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This is going to turn out to be the great investment opportunity that I mostly missed out on in 2008.
by overcast 7y ago
This is going to turn out to be the great investment opportunity that I mostly missed out on in 2008.
- cwilkes 7y agoEveryday is a great investment opportunity given a long time horizon.
- psychometry 7y agoTrue. Investing a little bit each day far exceeds the returns from investing a lot every time there's a local minimum.
- overcast 7y agoThere is no argument that the market for a lot of stocks was completely out of control. When stock charts are a 90 degree angle, trading on average at 25:1 price vs earnings, there is a problem.
- lotsofpulp 7y agoIt's all relative based on what people's options are. What if the government comes out tomorrow and says they will start buying stocks to prop up the values? You're always invested in something, whether it be cash, land, resources, equity, guns, food, water, etc. If you think a handful of large corporations will continue to gain power, it might make sense to pay 25x.
- overcast 7y agoNo doubt government will try to do that, they are also running out of options. Those are always temporary. Look what happened to the latest rate change.
- lotsofpulp 7y agoNot all governments are equal. The US has a lot more runway to devalue the USD than pretty much every other country.
- tobias3 7y agoThe argument would be that there's too much savings chasing too few investment opportunities. That causes investment to become speculation with periodical bubbles that do nothing to direct investment into productive areas. The thing is, there is so much opportunities with long-term pay-off. E.g. high speed rail, transitioning to renewable energy, research into new technologies, etc. they just seem to lack political/societal (or generational...) will? If the FED or EZB starts buying stocks like the BOJ, like some economists already propose, I'll see that as direct transfer to retirement savings btw. and further encouraging misdirected investment, especially if there is even a notion of doing it for propping up the stock market and not to increase inflation. Needless to say, I'd be very angry about that.
- ahelwer 7y agoI am obliged to tell you to find a chart of the Nikkei 225 and zoom out
- SEJeff 7y agoPuts are investments too...
- doubleunplussed 7y agoI don't know if I would use that term to describe them. They're investments like gambling is an investment.
- SEJeff 7y agoAll investment is gambling. You’re betting that the stock will go up if you’re long and that you can sell it for more in the future than when you bought it. Call options just allow you to leverage more as do put options. Your own statement just agrees with me. Investing and trading is gambling, but if you hedge properly you’re able to control the odds of success a bit better than you can at say a craps table.
- dangravell 7y agoErm, capital growth is one way of making money with an asset. It depends on the asset but there are other ways, e.g. dividends.
- mumblemumble 7y agoIt's true that you can use put options for purely speculative purposes, but that's not their only use, and that's not what they're supposed to be for. The more official purpose of a put option is to control your risk profile. That is a perfectly reasonable thing for an investor to do, and is something more like the opposite of gambling.
- doubleunplussed 7y ago
- deleted 7y ago[deleted]
- abarringer 7y agoOn the contrary given a sufficiently broad timeline the value of every company drops to 0.
- gpm 7y ago"In the long term, we're all dead"
- derwiki 7y agoBuy an index fund, not individual stocks. All companies don’t go to zero at the same time.
- throwaway373438 7y agoThey will all go to zero, given a sufficiently broad timeline. They're making a joke.
- barry-cotter 7y agoI don’t think the investors on the Shanghai stock exchange on 1939 would agree. Nor would anyone invested in any company between Germany and the Soviet Union at that time.
- Retric 7y agoDividends mean investments can have positive returns even if the companies value goes to zero.
- ttcbj 7y agoExactly. In fact, the best way to determine a fair value for an investment is to estimate the net present value of future cash flows to owners: from dividends or a terminal acquisition.
- deleted 7y ago[deleted]
- unlinked_dll 7y agoUnless your time horizon was 1965-1982 or 1929-1940 I don't see why the current economy is substantially different from the past and sustained losses over a decade or longer aren't possible.
- Finnucane 7y agoAll things are possible.
- onlyrealcuzzo 7y agoYou realize in real terms equities prices in EVERY western economy in the world beside the US are negative since 2000, right? In Japan, they're (very) negative since 89. As much as 7%! Depending on if you measure using global inflation, US inflation, or Japanese inflation. You realize that even in the US, there are three 20 year intervals where prices did not increase in real terms since 1890, and 1 30 year interval. That's a decent percentage of the time. The idea that they can never go down and stay down is lunacy.
- unlinked_dll 7y agoNo need to be a jerk, I didn't realize that because I'm an American without a background in financial markets' histories. You could rephrase this comment more cordially > Most western economies outside the US have been negative since 2000 as well. > In Japan, they're quite negative over the last 30 years, once one accounts for > Over the last 130 in the United States, there have been three intervals of >20 years where prices did not increase You can present additional information that helps illustrate a point without being an antagonist, and people will be more receptive. It's particularly counterproductive to aggressively reply in agreement with more detail.
- cik 7y agoWell said Mr. Buffet... and accurate.
- barry-cotter 7y agoTell it to the investors in the Russian stock exchange before 1914. Once you’re investments drop to zero they don’t go up again.
- czbond 7y agoGoldman just ratcheted down 2021 projections, and they're still being optimistic. They will ratchet down again to show a great recession. Don't make a poor financial decision based on FOMO.
- everybodyknows 7y agoLink to source?
- czbond 7y ago@tcharlton posted for me above. https://news.ycombinator.com/item?id=22557599 https://news.ycombinator.com/item?id=22557599
- jsight 7y agoHow do you know that they are being optimistic? Honestly, they know no more than any of us. Now is basically just as good of a time to buy as any time in the last 10 years.
- SpicyLemonZest 7y agoMany people have clearly not incorporated even the best-case predictions for COVID-19 into their expectations. Even if Goldman is aware of this, it's probably hard for them to add an explicit "people are being dumb about coronavirus" coefficient to their model.
- czbond 7y agoIt is in their interest to declare optimism. Pessimism gives one a chance to exit positions on 'green uptrends' and keeps other fees coming in. If people expect a downturn, spending of all sorts is restricted - and fees are questioned.
- teambayleaf 7y agoShiller P/E ratio is 24.2 today, which is ... slightly below the level of 2006 before the last recession started (25.6 in 2006.3). Frankly I won't be surprised even if S&P loses more than 30% from the current price. It is simply not a unthinkable scenario, considering that the historical median of S&P500 P/E is around 16. * https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe
- onlyrealcuzzo 7y agoIronically, prices are higher if growth is expected to be lower. Population Growth worldwide is expected to be lower. And most people think productivity growth is also going to be lower (harder to predict, this jumps with major new inventions). As long as interest rates sit at 0, the P/E ratio is not returning to historical norms. Prices are still 50% above historical norms. They're not falling that far. Retirees and home owners would riot in the streets.
- samvher 7y agoI've also been thinking along those lines - it seems logical to me that if you expect ~7% yearly profit that the P/E ratio should be around 14 (1 / 0.07) and that if the market is very competitive (lots of available capital, low perceived risk, low-yielding alternatives such as bonds) and therefore you expect ~4% yearly profit the P/E ratio should be around 25 (1 / 0.04). However I have never really encountered this explanation anywhere which makes me wonder whether my reasoning is somehow wrong.
- myle 7y agoThe denominator E goes up over time. If ratio is constant, then P also goes up.
- samvher 7y agoYes I think that makes sense. If you have real economic growth that can cause E to rise and through that mechanism P to rise. But even without economic growth, by reducing expected returns, you can keep E constant and get P to rise by increasing the P/E ratio. My sense is that historically the first mechanism was more important, but in the last 10 years the second played an important role.