PILOT SPIN
Spin Zone => Spin Zone => Topic started by: Jim Logajan on October 15, 2017, 08:06:13 PM
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One of the drifts on the "To football players..." thread touched on the stock market, which I think deserves its own thread.
The stock markets scare the hell out of me, and I still believe we have higher inflation than the government indexes are showing.
The stock markets have been scaring the hell out of me for about the past 20 years. Especially the period between around 2007 to 2011. But my IRAs are now around 3 or 4 times what they were then.
The stock market is nothing more than a casino. Place your bets and hope to win.
There is a major correction looming and when it hits the losses will be staggering. For the young investor who has time on his side he’ll ride it out, but retirees will take a huge hit.
I disagree - if you treat it as a casino then it will act like one. But I have never known a casino where you could have a 30 year winning streak. A correction is a test. It is not the final exam.
Besides, there is always a major correction looming. Sometimes the doomsayers get enough people be believe it and make it come true.
I agree with the last quote for one reason I consider fundamental:
Stocks are deeds of ownership of means of economic production. That implies a lot about their underlying value. As a result bull markets last five times longer than bear markets. And the trend has always been up.
Of course some metrics, like price to earnings and price to revenue are well above historical average. So a trigger could come along to trigger a bear market. But on average bear markets last 18 months.
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Here's what my dad said, about 50 years ago and it has proven remarkably accurate. "The 'big boys' are never going to get really hurt. If you want to get into stock investing, play a pat hand, and invest were the big boys invest. They are protected by congress from real damage." Now understand this was 40 years before 'too big to fail' was even a glimmer. His prophetic words have been remarkably accurate. I don't have any big winners, and I don't have any big losers. But I have a steady portfolio that the congress will protect from serious damage(IBM, Lockheed, Boeing, J&J, etc). Note - none of them are investment houses. I could have done great with something like E-Trade, but I decided to defer.
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Here's what my dad said, about 50 years ago and it has proven remarkably accurate. "The 'big boys' are never going to get really hurt. If you want to get into stock investing, play a pat hand, and invest were the big boys invest. They are protected by congress from real damage." Now understand this was 40 years before 'too big to fail' was even a glimmer. His prophetic words have been remarkably accurate. I don't have any big winners, and I don't have any big losers. But I have a steady portfolio that the congress will protect from serious damage(IBM, Lockheed, Boeing, J&J, etc). Note - none of them are investment houses. I could have done great with something like E-Trade, but I decided to defer.
I sort of followed that philosophy. I owned a ton of GM. And when it started to tank, I followed another philosophy: "never try to catch a falling knife".
Result: I lost a ton on GM. The sad part is that my losses were the union goons gains.
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The key word in my prev post was - 'portfolio'. An investment in one stock or bond issue is not typically called a portfolio, it is called a 'position'.
i.e. "Buffet took a strong position on GM today, liquidating almost all of his investment."
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I sort of followed that philosophy. I owned a ton of GM. And when it started to tank, I followed another philosophy: "never try to catch a falling knife".
Result: I lost a ton on GM. The sad part is that my losses were the union goons gains.
That's why I don't like government subsidies, or bail outs for the most part. The GM bailout went to the UAW, and other unions. Disgusting. Where did the Solyndra grants, and loans go to? Obama pals, who then took the cash and filed Ch. 7 bankruptcy.
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Where did the Solyndra grants, and loans go to? Obama pals, who then took the cash and filed Ch. 7 bankruptcy.
Why is no one in jail?
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Why is no one in jail?
Do you really need to ask?
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I sort of followed that philosophy. I owned a ton of GM. And when it started to tank, I followed another philosophy: "never try to catch a falling knife".
Result: I lost a ton on GM. The sad part is that my losses were the union goons gains.
Diversification is your friend. Don't have one big knife. Have lots of little ones.
I had a friend from 20 years ago who owned about shares of Lucent at $85/share, it was his retirement and almost all of it was in it. Steven Jobs had just come back to Apple and written off all the bad inventory, resulting in an accounting loss and their stock was crashing. I told him to sell 100 shares and buy Apple when it was at $10/share, if for no other reason than he needed to get rid of the single big knife.
I really wish I had insisted harder because within a couple of years, he sold the Lucent at $7/share. To be fair, I didn't buy any Apple either. But if either of us had, 100 shares of Apple stock would have been $1,000 then and worth about $500,000 today. If he had sold the 100 shares of Lucent, it would have been 3.8m today instead of the $700 he actually got.
But then I didn't invest in bitcoin either and still believe it's another tulip bulb fantasy.
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Diversification is your friend. Don't have one big knife. Have lots of little ones.
But then I didn't invest in bitcoin either and still believe it's another tulip bulb fantasy.
Hanging on to "a falling knife" does not imply lack of diversity.