Comments on: Dow 10,000: It’s do-over time!

By: Casper

Casper — Mon, 19 Oct 2009 07:27:16 +0000

VenDatta and Emma, quite right, it also depends what the tax effects of the new investment return would be and what the tax regime is in the particular environment. Also, cash losses might be so high, and the property value could dip to below the mortgage owing. Then one would be in trouble, as I suspect most people are right now.At the start of a mortgage, one usually pays interest until close to maturity, say on a mortgage of 20-30 years, the first 15 to 20 years is mostly interest repayments.

By: heywally

heywally — Sun, 18 Oct 2009 12:54:42 +0000

If you’re going to be in the stock market, you should have some idea of the mechanics of it and where it is ‘at’ in context, at the moment. Don’t just blindly throw money into the market and ‘buy and hold’ as that ‘may’ not be the best strategy any more — if it ever was. Consider moving some profits into cash from time-to-time, after wild upswings. Yes, I’m talking market timing.

With that in mind, consider setting aside a portion of your stock money in cash — the % relevant to your age –, to be used for a more active lower-risk market timing strategy that involves buying in small increments after extreme selling — defining that can be tough — and then selling into strength on the — usually — inevitable ramps back up.

In this way, you can generate some extra profits and are forced to actually have an idea of how the markets behave which you should, if you are pumping money into it every month. The only time this will not increase your returns is during a mostly straight-up move but in that case, you will just make a bit less, you won’t be losing money. In side-ways or down markets, you will do better than just sitting there with all of your funds in stocks.

The difficulty with market timing though, is buying when it is most uncomfortable and then figuring out when to sell. Manage that risk by using this portion of your investing money in smallish increments after heavy selling. And no, I wouldn’t keep these shorter term funds in bonds, as those carry risk also, maybe especially now. Use a liquid money mart even though there is virtually no interest right now.

By: Structured Products Guy

Structured Products Guy — Fri, 16 Oct 2009 15:48:29 +0000

@ Dave
I’m pretty sure it assume normalized over the very very long run, which over the last 80 or so years hadn’t been unreasonable. Taleb mostly tried to say that efficient market promoters said that was the case over the short run. In spite of its flaws the EMH still provides us with some important reminders. First, most research you do yourself, has probably already been done and is probably already somewhat “priced in”. Second, strong good news gets processed very fast and prices respond quickly, so be careful before you jump in to make sure that the stock isn’t already valued to reflect that news. EMH isn’t all about always buying and never thinking, as many opponents to it have made it out to be.

By: howard

howard — Fri, 16 Oct 2009 14:43:18 +0000

dave, i looked at that podhoretz piece yesterday and i said “it’s just a bunch of words that mean nothing,” which made sense, in that podhoretz is an idiot. it’s not even worth bothering to respond to him.

as to our host: he’s certainly right – you’ve got to know your risk appetite. i, for example, was a buyer in march because i felt the risk that everything was going to zero was overrated.

By: Emma

Emma — Fri, 16 Oct 2009 14:40:12 +0000

SOME of your mortgage interest is deducted from your taxes. Your mortgage is NOT a tax deduction. Paying off your mortgage is an excellent long term investment. If only because if you lose your job, you will be much less likely to lose your house…

By: SimpleSimon

SimpleSimon — Fri, 16 Oct 2009 08:03:50 +0000

Cramer was a Spartacist? He memorized Lenin’s “What is to be done?” He studied Trotsky?
Wow! You mean that he isn’t a one-dimensional babbler?

By: vk9141

vk9141 — Fri, 16 Oct 2009 07:55:18 +0000

I’m with you Dan and always have been.

Investing in strong (defensive) companies that make stuff and will continue to make stuff we need rather than want.

By: Dave

Dave — Fri, 16 Oct 2009 03:01:02 +0000

I would be curious to hear what your opinion of John Podhoretz’s claim that the efficient markets hypothesis is not dead is (link: http://www.commentarymagazine.com/blogs/ index.php/jpodhoretz/128291)

This argument appears dead wrong to me, if only because the efficient markets hypothesis assumes, in part, a normal distribution of asset returns. As per Taleb and Mandlebrot, among others, the recent volatility of the markets suggests that asset returns are emphatically NOT normally distributed.

Thoughts?

By: VennData

VennData — Fri, 16 Oct 2009 02:13:27 +0000

Paying off your mortgage is removing a tax-deductible expense, so it’s NOT like getting a 6% return.

By: JF

JF — Thu, 15 Oct 2009 23:25:12 +0000

For whatever reason: if unknown, the famous video with
Peter Schiff and a lot of other financial experts forecasting, commenting and advising in 06 / 07, before
the crash, can be really recommended. The viewer can
instantly figure out things worked out, has perfect
knowledge in hindsight and knows much better now than
what the experts say. It is considered impressive, awesome.
http://www.youtube.com/watch?v=2I0QN-FYk pw

By: Dan

Dan — Thu, 15 Oct 2009 22:09:23 +0000

Run, do not walk, to your nearest broker (PC terminal) and follow Felix’s advice.

Many consumers in the US and are up to their eyeballs in debt and will be paying that down for years to come. If companies cannot earn money from consumers who won’t spend, their stock prices will languish. If you must own stocks, own companies that sells something people need (electricity, healthcare) as opposed to something people want (designer clothes) because we are in for a long slog.