As for the markets this October, I am 100% defensive. I’ve taken all disposable cash out of the market. I have enough from my company stock and 401K.
.-= Financial Samurai´s last blog ..What Renting DVD’s Teaches Us About CD Yield Maximization =-.

You get the last word. I cannot have a discussion with you.
.-= Mark Wolfinger´s last blog ..Q & A. Pricing options below intrinsic value =-.

What happens to them when there are returns sequences in which high returns are frontloaded, Mark? The backloading of high returns doesn’t make this problem any worse. It just makes the vast majority of investors richer, enabling them to retire at earlier ages.

What do they do when it’s time to cash in and the market is even lower. Just answer that and say nothing else. Is that a possibility?

There are all sorts of return sequences that are possibilities, Mark. I did not create the possibilities. I am merely reporting on which ones are good possibilities and which ones are bad possibilities.

There are ways to protect yourself from being in a situation where it is time for you to sell stocks and prices are not high enough for you to take out the money you need to live on. The primary thing is to look at the range of possibilities before putting money on the table and make sure that you will be at least okay in a worst-case-scenario returns sequence. I have four calculators at my site (reporting the lessons of the historical stock-return data) that help people do this.

The idea that I am expressing here is that we all should be rooting for the best possible returns sequences, not the worst ones. Today, most of us are rooting for the worst possibilities (most of us like frontloaded returns for emotional Get Rich Quick reasons). I am trying to change that. As we come to a better understanding of how stock investing works in the real world, we will become better able to explore all sorts of exciting strategies that are closed to us today.

You are hostile to this idea, Mark. You are not the only one. So long as there are large numbers who are hostile to the idea of learning about better strategies, we are all held back by that. I make an honest effort to be responsive to your questions. I would be grateful if you would make more of an effort to come across as less hostile. If you have no interest in the ideas, take a pass on my posts and read someone else’s stuff. If you have sincere questions, I think could show a bit more gratitude when I go to the trouble to provide answers to them to you.

Rob
.-= Rob Bennett´s last blog ..Invest In Stocks Unless There Is a Strong Reason Not To Do So =-.

Answer these:

What happens to all investors for whom your expected returns don’t materialize IN TIME TO HELP?

What do they do when it’s time to cash in and the market is even lower.

Just answer that and say nothing else. Is that a possibility?

Mark
.-= Mark Wolfinger´s last blog ..Q & A. Pricing options below intrinsic value =-.

I’m serious, Mark. We call it a “market,” do we not? That means that it is a place for buying things and selling things. If it is a properly functioning market, those who are buying should be doing all that they can to keep prices low. The fact that many express surprise over this idea points to the root problem with the stock market, in my assessment. It doesn’t function the way a true market would function because millions of the participants in it are not acting in their self-interest (they are hoping for and working for high prices rather than low prices).

Then what? The market is going to conveniently turn around, allowing them to earn big profits for retirement? Think about how absurd that is.

I don’t think it is absurd, Mark. In the long term, stock prices always reflect the economic realities (it is only in the short term that investor emotion is the dominant factor in setting prices). In the long tern, the market is going to provide a return somewhere in the neighborhood of 6.5 percent real. That return can be provided through all sorts of return sequences. The best possibility for the vast majority of investors is that we have low returns for many years and then high returns only after we have purchased most of the stocks that we will be purchasing over the course of our lifetimes.

And while the market is conveniently trending lower for the youngsters, what about the 50+ generation? What are they supposed to do (rhetorical question)

Many continue buying stocks until they are 65 or older. That group should be rooting for lower prices. If you are taking money out of the market to finance your costs of living, you are a seller and you should be rooting for higher prices. But lots of people never take money out — they end up leaving their stock portfolios to their kids or to charities. They are neither buyers nor sellers and the returns sequence that happens to come up does not matter much to them.

The point on which we are not connecting is that you are viewing a price drop as a negative because you are viewing it as a permanent thing. I view the long-term return as fixed by the economic realities. So I am looking only at whether returns sequences with frontloaded price drops are a good thing or a bad thing compared to returns sequences with frontloaded price increases. The answer (this is true as a matter of mathematics) is that frontloaded price drops are better for most of us.

If you don’t agree that the economic realities support a long-term return of 6.5 percent real, then we disagree on a fundamental point that is not at issue here. You are of course entitled to disagree, but it is certainly not a crazy idea to believe that the long-term return is going to be something in that neighborhood. Most big-name experts believe this (that doesn’t make it so, but I do think it suggests that it is not an entirely crazy idea).

Rob
.-= Rob Bennett´s last blog ..Invest In Stocks Unless There Is a Strong Reason Not To Do So =-.

You cannot be serious.

You believe investors should root for lower prices so they can accumulate stocks at low prices.?

Then what? The market is going to conveniently turn around, allowing them to earn big profits for retirement? Think about how absurd that is.

And while the market is conveniently trending lower for the youngsters, what about the 50+ generation? What are they supposed to do (rhetorical question)
.-= Mark Wolfinger´s last blog ..Q & A. Pricing options below intrinsic value =-.

You are of course right that this is how most feel, Phil. I think we are very wrong to feel this way.

I am building a calculator (“The Buy-and-Hold Reality Checker”) that shows that, if we see price drops for the next 10 years, the vast majority of investors will be far better off than if we see price gains for the next 10 years. Why? Most of us are net buyers of stocks, not net seller. Buyers should always be seeking low prices and sellers should always be seeking high prices. Price increases are bad for stock investors (the exception is retirees who are selling stocks to raise money to live on).

We are all rooting for the wrong thing. That’s one of the reasons why our understanding of how stock investing works is so messed up today.

Rob
.-= Rob Bennett´s last blog ..Podcast #155 — The Retirement Risk Evaluator Is Not a Conservative Calculator, It Is An Accurate Calculator =-.

I don’t see how you can believe that to be true – just because it has been true – so far.

Wasn’t there a mentality that states there’s a limited amount of real estate, and because the population is growing, housing prices will always increase?

I don’t know about you, but I want an insurance policy that protects me in case you are wrong in your assumption. That policy is available in the shape of collars.
.-= Mark Wolfinger´s last blog ..Options trading: Questions welcome =-.