Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FYI: It’s become fashionable in the age of social media to derisively sneer at our fellow investors who are too optimistic and refer to them as “permabulls.” This sort of thing earns us intellectual style points – points which can be accumulated and redeemed to be spent precisely nowhere. Regards, Ted http://thereformedbroker.com/2017/02/25/proudly-permabullish/
Kinda of like the time period prior to the tech bubble of 2000. Three years later the broader index lost over 50% and NASDQ took an even bigger lost. Is this a secular bull market as often phased by Schwab?
The thing these kinds of essays fail to acknowledge is how short in terms of human history 100 years is. And there is nothing scientific to this historical experience that one can extrapolate necessarily into the future indefinitely. All one can say is in the past hundred years, it has generally been a good idea to be bullish on U.S. stocks. Is that any proof that it will be good to be bullish for the next 100? The implicit assumption really amounts to a feeling--patriotism, a belief in American exceptionalism--not a scientifically verifiable fact. Will America continue to represent the highest level of "productivity, innovation and economic dynamism" that will drive the stock market here higher? Or are we part of a larger pattern of economic development you see historically with emerging nations? Were not Britain, Spain, Portugal once like America in previous eras in their economic dynamism until America became the dominant force in the 20th century? Perhaps the 21st century will still belong to us. Or perhaps it will belong to China or some other nation state. The answer can only be understood in retrospect.
Besides being a dumb analogy, that washtub Buffet uses only works if one has some form of dry powder set aside to buy equities when cheap. Normally, that powder would consist of a pile of low yielding cash or short term bonds. A second problem is in determining when equities are cheap enough to hang out that tub - and than not expending all the dry powder too early - as markets usually overshoot on both the upside and downside. I'm afraid Warren's tub is riddled with holes. Not to say Buffet wouldn't know when and how to deploy it. That's what made him rich. But we are not he.
I like Buffet, but found his letter this year pretty much useless, unless you thrive on folk humor and don't care about valuations and economic trends. Yes - If you occupy an "average" place in the life cycle with "average" needs and an "average" temperament and you want to settle for "average" risk and "average" returns - than by all means buy index funds.
@Ted - Please tell me what's so admirable about the M* discussion forums? I looked at them for the first time today (based on your previous reference) and saw nothing of interest.
@hank - I find great value in the Income & Dividend, CEF and Fidelity forums occupied by some quite knowledgeable posters. I can respect they they are not for everyone. I haven't spent time in their mutual fund forum lately.
I'll not classify myself as a permabull, but I probably feel market bullish most of the time. Why? The historical market data supports that optimistic perspective.
"The best predictor of future behavior is past behavior". I don't know the origins of that saying and I'm too lazy to research for it. The historical data over a long timeframe encourages my optimism. Is that optimism impacted by current conditions? Of course it is. My level of optimism is dependent on current circumstances and conditions. So I do make adjustments, but these adjustments are done slowly and incrementally.
Although my portfolio is becoming more Index oriented, I still have actively managed elements. How do I select those active elements? To demonstrate my laziness, I'll repeat a portion of a post that I made earlier today.
I do not choose those actively managed products randomly. I exercise a rules based selection discipline. Those rules are easily summarized as follows: low fees, low fund turnover rate, a reliable firm, long manager tenure, manage's own money in the fund, a high ratio of stock holdings that diverge from its benchmark, and some recognition of any downside risk factors.
Note my criteria emphasize consistency on past performance. It's not a perfect predictor of future outcomes but it's a reasonable point of departure. That's especially true if the commitment is short term timewise and subject to constant review.
To appeal to a sports related example, if I needed a single in a baseball game, I would choose a .300 hitter on my bench over a .250 hitter. I might choose otherwise if my .250 hitter had a terrific record against the pitcher and the .300 hitter had a dismal record against that pitcher. Special circumstances do promote exceptions.
History is always at least a partial contributor to any decision, and that includes an investment decision. Is it a full proof approach? No, but nothing is in our uncertain world. Change does happen.
The 5Yr avg returns on S&P 500 will cross 15% soon. Marketing is already going up and will into overdrive when we reach 15%. I'm going to take money of the table, or even sooner, if that happens. At a minimum, good time for rebalancing or eliminating some trading holdings.
Comments
I like Buffet, but found his letter this year pretty much useless, unless you thrive on folk humor and don't care about valuations and economic trends. Yes - If you occupy an "average" place in the life cycle with "average" needs and an "average" temperament and you want to settle for "average" risk and "average" returns - than by all means buy index funds.
@Ted - Please tell me what's so admirable about the M* discussion forums? I looked at them for the first time today (based on your previous reference) and saw nothing of interest.
I'll not classify myself as a permabull, but I probably feel market bullish most of the time. Why? The historical market data supports that optimistic perspective.
"The best predictor of future behavior is past behavior". I don't know the origins of that saying and I'm too lazy to research for it. The historical data over a long timeframe encourages my optimism. Is that optimism impacted by current conditions? Of course it is. My level of optimism is dependent on current circumstances and conditions. So I do make adjustments, but these adjustments are done slowly and incrementally.
Although my portfolio is becoming more Index oriented, I still have actively managed elements. How do I select those active elements? To demonstrate my laziness, I'll repeat a portion of a post that I made earlier today.
I do not choose those actively managed products randomly. I exercise a rules based selection discipline. Those rules are easily summarized as follows: low fees, low fund turnover rate, a reliable firm, long manager tenure, manage's own money in the fund, a high ratio of stock holdings that diverge from its benchmark, and some recognition of any downside risk factors.
Note my criteria emphasize consistency on past performance. It's not a perfect predictor of future outcomes but it's a reasonable point of departure. That's especially true if the commitment is short term timewise and subject to constant review.
To appeal to a sports related example, if I needed a single in a baseball game, I would choose a .300 hitter on my bench over a .250 hitter. I might choose otherwise if my .250 hitter had a terrific record against the pitcher and the .300 hitter had a dismal record against that pitcher. Special circumstances do promote exceptions.
History is always at least a partial contributor to any decision, and that includes an investment decision. Is it a full proof approach? No, but nothing is in our uncertain world. Change does happen.
Best Wishes