Buy and Hope Investing

"The stock market turns up six months before the end of the recession. This recession is already almost the longest, so now is the time to buy."

The bullish cheerleaders said that six months ago, they say it today, and they will say it in six months.
One day they will be right. Care to make a bet?.....
more is below...

 

Hi Tropo,

Who is saying "This recession is already almost the longest, so now is the time to buy".

There is a good bull and bear market chart which has blue lines for the ups and red for the downs. This recession is only the average bear market, the longest has certainly gone for much longer than our current one.

Hopefully we will have some good news in 2009!

Cheers,

Dan

 

If you want to know what it means maybe you should read the whole article in full.

 

Hi Tropo,

It makes much more sense in context

Cheers,

Dan

 

It is a very uncertain time indeed.
I see my portfolio dropping every week but still holding them because I've been saying to myself "give it another six months and they'll be alright".

The problem with investing for a really long run is that in the long run we all be dead.

Any of you guys are still holding and hope?

By the way I just browsed John Mauldin archive newsletter.
I thought he has been quite negative since 2001?

 

I found the following sentences worth mentioning

"We simply do not know."

"There is no predestined rate of return.
There is only an expected return that may not be realized."

"When we do get the problems worked out, and we will, the recovery that ensues may be breathtaking in its scope"

"Buying a stock market index in today's environment is as much a matter of hope as it is anything else"

"Today, look for ways to get absolute returns"

 

but who is this guy?
Here is some info on him

John Mauldin has been mostly negative about the U.S. economy and U.S. equities since early 2001. He maintains that stocks are in the early part of a secular bear market, with lower lows to come with future recessions over the next decade.

He addresses many economic issues and quotes others liberally in his long commentaries (so long that we sometimes resorted to key word searches to find mentions of stocks). He comments frequently on bonds, housing, gold and other markets.

Based on subsequent stock market performance and our judgments about the accuracy of John Mauldin's forecasts, his bottom-line advice about market direction was correct 43% of the time, below average. His forecast sample size is fairly large, as is our confidence in this conclusion.

It is relatively difficult to assess the accuracy of Mr. Mauldin's market projections because of equivocation and because he often uses distant forecast horizons (which reduce effective sample size). Even while offering some short-term and intermediate-term forecasts, he occasionally denies the feasibility of forecasting stock market behavior over periods as short as a year.

more here and don't forget to look at the chart

CXOAG Guru Grades – John Mauldin's Muddle Ages

 

"The problem with investing for a really long run is that in the long run we all be dead"

That is what John Maynard Keynes said long time ago.
JM Keynes the economist, was also a very good trader and made a fortune not only for himself....

 

Tropo

but as long as our portfolio does not fall or goes up in value we should be ok?
And we can live of the dividends??
maybe....???

Also don't forget what our problem is
If we don't invest our money what do we do with it?
Inflation is at 4% and the interest rate we get from the bank is 4% max

 

"but as long as our portfolio does not fall or goes up in value we should be ok?
And we can live of the dividends??
maybe....???"

I would say that as long as your portfolio is up and is beating inflation and other cost you should be O.K..
Dividends are a bonus and should not be a prime motive for investing!

"Also don't forget what our problem is
If we don't invest our money what do we do with it?"

I always believed that people invest in order to make money...not in the sake of investing.

"Inflation is at 4% and the interest rate we get from the bank is 4% max"

Bank may well be the best place to put your money and PRESERVE your capital instead of losing it.
If one day you lose your capital, you’ll be out of the game for a long time.
Some people invest because they are bored, other invest because they think that investing is a hobby.
Nobody said that you must be in the market all the time.
As I said before few times: ”standing aside is a position”....waiting for an investing opportunity.

 

BV,

"Guru Grades" is not about the smartest ‘guru’ on the street, but about reliability of some forecasters.
Some guys are better than others....So, no matter what you read and to whom you are talking to, always apply salt, KFC and few beers.

 

This is such an important point, and I don't think it even does the justice to the culture change that "might" result from this recession.

In my mind adversity brings out the best in people - in this case bringing out the best in people will mean that people stopping living in ignorance when it comes to making investment decisions. As in people won't make investments based of stupid, baseless cliches of "invest for the long run and you can't lose" and "you'll double your money every 7 years".

Rubbish like that will be removed from society and people might actually start looking at their investments as actually investments rather than lazy speculation reliant on the continued delusion of the masses. Of course I don't expect this culture change to last forever but I'd fully expect it to last a decade or two, which will only give rise the likelihood of a L shaped recovery as we slowly work down our debts, and make sound investments decisions based on real ROI rather than hoping for continued credit growth within the economy.

How secure is an economy that is projecting a budget deficit that is over 20% of GDP in 2010 alone whilst using VERY optimistic figures just to help fight recession. I fully expect the 2010 budget deficit to blow out to at least $4T - $5T. Keeping the 2009 budget deficit under $2T will also be a tough ask.

The US budget is the most ridiculous non-wartime budget blowout ever.

The only real justification to be buying into the Dow for the long run at the moment is based around the idea that at some point the US is going be hit by some BIG inflation numbers which will translate to nominal growth in the economy which will be reflected in the stock market. Buying the dow for real growth at this point is just naive hoping.

 

I keep forgetting
I should print it out and frame it

 

Its a fact of stocks that its harder for most people to buy when stocks in general are down compared to when they are high. When stocks are down usually the economy as a whole is depressed and unemployment may be higher and many people have lost money in the crash so dont even want to think about the stock market as an investment option as they prefer to put their money in guaranteed investments. This is evident now as most people tihnk your crazy for looking at the stock market as an investment option.

Lets say you wait for stocks to become mainstream and popular again and get back into the market when your completely satisfied that the economy has a good outlook for the next few years and company earnings will be solid. At this point you may have already missed a 20% rise in the market making yourself feel secure that the economy is in good shape and justifying your behaviour by the fact that stocks are in vogue again. This intial rise which may happen in a matter of a month or two combined with dividends earned if you bought on the way down a few years before may have already eclipsed the majority of your earnings if you stayed in bonds or savings accounts for the previous 3 or 4 years.

By the time people like John Mauldin will recommend for you to buy an index fund again stocks in general will probably be up quite a bit and doing well, thats because everyone has realised the same thing he has, stocks are good value. I reckon in the long term a sure fire way to lose money in stocks is to follow the masses, you'll end up buying closer to the top of a bubble and being too greedy to sell before it crashes. I always thought you bought low and sold high, not buy high and sell higher.

 

Some people like J. Mauldin know their stuff but it does not mean that you or anybody else should follow blindly his point of view.
It always amazes me that most of moms/dads are almost obsessed with missing say 10% ~ 20% gain trying to catch a bottom, but they are not concerned at all sitting for years on 40+% losses.
Nobody knows where bottom or top is...
Professionals are trying to get on trend as soon as possible and they are not concerned at all if they miss beginning/end of the move.
The sure way to lose money in the market is NOT to have a basic system in place. There is nothing wrong with to buy high and sell higher – if your system (tested system) is telling you to do so.
Do not forget that no matter how bad economy is there is always few stocks trending in the 'right' direction. The only problem is to find them.

 

"This time it really is different...."

Every time this phrase has been offered in the past it has been wrong. Just as the dotcomers were wrong, I think the "death of capitalism"ers are wrong today.

The long term trendlines are underpinned by the fundamental that equity demands a premium over bonds/debt. It may take some time to return to this truth, but we will get there eventually.

Yes - the particular circumstances of correction events are always different from those that have occurred in the past. Hasn't ever stopped the recovery coming.. eventually..