spans decades returns always seem to fall out within 2% or so as an average with each other despite wars , crashes , recessions and everything else thrown at us over these periods ..
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