Episode-107- User Feed Back for Dec. 10th 2008 — 16 Comments

  1. I don’t know. For some reason, I tend to lean toward the official story of them not having a license or opening their facility to USDA inspections. Only the cops and the family know the truth though.

    Regarding market timing, nobody knows what is going to happen. Sure, things look bad but the spikes up and down aren’t predictable otherwise people would be rich beyond belief. This discussion reminds me of that infomercial software with green up arrows and red down arrows. Simply log in, watch the arrows which accuratly predict movements and become wealthy.

    Many, many statistics show the more movements in and out of the market one makes, the lower their return in the long run.

    There will be a recovery at some point, and it is almost guaranteed to happen before people think it will. It will also happen quicker than timers can react to. Upward movements are condensed into hours or days and if you miss just a few, your gains will be drastically lower.

    Of course, the amount of time between now and retirement and the amount you have saved should affect where your money is, but a good plan works if times get tough, or even if they don’t.

  2. Stein,

    There is a lot more info about the Manna thing that I found after recording today’s show, I will update when I know more.

    On market timing dude please stop believing the “marketing spin” of Fidelity, Edward Jones, etc.

    No you can’t time the market trading day to day, etc. Yet anyone that says “we did not know the market was going to fall” this time is totally full of beans (or worse), every friken indicator was in place to show it was about to occur. A failing financial system, the government denying an existing recession everyone knew was already here, rising unemployment, declining retail numbers, a failing domestic auto industry, the out right failure of the biggest lenders, upside down bank balance sheets, declining interest rates and more.

    Sure no one could have said these five stocks are what to buy and been right 100% but anyone who stood looking this train in the face and advised clients to “just think long term” either bought their own companies bullshit or wanted to ensure their commissions.

    By the way that adviser I mentioned, talked about that software, he called it “garbage”.

  3. Sure we were looking at an oncoming train, but it has been coming at us for over a decade. If one got out when it was first obvious, they would have missed the last half of the bull market. Smart guys like Prechter saw it coming in the late 80’s to early 90’s but their timing was wildly off. Nobody knew how long the bubble could be managed.

    Also, in order to make a good trade, one needs to sell at the right time, then buy again at the right time. If you miss the upswing, you are no better off than the buy and hold strategy.

    I pulled out at Dow 13k and got back in at Dow 10k. Was I smart? Nope, just lucky. If it is straight forward to get in and out at the right time, why aren’t there more rich people?

    There are other factors as well. My company matches my 4% contribution. So, I am still in the black and when it goes up my gains will be double. Besides, what are my options, buy muni bonds? Buy a shovel? Buy government bonds with zero or negative return? Put all my eggs in the PM basket? None of those look too positive when I extend the horizon for 30 years.

    A big part of the problem is that the only investment strategy that has potential over 30 years is stocks. Nothing else even comes close to the track record. FED and Congress ensure that PMs won’t be an answer, neither will simply saving money in a savings account or CDs. This is the true crime in America, people can’t just save money at a return of inflation plus a few percent without being in the equities market like they could a generation ago.

    Do you honestly believe you can predict correct timing on both the crash and recovery? If you can, I am impressed, but I remember that you also predicted that gas would never fall below $2 again. I’m not beating on you, just pointing out that the future if full of surprises we cannot anticipate. Central banks are in uncharted territory. We have no historical data to see what the effect of dumping 8 trillion into the economy will do. That is where we are so far, not counting what Obama will add.

  4. Stein,

    Say what you like but you got out didn’t you? And why?

    Yes I was wrong about gas and have said so several times and explained my mistake.

    This market drop was different, EVERYONE KNEW and not in the way we knew for 10 years. I heard “expert” after “expert” say yes a big drop is comming, but “stay in anyway”. Nonsense!

    There was no justification to stay fully invested in the typical stock based mutual funds by the middle of 2008, a blind autistic chimp could have seen this coming. I honestly felt the same way about the Dot Com thing back then, but NOOOOOO, I listened to the “experts”. Not this time, I am out, staying out and if the market surges 2K points today, I am still far ahead.

    There are absolutely no indications of recovery right now, none. If you are leveraged now I think you are in the wrong place. In the end we all make our own choices, but the “don’t time the market” statement is simply bullshit.

    A good adviser should be able to build a plan that minimizes risk, buy and hold no matter what, is not such a plan, never will be, never was.

  5. On the Manna thing , the feds don’t have to act like a buch of pissheaded facist , A simple subpoena in english should suffice.

    Can we get to the mechanics of survival preparation , I find it far more useful?

  6. Mark in response to,

    “Can we get to the mechanics of survival preparation , I find it far more useful?”

    Ya know I do what I can but the only way to do a show every day is to have varied topics. No matter what I do, someone wants something else. So do a bit of that and a bit of this, as one man it is all I can do.

    Honestly as well, you can discuss modern survival at this point in history with out looking at economics and politics, as they are the main drivers behind many of the threats we face, both by malice and by incompetence.

  7. I did get out, then back in because I realized I was simply guessing. I accepted that buying and holding quality businesses is a time-proven guaranteed way to make money. It has worked 100% of the time, without fail since the dawn of the country. I rode out the dot-com as well as 911 and made money on both of the rapid recoveries (not to mention the stocks I bought at or near the bottom from my monthly investing).

    There simply is no period of time where buying and holding quality companies (American and international) hasn’t returned a premium as long as your timeframe is at least 10 years. Roughly half comes from appreciation and half from dividends (GE is paying me 7% and MSFT is paying me 2.5% as we speak).

    If a mutual fund or hedge fund manager with a $1M research budget and a staff of 50 economists and analysts can’t time the market, I am under no illusion that little old Stein can beat the system.

    I fully agree the writing was on the wall for this correction, but the big question is when to get back in? With the DOW oscillating up to 900 points a day, how will you be ahead of the market recovery? Simply getting out is only 1/3 of the equation. In order to win, you must exit correctly, move to the correct investment to ride out the storm, then buy back at the right time. You need three decisions to all be correct in order to succeed.

    What investment will do better in the next 12 months: CD, savings account, silver/gold, energy, food commodities, bond fund or S&P 500 fund?

    What is your indicator to re-enter the stock market?

    Thanks for the discussion, I enjoy the friendly debate. If you are interested in a friendly wager on predicting the bottom or where to invest your money in the next 12 months, let me know!

  8. Buy and hold always works?

    Really, oh, oh yea so buy and hold “long term”? Like 10 year right? Has it always worked over 10 years? Would you say that is true? That is what the legions of “advisers” are saying. What say you?

  9. Thanks for the debate. Yes, it is historically true. I know you are trying to trip me up by cherry picking an index, but I am one step ahead of that!

    Pull up the Russell 2000 broad market index (four times the companies as the S&P 500) and you will see it is true. Factor in dividends and there isn’t a 10 year period with a negative return (not to mention my horizon of 30 years). Dec 11, 1998 close was 395.37, today it is sitting at 456.72. Not good, but still a positive 15%. Factor in my employer match and tax deferal and the return is actually quite good – even in the worst decade we have seen for at least 50 years.

    I have no idea whether this downtrend will break that record and be the first in history, it very well might. I do know which direction the next 100% move will be though.

    I don’t listen to advisors as you assume (actually, I have never sought the advice of a single investment advisor), I separate the fact from fiction and make what I feel is an informed decision.

    Periodically investing in the broad market through low cost index funds one’s working life has been an excellent and painfully simple strategy that has worked for over 100 years.

    Seriously, if you have a better idea I would be very interested in hearing it. You challenge me which is fair and fun, but I have an open mind if you have a legitimate strategy that increases risk adjusted return for 10-30 year periods.

    Even if you pull up another index with a negative decade return, I will pull up rolling returns on gold, silver, energy, food and real estate charts with losses 10x worse.

    I hate to say it, but you are not right on this issue, buy and hold is a winning strategy. I just showed you how it works for 10 years, now look at the 30 or 40 year rolling returns. For 30 year periods, the worst period to date was 4% real returns (inflation adjusted). The most unlucky guy in the universe could have compounded his money at 7-8% over his working lifetime by using this strategy.

  10. Stein,

    What I am suggesting for most is not much different then what you are.

    My only variance is that when every single expert is saying the market is in for a real downturn and all indicators are saying that is the case a well don’t just stay put. There is no reason for it. In 2000 EVERYONE knew a big drop was coming but the mantra went out, just stay put and please don’t 911 me that had an effect but the drop was about a lot more more and the fundamental indicators were in place for all to see.

    Those that bailed into the safety of cash funds (paying about 5% at the time by the way) had almost two full years to “get the bottom”. I was not among them, I did not bail, I stayed in and lost well over 200K!

    It took years to “get it back”, once I did I was like hell no not again so when everyone agreed a down turn was coming I bailed.

    I have not gone back in yet, some of my money is now allocated to pick a few individual stocks that are down because everyone is down but have strong fundamentals. Some will go back into funds when we feel that the risk has declined and most will set in conservative stuff until we are ready.

    This is NOT day trading! It is looking at the macro view and going, here comes a recession, lets get conservative while it occurs.

    Oh and I did not cherry pick the dow. My point was that yesterday it was lower then exactly 10 years ago.

  11. I am reposting a previous post of mine to another blog that mentions your figure. –and I am not trying to diminish the importance of your point that the national debt is ridiculously high, but you need to reconsider your figures. Look below:
    Current Debt Held by the Public — 6,390,881,581,542.01
    Intragovernmental Holdings — 4,207,003,477,916.77
    Total Public Debt Outstanding — 10,597,885,059,458.78
    Population Clocks
    U.S. 305,880,027
    World 6,743,414,834
    16:39 GMT (EST+5) Dec 14, 2008

    per capita national debt is $34,647.20

    Actually, you should reconsider your figures
    Current Debt Held by the Public — 6,390,881,581,542.01
    Intragovernmental Holdings — 4,207,003,477,916.77
    Total Public Debt Outstanding — 10,597,885,059,458.78
    Population Clocks
    U.S. 305,880,027
    World 6,743,414,834
    16:39 GMT (EST+5) Dec 14, 2008

    per capita national debt is $34,647.20

    But, don’t get me wrong. Even this number is bad.

  12. David,

    Before you get married to that number please see this link (which I had already posted)

    The problem is what is our debt, may consider the debt only what we owe today, the figure I used includes the obligations we have created for ourselves which we have no source of funding for, no planning for, no money to pay for, etc.

  13. I looked at that link before I posted. But we are talking about two figures and mixing them up. Originally, you stated that the government has racked up $440,000 on my behalf. Individual, household, family, whatever — that figure is inaccurate if it is being represented as what the government has racked up for us. I don’t disagree to the fact that individuals have racked up their own debt on their own. I’m fine with an analysis that takes personal and government-created and adds them up to show what is owed on each person’s behalf. That’s fine. But don’t call it all government-created debt.

    No, I’m not a fan of the government, I’m just seeking accuracy.

    Bottom line — personal debt, gov’t debt, both — I agree that a lot of people are in really screwed.