Anyone scared about the economic crisis?

[lookout123]

if the US markets go, the foreign markets will also spiral until a new leader steps up. Foreign currency will be about as useful as domestic currency. If that is your concern you're better off investing in food, weapons, ammo, security systems for your land, and items that will be good for bartering in the new economy.

Or you can start preparing your doomsday safe house elsewhere - i'm thinking central america or australia.

[aimeecc]

Were considering Canada.
And of course, like any good American, we are prepared with weapons. lol Security system - definitely. Land to farm on, lake to fish in. Who could ask for more.
That's why we want to buy actual gold. Useful for bartering.

[Undertoad]

Well mankind has invented apocalypse stories since the very beginning, and only an extreme few have come true. There is something in human behavior that wants to convince you the sky is falling. Resist it.

[TheMercenary]

Originally Posted by aimeecc

Were considering Canada.
And of course, like any good American, we are prepared with weapons. lol Security system - definitely. Land to farm on, lake to fish in. Who could ask for more.
That's why we want to buy actual gold. Useful for bartering.

Canada will not let you bring in guns. They are very strict on gun ownership.

[tw]

Meanwhile, some great investment possibilities currently or will soon exist - for those who do not entertain fears of the second coming of Christ.

[lookout123]

Oh, you're back to talk about investments again?

[tw]

In May 2004, these same investment concepts were discussed. Two posts that discucss how to invest were Portfolio 101 and Portfolio 101 [quote]Market professionals are too buy selling themselves rather than learning what really makes a good investment. There is great profit in selling themselves because so many laymen think you must be an economist or some kind of professional investor to invest in stocks. ... Listen to what he says. If he hypes cyclic trends and capital expenditures, then run. However if he talks about the company product and industry trends, then put his stock in your basket of 'stocks to watch'. ...
In May 2004, these same investment concepts were discussed. Two posts that discucss how to invest were Portfolio 101 and Portfolio 101

Market professionals are too buy selling themselves rather than learning what really makes a good investment. There is great profit in selling themselves because so many laymen think you must be an economist or some kind of professional investor to invest in stocks. ... Listen to what he says. If he hypes cyclic trends and capital expenditures, then run. However if he talks about the company product and industry trends, then put his stock in your basket of 'stocks to watch'. ...
There is nothing fancy about stock investment except by understanding the only reason for growth - the product and its markets. Don't let the market liars have you think that investment is only for professionals. Again, the market experts average underperform the markets. Product is why Peter Lynch and Warren Buffet were such good investors.

As usual, the emotional make claims without even stating a single reason why:

Originally Posted by depmats

tw - you have your head so far up your ass on this one that i don't even know where to start.

and

Originally Posted by sycamore

Tear his arguments apart then.

How do we know both have not a clue? Both would attack the messenger AND both would not provide a single useful fact. How curious. Extremists also do this.

Well let's see what happened to Onyxcougars investments.

Initially were investments in Dodge & Cox Stock Fund (DODGX) and Dodge & Cox Income Fund (DODIX). Apparently after professional advise from elsewhere, the Stock Fund was eliminated. Added were
Dodge & Cox Income (DODIX)
Vanguard Morgan Growth (VMRGX)
Vanguard Wellington (VWELX)
Vanguard Total Stock Index (VTSMX)

The eliminated Stock Fund outperformed the market over four years. But all non-indexed funds in the new portfolio, except one, underperformed the market constantly over those same four years. The only index fund (fourth down) outperformed the market. Eliminate the index fund and the entire portfolio of professionally managed funds is tragic.

Blue line is each fund over the past four years; red line is the Dow Jones Industrial Average. Below are DODIX, VMRGX, VWELX, and the index fund VTSMX:

[tw]

UT selected a fund apparently using Vanguard's fund picker (not using professional advise).

Originally Posted by Undertoad

Personally I would be more in the growth fund - and I am (my choice is VSEQX), even though I'm a little older than you.

Well UT outperformed the market; if he got out on or before the end of last year.

Unfortunately, if UT did not get out last year, then he underperformed the market AND lost all four years of profits. Had he invested in a DJIA or an S&P500 index fund (funds without experts selecting the investements), then UT would have outperformed the Vanguard Strategic Equity fund. His investment was no better than an index fund starting Jan 2007 and then became worse than an index fund on Thanksgiving 2007.

Again, the chart is the past four years with VT's fund in blue and the DJIA in red.

[tw]

In that same discussion were a cross section of stocks:
Microsoft (MSFT)
Intel (INTC)
Nokia (NOK)
Amazon (AMZN)
Adobe (ADBE)
Qualcomm (QCOM)
Cisco (CSCO)
Juniper Networks (JNPR)
Warren Buffet's Berkshire Hathaway (BRKA)

As Peter Lynch noted, most will mimic the market, one may be a dog, and one will be so good as to make the entire portfolio profitable. Observe with care. For example Intel (second down) looks like a large loss. But it is only 20% down. Next stock, Nokia, looks like a small gain but is really 50% up.

This 'basket of stocks' duplicates what Peter Lynch stated and demonstrates how a simple cross section of stock typically outperforms professionally managed mutual funds. Notice the performance of Nokia, Amazon, Adobe, and Qualcomm (until it started losing lawsuites). Even the legendary Berkshire Hathaway is only an average performer in this portfolio posted four years ago but better than the non-indexed mutual funds.

Meanwhile, why would anyone even waste one dollar on a lottery ticket? Why would anyone invest in a losers proposition?

Blue is each stock as posted four years ago; red is the DJIA:

[Undertoad]

Lynch's strategy makes sense, as it did when he first wrote it, what, 20 years ago? After learning it as a manager of funds...

But this handful of stocks has a problem: they are all in one sector, technology. If you had looked at a different time frame, say the time frame ending in the dot-com bust (to be a little too obvious), they would all be dogs and you'd underperform the funds.

Ideally your handful includes stocks in many sectors; it is exactly the same strategy as W.Hi.P's defencive betting schemes in the "Betting tips" thread.

BTW I got out of VSEQX about two years ago. But not for good reasons.

[lookout123]

But all non-indexed funds in the new portfolio, except one, underperformed the market constantly over those same four years. The only index fund (fourth down) outperformed the market. Eliminate the index fund and the entire portfolio of professionally managed funds is tragic.

Point of order: As I pointed out in the other thread which I linked above, you are using accurate numbers to support inaccurate assumptions. Not a single one of those funds is benchmarked to "the market" represented by the S&P 500. They each have different uses in a portfolio.

BTW, and index fund can't outperform the market unless A) you're measuring it against the wrong index, or B) it has drifted away from mirroring it's designated index.

But, hey - i really like your hammer. Unfortunately, every problem is not a nail.

[tw]

Originally Posted by Undertoad

Lynch's strategy makes sense, ... But this handful of stocks has a problem: they are all in one sector, technology. If you had looked at a different time frame, say the time frame ending in the dot-com bust (to be a little too obvious), they would all be dogs and you'd underperform the funds.

The dot.com crash hit everything. For example, Ford and big pharma also suffered. How are autos affected by computers? Well major downturns tend to take all down. Whereas the downturn was larger among the dot.coms, still the downturn was mostly with stocks not on my list. Notice how those stocks mostly followed the DJIA down meaning most all stocks took a hit.

Viewing aimeecc's three stocks demonstrates the problem. J&J, Intel, and a bank was a diversified portfolio and a prescription for failure. A typical and diversified investor would not understand all those industries and their products. Bad news is to invest in industries not understood; which was the point in Portfolio 101. Investing without grasping the product is why one should invest in one stock in his early twenties so as to learn the 'feel' of how it works; to learn using money that is most precious. I believe most everyone loses on their first investment - which is necessary to understand investing by 30. aimeecc's other mistake was to ignore those investments - not learn from them. We make mistakes to learn.

Peter Lynch talks about investing in things he understands such as retail that his daughters and wife preferred shopping at. Warren Buffet makes the same point. Buffet's closest friend, Bill Gates, repeatedly tried to explain the computer technology. Warren refused to invest. Buffet is another famous investor who invests only in what he understands such as MacDonalds, Dairy Queen, Coke, a railroad, etc.

aimeecc violated principles in Portfolio 101 and Portfolio 101. Intel was a very bad investment if the computer industry was not understood. Bank of NY also a poor investment for same reasons. Even if one hits the lottery does not make it a good investment. The good investment is not about luck.

Big and famous name is not sufficient to judge a good stock. Using that strategy means GM is an ideal investment. After all, see all those GM cars? Learn the failure of that reasoning as demonstrated by GM's stock for the past 20 years. GM products have been that bad that long. One cannot invest using a product oriented perspective if the company and its products are not understood.

Diversification is overrated. Yes, if one can diversify, then by all means do so. I also understand cars - so I can diversify. But back then, I saw no good auto investments. If diversification means investing in industries not understood, then diversification would only pervert the investment. If one needs diversification, that means index funds and ETFs. Those are the only way to diversify and not get punished because the investor does not understand each company’s products.

One previously forgotten point: returns did not include another profit - dividends. Most of those examples did not have dividends. But those few dividends actually pay the rent.

To be diversified, one must first learn about other industries. Being diversified in other 'unknown' industries is how to lose. Meanwhile, notice how all those stock in one industry - when one was down, another was up big time. Even though all were in a same industry, all did not rise and fall together. Being in various aspects of the same industry was diversification.

[TheMercenary]

Originally Posted by lookout123

Point of order: As I pointed out in the other thread which I linked above, you are using accurate numbers to support inaccurate assumptions. Not a single one of those funds is benchmarked to "the market" represented by the S&P 500. They each have different uses in a portfolio.

BTW, and index fund can't outperform the market unless A) you're measuring it against the wrong index, or B) it has drifted away from mirroring it's designated index.

But, hey - i really like your hammer. Unfortunately, every problem is not a nail.

[xoxoxoBruce]

The economy is in trouble... must be a shortage of cash, because Atlantic City has just added $25,000 chips.

[xoxoxoBruce]

Here's an excellent explanation about the price of gasoline.