I would generally agree and I am still about 20% in the market (and still doing DCA) but the rest is in safer cash type investments, but as a person nearing retirement I can't predict how long this bear market will last and I don't know how much time I have either.  What I need to see is real capitulation and we haven't seen that yet.  Only then will I re-engage some of that cash. Otherwise though, I sleep well at night.

Today was just a blip, like any bear market you'll see bull rally's (as we've seen for about 2 months) but you also have to look at the landscape for the future and I don't see anything that is promising at all on the current administration's agenda for the average investor like a person on my timeline.  

On the other hand, if I was in my 20's, 30's or 40's I'd put it all to work right now.

About 400k at 3% for 30yr. Haven’t lost anything.

The margin loan loan is just a cash buffer based on sibor.

My 401k bought today.

Quite honestly if it wasn't for Spidey I wouldn't have a Roth ira retirement account right now.  And then three of my hard working, but not investment savvy friends wouldn't have retirement accounts based off my recommendation from the knowledge I gained.

I'd love to hear what falsehoods he's spreading? From what I can tell he's telling people,  primarily young ones that don't know where to start,  what to invest in.  He's personally helped me get out of high fee target date funds and into something more aggressive for my age with an extremly cheap expense ratio. His advice is a no brainer and probably would work for 90% of Americans who have no fucking clue how easy it is to save for retirement.

No homo but I love the guy.  I only wished I had learned how to invest when I was younger and not start at age 27.  Now I have the knowledge to pass onto my kids so they don't make the same mistake. I was a fucking moron in my early 20s. Buying motorcycles,  cars,  toys,  gadgets  you name it.  I should of been investing that money.  Material shit don't matter in the end.

OK, State the reasonings behind that assumption.

If the market goes to 0, that is the ultimate good news.  Need lots of room to grow. Can’t wait for that.

The Fed is flat out saying they are going to deflate the market, and the economy, And, resist calls for stimulus/life support.    I’ve never seen them this transparent about anything.

That is one big concern, tons of portfolio managers haven’t seen real downturns. They won’t know how to navigate it.

Even scarier, you look back and no one has seen a real increasing rate situation since the early 1980’s. How many fund managers were actively trading then that haven’t retired?  The market is banking on more easing and Powell is saying NOPE. Big difference.

They only have so many tools in the toolbox. Like 2 tools.

Their short term policy decisions do not affect my long term financial plan.

And borrowing money at less than inflation?  More please.

I provided 2 time periods where the S&P 500 took 25 years to recover since 1929. That's a combined 50 years out of the last 93. This demonstrates the error in thinking that Bear markets are short lived. Just imagine, you put your money into the market today, and you don't get made whole until 2057.  

Imagine you compound your error by taking equity out of your home. "Oh, it's 400k at 3%, and inflation is running at 9-17 percent. I'm being paid to take this loan." Except that unemployment gets really high, and you don't get any raises at work because of the labor market situation. Eventually they have to start giving 2 raises a year to keep up with inflation, but you lose 30-40% of your earning power before that happens. You don't have money for stocks, even though they are at all time lows, but between your 400k loan, and inflation in general things are very tight.

You lose your job. Also your home has gone from 600K value to 300k, because no one can afford homes at those high prices with 7% interest rates. You don't have any home equity to help you make ends meet, because you took out that 400k loan and sunk it into stocks which still haven't recovered. You start selling stocks at -60% to make ends meet for the next year, until you can find employment.

In 2050, you are thinking about retiring, but unfortunately you've lost so much money on the stock market, and it still hasn't recovered. You have to keep working. 7 years later, you're 72, and the market has recovered, but your investments haven't because you sold at the bottom and didn't have spare cash to buy back in when it was low. Social security and medicare have been largely eroded by inflation and a demographic bust (no young people), so you have to keep working, but no one wants to hire you at 72. You're a greeter at walmart, and glad for the employment.

This is why it's a bad idea to leverage your investments in general, but especially at the top of the market. Now, who knows what's going to happen, but this sort of thing DID happen after the 20s and 60s.

In 2008, people were committing suicide over the housing bust. Largely due to being overleveraged.

If you're going to dollar cost, then great, you will minimize your exposure to this sort of thing. But taking a 400k loan on your house because bear markets only last 11 months, is based on historical ignorance, and risky as hell.

Sunday evening update from the market wizard.

Attached File

^ as SP futures are down about a percent.

The pain is coming.  Europe accounts for 25% of the earnings in the SP500. Europe is currently having an energy crisis, inflation, and the Euro is falling like a stone. This will start to show up in earnings.

I would remain bearish on the markets until the EU abandons its insane energy policy and/or the Fed pivots.

The Bull runs strong Bahahaha!

Lol, Spidey thread. This one won’t age well.

Optimistic investors is great for the market.   Someone has to sell me puts

You mean your retirement plan isn't to rob a bank, surrender peacefully, plead guilty, then live out your days with 3 squares, a cot and free medical care?

It’s nice that Spidey woke you up to the idea of investing, but now, you have to start thinking for yourself.   Spidey’s optimism is infectious, and his theories may well be useful in avoiding panic, However, his carefully constructed and aggressively preached paradigm, has more holes than Swiss cheese.   (Ie. The Market will Always go up over time, and will Always outstrip inflation and make you Rich Rich Rich!)

We all look for Certainty in life, but it doesn’t exist.  Faith means nothing  in the world of investing.    What you want is information.
Worshipping another mortal Man, is unhealthy and foolish.   Becoming a robotic disciple, is guaranteed to end badly, as even the followers of the OG himself, will attest.

Troof!

Lol we are fucked

“Borrowing money at less than inflation” only works, if your Gains from that money (minus taxes), outstrip inflation.    Assuming that the Market will do that without artificial stimulus, is a big leap of faith.   -Especially, when current valuations are hugely inflated due to past stimulus.  

Some companies will be able to out-earn inflation, but it takes a special combination of pricing power and product, to be able to do it (AAPL?)   Even then, there is no guarantee that Equity Prices will reflect it.   Assuming the whole market will float above inflation, is bound to result in heartbreak.

I’d love to see a study of which sectors held up best during periods of rising inflation/ increasing bank rates.   Will have to see what I can find today.  

Fwiw, consider what you did with borrowing—into—->Stock Market, and extrapolate that out, to all the other millionaire/billionaires, Corporations  and Governments worldwide, who did the same…. Now, consider the effect, when all of that is reversed.  Interest rates going up, Stock Market gains going down.   And the rest of the world doesn’t operate on SpideyFaith - diamond hands.    They are notoriously fickle.

Dear lord. I have 20-25 years til retirement. I think I'll be OK in my index fund.

Of course you will.  Just stop thinking of random internet hacks as Gurus, (or Lords).  

It's almost like company fundamentals will start to matter again.  Not Meme's.

that would be nice.

There will continue to be more truth in the memes. They aren't going anywhere.

I was speaking to the insanity with GME, AMC, BBBY.  

Good for a quick trade.  Not for investing.

No, you don't have to beat inflation, you just have to beat the interest rate.  If you borrow at 3% and earn 5% you're still ahead even if inflation is 10%.  Also, stock markets have historically performed well against inflation and are way better than doing nothing.

I'm more concerned of monentary fundamentals. These rate hikes and big talk from JP are a speed bump. Fedgov is spending like drunk sailors, more USD outside this country than inside.  It's like we are doing everything possible from both ends of the candle to make everyone abandon the dollar. One way or the other.

How interesting

If you don't beat inflation, inflation beats you. If you're 5% under water, you lose 5% of your purchasing power every year. Eventually, you run out of purchasing power.

That isn't how that works.

You can either lose 5% to inflation or 10%.  You pick.

The million dollar question is if inflation will sustain at 10%. Powell has been clear the Fed won’t let that happen.

Inflation has never been beat without rates above it. Will the propaganda, fed or treasury win?

jokes on you all, I bonds for my 50 LLCs FTW!!!

I think it will sustain and the Fed is powerless to do anything.  Fractional reserve banking doesn't work that way and it is dependent on increasing the quantity of currency to sustain itself --- until it collapses as unsustainable.  Then it's reset time.  

Then it becomes a matter of liquidity.  Market/bank holidays means you're locked out of your "wealth" and powerless to do anything.  History taught us that that happened during the Great Depression.  Dr. Dave Janda's (MD, ret.) G-G-Grandfather lost almost everything.  The place where he banked at was seized by regulators who then called in all loans.  He said no problem as he had the funds and asked let me draw it out of my account of the bank you seized.  "Nope, no can do but you must pay the loan or forfeit the brewery."  He lost his brewery that way but pocketed a bag of gold coins he had in his office and his nameplate before walking out of his brewery.  Then he died a few days afterward.

So our dear well intended friend Spidey007 who wants the best for us is correct.  Know history like Spidey007 says.  Do you?

Here's the Dave Janda video:


End bancos los federales before bancos los federales ends you.

Don’t forget to include the effect of Taxation.  Your example seems to be doing just that.  

In a very real sense, Inflation is a sinister form of double taxation.   We get taxed on any money we made, while trying to maintain the initial value we had.

Bragging rights if you collected PPL’s on all those paper LLC’s!

That is exactly how that works. If inflation is 10% and you are only getting a 5% return, you are losing 5% of your purchasing power in real terms. That is precisely how it works.

What part of "If you don't beat inflation, inflation beats you." did you not understand?

Inflation devalues every dollar. Your strategy is basically "earn more money." If you could double the market returns, why haven't you already done that? And why would you be discussing on arfcom?

That's way too complicated for this thread.  Like for example if you refinanced your home and the interest is tax deductible.

So you're picking losing 10% over losing 5%?  Bold choice.  Inflation is out of your control, all you can do is preserve as much of your buying power as possible and that means investing your money.

Spider isn't wrong, though I disagree with him in his zeal for the moment.

Bear markets tend to be fast and deep, bull markets tend to be slower and significantly longer.

Thay said, I disagree with his current optimism, the markets and underlying products are a mess along with the economic factors that would drive a strong recovery. Until the economy gets fixed we have strong indicators that the market will dwindle still. We are 9 months since the market began to drop, some bear markets lasted years.

Edit: the assumed "mortgage the house to buy assets" responses are incorrect. You only need to beat the mortgage interest rate to be ahead of the game.

how you think I got the money to invest?

HA turns positive!

I've been beating the market for years. That aside, it's pretty simple, if your rate of return doesn't beat inflation, you're losing ground.

So, I'll repeat it again only slower this time so you can understand what I'm saying: "If you don't beat inflation, inflation beats you." It has always been thus.