2008: About $ 3,000 Bn Wiped Out Globally So Far

[Kf6vci]

A friend has mostly AAPL Apple computer) shares. when those were at 208, he was dreaming of an early retirement. now they are at 159. How are you guys affected? How are you reacting to this? Get out of stocks and into bonds?

[Naam]

A friend has mostly AAPL Apple computer) shares. when those were at 208, he was dreaming of an early retirement. now they are at 159. How are you guys affected? How are you reacting to this? Get out of stocks and into bonds?

the advantage of bonds over stocks is that fluctuations in book value does not affect the income of a bondholder. he has only a problem if one of the debtors defaults. as far as i am concerned i have great difficulties getting out of stocks... i don't own any.

[LivinLOS]

Make sure a portfolio is balanced.. It should be able to handle equity pullbacks and benefit from safe haven rises.

Got Gold ??

[fletchsmile]

A friend has mostly AAPL Apple computer) shares. when those were at 208, he was dreaming of an early retirement. now they are at 159. How are you guys affected? How are you reacting to this? Get out of stocks and into bonds?

Really wouldn't want to be basing my retirement ideas on individual stock prices. If you enjoy trading rather than investing and think you can call short term trends then go for it. These are interesting and volatile times. Personally I prefer longer term and investing.

As LivinLOS says, a diversified portfolio is key. It also very much depends on your time frames. Personally I invest long term and don't try and call short term movements. That doesn't mean I wouldn't rebalance and adjust my portfolio according to conditions, however, it does mean I don't go for knee jerk reaction massive shifts.

I very much prefer the idea of "time in the market" vs "timing the market". The problem trying to make short term calls, is no-one consistently gets it right. Even if you call a bear market correctly and sell, you risk not re-entering at the right point.

A good example is the "global correction" thread. Several people had been calling negative corrections throughout 2007. Yes negative corrections will come as they always do, as do positive ones. Those who were bearish throughout 2007 got the timing overall wrong and missed the 100%+ I you could get in China, 70%+ in India, 30%+ in Thaiand, etc that some investments made during that year. That's not to say everything was rosy last year, UK for me was flat, Japan down around 10%, property a little more. The point being 2007 was a very good year for a lot of markets. The global bears missed a lot of good gains, thru getting the timing wrong.

2008 will have a tough start. Those advising sell now, will not necessarily get the timing right to re-enter, which is the bigger risk in my view.

Adjust your portfolios, as you should be doing on an ongoing basis anyway, keep a diversified portfolio and ride it out. Drastic changes in my view risk you getting timing wrong. My views for 2008 are on the 2008 investment thread.

In the same way Naam invests in his bonds for income and doesn't worry about the capital fluctuations (except default), a mid-long term equity investor just focuses on where things will be a few months or more appropriately years from now. The long term odds have been in an equity investors favour for decades. Short term always brings risk. I don't see that changing.

[PeaceBlondie]

My best friend has tripled his investments in Shanghai (stock market and condo) in a few years. He thinks I should take more risk. Maybe I should buy some armaments stock, some tobacco or gambling stock, maybe invest in some whore houses. No, thanks. I'm no prude, but there's shit I don't eat or invest in.

[jumnien]

Easy come, easy go! Obviously, with prices dropping everyone is trying to figure out when the best time to buy is; no foolproof method, is there? There are many bargains in stocks right now, but who knows if this the absolute best we will see?

[backflip]

I acquired several thousand shares of Apple at $12. The fact that the price dropped from $208 to $168 bothers me not at all.

The American taxpayers have paid $4,000 billion for Bush43's wars, so your figure of $3k billion seems a little shy of the mark.

Edited January 18, 2008 by backflip

[PeaceBlondie]

I acquired several thousand shares of Apple at $12. The fact that the price dropped from $208 to $168 bothers me not at all.

The American taxpayers have paid $4,000 billion for Bush43's wars, so your figure of $3k billion seems a little shy of the mark.

As much as I like to exaggerate the cost of Bush's wars, I doubt it has been 4 trillion dollars in current value (only if you include the interest, due to the undeniable fact that the borrowed money will never, ever be repaid). Three trillion dollars of stock market value is lots of value, especially if it's just the beginning of a bloodbath.

[lannarebirth]

A friend has mostly AAPL Apple computer) shares. when those were at 208, he was dreaming of an early retirement. now they are at 159. How are you guys affected? How are you reacting to this? Get out of stocks and into bonds?

I've never understood the allure of stocks. You pay money to watch insiders get rich. As for Bonds unless there's a deflationary armageddon around the next corner, I expect they'll top out in the next week or two.

[britmaveric]

Ride the wave - muppets are the ones who pull out. THINK LONG TERM.

[lannarebirth]

Ride the wave - muppets are the ones who pull out. THINK LONG TERM.

What wave? American markets are trading at the same level they did 9 years ago, while the stocks contained therein have been paying dividends at less than half the inflation rate. Is this some kind of new math?

[PhilHarries]

Make sure a portfolio is balanced.. It should be able to handle equity pullbacks and benefit from safe haven rises.

Got Gold ??

You bet, I got a 3 Baht chain, guess that makes me sound as a pound.

[Gary A]

I got out of the stock market last February and missed the big surge. I invested that money in nice safe exchange traded funds (ETF) that were paying a good dividend. My nice safe funds have dropped 30 percent since then. The good thing is that they are still paying the same dividend as when I bought them so I have lost nothing, YET. I did stay away from funds that were involved in home mortgages.

[blizzard]

anyone who "invests" more than 4% of their net worth in any one stock is silly, as a rule of thumb.

ex. to be clear, anyone who invests 4% in 25 computer stocks is also silly.

[siamamerican]

Ride the wave - muppets are the ones who pull out. THINK LONG TERM.

What wave? American markets are trading at the same level they did 9 years ago, while the stocks contained therein have been paying dividends at less than half the inflation rate. Is this some kind of new math?

You are being a tad selective. What happened the prior 9 years or for that matter the prior 18 years.

S&P 500 today $1333

Jan 17, 1989: $337 (50k investment in a S&P ETF would have grown to roughly 200k )

Jan 17, 1981: $129 (50k investment in a S&P ETF would have grown to roughly 500k )

This is the point britmaveric is making. As for myself, I became a muppet 2 weeks ago and pulled 75% of my money out of stocks. I'm not a market timer, having held the majority of the stocks for over 2 years. Time will tell if I made the right decision, but it's hard to argue that long term investing doesn't work.

Edited January 18, 2008 by siamamerican

[lannarebirth]

Ride the wave - muppets are the ones who pull out. THINK LONG TERM.

What wave? American markets are trading at the same level they did 9 years ago, while the stocks contained therein have been paying dividends at less than half the inflation rate. Is this some kind of new math?

You are being a tad selective. What happened the prior 9 years or for that matter the prior 18 years.

S&P 500 today $1333

Jan 17, 1989: $337 (50k investment in a S&P ETF would have grown to roughly 200k )

Jan 17, 1981: $129 (50k investment in a S&P ETF would have grown to roughly 500k )

This is the point britmaveric is making. As for myself, I became a muppet 2 weeks ago and pulled 75% of my money out of stocks. I'm not a market timer, having held the majority of the stocks for over 2 years. Time will tell if I made the right decision, but it's hard to argue that long term investing doesn't work.

You have a point. There's a season for everything. Good Luck.

[PCA]

Ride the wave - muppets are the ones who pull out. THINK LONG TERM.

What wave? American markets are trading at the same level they did 9 years ago, while the stocks contained therein have been paying dividends at less than half the inflation rate. Is this some kind of new math?

You are being a tad selective. What happened the prior 9 years or for that matter the prior 18 years.

S&P 500 today $1333

Jan 17, 1989: $337 (50k investment in a S&P ETF would have grown to roughly 200k )

Jan 17, 1981: $129 (50k investment in a S&P ETF would have grown to roughly 500k )

This is the point britmaveric is making. As for myself, I became a muppet 2 weeks ago and pulled 75% of my money out of stocks. I'm not a market timer, having held the majority of the stocks for over 2 years. Time will tell if I made the right decision, but it's hard to argue that long term investing doesn't work.

lets say someone invested just 10 years ago, you really think he made any profit? Despite you long term investors in stocks think thats the safer way to do it you are very wrong unless you know how and what to pick. Timing there is as much as important if not more in case you think for your relatives than it is for short and medium term plays. See the spy (ass n pee) and consider how inflation and currency impact would have eaten your investments not mentioning the high chance that we really get into a bear market. In this case you will never ever see a single dollar profit of your initial investment for the rest of your life.

[Naam]

A friend has mostly AAPL Apple computer) shares. when those were at 208, he was dreaming of an early retirement. now they are at 159. How are you guys affected? How are you reacting to this? Get out of stocks and into bonds?

I've never understood the allure of stocks. You pay money to watch insiders get rich. As for Bonds unless there's a deflationary armageddon around the next corner, I expect they'll top out in the next week or two.

there are all kinds of different bonds. which ones are you referring to LRB?

[lannarebirth]

A friend has mostly AAPL Apple computer) shares. when those were at 208, he was dreaming of an early retirement. now they are at 159. How are you guys affected? How are you reacting to this? Get out of stocks and into bonds?

I've never understood the allure of stocks. You pay money to watch insiders get rich. As for Bonds unless there's a deflationary armageddon around the next corner, I expect they'll top out in the next week or two.

there are all kinds of different bonds. which ones are you referring to LRB?

Yes you're right Dr. For the record I always refer to UST's when referencing bonds. I have a liquidity bias.

[Naam]

Jan 17, 1981: $129 (50k investment in a S&P ETF would have grown to roughly 500k)

absolute figures can be deceiving. we are talking of a time span of 27 years and should compare yields (although it's absolute figures which count in real life )

the S&P investment yielded an average of 8.91% per annum whereas a 30Y-UST-Zerobond at that time yielded approximately 13.5% and was/is triple A rated. personally i wouldn't even award a single B to any index

i am not advising to buy US-Treasury Bonds but for a correct comparison that's the only way.

question: where's the [s&P]beef?

[Naam]

For the record I always refer to UST's when referencing bonds.

i thought as much but asked to be sure. i also agree with your view "will top out". Benjamin Shalom can lower FED funds as low as he pleases but starting from 6months USD LIBOR the market decides the yields of USTs over the whole range till 30 years. the afore mentioned also applies to any fiscal stimuli George Walker and his (not so wise) advisers in the White House might be up to.

[sonicdragon]

For the record I always refer to UST's when referencing bonds.

i thought as much but asked to be sure. i also agree with your view "will top out". Benjamin Shalom can lower FED funds as low as he pleases but starting from 6months USD LIBOR the market decides the yields of USTs over the whole range till 30 years. the afore mentioned also applies to any fiscal stimuli George Walker and his (not so wise) advisers in the White House might be up to.

I hope you'll excuse the pedantry, but the Fed only sets the target for the Fed Funds Rate - the actual Fed Funds Rate is still set by the market - and it can be quite considerably different from the target rate, but through open market operations the Fed can usually supply enough liquidity to bring down the actual rate very close to the target rate. However in an unusual situation it's quite feasible that the Fed would be unable to do so through normal open market operations. That would be quite a scary situation for BB. It was through considering these kinds of unusual situations (such as the zero bound in a deflationary situation) that BB got his nickname "Helicopter Ben". As for LIBOR rates, since these are set completely outside the Federal Reserve System even the shortest (overnight) LIBOR rates can and often are different from the target and actual fed funds rate, and there is nothing magical about 6 month LIBOR in this respect.

I believe we should be expecting significant curve steepening in the near future - and I have already been putting on such a trade.......

[britmaveric]

Well I can understand being nervous for someone who is close to retirement, but if you have 20-30 good work years left then you should be thinking long term wise. Closer you get to retirement then you should be moving investments into low risk financial portfolios. However I'm highly invested in broad range of stocks in international companies. Big fan of China Telecom!!!

[Khun ?]

I am a big fan of getting managers who are highly educated in the nvesment field with proven all

around skills that have done good in all markets.

Had two investments done over 35% and two that done around 5% in 2007 after fees.

Each has specialties that attracted me to them. I prefer hedge funds, they do not have to be invested and have no limits

on how much cash at any time they can hold.

Edited January 19, 2008 by Khun ?

[LivinLOS]

Ride the wave - muppets are the ones who pull out. THINK LONG TERM.

What wave? American markets are trading at the same level they did 9 years ago, while the stocks contained therein have been paying dividends at less than half the inflation rate. Is this some kind of new math?

You are being a tad selective. What happened the prior 9 years or for that matter the prior 18 years.

S&P 500 today $1333

Jan 17, 1989: $337 (50k investment in a S&P ETF would have grown to roughly 200k )

Jan 17, 1981: $129 (50k investment in a S&P ETF would have grown to roughly 500k )

This is the point britmaveric is making. As for myself, I became a muppet 2 weeks ago and pulled 75% of my money out of stocks. I'm not a market timer, having held the majority of the stocks for over 2 years. Time will tell if I made the right decision, but it's hard to argue that long term investing doesn't work.

Well if you mean equity.. Try telling that to a Japanese person having bought into the Nikkei !!

Also most people will need to pay taxes on thier gains.. Bid / offer spreads.. Thats without the brokers fees that were more commonplace prior to the internet side.. Then look at those gains in real terms not nominal inflating dollars..

Has it created real new wealth ??

[LivinLOS]

I am a big fan of getting managers who are highly educated in the nvesment field with proven all

around skills that have done good in all markets.

Had two investments done over 35% and two that done around 5% in 2007 after fees.

Each has specialties that attracted me to them. I prefer hedge funds, they do not have to be invested and have no limits

on how much cash at any time they can hold.

Never had good managers that didnt charge like a wounded bull and only performed about on par with markets / market segments..

I myself made 35% on my entire net worth last year (not one or two assets) and thats having about 1/4 of my net worth in cash.

[backflip]

"I doubt it has been 4 trillion dollars in current value..."

In current value is $4 trillion. The direct was costs are less, and you have to figure other costs that have increased due to the war. For example, on the eve of the war, you could buy as much oil as you wanted for $37/barrel. Today, it's almost $70/barrel more.

On the other hand, the OP's post lacks perspective, ignores reality, and is an indication why school systems are in disarray. According to the OP, the "global correction" began when his friend bought Apple stock @ $208, and the correction ended when Apple stock hit $166. That's silly, and it's terribly myopic. The OP, and his friend, were obviously unaware that the MacWorld computer exposition in San Francisco was held last week. During the expos, Steve Jobs:

1. introduced an uncompelling computer

2. admitted that the highly-touted "AppleTV" product was an abject failure

So, the drop in Apple stock price was due to SJ's mistakes, not "global correction".

[siamamerican]

Jan 17, 1981: $129 (50k investment in a S&P ETF would have grown to roughly 500k)

absolute figures can be deceiving. we are talking of a time span of 27 years and should compare yields (although it's absolute figures which count in real life )

the S&P investment yielded an average of 8.91% per annum whereas a 30Y-UST-Zerobond at that time yielded approximately 13.5% and was/is triple A rated. personally i wouldn't even award a single B to any index

i am not advising to buy US-Treasury Bonds but for a correct comparison that's the only way.

question: where's the [s&P]beef?

If I had as much money as yourself, I would probably be risk adverse and invest most of my portfolio in bonds. 8.91% yield you mentioned seems a little low. The actual yield when reinvested dividends are considered is closer to 11% the last 50 years. Bonds are definitely saver but don't offer the upside of stocks. The chart below illustrates the difference in yeilds.

Edited January 19, 2008 by siamamerican

[siamamerican]

The chart is too small to read. What it illustrates is if you invest $1 in US Treasuries, the dollar would have grown to $31 compared to $973 for the S&P.