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Thank you Mr Bogle

Jack Bogle, Taylor, Mel, Rick Ferri, and others have provided us with the means to survive and prosper in all types of market conditions; to them, I say thank you. The importance of an IPS and the discipline to maintain a portfolio is never more apparent than during times of volatility. Trying to make adjustments on the fly is unwise and nerve-racking and can lead to costly choices.
Thanks again to the members who have contributed to the Boglehead investment philosophy over the years; its times like we are experiencing now that all the knowledge and experience of others is put to good use.

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Re: Thank you Mr Bogle

Yes, stay the course and as one accelerates into a turn, buy into a down market. Just be prudent!

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Re: Thank you Mr Bogle


@Bentley wrote:

 


Thanks again to the members who have contributed to the Boglehead investment philosophy over the years; 

 


You're welcome, Bentley.

R48

 

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Re: Thank you Mr Bogle

@Bentley 

"Trying to make adjustments on the fly is unwise and nerve-racking and can lead to costly choices."

Thanks for the insight, Captain Obvious.  In fact, however, it depends on the choices.  They may be wise or they may be unwise.

Late 2020 JRinNY commented on the weak market technicals.  She suggested it might be an opportunity to re-examine portfolio risk and to not succumb to a "fear of being left out".  She didn't know about Corona, but she knew the market advance was vulnerable to negative news.  It wasn't a bad moment to cut risk by re-balancing, selling some equities at high prices. 

I recall that Mr. Bogle studiously avoided performance chasing and occasionally pointed to reduced market expectations resulting from high stock prices. For example, read HERE.  In late 2017 Bogle said,

I believe strongly that [investors] should be realizing valuations are fairly full, and if they are nervous they could easily sell off a portion of their stocks.

Late 2020 Bentley pursued his PERMA-BULL "DOW 33,000" mantra.  I don't think Bogle would have condoned that, were he still with us.

---

At present we're starting to see panic and maybe even the beginnings of 2008-style forced selling.  This is becoming another good opportunity to rebalance portfolio risk, this time by adding equities at lower prices.  There's a decent probability that even better opportunities will emerge.

Now's the time.  You heard it here first.

N.

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Re: Thank you Mr Bogle


@norbertc wrote:

@Bentley 

"Trying to make adjustments on the fly is unwise and nerve-racking and can lead to costly choices."

Thanks for the insight, Captain Obvious.  In fact, however, it depends on the choices.  They may be wise or they may be unwise.

Late 2020 JRinNY commented on the weak market technicals.  She suggested it might be an opportunity to re-examine portfolio risk and to not succumb to a "fear of being left out".  She didn't know about Corona, but she knew the market advance was vulnerable to negative news.  It wasn't a bad moment to cut risk by re-balancing, selling some equities at high prices. 

I recall that Mr. Bogle studiously avoided performance chasing and occasionally pointed to reduced market expectations resulting from high stock prices. For example, read HERE.  In late 2017 Bogle said,

I believe strongly that [investors] should be realizing valuations are fairly full, and if they are nervous they could easily sell off a portion of their stocks.

Late 2020 Bentley pursued his PERMA-BULL "DOW 33,000" mantra.  I don't think Bogle would have condoned that, were he still with us.

---

At present we're starting to see panic and maybe even the beginnings of 2008-style forced selling.  This is becoming another good opportunity to rebalance portfolio risk, this time by adding equities at lower prices. 

Now's the time.  You heard it here first.

N.


I concur with all of this. My only reservation is that if we are in the midst of a "2008-style" scenario, then we could be a long way from a bottom. I sincerely hope that is not the case. There is a measure of fear, despite my being more conservatively invested than at any point in my investment history. I am a buyer at these levels, but I cannot say that I do not have my doubts. It took nearly 6 years last time for the markets to reach their previous highs. That is a long time, indeed. Any fears I have stem from buying too soon (mainly ego driven). Yet, despite my fairly significant purchases of the last couple days, I am still below what I consider my risk tolerance level.

Also, my growth stocks, which could be construed as "performance chasing", are doing much better than my index funds. Their gains over the past 10 years have insulated them from any real value destruction. So there is that, FWIW.

On JR's thread I highlighted "uncertainty" a month ago (specifically thinking of COVID-19) as a big factor in my feeling cautious and was dismissed by the usual suspects. I was inundated by the usual stream of "healthy economic indicators". Pretty **bleep** clear that uncertainty is driving this sell off big time!  It appears I have been vindicated, though I cannot say that I like it. What is disconcerting is that what I thought I was seeing appeared quite obvious at the time. And the market still climbed rapidly for another month! Glad I held my ground though.

Here is to hoping that now is the right time to be buying!

 

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Re: Thank you Mr Bogle

The cause of this down turn is not the same as 2008. Then, bad mortgages, banks leverage, etc. This time a virus when the banks etc. are in better shape. But what does bother me is the amount of personal debt out there. It does not leave much room for emergencies.

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Re: Thank you Mr Bogle


@norbertc wrote:

@Bentley 

"Trying to make adjustments on the fly is unwise and nerve-racking and can lead to costly choices."

Thanks for the insight, Captain Obvious.  In fact, however, it depends on the choices.  They may be wise or they may be unwise.

 


 

 Thanks to the shared knowledge of Mr. Bogle, Taylor, Rick Ferri, Mel, and many others, I and many Bogleheads are not forced to make choices. We follow our IPS, which assumes the market will go up and down. Trying to adjust allocations based on the daily market action and each new news cycle is not something I recommend.

Best to all.......

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Re: Thank you Mr Bogle


@Bentley wrote:

 

 Thanks to the shared knowledge of Mr. Bogle, Taylor, Rick Ferri, Mel, and many others, I and many Bogleheads are not forced to make choices. We follow our IPS, which assumes the market will go up and down. Trying to adjust allocations based on the daily market action and each new news cycle is not something I recommend.

Best to all.....


I can understand your wanting to change the subject from DOW 33,000 given that it's looking more like DOW 23,000 could be the train's next stop. 

So, start talking about Jack Bogle and stop your forecasting exercise?  Unfortunately, Jack Bogle would turn over in his grave if he read your posts predicting the DOW.  Real Bogleheads don't do forecasts. 

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Re: Thank you Mr Bogle


@norbertc wrote:

@Bentley wrote:

 

 Thanks to the shared knowledge of Mr. Bogle, Taylor, Rick Ferri, Mel, and many others, I and many Bogleheads are not forced to make choices. We follow our IPS, which assumes the market will go up and down. Trying to adjust allocations based on the daily market action and each new news cycle is not something I recommend.

Best to all.....


I can understand your wanting to change the subject from DOW 33,000 given that it's looking more like DOW 23,000 could be the train's next stop. 

So, start talking about Jack Bogle and stop your forecasting exercise?  Unfortunately, Jack Bogle would turn over in his grave if he read your posts predicting the DOW.  Real Bogleheads don't do forecasts. 


 

 We Bogleheads are human, we have feelings and urges just like active investors. One difference between active and passive investors is while we may express opinions on market directions we do NOT act on them. Buying and selling based on where you think the market is going to go is not a good strategy IMO. This thread is beginning to stray from its intended purpose. Please excuse me if I do not respond to off-topic posts.

 

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Re: Thank you Mr Bogle

Nothing is being pointed to comparing 2008 to 2020. What crisis do we have? At least 1 talking head could give us a real reason like subprime loans. Coronavirus popped up while the market was ripe for a correction.


@DrVenture wrote:

@norbertc wrote:

@Bentley 

"Trying to make adjustments on the fly is unwise and nerve-racking and can lead to costly choices."

Thanks for the insight, Captain Obvious.  In fact, however, it depends on the choices.  They may be wise or they may be unwise.

Late 2020 JRinNY commented on the weak market technicals.  She suggested it might be an opportunity to re-examine portfolio risk and to not succumb to a "fear of being left out".  She didn't know about Corona, but she knew the market advance was vulnerable to negative news.  It wasn't a bad moment to cut risk by re-balancing, selling some equities at high prices. 

I recall that Mr. Bogle studiously avoided performance chasing and occasionally pointed to reduced market expectations resulting from high stock prices. For example, read HERE.  In late 2017 Bogle said,

I believe strongly that [investors] should be realizing valuations are fairly full, and if they are nervous they could easily sell off a portion of their stocks.

Late 2020 Bentley pursued his PERMA-BULL "DOW 33,000" mantra.  I don't think Bogle would have condoned that, were he still with us.

---

At present we're starting to see panic and maybe even the beginnings of 2008-style forced selling.  This is becoming another good opportunity to rebalance portfolio risk, this time by adding equities at lower prices. 

Now's the time.  You heard it here first.

N.


I concur with all of this. My only reservation is that if we are in the midst of a "2008-style" scenario, then we could be a long way from a bottom. I sincerely hope that is not the case. There is a measure of fear, despite my being more conservatively invested than at any point in my investment history. I am a buyer at these levels, but I cannot say that I do not have my doubts. It took nearly 6 years last time for the markets to reach their previous highs. That is a long time, indeed. Any fears I have stem from buying too soon (mainly ego driven). Yet, despite my fairly significant purchases of the last couple days, I am still below what I consider my risk tolerance level.

Also, my growth stocks, which could be construed as "performance chasing", are doing much better than my index funds. Their gains over the past 10 years have insulated them from any real value destruction. So there is that, FWIW.

On JR's thread I highlighted "uncertainty" a month ago (specifically thinking of COVID-19) as a big factor in my feeling cautious and was dismissed by the usual suspects. I was inundated by the usual stream of "healthy economic indicators". Pretty **bleep** clear that uncertainty is driving this sell off big time!  It appears I have been vindicated, though I cannot say that I like it. What is disconcerting is that what I thought I was seeing appeared quite obvious at the time. And the market still climbed rapidly for another month! Glad I held my ground though.

Here is to hoping that now is the right time to be buying!

 


 

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Re: Thank you Mr Bogle

@Gary1952I agree, this is a completely different sort of animal. I may not have made that clear in my post. For one thing we are experiencing workers shortages as opposed to looming unemployment.

I think this will be relatively short lived and perhaps the fact that it is happening in the USA so late in the flu season will be what keeps it so. My current view is that this is a severe market overreaction and somewhat (late and due to) declining earnings. A lesson that both data and psychology must be considered when participating in the stock market. Data for the long term and psychology for the short term. The market is constructed of humans and, when I think about it, technical indicators are deeply rooted in psychology.

 

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Re: Thank you Mr Bogle


@Bentley wrote:   

 

We Bogleheads are human, we have feelings and urges just like active investors. One difference between active and passive investors is while we may express opinions on market directions we do NOT act on them. Buying and selling based on where you think the market is going to go is not a good strategy IMO. This thread is beginning to stray from its intended purpose. Please excuse me if I do not respond to off-topic posts.

It's one thing to have "feelings and urges".  It's another to make hundreds of PERMA-BULL posts about how the DOW is going to the moon and that we had better get on board the rocket train.  No one is questioning your portfolio management skills, but I would immediately put you on "IGNORE" (like over 70 people did on the old forum) to avoid seeing even one more of your ideological, condescending posts.

You sneered at JRinNY's excellent post alerting us to weak stock market technicals back in December.  Weak technicals (poor breadth, "fear of missing out" psychology), combined with high valuations, can lead to sharp corrections.   Your response was cynical and confident: "DOW 33,000!". 

All this is a shame, because you're a smart guy and (for example) correctly alerted us to a risky yield-chasing mania on the Income forum.  I love reading contrarian opinions.  But, was it necessary to make the same point hundreds of times and rub the culprits' noses in it after the KMI crash? 

JRinNY made a single post; no need to say the same things over & over.  She has class.

Just my opinion.

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Re: Thank you Mr Bogle


@DrVenture wrote:

@Gary1952I agree, this is a completely different sort of animal. I may not have made that clear in my post. For one thing we are experiencing workers shortages as opposed to looming unemployment.

I think this will be relatively short lived and perhaps the fact that it is happening in the USA so late in the flu season will be what keeps it so. My current view is that this is a severe market overreaction and somewhat (late and due to) declining earnings. A lesson that both data and psychology must be considered when participating in the stock market. Data for the long term and psychology for the short term. The market is constructed of humans and, when I think about it, technical indicators are deeply rooted in psychology.


Very nice post.

I certainly don't know that we've seen the bottom of this correction (or whatever it is).  My favorite CEFs are still trading at a premium, unlike in December 2018 when PCI traded at a 10% discount.  But, prices are more attractive than they were a few weeks ago after a lengthy melt-up.  Why not start buying, if that fits one's portfolio targets and we see decent value?

I'm not sure I'd characterize the downturn as an "overreaction".  The market was pricey and the leadership was narrow.  Corona is a serious problem and has to be handled.  Weak profits in various sectors will get even weaker for a while; cutting rates again won't help the banking sector.  Credit issues might emerge.  Still, once the market can look around the next corner thanks to more clarity on Corona medicines and vaccines, I bet we'll see renewed strength.

FWIW.

N.

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Re: Thank you Mr Bogle

You have actually nailed a few of my concerns. I think certain aspects of the market are still a bit overvalued. And am concerned that this may not be an overreaction. I am leaning into optimism here. I am hoping that this week's drop is based on the acceptance that further outbreaks are inevitable, yet they will be manageable. In other words, the appropriate concern is now priced in. Or soon will be.

If not, look out below!

I have been buying all week. I am now paused waiting on some sign of a bottom. Hindsight is indeed 20/20 or I would have made all my purchases Friday. I began nibbling earlier in the week. I know that I cannot hit the very bottom, so my strategy is to buy on the way down and on the way up too. Hoping I am not too early. I am prepared to overshoot my (very conservative) target allocation, if I have misjudged badly and the correct opportunity presents itself. I am still 3% below my target allocation.

Either way no big loss the way I see it. I am now investing money that I would have put to work at Dow 25,000 or 26,000 had I had that money available at that time. Who says that in life there are no second chances? LOL

With RMDs over a decade away I am playing the long game.

 

 

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Re: Thank you Mr Bogle

Norbert,

Bogle has previously done forecasts.

Here's one of his last:

https://www.financial-planning.com/opinion/jack-bogle-forecasts-lower-stock-and-bond-returns

However, I quite agree with you in general about "real" Bogleheads.  The rah rah mentality of some posters is downright ludicrous.

Bob (Boglehead excommunicant)

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Re: Thank you Mr Bogle


@GLI2019 wrote:

Norbert,

Bogle has previously done forecasts.

Here's one of his last:

https://www.financial-planning.com/opinion/jack-bogle-forecasts-lower-stock-and-bond-returns

However, I quite agree with you in general about "real" Bogleheads.  The rah rah mentality of some posters is downright ludicrous.

Bob (Boglehead excommunicant)


That was a good read. And boy I hope he is wrong.

This is certainly something to ponder:

"5) Money will flow from stock funds to bond funds. Since 1900, stocks have outpaced bonds by 4.2 percentage points annually, according to Bogle’s presentation. Now he projects that differential to be only about 0.5 percentage point. If the volatility of stocks stays many times that of high-quality bonds, then it is reasonable to assume investors will flee risky stock funds to get a nearly identical return on bond funds. That itself can create the self-fulfilling prophecy that results in lower stock returns.
Consider a more conservative allocation for your clients now, especially if they don’t have the need to take risk. Don’t do what many advisors did after the 2008 plunge, which was to grow more conservative. While I can’t predict markets, I suspect that investors will remain predictably irrational and sell their stock funds after a bear market."

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Re: Thank you Mr Bogle

Bogle is far wiser than many of his acolytes.

I have invested in Vanguard since the 1980s, read all of his books, had a few private exchanges with him and his former assistant, Kevin, and mourn the loss of such an admirable human being.

He was one of a kind.

Bob

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Re: Thank you Mr Bogle


@DrVenture wrote:

@GLI2019 wrote:

Norbert,

Bogle has previously done forecasts.

Here's one of his last:

https://www.financial-planning.com/opinion/jack-bogle-forecasts-lower-stock-and-bond-returns

However, I quite agree with you in general about "real" Bogleheads.  The rah rah mentality of some posters is downright ludicrous.

Bob (Boglehead excommunicant)


That was a good read. And boy I hope he is wrong.

This is certainly something to ponder:

"5) Money will flow from stock funds to bond funds. Since 1900, stocks have outpaced bonds by 4.2 percentage points annually, according to Bogle’s presentation. Now he projects that differential to be only about 0.5 percentage point. If the volatility of stocks stays many times that of high-quality bonds, then it is reasonable to assume investors will flee risky stock funds to get a nearly identical return on bond funds. That itself can create the self-fulfilling prophecy that results in lower stock returns.
Consider a more conservative allocation for your clients now, especially if they don’t have the need to take risk. Don’t do what many advisors did after the 2008 plunge, which was to grow more conservative. While I can’t predict markets, I suspect that investors will remain predictably irrational and sell their stock funds after a bear market."


Well, he was correct re the flows into bond funds.

But in this article, Bogle is discussing earning 4-4.5% in bond funds.  Those days are temporarily(at least) history.  Wonder what Bogle would say, now that Treasury bonds are below 1.8% across all maturities.  Would he now state that stocks are looking much better vis-a-vis bonds...as Buffett just posited in a recent lengthy interview.

Bogle also had big issues with Vanguard's Index all-everything bond fund, bnd, having to keep so much in Treasury Bonds, which he considered overvalued even then.  He wanted the prospectus changed to allow lesser Treasuries.  He might be perplexed at Treasury Bond yields today!

R48

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