Fear is the mind-killer

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WiseOne
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Re: Fear is the mind-killer

Post by WiseOne » Fri Nov 16, 2018 7:45 am

Welcome back Pointedstick! I do wonder, though, what precisely motivated you to come back?
Pointedstick wrote:
Thu Nov 15, 2018 9:43 am
I know the market may drop 75% tomorrow and take 40 years to recover. And I say, "so what?" I don't care. The one time I found myself living off of my investments, I hated it. I felt like a useless penny-pinching sponge. Earning money by contributing things of value to the tapestry of human existence makes me feel better in every way. I was previously afraid that if I lost my income, I wouldn't be able to regain it, because deep down I was afraid that I was an imposter who got them through an accident of fate rather than merit. What a bunch of nonsense!
So this is about early retirement rather than investing, right? As I read the FIRE movement, no one is suggesting that you should limit yourself to sitting home and pinching pennies. The idea is to free you from the need to do meaningless work in a cubicle in order to survive, so that you can do stuff you REALLY, fervently, want to accomplish in life. What specifically is that, for you? I thought you were planning to start a sustainable building company.

I remember what my outlook was at age 31, and trust me, it's VERY different now. At 31, I wanted to go out there and put my stamp on the planet in as many ways as possible. Now, I just want to focus on the rewarding and productive parts of my career, devote time to friends & family, and tell the corporate leeches and bean counters to go f**k themselves. In order to do that, I need the confidence that stems from being financially independent and having a sustainable lifestyle. And, I can also see how I don't necessarily want to be running on this treadmill forever. The ability to get off, whether I use it or not, is priceless.

Call this fear-based if you like, but it's just plain reality. The fact is that bad stuff happens to people, and if you haven't learned that by age 31 you assuredly will as you get older. Friends and colleagues in their 40s and 50s dying of pancreatic cancer, glioblastoma, or heart attacks; elderly relatives needing expensive end of life care; kids wanting to go to colleges costing $60K/year tuition; a divorce that left my brother with zero savings apart from his business & home, and >15 years of high financial obligations. Money won't prevent those things nor is it the answer to everything, but it will make dealing with life's little surprises a lot easier.
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Re: Fear is the mind-killer

Post by Cortopassi » Fri Nov 16, 2018 8:16 am

WiseOne wrote:
Fri Nov 16, 2018 7:45 am
Now, I just want to focus on the rewarding and productive parts of my career, devote time to friends & family, and tell the corporate leeches and bean counters to go f**k themselves. In order to do that, I need the confidence that stems from being financially independent and having a sustainable lifestyle. And, I can also see how I don't necessarily want to be running on this treadmill forever. The ability to get off, whether I use it or not, is priceless.
You have read my mind WiseOne.
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Re: Fear is the mind-killer

Post by Tortoise » Fri Nov 16, 2018 12:23 pm

For me, switching to the PP was definitely not a result of fear. My investing strategy prior to the PP was fear-based (mostly gold bullion and various contrarian stock funds) because I was listening to people like Peter Schiff who constantly warned of our economy and currency completely collapsing. My switch to the PP was a result of my finally letting go of that fear and admitting to myself that I couldn't predict the future and wanted to stop trying.

The PP is the most broadly diversified portfolio I could find, and I felt that it provided sufficient protection that I could stop worrying about my investments.

People don't buy insurance because they're in constant fear of burning down their house, crashing their car, or having emergency surgery; they buy it precisely so that they won't have to live in constant fear of those things. The PP is very similar. For me, it's just another form of insurance.
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Re: Fear is the mind-killer

Post by Cortopassi » Fri Nov 16, 2018 1:39 pm

Tortoise wrote:
Fri Nov 16, 2018 12:23 pm
My investing strategy prior to the PP was fear-based (mostly gold bullion and various contrarian stock funds) because I was listening to people like Peter Schiff who constantly warned of our economy and currency completely collapsing.
Another exact representation of what happened with me.
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Re: Fear is the mind-killer

Post by Kbg » Fri Nov 16, 2018 7:02 pm

One must always remember, fear sells a lot of stuff. When you understand that, particularly when it comes to the financial industry and the news media, you are a much wiser person. You can't eliminate every risk in life. If you read much of the financial planning stuff you will save every last penny you have to invest it, spend thousands insuring against every possible catastrophe, and provide many fees to lawyers, financial planners and accountants for estate planning.

I'm not saying any of this is bad, but what I am saying is that you are being fed a constant diet of stuff you "need" from the financial industry.
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Re: Fear is the mind-killer

Post by ochotona » Sat Nov 17, 2018 9:33 am

Ad Orientem wrote:
Thu Nov 15, 2018 8:21 pm
ochotona wrote:
Thu Nov 15, 2018 1:26 pm
I'm really happy with

40% stocks
10% gold
10% cash
40% bonds

I haven't lost any sleep over the portfolio.
I have been mentally inching in that direction for a while. I still like the HBPP but I am not in a position where I need to be ultra-conservative... yet. Having said that, I have doubts about whether year 9 of the biggest bull market since the 1920's is the right time to add weight to equities. hmmm...
It is all about fear the mind-killer. It's about titrating what amount of each asset you can tolerate in order to get the least-bad outcome.

GOLD - I want it for all the reasons Harry Browne outlined. But 25%? So then, I ask, if gold were to go down to $600, how much could I tolerate in my portfolio and take that kind of hit, understanding that physical gold really is buy-and-hold, retail trading physical is an exercise in stupidity. Oh, Ray Dalio says 5%-10%. Jim Rickards says 10%. OK then, 10%.

STOCKS - Stocks could go down 50%, but historically long-term momentum techniques have limited the drawdowns to 25%. How much of a stock-induced drawdown could I tolerate, with downside protections in place? Maybe a 10% draw. OK, if I have 40% stocks, and it goes down by 25%, then I can stomach that.

CASH - I need a ton because of this stupid industry I am in (upstream oil & gas) and I could get unemployed. OK, 10% or even more

BONDS - the rest is T-bonds, the only question is duration. Sitting on the fulcrum between Fear of Loss if interest rates go up, and FOMO if interest rates go down, I stand unequivocally in the mushy middle, with average duration in my bond portfolio around 4 years (current yield 2.88%).

That's how I got where I am. But if we ever get to another March 2009 situation, I think it's going to be:

GOLD 10%
CASH 10%
BONDS 10%
STOCKS 70%
Last edited by ochotona on Sat Nov 17, 2018 6:00 pm, edited 1 time in total.
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Re: Fear is the mind-killer

Post by flyingpylon » Sat Nov 17, 2018 12:02 pm

ochotona wrote:
Sat Nov 17, 2018 9:33 am
But if we ever get to another March 2009 situation,
How will you know?
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Re: Fear is the mind-killer

Post by Kbg » Sat Nov 17, 2018 12:04 pm

If I were you I'd ladder the whole cash & bonds portion. Solves both problems you have.
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Re: Fear is the mind-killer

Post by ochotona » Sat Nov 17, 2018 1:18 pm

flyingpylon wrote:
Sat Nov 17, 2018 12:02 pm
ochotona wrote:
Sat Nov 17, 2018 9:33 am
But if we ever get to another March 2009 situation,
How will you know?
How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?
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Re: Fear is the mind-killer

Post by dualstow » Sat Nov 17, 2018 8:14 pm

Great title and first post (of this thread) Mr Stick. So glad to hear from you, no matter whether you’re in the pp, all stocks, or pork belly futures.

I read it with relish- well actually I read it over coconut-curry-lemongrass soup. Homemade.
And I look forward to reading the rest!
RIP Marcello Gandini
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Re: Fear is the mind-killer

Post by barrett » Sun Nov 18, 2018 7:31 am

ochotona wrote:
Sat Nov 17, 2018 1:18 pm
flyingpylon wrote:
Sat Nov 17, 2018 12:02 pm
ochotona wrote:
Sat Nov 17, 2018 9:33 am
But if we ever get to another March 2009 situation,
How will you know?
How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?
ocho, what did you actually do in March of 2009? Have you really learned a lot since then? Not only about markets, but about yourself and your willingness to take on risk? Not trying to be a smart ass... just asking. With only 10% cash in your portfolio you wouldn't be positioned to ramp up to 70% stocks. It's really easy in retrospect to see that March of 2009 was a great time to load up on equities, but at the time I didn't hear too many people saying with any confidence that the bottom was in.

I think the best outcomes during that crash was for people who entered 2008 with a lazy portfolio with a high cash position who also had the discipline to keep rebalancing into stocks. The second best position was probably for investors who didn't lose their jobs and who also actually kept purchasing stocks. But even that strategy was only effective for a relatively short time as the bounce back was quick.

I just can't predict this stuff. It might be March of 2001 for gold right now. I just have no clue.
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Re: Fear is the mind-killer

Post by ochotona » Sun Nov 18, 2018 8:11 am

barrett wrote:
Sun Nov 18, 2018 7:31 am
ochotona wrote:
Sat Nov 17, 2018 1:18 pm
flyingpylon wrote:
Sat Nov 17, 2018 12:02 pm


How will you know?
How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?
ocho, what did you actually do in March of 2009? Have you really learned a lot since then? Not only about markets, but about yourself and your willingness to take on risk? Not trying to be a smart ass... just asking. With only 10% cash in your portfolio you wouldn't be positioned to ramp up to 70% stocks. It's really easy in retrospect to see that March of 2009 was a great time to load up on equities, but at the time I didn't hear too many people saying with any confidence that the bottom was in.

I think the best outcomes during that crash was for people who entered 2008 with a lazy portfolio with a high cash position who also had the discipline to keep rebalancing into stocks. The second best position was probably for investors who didn't lose their jobs and who also actually kept purchasing stocks. But even that strategy was only effective for a relatively short time as the bounce back was quick.

I just can't predict this stuff. It might be March of 2001 for gold right now. I just have no clue.
As 2008 unfolded, I lightened up on stocks from an aggressive position maybe 80% to about 50% before the Lehmann Moment. I didn't have much cash, but had bonds. In March 2009 I decide to take my bonds and redeploy into stock in ten monthly steps. I remember that talk with my wife, almost a decade later.

In retrospect, I was lucky. The S&P500 might've gone from 666 to 333. I didn't have a process other than "buy when others are fearful". That process (lack thereof) has failed me since in different sectors; energy, gold.

I have learned a lot. The value of cash as an asset (it's a call option on anything), I had no gold in 2008-2008, and I'm using simple but robust technical indicators, and I've found researchers that I like (Kathy Jones for bonds; Ned Davis, Lance Roberts, I find value in the bearishness of Hussman, he's the Roman slave whispering in my ear "this too shall pass").

In 2000, I was fully exposed to the bear market. I was unaware of it mostly; I don't remember feeling any angst during that period. I had much less money back then, and still 26 years from retirement. Now I'm 7.5 years out.

I wish I knew in 2000 what I know now. My net worth would be 50% greater. I'm passing the learnings on to my daughter. She's graduating with a BSEE and going to work in EE in June. I think that's how families get wealthy. I loved my Dad, but didn't learn Jack from him about money. Learned much more from Mom. She practised Couch Potato portfolio investing.
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Re: Fear is the mind-killer

Post by dualstow » Sun Nov 18, 2018 8:15 am

+1 Barrett
And even if I had been wise enough to want to buy stocks before the bounce back, my first wife and I parted ways in ‘09. I didn’t have free cash to put into the market. I had to drip it in over the next decade.
RIP Marcello Gandini
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Re: Fear is the mind-killer

Post by Mountaineer » Sun Nov 18, 2018 8:28 am

dualstow wrote:
Sat Nov 17, 2018 8:14 pm
Great title and first post (of this thread) Mr Stick. So glad to hear from you, no matter whether you’re in the pp, all stocks, or pork belly futures.

I read it with relish- well actually I read it over coconut-curry-lemongrass soup. Homemade.
And I look forward to reading the rest!
Would you mind sharing the receipe? Sounds delicious.
DNA has its own language (code), and language requires intelligence. There is no known mechanism by which matter can give birth to information, let alone language. It is unreasonable to believe the world could have happened by chance.
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Re: Fear is the mind-killer

Post by Maddy » Sun Nov 18, 2018 9:11 am

I've come to embrace fear. Far from a mind-killer, it's one of the most efficient learning tools we have. Research has shown that organisms adapt far more efficiently to negative reinforcement than to positive; you touch a hot stove once and never again. The so-called "negative" personality may, in the large scheme of things, have a real evolutionary advantage.
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Re: Fear is the mind-killer

Post by Kriegsspiel » Sun Nov 18, 2018 9:29 am

I didn't even know what the stock market was in 2009. In 2010 my buddy got me started investing and I got Greenblatt's book from the library.

At that point, VTI could pass the Magic Formula valuation screen ^-^ Too bad I didn't know wtf I was doing.
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Re: Fear is the mind-killer

Post by dualstow » Sun Nov 18, 2018 12:33 pm

Mountaineer wrote:
Sun Nov 18, 2018 8:28 am
dualstow wrote:
Sat Nov 17, 2018 8:14 pm
Great title and first post (of this thread) Mr Stick. So glad to hear from you, no matter whether you’re in the pp, all stocks, or pork belly futures.

I read it with relish- well actually I read it over coconut-curry-lemongrass soup. Homemade.
And I look forward to reading the rest!
Would you mind sharing the receipe? Sounds delicious.
It was/it is. Enjoy. O0
https://littleferrarokitchen.com/lemong ... ent-309693
RIP Marcello Gandini
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Re: Fear is the mind-killer

Post by dualstow » Sun Nov 18, 2018 12:36 pm

Ok, I think I have it. Pug, you quoted me but with the word "first" crossed out, probably as shorthand for your case, but since it's my quote it kinda looks like I split with a later wife as well, which is not the case. O0
MangoMan wrote:
Sun Nov 18, 2018 8:22 am
dualstow wrote:
Sun Nov 18, 2018 8:15 am
my first wife and I parted ways in ‘09. I didn’t have free cash to put into the market. I had to drip it in over the next decade.
Likewise, except I'm not remarried. That was not a good year to be splitting assets. :( >:(
RIP Marcello Gandini
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Re: Fear is the mind-killer

Post by Mountaineer » Sun Nov 18, 2018 12:41 pm

dualstow wrote:
Sun Nov 18, 2018 12:33 pm
Mountaineer wrote:
Sun Nov 18, 2018 8:28 am
dualstow wrote:
Sat Nov 17, 2018 8:14 pm
Great title and first post (of this thread) Mr Stick. So glad to hear from you, no matter whether you’re in the pp, all stocks, or pork belly futures.

I read it with relish- well actually I read it over coconut-curry-lemongrass soup. Homemade.
And I look forward to reading the rest!
Would you mind sharing the receipe? Sounds delicious.
It was/it is. Enjoy. O0
https://littleferrarokitchen.com/lemong ... ent-309693
Thank you, I can hardly wait to try it. 8)
DNA has its own language (code), and language requires intelligence. There is no known mechanism by which matter can give birth to information, let alone language. It is unreasonable to believe the world could have happened by chance.
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Re: Fear is the mind-killer

Post by Kriegsspiel » Sun Nov 18, 2018 4:29 pm

Amateurs fear investing. Professionals fear marriage.
- Prussian General
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Re: Fear is the mind-killer

Post by dualstow » Sun Nov 18, 2018 4:35 pm

Kriegsspiel wrote:
Sun Nov 18, 2018 4:29 pm
Amateurs fear investing. Professionals fear marriage.
- Prussian General
😂
RIP Marcello Gandini
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Re: Fear is the mind-killer

Post by Mark Leavy » Sun Nov 18, 2018 11:11 pm

You continue to intrigue me, PS.

Finish the quote...

I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.
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Re: Fear is the mind-killer

Post by barrett » Mon Nov 19, 2018 2:38 pm

ochotona wrote:
Sun Nov 18, 2018 8:11 am
barrett wrote:
Sun Nov 18, 2018 7:31 am
ochotona wrote:
Sat Nov 17, 2018 1:18 pm


How can you not know? Stuff will be flying all over the place like a tornado hit it. You'll know, the question is, what will you do?
ocho, what did you actually do in March of 2009? Have you really learned a lot since then? Not only about markets, but about yourself and your willingness to take on risk? Not trying to be a smart ass... just asking. With only 10% cash in your portfolio you wouldn't be positioned to ramp up to 70% stocks. It's really easy in retrospect to see that March of 2009 was a great time to load up on equities, but at the time I didn't hear too many people saying with any confidence that the bottom was in.

I think the best outcomes during that crash was for people who entered 2008 with a lazy portfolio with a high cash position who also had the discipline to keep rebalancing into stocks. The second best position was probably for investors who didn't lose their jobs and who also actually kept purchasing stocks. But even that strategy was only effective for a relatively short time as the bounce back was quick.

I just can't predict this stuff. It might be March of 2001 for gold right now. I just have no clue.
As 2008 unfolded, I lightened up on stocks from an aggressive position maybe 80% to about 50% before the Lehmann Moment. I didn't have much cash, but had bonds. In March 2009 I decide to take my bonds and redeploy into stock in ten monthly steps. I remember that talk with my wife, almost a decade later.

In retrospect, I was lucky. The S&P500 might've gone from 666 to 333. I didn't have a process other than "buy when others are fearful". That process (lack thereof) has failed me since in different sectors; energy, gold.

I have learned a lot. The value of cash as an asset (it's a call option on anything), I had no gold in 2008-2008, and I'm using simple but robust technical indicators, and I've found researchers that I like (Kathy Jones for bonds; Ned Davis, Lance Roberts, I find value in the bearishness of Hussman, he's the Roman slave whispering in my ear "this too shall pass").

In 2000, I was fully exposed to the bear market. I was unaware of it mostly; I don't remember feeling any angst during that period. I had much less money back then, and still 26 years from retirement. Now I'm 7.5 years out.

I wish I knew in 2000 what I know now. My net worth would be 50% greater. I'm passing the learnings on to my daughter. She's graduating with a BSEE and going to work in EE in June. I think that's how families get wealthy. I loved my Dad, but didn't learn Jack from him about money. Learned much more from Mom. She practised Couch Potato portfolio investing.
Thanks for sharing all that, ocho. Very interesting.

I think when considering what our parents teach us about money, we have to consider what market conditions and world events they have lived through. Didn't you post on here that your family is Chinese? No mater when they came to the US, there must be an interesting story there.

My dad and mom were born (here in the US) in 1917 and 1918 respectively. So they both went through the Great Depression and its hellish stock market. My dad served in WWII for the duration and it took him about another ten years to really get back on his feet after that... so basically 15 prime earning years taken away. He retired in 1983 so he had just lived through 15 years of crippling inflation and seen gold skyrocket and then tumble back down. Stocks were just starting a historic bull run at that point but none of us really knew that at the time. My sister said a couple of years back that our parents never taught us much about money and I asked her what lessons she would have drawn from all of the above.

Our parents worked hard and lived well within their fairly limited means. That was their main contribution to our understanding of money .
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Re: Fear is the mind-killer

Post by stuper1 » Mon Nov 19, 2018 2:56 pm

barrett wrote:
Mon Nov 19, 2018 2:38 pm
Our parents worked hard and lived well within their fairly limited means. That was their main contribution to our understanding of money .
That is the most important lesson to be taught, and is also I think very much in line with Pointed Stick's original post in this thread.
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Re: Fear is the mind-killer

Post by ochotona » Mon Nov 19, 2018 5:10 pm

barrett wrote:
Mon Nov 19, 2018 2:38 pm
Thanks for sharing all that, ocho. Very interesting.

I think when considering what our parents teach us about money, we have to consider what market conditions and world events they have lived through. Didn't you post on here that your family is Chinese? No mater when they came to the US, there must be an interesting story there.

My dad and mom were born (here in the US) in 1917 and 1918 respectively. So they both went through the Great Depression and its hellish stock market. My dad served in WWII for the duration and it took him about another ten years to really get back on his feet after that... so basically 15 prime earning years taken away. He retired in 1983 so he had just lived through 15 years of crippling inflation and seen gold skyrocket and then tumble back down. Stocks were just starting a historic bull run at that point but none of us really knew that at the time. My sister said a couple of years back that our parents never taught us much about money and I asked her what lessons she would have drawn from all of the above.

Our parents worked hard and lived well within their fairly limited means. That was their main contribution to our understanding of money .
The mind-blowing sequel is that my Aunt in China just days ago sent $20,000 to my Mother to pay her back for twenty years of Mother sending money over to China when they were dirt-poor, and also to pay back for sponsoring relatives' to emigration to the US. More than any statistic that tells you how far China has come.

Yeah, and living through the Depression and WW2 just completely colored an entire generation's thinking about money in a major way; and that was a worldwide phenomenon, not just in the USA.
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