Trump Bubble

[Singuy]

Not at all. He put 100K into the market 2 weeks ago because that's when he received his bonus. He didn't sit around watching and analyzing and trying to guess when the "best" time to invest was. He invested when he had the money available to invest. That's not market timing at all.

Much smaller scale but I put $2,000 into our Roths last weekend. Why? Because I had the cash available to do so. As soon as we accumulate another couple thousand, I'll do it again, and again, and again until we have the full $13,000 in there for the year. I will do that with complete disregard to market conditions.

Steve I was more or less referring to the result of his action, not the action itself. He didn't time the market when he put in 100k.

He's glad that he didn't try to time the market because it he would of lost the 1.5% gain. --->this statement is the market timing mentality.

When you don't market time, you also don't look at gains and loses until 20-30 years from today..that's kind of the point of the thing.

You really have to separate the two clearly or else you'll end up accidentally timing the market or start regretting everytime there's a loss.

[disneysteve]

Steve I was more or less referring to the result of his action, not the action itself. He didn't time the market when he put in 100k.

He's glad that he didn't try to time the market because it he would of lost the 1.5% gain. --->this statement is the market timing mentality.

Ah. Understood.

I think it's human nature to do that, though. It's just like buying something and then watching to see if it goes on sale cheaper afterwards. We're all sort of programmed that way.

Personally, I rarely look at what the market is doing. Years ago, I used to update our portfolio spreadsheet weekly. Then I cut back to monthly. Now I do it just a few times per year. Everything is pretty much on autopilot and we won't be touching the money for another decade so it really doesn't matter what happens week to week or month to month.

[AJ444]

I invest to my asset allocation as soon as I have the money to do so. The most important thing I discovered about myself and investing is that I cannot call peaks or valleys.

Here is a great study by Vanguard on dollar cost average vs lump sum, lump sum is usually the right call:

https://personal.vanguard.com/pdf/s315.pdf

[corn18]

Steve I was more or less referring to the result of his action, not the action itself. He didn't time the market when he put in 100k.

He's glad that he didn't try to time the market because it he would of lost the 1.5% gain. --->this statement is the market timing mentality.

When you don't market time, you also don't look at gains and loses until 20-30 years from today..that's kind of the point of the thing.

You really have to separate the two clearly or else you'll end up accidentally timing the market or start regretting everytime there's a loss.

The key point is I didn't think twice about putting it in right away. If it had lost 1.5% the next day, then so be it. Before I found the boglehead way, I would have fretted endlessly about what to do with my bonus and maybe hold cash until a crash, etc... Now I just follow my plan: 60/40 AA, 10% international and rebalance when things get more than 5% out of whack.

[Spiffster]

People have been saying the stock market was a bubble propped up by the feds with funny money for about the last 6 years or so... look where that got them. Now a lot of those same people are jumping back in and all of a sudden the money is real again. Go figure. Best to just ignore the noise of people that are making financial decisions based entirely on politics.

[97guns]

People have been saying the stock market was a bubble propped up by the feds with funny money for about the last 6 years or so... look where that got them. Now a lot of those same people are jumping back in and all of a sudden the money is real again. Go figure. Best to just ignore the noise of people that are making financial decisions based entirely on politics.

I've been through several collapses in my investing career , dot com bubble, real estate bubble, and I saw the same frenzy with gold when it hit $1800 before dropping to $1200. All bubbles pop at the height of the frenzy, the wise investor will realize the mania and react to it

[kork13]

None of the moves I'm making right now are driven by the market. I did just recently rebalance my AA, which included finalizing a transition from 100% stocks to 90/10 from the last few years to finally settling in at 80/20, which is where I plan to stay for the foreseeable future. Not sure if that's "good" or "bad" timing, but I don't really care too much.

I do also have standing limit orders out for a few ETFs I own, which are indirectly impacted by the recent run-up... I set my limit purchase prices at reasonable levels. So if the market continues to go up, my buy orders will do nothing. If the markets settle a bit, I may in fact get the shares I'm after.

[rennigade]

When you don't market time, you also don't look at gains and loses until 20-30 years from today..that's kind of the point of the thing.

Huh? My wife and I do a year end net worth calculation every year. I also add up all my accounts at the end of every month.

So you're telling me you havent checked your accounts in 2 decades? Thats really irresponsible advice if you ask me. How could you possibly keep your AA in check? Are you telling me you have no idea what your AA is?

[rennigade]

the wise investor will realize the mania and react to it

Oh wise one please visit your crystal ball today and spread your deep knowledge of when the market will collapse. An exact date would be ideal so all of us peons can get out in time.

[disneysteve]

I've been through several collapses in my investing career , dot com bubble, real estate bubble, and I saw the same frenzy with gold when it hit $1800 before dropping to $1200. All bubbles pop at the height of the frenzy, the wise investor will realize the mania and react to it

Oh wise one please visit your crystal ball today and spread your deep knowledge of when the market will collapse. An exact date would be ideal so all of us peons can get out in time.

I think I'm with 97guns on this one if I'm reading his comments correctly. I've also lived through the bubbles he mentions and clearly recall what happened as each of them reached the bursting point. People were going nuts, believing that "this time is different", and pouring all of their resources into jumping on the bandwagon. People were mortgaging their homes to free up cash to invest in tech stocks or real estate or whatever. There were TV commercials showing truck drivers and the guy next door getting filthy rich. Suddenly everyone seemed to be flipping homes and making boatloads of money. And then the bubble popped.

Warren Buffett has said, "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful." I think that applies here. Yes, the market has been on an unprecedented rise since 2009. We're 8 years into this bull market. Will it continue to rise? I don't know. Will there be a correction? Absolutely. Do we know when? Of course not. Is now the time to jump in or alter your plan to boost your stock exposure? Probably not. Now is the time to stay the course and not get greedy but also not to be running in fear, retreating to cash and sitting on the sidelines waiting for "something" to happen.

[Spiffster]

Yeah hindsight is always 20/20. Im still trying to figure out why I was quoted in relation to that response... I was simply pointing out that the nay sayers who where predicting the end of days are now jumping into the market they said was doomed... and now everything is peachy. These people already lost out on a huge bull market, so jumping in (or out) right now is wise? I disagree. If the market makes a 50% correction, im still in good shape, while the people jumping in now due to perceived favorable political forecast would be screwed. This is exactly why timing the market is a bad thing.

[97guns]

I think I'm with 97guns on this one if I'm reading his comments correctly. I've also lived through the bubbles he mentions and clearly recall what happened as each of them reached the bursting point. People were going nuts, believing that "this time is different", and pouring all of their resources into jumping on the bandwagon. People were mortgaging their homes to free up cash to invest in tech stocks or real estate or whatever. There were TV commercials showing truck drivers and the guy next door getting filthy rich. Suddenly everyone seemed to be flipping homes and making boatloads of money. And then the bubble popped.

I don't think the market is at a frenzy yet, I see a lot of new money and interest coming in but not a mania stage. When gold was $1800 you weren't even able to step into a shop to sell, the lines were out the doors, couldn't get through on the phone of the big dealers


I try to learn from every experience I have whether it be financial in nature or not, if you don't learn from your experience you will just be walked on all your life

[disneysteve]

I don't think the market is at a frenzy yet, I see a lot of new money and interest coming in but not a mania stage.

I agree, but it's getting there. My personal radar goes off when people who never mention investing or the stock market start talking about it or when the topic of investing starts popping up in social gatherings where it normally doesn't and I haven't really seen that yet.

[97guns]

... I was simply pointing out that the nay sayers who where predicting the end of days are now jumping into the market they said was doomed....

that is a sign of a mania approaching, a reason i will not get in right now is because the time frame im looking to get from the investment might not be there, could be a shorter widow of opportunity right now. the mania stage comes on quick

[97guns]

its an interest of mine and ive read a bit about bubbles and crashes


Displacement: A displacement occurs when investors get enamored by a new paradigm, such as an innovative new technology or interest rates that are historically low. A classic example of displacement is the decline in the federal funds rate from 6.5% in May, 2000, to 1% in June, 2003. Over this three-year period, the interest rate on 30-year fixed-rate mortgages fell by 2.5 percentage points to a historic lows of 5.21%, sowing the seeds for the housing bubble.

Boom: Prices rise slowly at first, following a displacement, but then gain momentum as more and more participants enter the market, setting the stage for the boom phase. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be an once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of participants into the fold.

Euphoria: During this phase,caution is thrown to the wind, as asset prices skyrocket. The "greater fool" theory plays out everywhere.
Valuations reach extreme levels during this phase. For example, at the peak of the Japanese real estate bubble in 1989, land in Tokyo sold for as much as $139,000 per square foot, or more than 350-times the value of Manhattan property. After the bubble burst, real estate lost approximately 80% of its inflated value, while stock prices declined by 70%. Similarly, at the height of the internet bubble in March, 2000, the combined value of all technology stocks on the Nasdaq was higher than the GDP of most nations.

Profit Taking: By this time, the smart money – heeding the warning signs – is generally selling out positions and taking profits. But estimating the exact time when a bubble is due to collapse can be a difficult exercise and extremely hazardous to one's financial health, because, as John Maynard Keynes put it, "the markets can stay irrational longer than you can stay solvent."
Note that it only takes a relatively minor event to prick a bubble, but once it is pricked, the bubble cannot "inflate" again. In August, 2007, for example, French bank BNP Paribas halted withdrawals from three investment funds with substantial exposure to U.S. subprime mortgages because it could not value their holdings. While this development initially rattled financial markets, it was brushed aside over the next couple months, as global equity markets reached new highs. In retrospect, this relatively minor event was indeed a warning sign of the turbulent times to come.

Panic: In the panic stage, asset prices reverse course and descend as rapidly as they had ascended. Investors and speculators, faced with margin calls and plunging values of their holdings, now want to liquidate them at any price. As supply overwhelms demand, asset prices slide sharply.
One of the most vivid examples of global panic in financial markets occurred in October 2008, weeks after Lehman Brothers declared bankruptcy and Fannie Mae, Freddie Mac and AIG almost collapsed. The S&P 500 plunged almost 17% that month, its ninth-worst monthly performance. In that single month, global equity markets lost a staggering $9.3 trillion of 22% of their combined market capitalization.