I think the vast majority of the PF blogosphere has utterly failed to deliver anything useful on the current economic crisis. The peppy optimism (and/or arrogant neglect) which permeates most blogs borders on sickening.
Let's see, I've personally already maxed out my 401(k) and half-way to my IRA this year, and now I have less than what I had at the beginning of the year … way less, and I haven't even been investing all that long.
I just funded my IRA yesterday, and already lost ~9%, in one day! Due to sell-offs in Russia, Brazil, India … (yes, I am overly invested in EM; I'm not bitter about my loss and will continue to put almost all of my money in EM because I believe it is the right strategy over the next ~30 years).
The common sentiment is "I'm loading up stocks while they are on sale". Sorry, but I am going to wring the neck of the next person who says that. I'm old enough to remember when the NASDAQ hit 5000, more than eight years ago. During its freefall, when did the NASDAQ go "on sale"? When it was 4000? 3000? 2000? Today (eight years later), it's 1552 … I'm not sure it will EVER go back to 5000, or at least in a meaningful time period (i.e. my lifetime).
Or for even more effect the NIKKEI 225 Average (50% off its high twenty years ago!). Or Pets.com, ...
And these for the most part are the same people who've advocated dollar cost averaging, and not timing the market, so why do they suddenly have all of this cash on hand to invest? I've been "following the rules", but lost big time because I was DCA'ing for the first 9 months of the year, because I knew I couldn't beat the market.
I know people who have lost several years salary in their 401(k) over the past month. The typical PF blog reads something like, "I lost almost $3000 this year, and am really not all that concerned, because I have 40 years left until I retire". LOL… Am I the only one in the PF blogosphere who actually has lost real money? Whose long term plans have been completely derailed by the current market conditions?
IMHO, the underlying cause is the vast majority of PF bloggers have no real experience investing, and just repeat the same old mantras they read in investment books … IMHO, the PF blogosphere should stick to topics like saving money on baking soda and stay the hell away from investment advice.
Hey, the one guarantee is the market will go up eventually. But the little secret you don't hear on the blogs is that it might take 200 years, by which time it will be worth nothing, …
Friday, October 24, 2008
Subscribe to:
Post Comments (Atom)
Posts
7 comments:
Frugal - you are spot on with this! I actually saw someone on CNBC today say that they have not lost anything because they have not sold! It's like saying my house is still worth what it was 3 yrs ago, b/c I say so. Unreal. The truth is this crisis could end up lasting a very long time. We are dealing with TRILLIONS of dollars of bad debt. Just for a kicks, look a 10 year chart (considered long-term) of the S&P 500. How's your return there? How about the 50+ yr chart on GM It's classic!
I've lost 2 years afte-tax salary out of my retirement account in the past year, and my net worth is down about 35% (which is around 8 years after-tax salary!).
I did blog about buying index put options as "insurance" when the market was quite high during early 2007, but then didn't get around to replacing the options when they expired in Dec 07, and have therefore suffered fully from the bear market this year.
So, any reader who did as I said (and not as I actually got around to doing) would have been reasonably OK.
I'm still sticking to my asset allocation of about 75% in stocks in my retirement account (via the Vanguard "High Growth" index fund), and am contributing around 30% of my salary into this investment for my retirement each month. And I haven't sold off any of my geared stock portfolio yet (although if I get a margin call next week I may have to start selling stocks).
Although I only started investing in stocks in the early 90s, I was tracking the market as part of a business economics course during the 87 crash. I'm still hoping that in a couple of years time the market will have recovered most of it's recent losses, as in most previous bear markets (although the 70s looked pretty dismal). Then again, I'm mostly invested in the Australian stock market, and the Australian economy is still growing quite well, being underpinned by commodity exports to Asia and especially China. If I was invested mostly in US stocks I'd be a bit more nervous about the potential severity of the current US recession/depression.
right on frugal bachelor - me too its sheep mentality - "buy and hold because the market always comes back and its only a paper loss" and if you dare disagree you are made to look stupid
But yet isn't everyone a hypocrite? You say you are heavily invested in EM? Are you just going to leave your money there? What if I told you, which I will the market may fall next week 20-25% more? Why would you not go and pull your money out now and park it somewhere safe until it is a better time to go all in and ride things back up? Dont you want to buy at the bottom and ride it up, regardless of whether it takes years or decades? I think this common return of 8-10% over history is now going to be blown out of the water. Going forward everyone must deleverage, there is no choice, corporations, banks, investment houses, even consumers will have to stop spending money they no longer have - or have access to. There is no other option. We haven't even seen how bad it will be getting. All the ideas of DCA, buy + hold, etc are nothing but bullshit. People are losing everything and heading forward with nothing but false pretenses and safety in antiquated idealism.
Very good.
I think the market will recover, and I don't think it will take 200 years. I don't have a ton invested, so no, my long term plans aren't affected (yet).
I'm not going to cash out my stocks, but I too tire of "stocks are on sale!" fake optimistic bs. (Or i hope it is fake, otherwise it is just naive). I'm just not going to be excited about it until I know it actually was a "sale".
The stock market always goes up? Just like housing prices never go down? I think that things will improve, but I also think, what the hell do I know?
At the same time, reading an article about how to save $30 a year by making your own X seems a bit trivial when my stocks are down 20% in 20 days.
Yeah...I am 29, I've lost a third of my IRA, and I am in advertising, so I could lose my job at any moment it seems. Oh, and I love in the midwest, so not a hot bed of job opportunity anyway.
I am no expert but I can safely say that I will never have what my parents or grandparents have, and not for lack of trying to educate myself and do the best I can with what I have.
It's not just clueless PF bloggers who are making these comments, though.
What do you expect people to do when even Warren Buffett says to "buy on sale":
http://www.nytimes.com/2008/10/17/opinion/17buffett.html?dbk
I still think DCA and indexing are the best route for most people who are not full-time investors.
You complain about your portfolio taking a huge dive, but is that the fault of DCA, indexing, and other long term approaches? If you were to hold your assets for another 30 years like most people your age, you'd probably be fine. It's just your ERE approach that is so much more susceptible to market dips.
Well guess what? There is a new sheeple herd and it's the cult of "indexing is dumb". Now there's all these PF bloggers jumping on *that* bandwagon.
I guess my point is, what's the casual investor to do? You read the books, you listen to the sages... you're damned if you do, and you're damned if you don't. If you can't take risks, go 100% TIPS, etc. and accept the fact that with your security, potential gains go out the window.
Post a Comment