r2i forum

ADMIN NOTE: This thread was spun off from Recession of 2011 thread. Some posts that apply to both threads have not been moved but copied into this thread. Other posts that applied only to this thread have been moved.

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Member Casper's post follows:

You need to get your fundas straight.

#1 - don't know if recession has started, will start or will end

#2 - Short term investing is a complete oxymoron. There is no such thing - just like there is no such thing as a non-techie desi :-)

#3 - Don't have any "speculative stock investments". There is no such thing as "speculative investment" - stock or non stock. Again another oxymoron like #2 above.

Since I'm investing for the long haul (retirement/college funding etc) I'm perfectly happy that stock market was down to flat during the last decade and will be happier if the stock market stays down for the next two decades. And be happiest if it goes to 0 and stays there during the next 20 years.

sid_earth;393788QEII coming to an end.
Nasdaq officially loosing all the gains for the year, and S&P500 not far behind.
Job market not growing as much as everyone expected.
Silver prices have already crashed 25% from their peak.

Has the recession of 2011 already started?
What are the investment strategies you are planning to follow for the short term?
Are you already out, or planning to move out of your speculative stock investments?

sid_earth;393788

Has the recession of 2011 already started?

Can not predict , neither care about it.

[QUOTE]

What are the investment strategies you are planning to follow for the short term?



Since I can not predict the recession, I can not have any strategy based on that. On top of that , economy and stock might not move in synch with precision.

I will simply keep evaluating the businesses and buy when they are selling at big discount to their true worth. Recession does not change my investment strategy but it does make easier to find oppurtunities.

[QUOTE]


Are you already out, or planning to move out of your speculative stock investments?



Speculative and investment should not be used in same sentence :). Speculation and investment are two very different thing.

casperof1999;393873Short term investing is a complete oxymoron. There is no such thing - just like there is no such thing as a non-techie desi :-)

casperof1999;393873Don't have any "speculative stock investments". There is no such thing as "speculative investment" - stock or non stock.

Buffet;394527
Speculative and investment should not be used in same sentence :). Speculation and investment are two very different thing.

Just lke there are non-technie Desis(just that you dont see them or refuse to ackonwledge them), there are many folks who do allocate a 5-10% to that thing described above, whatever that you want "label" them as. You personally may and can claim that you dont do it but its too much to say that you are not aware that such portfolio allocation do exist among quite a sizeable portion of other folks, in various forms, in various labels that suit our/your convenience. Some people do specialize or dabble in various short term instruments or more "aggressive risk taking" - if that word pleases you. Lets not argue over semantics here. I aometimes find such pedantic preaching too much of a cliche, especially when they dont form the main part of the OP and when OP doesnt claim he is a noobie and wants to be taught.

casperof1999;393873You need to get your fundas straight.

Why the assumption that he doesnt? Just because he didnt have a lawyer go over his every word to bullet-proof them against misinterpretations or off-tanget interpretations and because you dont agree with his style of defintions or investments?

The kind of responses that Desi and Rabtag gives helps fuel the discussion right up the main context instead of succumbing to cliches. Unless the OP claims he's a newbie and wants to "learn" investment, its better to stick to answering the main intent of the OP.

Thanks MINF. You put it exactly right.

For posters on this thread: Of course predicting economy and stock market direction is no different than astrology. I'm not looking for advice. Neither am I looking on investment lessons. All I'm looking for is what are folk's perception about the economy, and if anybody is making any changes in their portfolio based on current news/events.

I believe that US is either in a recession already or is going to be in second half of 2011. If someone doesn't believe it, then they should follow their course, and enjoy the party. But if someone agrees with me, then most likely they are planning for some adjustment to their portfolios. So far 70% of people agree with my belief (which is HUGE... I think). Of course it doesn't matter if even 90% people believe something. It won't make it happen. But at least those folks can start to discuss and share notes!

My post is divided into two parts. In the first part, I post my views on market timing and a couple comments on speculation vs investments.

In the second part, I post my views on the recession queries of Sid_Earth.
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I invest and I also speculate.

In general, I do not advice others to speculate unless they show an interest and want to. In that case, after assessing their risk appetite and affordability based on their assets and goals, I suggest a small portion of their portfolio with which they can speculate if they want after explaining the issues with market timing.

Market timing has been succesfully done by very very few, although technical traders will contest my statement. None the less such trading is succumbed to even by those who understand this, perhaps due to adrenline rush, perhaps due to misplaced confidence or perhaps out of boredom of staid investing.

If I can determine that recession has already started then others in the field probably can also and if they can then that is already priced in the market. This concept makes sense for the long term. However, in the short term, even if priced in, speculators will cause swings by reacting without consideration to news being priced in. This causes markets to over react in both directions and speculators, arbitrageurs and very very very savvy market timers have to succesfully time this in both directions (sell and buy times) to get somewhere.

There have been a number of studies done and I am sure technical traders and others might find some flaws with these studies, but here is one brochure that one should read because what it says is true.

http://www6.ingretirementplans.com/SponsorExtranet/MarketTiming.pdf




* Sources: GE Asset Management
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Now, understanding the above, the speculation sought is if we already are in a recession and should we alter our investments.

If one is altering investments based on speculation, it is speculation. I agree that we can chalk this to semantics but it does need to be underlined that speculation is different than investing.

As to Sid_Earth's query:
Now as to whether we are already in a recession - possible, but from a technical perspective, I seriously doubt it. If the GDP growth numbers for this quarter are positive (anticipated to be 2.3%), then technically we are not in a recession.

How about recession starting in the third quarter? I personally doubt it. I think that the numbers of jobless claims, new jobs created, GDP growth rate, all, while pointing to an anemic recovery do not suggest a double dip. Of course we won't know till January 2012 if we technically entered recession in 3Q2011.

Why do I doubt that recession will not start in 3Q? This is because, the amount of money pumped in has been large and the effects of this liquidity is generally delayed and we have not seen all the effects yet and the effect is going to be growth. I think companies have already slimmed enough and cannot afford to slim further. I don't think they need to as they are sitting on fair amount of cash. I see no reasons that would drive growth down unless there are massive failures. I see preparations for the campaigning for presidential elections and general govt policies will create an economic environment of growth.

Many argue that GDP growth rate while a technical definition of recession is not really reflective of recession. For example, a 9.1% unemployment rate means we are in a recession and a depression regardless of GDP growing. Others argue that GDP growth rate is nor a proper measure for technically defining recession.

Whatever may be the case and putting technical definitions aside, there is no question that the recovery is anemic. But I think we will chug forward not backward which is what technically a recession is.

sid_earth;394680Thanks Desi. Earlier this year, I stopped DCA in to my stock index mutual funds (even took some profit), and sold a large chunk of MINDX last November (which incidentally was good timing). So I have a buildup of cash now. I restarted DCA in MINDX few months back, and feel that this is the right time to initiate the DCA again in US index funds (already got it set up just yesterday). In fact I'm thinking of putting all monthly cash savings in to US index funds (my past savings are sufficient for a rainy day use).

Sid, while that timing worked for you, it does not always net result is that those that remain invested generally come out ahead.

One should he a separate emergency reserve and then any savings, one should not attempt to time them but keep DCAing it. This is my advice to those who are young and have time on their side. The benefit of this discipline will be recognized by them two decades from now.

BTW, I am a bit baffled by exchange rate re India. In my view Ruppee should deflate and I felt that way two years back based on inflation on India and feel that it has to deflate.

sid_earth;394680I was doing some speculations too for the first time, and am currently in a position of very little gains (most heavy gains got eroded in past 2 months). So this was a learning lesson. But I am not selling any of those stocks, as I believe in the future growth of those companies.

I think the benefit of discipline will be seen years down the road. As long as there is a good diversification into many many asset classes, long term will pay off.

I think that there are some times in the market when signals seem clear if one is dispassionate, but those situations are rare and even those who can identify those often "identify it" more frequently than they occur, which means their success rate is not 100%.

One signal that I try to look at periodically is investor advisors bullish/bearish sentiment. This is a contarian indicator but even this signal I think works well at market bottoms and not as well at market tops and really needs to go to extremes. But let us say it flashes a market bottom, what will one buy with? If one is DCAing in the market, then there should be no cash on the sidelines.

The best time to buy for a long term investor is when there is blood in the streets, but they should also not be accumulating cash waiting for that opportunity which may come once in many years, so DCA becomes the correct mechanism. So how do they buy when there is blood in the streets? Perhaps that is a good time to rebalance as the portfolio allocation will be out of whack anyways. Doing rebalancing and buying more equities ends up looking like putting more good money after bad and requires tremendous intestinal fortitude as it goes against the prevailing market, but I think that does have a long term payoff.

Anyways, those are some thoughts.

moneyIsNot_funny;394561Just lke there are non-technie Desis(just that you dont see them or refuse to ackonwledge them), there are many folks who do allocate a 5-10% to that thing described above, whatever that you want "label" them as. You personally may and can claim that you dont do it but its too much to say that you are not aware that such portfolio allocation do exist among quite a sizeable portion of other folks, in various forms, in various labels that suit our/your convenience. Some people do specialize or dabble in various short term instruments or more "aggressive risk taking" - if that word pleases you. Lets not argue over semantics here. I aometimes find such pedantic preaching too much of a cliche, especially when they dont form the main part of the OP and when OP doesnt claim he is a noobie and wants to be taught.

Instead of attacking the messengers, let’s attack the message. Three above quoted sentence were simply trying to convey that speculation should be always called speculation and not to be confused or mixed with investment. There is nothing wrong in speculation as long as people understand that it's not an investment.

You might take it simply as arguing over the semantics but if you think calmly, how many people do you know personally who calculate the true worth of business and do buy/sell accordingly? There won't be many but most people think/believe that it's an investment. So it's not arguing over the little semantics rather it has big meaning. You might see it as succumbing to clich?but did you think that people might be simply sharing their view point?

Now if the post comes with statement that hey anyone who does not see the things same way as me should not post here, then you will get more people with same thought process replying to OP. I will personally want more people to post who don't agree with me and also give reasons for their thought process. I find it more helpful than people who simply agree with me.

So you should attack the message always not the messengers. No one is teaching the OP but in message board you will always find people correcting you if you are wrong or if they think you are wrong. Here also people were pointing out what they thought was wrong, that’s all. You might find the difference as purely semantics but in my opinion majority of people don't know the difference. So assuming that OP knows the difference and used speculation and investment interchangeably only due to not having a lawyer will be a very bold assumption. It does not mean that OP cannot evaluate any business but assumption will be still a bold one.

Extreme example would be: An OP comes and ask all of us the best way to commit suicide. I am sure we will not start giving him the ideas. Most of us will try to talk him out of that. I know here situation is very different but I was using it for an example only where people are not simply answering OP questions and giving some other suggestions based on their thought process. In any message board you will always have that. If their thought process is wrong then you should point it out.

I found your reply very offensive so could not help replying. Anyway we are going off topic here with all this so I won't post anything more on it.

Buffet;394733

Instead of attacking the messengers, let?s attack the message. Three above quoted sentence were simply trying to convey that speculation should be always called speculation and not to be confused or mixed with investment. There is nothing wrong in speculation as long as people understand that it's not an investment.

There's a reason why most of us allocate only an insignficant portion to it. You are not going to find much argument over this and therein lies the point - you are preaching to the choir here. By doing so, you are taking the focus away from the main context of the discussion by veering into the sidelines. There isnt a need to do this on all investment threads, but when a good example presents an opportunity - for e.g a newbie wanting to ask some questions about investments, etc. I have noticed that some folks tend to overdo this at the cost of taking the focus away from the main discussion. For e.g your latest reply, using Railway economics, contributed a lot more to the discussion and the flow of it, rather than the earlier one. If you dont mind, I would like to take some credit for it due to my earlier missive ;-)

To borrow your own extreme example, you could be a good politician or a budding politician but you are not going to walk into a room of Rahul, Sonia, Advani, Maran and start preaching politics to them just because they were casual in the way they frame their question on reading the latest tea leaves about Indian politics.

Buffet;394733

So you should attack the message always not the messengers......I found your reply very offensive so could not help replying.

With all due respect, the message(s) was being attacked and not the messenger. In any case, if it helps, let me slide a :embeer: over to you to shoot some stars together. I will leave it upto Boca to find a picture of shooting stars icon to paste here..and then preach to us about why shooting stars is sooooo bad

moneyIsNot_funny;394755 To borrow your own extreme example, you could be a good politician or a budding politician but you are not going to walk into a room of Rahul, Sonia, Advani, Maran and start preaching politics to them just because they were casual in the way they frame their question on reading the latest tea leaves about Indian politics.

He he.. You cracked me up with this . Point noted and apology if I came too preachy.

Buffet;394759He he.. You cracked me up with this . Point noted and apology if I came too preachy.

Thanks. That was pretty too cool of you. Look forward to more kontributions from you.