Friday, October 10, 2008

Procrastination pays off

I knew if I put off dealing with my procrastination long enough it would pay dividends, and it finally has. I joined my current employer in 2005, and never set up any investment elections with the new 401k plan. Since then all my contributions have been going into their short term cash vehicle. I missed out on all those fabulous gains in the equity market between 2005 and the market peak in October of last year, but unless I had had the prescience to unload my equity holdings then, which I wouldn't have, my cash un-strategy worked perfectly for the equity market crash unfolding before our eyes.

Anyone feeling prescient about when the bottom might appear?

11 Comments:

Blogger Susan's Husband said...

I know exactly when the bottom will occur, and that is one week before I decide to shift from cash to stocks. So just wait till I buy in, then load up the previous week. Just promise to share some of your massive returns with me.

October 10, 2008 10:12 AM  
Blogger Harry Eagar said...

I think you'll recognize the bottom when the Dow gets down to 1,600.

Yesterday in the newsroom, I was being asked, as the business writer and as someone who has been contradicting all the happy talk since March, what I thought was going to happen.

I said I expected the Dow would get down to 7,500 by election day.

Too optimistic again.

October 10, 2008 11:18 AM  
Blogger Ali said...

I feel pretty good about buying a Lexus a year ago instead of doing the sensible thing and sticking it in index funds.

I wish I had ready cash now though. This is a once-in-a-generation event that has created a lot of buying opportunities.

October 10, 2008 11:45 AM  
Blogger Susan's Husband said...

Hey, what about a bet on that? One side is "DOW reaches 2000", the other "DOW reaches 10,000". First across the finish line wins. I'll take the upside.

October 10, 2008 12:10 PM  
Blogger Bret said...

If you had purchased $1,000 of Delta Air Lines stock one year ago, you would have $49 left.

With Fannie Mae, you would have $2.50 left of the original $1,000.

With AIG, you would have less than $15 left.

But, if you had purchased $1,000 worth of beer one year ago, drunk all of the beer, then turned in the cans for the aluminum recycling REFUND, you would have $214 cash.

Based on the above, the best current investment advice is to drink heavily and recycle.

(HT: http://mjperry.blogspot.com/ )

October 10, 2008 1:03 PM  
Blogger erp said...

SH, I'll take piece of that for a benjie -- double if the DOW is past 14,000.

October 10, 2008 1:08 PM  
Blogger Duck said...

2000 isn't in the cards, but 7,000 may be. I'm not expecting a rebound back to 10,000 until 2010 at the earliest. Some real damage has been done, and it will take some time to put a new international regulatory scheme in place before capital will flow freely into US equity markets again. Where will the capital to propel the Dow above 10,000 going to come from?

October 10, 2008 3:04 PM  
Blogger Susan's Husband said...

Economic growth. I am not claiming we'll seen a 10K DOW soon, just much sooner than a 2K DOW. My view isn't too far from yours so I picked 10K so the bet wouldn't drag on for more than a year or two. If we haven't hit 2K by then, we'll get to 10K. I am just waiting to see if Mr. Eagar thinks bumping his 1600 to 2000 makes it enough of a sucker bet to take advantage of me.

October 10, 2008 5:37 PM  
Blogger Hey Skipper said...

Unlike Harry, I don't think the market will go down a lot further.

Outside the financials -- which is most of the market -- PE ratios are getting better by the minute. Like Ali, I think there are a lot of buying opportunities out there

Also, the Chinese are sitting on scads of cash. (It is worth noting that their failure to allow the yuan to become fully convertible has contributed in no small part to this schlamozzle) The US economy tanking can have no attraction to them.

Anyway, I am sticking to the dollar cost averaging strategy. My 401k is maxed out. Since I won't be making any withdrawals for at least another 10 years, I figure this market is going to work out well for me in the long run.

BTW, an editorial in today's WSJ provides a brief overview of how we got here.

Contra Harry, the CRA figures prominently.

October 10, 2008 5:54 PM  
Blogger Harry Eagar said...

Sucker bet?

Well, I picked 1,600 for a reason: that's how much the Dow fell after Black Friday in '29.

I am not too concerned about the rises and falls in the indexes, which we have to live with anyway. Nobody claims there's a path out of the business cycle.

I am concerned about crashes. You cannot predict a crash by extending a trend. Duh. That's why we call it a crash.

We knocked out the props that had a good record of forestalling crashes. We did get the entirely predictable panic.

Unlike in, say, 1893, we now react to panics by trying to shore up the system. So a crash is no longer inevitable when you have a crash.

I cannot estimate whether the shoring techniques will work because:

1. It's a new system, never been crash-tested before.

2. I have no idea what US government financial policy is. They're winging it.

It's not a sucker bet. It's a crapshoot.

I prefer poker.

October 11, 2008 11:21 AM  
Blogger Harry Eagar said...

' So a crash is no longer inevitable when you have a crash.'

should have been

' So a crash is no longer inevitable when you have a panic.'

October 12, 2008 5:04 PM  

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