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Happy holidays MFOs; Is another black-swan or turmoil like event coming soon in 2015? Any thoughts how to play this market? I am still 80/20 but still have many yrs left. thinking about buying more oil
Sugg not reading so much in theory or the sociology or culture of markets and finance.
Oil is probably v good play if you are in a speculative mood. I don't know how anyone is going to lose buying REXX now --- financially solid, just takes patience. Awfully low. Just one example.
We want the highest confidence statistical outcomes via a large data sample on our side as we can have so as to develop a "gist" of what the year will look like historically and have emotional preparedness, if necessary. Component 3 of our model identifies the risk profile for the year during the 3rd week of Januarys. https://docs.google.com/presentation/d/18kMFJrq_F384HhHUS-lU1C8ec4NdmmjkCrCsye_shE8/edit?usp=sharing You can see from the slides that the preponderance of steep decline years occurred in the high risk profile years, a couple in the neutral profile years, and a one in the Favorable "invested first half" profile. 2014 is shaping up with an above average performance in the context of having been a neutral risk profile year.
A BlackSwan event is one that was not anticipated, something that happened 'out of the blue' which no one would have expected. That is how I define it. In many instances they are geo-political events that cause economic events. Those economic events might have happened anyway, but the geo-political event(s) made it a reality.
2007-08 was not a BlackSwan event as such, since the primary causes were financial in nature - mortgage mess, financial leverage, etc. 2001-02 certainly had a portion that was BlackSwan...the terrorist attacks in the U.S., which may have precipitated an already high-priced stock market and other economic issues.
Others may have different definitions of BlackSwan events. But by definition, if a certain geo-political event is in the news and already occurring or about to occur, it is not BlackSwan.
No - 2015 looks pretty good John. But look out in 2016 for a possible replay of the 2000 Bush V Gore Supreme Court battle centered again around Florida. Markets tanked during that previous dispute.
This time it would be Bush V. Clinton with potentually nastier ramifications - as the Clintons are much more "connected" politically than was Gore, who was pretty much an outsider. I'll give it a 25-35% probability. But - has the potential do do a lot of harm. -
Moderators: Go ahead and delete this if too far off base. It's hard to come up with Black Swans that aren't emotionally charged and offensive.
A questionable election result for President would be a spark for a black swan but it would have to expand beyond that. If the military commanders and /or the Joint Chiefs failed to recognize the new Commander in Chief, then that could be an event that triggers the black swan. A Constitutional Crisis in effect. I would hope it never came to that.
Some here might remember the Nixon-Kennedy election. It was told in the years later on that Nixon felt he had won but Kennedy had some good help in Chicago that put him over the top. Rather than putting the country through the turmoil of contesting the election, Nixon conceded.
Since this thread is under Fund Discussions, which fund would everyone go into in the case of such a predicament?
My recollection is that the crisis contributed to investor uncertainty and did impact markets. Hard digging much up on that, but from The National Review:
"In 2000, the market reacted very badly to the election crisis. In the five weeks between Election Day and the resolution in the Supreme Court, the 10-year bond yield fell 53 basis points. The Nasdaq fell 24 percent from November 7 through November 30, 2000. This reaction also reflected the looming recession; technically, it started in March 2001, though revised data show negative results for the third quarter of 2000 and the first and third quarters of 2001."
"Is another black-swan or turmoil like event coming soon in 2015? Any thoughts how to play this market? I am still 80/20 but still have many yrs left. thinking about buying more oil."
IMO, black swans come suddenly and without warning. There is no way to plan for them. You can invest based on the possibility of one happening but that could leave you vastly underperforming the markets when the situation does not materialize. Plus, when the black swan event occurs, you would be super lucky to get out unscathed. Try to call your fund company in the event. All lines busy. Markets might be closed such as after the Sept. 11th attacks.
It sounds like you have a long time horizon ahead. All you can do is make sure your asset allocation is what you want. As you get closer to retirement, going to a more conservative allocation would cushion the effects of a major market downdraft.
i'm w/ JC on this. i mean, if you can predict a black swan, ipso facto it ain't a black swan. (have no idea if i used ip-fa properly but it sure sounds good, don't it?)
There are lots of potential Black Swans. Since they can (and do) strike at anytime, it's difficult to prepare for one. Some would be so awful that it wouldn't matter what you owned. Any implications for investing? For me I guess it argues for a degree of cf extra caution ..... some cash and higher quality bond funds. Also, some see gold or rare coins as their life raft.
Comments
phft
Sugg not reading so much in theory or the sociology or culture of markets and finance.
Oil is probably v good play if you are in a speculative mood.
I don't know how anyone is going to lose buying REXX now --- financially solid, just takes patience. Awfully low. Just one example.
Component 3 of our model identifies the risk profile for the year during the 3rd week of Januarys. https://docs.google.com/presentation/d/18kMFJrq_F384HhHUS-lU1C8ec4NdmmjkCrCsye_shE8/edit?usp=sharing
You can see from the slides that the preponderance of steep decline years occurred in the high risk profile years, a couple in the neutral profile years, and a one in the Favorable "invested first half" profile. 2014 is shaping up with an above average performance in the context of having been a neutral risk profile year.
The rest of components for model are here: http://stockmarketmap.wordpress.com/2013/08/29/market-map-basic-version/
In terms of economic validation, the economic conditions index can alert us of drastic economic slowing and affect on stock prices ( we only use this as a confirmation of the model as the data sample is not robust enough, although it has done a good job none the less )
https://docs.google.com/document/d/1IqXuggnKY7fDH-i_96uMIOlmhzS7ei-dreUZ_8dpatc/edit?usp=sharing
We'll see the results of component 3's calculation for 2015 during January
2007-08 was not a BlackSwan event as such, since the primary causes were financial in nature - mortgage mess, financial leverage, etc.
2001-02 certainly had a portion that was BlackSwan...the terrorist attacks in the U.S., which may have precipitated an already high-priced stock market and other economic issues.
Others may have different definitions of BlackSwan events. But by definition, if a certain geo-political event is in the news and already occurring or about to occur, it is not BlackSwan.
This time it would be Bush V. Clinton with potentually nastier ramifications - as the Clintons are much more "connected" politically than was Gore, who was pretty much an outsider. I'll give it a 25-35% probability. But - has the potential do do a lot of harm.
-
Moderators: Go ahead and delete this if too far off base. It's hard to come up with Black Swans that aren't emotionally charged and offensive.
But that wasn't why, right?
We will be lucky if it's Bush v Clinton, very lucky. Consider the unthoughtful or less-experienced alternatives.
Some here might remember the Nixon-Kennedy election. It was told in the years later on that Nixon felt he had won but Kennedy had some good help in Chicago that put him over the top. Rather than putting the country through the turmoil of contesting the election, Nixon conceded.
Since this thread is under Fund Discussions, which fund would everyone go into in the case of such a predicament?
"In 2000, the market reacted very badly to the election crisis. In the five weeks between Election Day and the resolution in the Supreme Court, the 10-year bond yield fell 53 basis points. The Nasdaq fell 24 percent from November 7 through November 30, 2000. This reaction also reflected the looming recession; technically, it started in March 2001, though revised data show negative results for the third quarter of 2000 and the first and third quarters of 2001."
http://www.nationalreview.com/articles/212647/litigation-jitters/david-malpass
>> This reaction also reflected the looming recession
Burying the real content.
Thanks; interesting to dig up their perspective.
"Is another black-swan or turmoil like event coming soon in 2015? Any thoughts how to play this market?
I am still 80/20 but still have many yrs left. thinking about buying more oil."
IMO, black swans come suddenly and without warning. There is no way to plan for them. You can invest based on the possibility of one happening but that could leave you vastly underperforming the markets when the situation does not materialize. Plus, when the black swan event occurs, you would be super lucky to get out unscathed. Try to call your fund company in the event. All lines busy. Markets might be closed such as after the Sept. 11th attacks.
It sounds like you have a long time horizon ahead. All you can do is make sure your asset allocation is what you want. As you get closer to retirement, going to a more conservative allocation would cushion the effects of a major market downdraft.
Good point.
And Bob C put it very well above too I thought.
There are lots of potential Black Swans. Since they can (and do) strike at anytime, it's difficult to prepare for one. Some would be so awful that it wouldn't matter what you owned. Any implications for investing? For me I guess it argues for a degree of cf extra caution ..... some cash and higher quality bond funds. Also, some see gold or rare coins as their life raft.