Well it started out good (for those of us that are long) and then got better (for those of us looking to buy).

Shorting this bad boy till march. Wish me luck

Just sitting on the sidelines.

Well, historically - that's an incorrect statement.

Lets look at some data.  

http://www.advisorperspectives.com/dshort/charts/census/household-income.html?household-incomes-mean-nominal.gif


And use this calculator:

http://www.mycalculators.com/ca/401kcalcm.html

For *households* in the 2nd quintile, often considered "middle class" have a total household income of $87,000 today.  Going back 40 years, that quintile was around $25,000 annual income.  Assuming you put 15% of your income in retirement, starting in 1976, and assuming ZERO pension, employer match, tax benefits, NOTHING else but you putting 15% of your money into a simple retirement account, invested moderately.

This assumes a 3.25% avg salary increase, which matches the chart.
This assumes a long term earnings rate of 7%, which would be difficult to argue wasn't possible.




You'd have a balance of 1.2 million dollars today.

You almost have to try NOT to be a millionaire today given the performance of the market of the past 40 years....

I should have been more precise, it is the later half of the statement that I agree with.

But that is exactly how it does work...and has a far greater chance of success than timing the market...with far less risk, effort and expense/taxes.

If you disagree, perhaps you could explain why passively managed funds (doesn't matter which fund nor which index) consistently beat a vast majority of the (active) money managers.

First, It looks like you are assuming that your young investor started out making $25,000 per year, 40 years ago.   (Roughly $87,000 per year in todays money.).     That's pretty unrealistic, don't you think?       Rationally, people make "middle income" money, at the middle of their career.       How many people start at $87,000 today?  

Also,was there even a way to invest in the total market, 40 years ago?

Second, and most important:  the interest rates were much higher back then.  That means the Stock Market was less popular as a saving vehicle.   Then, it became very popular due to not having much competition.

Here's the main thing:
You need to look at the fundamentals:   What was the average P/E ratio during each decade of that time period?    

What is it today?      Why is there a difference?

What would the stock market be at, if it corrects back to historic norms?    

What was the National Debt during each quarter of that 40 years?    

How much of the current stock market is inflated by Runaway government spending?      Can that deficit spending continue to grow exponentially, as it did during that 40 years?    

Do you understand how the resulting Government debt now imposes a Drag effect on the economy?  

Basically, you are looking at a Goldilocks period of history, where stocks got massively over inflated, due to Governmental intervention and experimental fiscal policy.     And in looking at that exponential growth, you conclude that exponential growth must continue.     I disagree.   It isn't that simple.  Very few things in life, nature, or math, work that way.  

The last thing is says on every prospectus is "Past Performance is no indication of Future Returns".  And yet, it is the very First thing that people forget.      Because, it is just so comforting to trust and believe in the magic.  

A lot of what you posted is totally irrelevant....

Yes, I think it would be quite plausible for total HOUSEHOLD income to be around 25,000 40 years ago.  Especially using the 87k figure today.  My expamle used the second quintile - which is middle class.  Middle class is always above median, my numbers are conservative.

So my response is....  ok, then go bury your head in the sand, and buy gold, and see where that gets you.  

I watched people in my family make these same chicken little cries my entire life, and watched them stay out of the market "because it was rigged" "manipulated" because of "the government" etc..etc..etc... and watched them have almost zero growth and retire with "enough" but FAR less than they could have.... because their fear and distrust overwhelmed their data driven mindset.  They only listened to data that fit their own narrative or bias, as many here do.

So what happened to the oil to market hook up, its not working now. Thats because it was all BULL SHIT to begin with.

WHY FORD WHY???

So, you jumped to the defense of your unrealistic assumption.   Fair enough.  It's YOUR scenario.  Give him a million a year, at 12 percent for 80 years.    Plug any numbers you want into the calculator of false assumptions.


But you didn't address the main point, which I bolded for you, and prefaced by saying "Here's the main thing".  

- it was supposed to help focus your attention.  

Did you bother looking up the historical Valuations?      What do you have to say to that?

You must have an opinion.     Will you argue that Valuations don't matter any more?       This might be the case, I don't know.    Are we in a new paradigm?

Right now, the price of most stocks worldwide, is dependant on "The Bigger Fool theory".      Is that going to hold true for the next 40 years?    

You must have some logic to back up the faith, right?    As. I've said; you may be right.   But I would like to hear the reasoning, if any.  

Here's an article that discusses it in detail, in an educated way:  http://www.wellscap.com/docs/emp/20131204.pdf

True, yet past performance, especially over long periods of time (as long as we can make them based on stock market record keeping) is the only method we have of estimating what the market will probably do in the future.  We know that, over the last 144 years the average annual return of the S&P500 was about 8.5%.  That includes periods of high interest rates and inflation, low interest rates and deflation, recessions, depressions, bull and bear markets, wars, disasters, etc.  Do we have any reason to believe that the next 144 years are going to be different?  They may very well be, but there is nothing to indicate otherwise.

My personal example of the "magic":  about the time IRAs became available, I started putting money into one pretty much for the hell of it; I maxed it out for not even 10 years.  Guess what also became available about that time:  Vanguard started their S&P500 index fund and that's where I put it.  As lives do, mine got complicated and I literally forgot about that IRA, after all it was "only" about $15k.  Today, that forgotten $15k is worth over $300k...which is, wait for it, exactly what the average rate of return for the S&P500 was from then to now and which, not coincidentally was also pretty close to 8.5% (a little over 9%, actually).  Pretty magical!

Which brings us to what that 8.5% return really is:  it's the return you earn for letting someone else borrow your money...yep, just like a bond.  The idea is not to beat the market (since I don't believe anyone can) but to accept what the market is giving you:  8.5% for risking your capital with a company or companies.  Some years you win, some years you lose; long term average you get 8.5%.  Doesn't sound like anything to get worked up about but as my example showed, 8.5% over a few decades, it adds (multiplies, actually) up.

Don't get me wrong, most of us have a "need" to take risks and gamble if you will...after all, it's fun, especially when you win.  When I was young, I traded everything imaginable and it was exciting, win or lose.  But after a while I realized that I was working my ass off trading and that my unmanaged (passive) accounts were, on a risk adjusted basis, doing about the same.  I eventually decided that the effort and the risk weren't worth it.

Ultimately my point is whether you believe it's possible to beat the market or not, it isn't necessary in order to amass literally a fortune...the market and time will give it to you and for little to no effort on your part.

You just have to be disciplined and patient.

Just checked the Dow.  Up over 100.  I'll check Tomorrow™ to see if the crash is happening, or in 6 Months on a Monday™

Because Q4 results were great, so naturally it's down 3%.  

I realized today I'm only buying Ford when they publish good news

Amazon down $87 in after hours.




CRUSHED

Just made 15% on USO bought at 8.24 and sold today. not bad for one weeks worth of work

I bought some USO on Monday, and I'm going to hold on to it long term. I don't think oil will stay this cheap for too much longer.



 

Survival bias runs deep with Americans and who can blame them.  Be a Bogle head, buy the market on a low cost index fund, change asset allocation annually if necessary, retire rich.  I love the idea of it, but  sadly, the sheep will be sheared.  And like my grandparents who had everything stolen by the banks in the Great Depression, will learn a very similar and valuable  lesson.

Last time (2008) we bailed out the banks collectively, next time we bail them out individually.

So I guess keeping $$$ under your mattress and losing a compounded 2% per year in inflation is a better idea.

No matter what you do - you will be fleeced at one point or another.

Down $87 to $551 after being up $52 is "crushed"?  In big red letters?  You MUST be good  

Yes

It's better to own the mattress than the paper under it.

Ford:  just another example of how sometimes, the people moving markets just don't make sense, at least not to the rest of us.

I am looking forward to that special dividend in a little over a month.

Boeing is another one:  some relatively minor production schedule changes to free up resources to work on new models and down whatever it was, 8 or 9%.

UA, OTH, CRUSHED it (+22.6%).

LOL.

Apparently Amazon Prime has become self aware.  

Damn my hubris, these humans are onto me!

$300 ACOGs for the next thirty seconds!

I gambled on AMZN ER.  The one time it fell after earnings is when I owned it.

I too jumped to the defense of his "unrealistic assumption"...because it's not an assumption, it's a simple math equation.  The only real source of "error" if you will is the two-edged sword of inflation.  While you will still have $1.2M per FALARAK's example (actually, you might earn a lot more if returns are higher but we won't assume that) your future $1.2M may not be worth as much as $1.2M of today's $.

If you read the article you linked carefully, you will see:

1.  The title of the article contains a question mark:   "A New Valuation Range for the Stock Market?"

2.  The author is saying (asking actually) what I said in an earlier post:  are P/Es high based on historical averages or, has the market adopted a new range of P/Es?

3.  Per the author's summary:  "Is this bull market running out of valuation room and should investors therefore become more conservative based on the historical valuation range? Or, does the stock market still offer considerable upside potential based on the norms of the last quarter century? We are as puzzled as anyone by these questions. Perhaps investors are best served by heeding both valuation ranges."  [emphasis added]

It's a cart versus horse proposition:  will the market be driven lower by investors trying to force P/Es to a historical mean or have investors adopted a new concept of what constitutes an "acceptable" P/E?

Ultimately, P/E is not the sole metric upon which to base your investing decisions.

The new paradigm.

So where are we at with this crash and the one that happened Monday like 6 months ago? Its hard to keep track of whether or not I'm living in a post apocalyptic wasteland or not.

Thank you Exp,

and you too KB6, (at least you read it, and replied intelligently.  I got you thinking )    

I was trying to help Falarak out, because I feared I might be talking a bit over his head.  

I'm not trying to argue for any one point, except perhaps, "Informed, Rational Decision Making".    

It's a complex question, with many variables, and complex questions almost never have answers as easy as "Put in 15% of your salary every payday for 40 years, B&H, DCA for the Win!"    

We Want  there to be an easy answer, and some people Need to latch onto one, because facing contradictory unknowns literally causes them pain.  

The BuyandHold,DCA advocates look at the gains of those previous 40 years and think, "Well, Duh, it's a sure thing, 8% gains forever!"

I look at the same history, and see that those gains were pulled forward by deficit spending, and every other trick employed by our Government and the Fed.    I guess the question is: Can they keep the charade going?     And if so, how long?  

It helps to stop and consider what exactly Stock is.   When you "Put it into the Market", what exactly, are you buying?  

If I buy $100,000 worth of stock today, I am buying, say, 1/12th of that lucky old guys portfolio.   The gains have already been realized, specifically, because there are buyers.    The question for me is, not only "Has the average P/E valuation shifted" but more importantly "Will the P/E ratio CONTINUE to shift in my favor".

Todays valuations require the P/E to stay at those historic high valuations, but the Predicted, future gains going Forward, depend on the P/E shifting even more, say from 17 to 27.    

Is that sustainable.    Is it likely?

"The race is not to the swift and the battle is not to the warriors, and neither is bread to the wise nor wealth to the discerning nor favor to men of ability; for time and chance overtake them all."

Ecclesiastes 9:11.

Or:

“The race is not always to the swift, nor the battle to the strong; but that is the way to bet.” -Hugh Keough.

Suckers needed, please jump back in and run it up !

WHAT! I can't hear you over all these crashes the OP keeps predicting!

I expect the market to go down further.

The hilarious part worth laughing at is the number of times the OP has declared "this is it!  It's really crashing this time!" Only to be wrong Every. Time.

The law of averages will eventually catch up to him and I'm sure he'll goat about his predictive ability.

I'll still be chuckling.

What we're laughing at are the perpetual claims of "Called it!"

As far as a 50% drop, guess I'd call that a ½ off sale.

Looky looky - we have another zerohedge reader who lacks critical thinking skills so he gobbles up anything that fits his bias and narrative.

You DO realize a lot of that image is complete bullshit, don't you?  How convenient the X and Y axis are barely legible - that's because they modified the X and Y scales to make the most DRAMATIC LOOKING CHARTS.... not actually look at real data and compare it to historical values in context.

Congrats on your lemming-ness to Jim Sinclair and the rest of the people who profit from willfully ignorant fearmongering.

You are a funny man.    My critical thinking skills are just fine.  

I might have once upon a time interviewed and been offered a job working at the St. Louis Federal Reserve in the Economic Data unit during my youth.  Hmmm, I wonder what that FRED watermark on 8 of those charts stands for.

So, are you claiming the Charts are Wrong?       Or just that they were made "Dramatic looking".  

Why don't you put your googly retard eyes to good use, and find some charts that Refute what Exponential posted?    

You are spouting a lot of opinions, but I haven't seen you post anything substantial yet.      Just hit and run nonsense, which makes it clear you aren't even really reading the thread.  

Stock market crash begins.......today!

I hope not. I can't take another crash this soon after the last 17 that gym predicted.  

I can't take any more crashes either...I'm out of cash (100% invested).

I need some more dividends to roll in so I can take another position...hopefully during the 50% off sale...hmmmm.....

Baltic dry index sure is looking flush. Happy days are here again!

Between this and your election predictions, I have to wonder why you keep doing this. It's bizarre to me.

Not only did the stock market crash not begin on the 21st, it has yet to fall below where it was on the 20th when you made your prediction. The S&P 500 closed at 1859.33 the day you posted this thread. It has yet to fall below that, and is actually up 313 points to 1903.03 as of right now.

Like I suggested in one of the bazillion Trump threads, might you consider reeling it in a little bit and just thoughtfully watching events unfold like a normal person?

Did it crash yet? Still in my bunker

Market crashed, Hillary was elected dictator for life and millions died when they didn't heed the Oracle of GDs warning that Justin Bieber concerts were the only true safe space.  

I predict he does no such thing.  Starting tomorrow  

Wait, so there's going to BE an election AND there are normal people on the internet?

 

STOP THE PRESSES!

Now this is a prediction I'd be willing to put money behind.