4 ms·

Just so people remember history correctly: 1. The Roaring Twenties market peaked in August 1929 with a ~6100 Dow. 2. Market low in November 1929 at ~3800, a ~

Just so people remember history correctly: 1. The Roaring Twenties market peaked in August 1929 with a ~6100 Dow. 2. Market low in November 1929 at ~3800, a ~38% drop. The "big crash" was just ~4400 to ~3800. 3. Then it RECOVERED to ~4700 by March 1930, a ~24% gain. 4. It then dropped over a year to ~3000 by March 1931, a ~37% drop. 5. Then the real crash to ~900 in June 1932, a ~70% additional drop. People had a LOT of time and a LOT of additional information about the economy to decide to get their funds out of the market. I have finally drilled into my skull that I am unable to time the markets with reliability. So I hold across corrections. In 1930 I wouldn't have done anything -- I wasn't born yet.

simo7 5y ago
Agreed, macro predictions are very hard. Much easier to make predictions on individual assets (companies, commodities etc.) and hold long term. Also, precisely because macro is hard, these analyses often feel superficial. Inflation, especially if exogenous, can negatively impact the economy but at the same time cash-alternative assets become more attractive. What's the ultimate effect there? And what about historically low interest rates? Don’t they warrant a shift in investment preferences towards stocks? Wether a macro prediction turns out to be right or wrong it’s rare to read a deeper argument than “things are too high must go down”.
odiroot 5y ago
Ok, let's assume people were reasonable and liquidated their portfolios after November 1929. Now they have cash, great. I may be wrong but didn't the value of the dollar also crash? It seems the safest option was to cash out and buy gold or land.
- bottled_poe 5y ago
  Don't forget to factor in capital gains taxes on selling. This is a strong behavioural influencer. Basically, unless you are very certain of a major downturn in your investment eg. 40%, it doesn't make sense to sell, ever!

simo7 5y ago

Agreed, macro predictions are very hard. Much easier to make predictions on individual assets (companies, commodities etc.) and hold long term. Also, precisely because macro is hard, these analyses often feel superficial. Inflation, especially if exogenous, can negatively impact the economy but at the same time cash-alternative assets become more attractive. What's the ultimate effect there? And what about historically low interest rates? Don’t they warrant a shift in investment preferences towards stocks? Wether a macro prediction turns out to be right or wrong it’s rare to read a deeper argument than “things are too high must go down”.

odiroot 5y ago

Ok, let's assume people were reasonable and liquidated their portfolios after November 1929. Now they have cash, great. I may be wrong but didn't the value of the dollar also crash? It seems the safest option was to cash out and buy gold or land.

bottled_poe 5y ago
Don't forget to factor in capital gains taxes on selling. This is a strong behavioural influencer. Basically, unless you are very certain of a major downturn in your investment eg. 40%, it doesn't make sense to sell, ever!