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Buying Stocks at "The Point of Maximum Pessimism"

flawed theory

Start
AAA
Fri Sep 19, 2008 8:43 AM

Post Reply

And how do you know the market has bottomed out and we have reached "The Point of Maximum Pessimism"?

Why buy now if the I, C, L funds are going to be cheaper a week, month or -most likely- a year from now? If you see the SP500 and DJIA trends, we still have way to go DOWN. Move into the G fund, watch the market and buy cheaper later.

Re: flawed theory

worker
irs
Fri Nov 21, 2008 9:55 AM
How do you know that the market will be cheaper later? This is a personal decision based on your financial situation and your knowledge of the market. I have no answers and will not give advice.

fingernails

HR Specialist
CHRA for the Army
Fri Sep 19, 2008 9:28 AM

Post Reply

I am gritting my teeth and hanging on by my fingernails but I am NOT shifting my money any - I have most in C fund. I'm 49 and have 21 years and hope to retire in less than 10 years. We'll see . . .

TSP Allocations

Test Control Officer
Air Force
Fri Sep 19, 2008 9:32 AM

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A couple of weeks ago I spoke with a financial advisor on Sheppard AFB. He works at the Airmens' Readiness Center.

My allocations are 80% to G; 5% to C; 5% to F, 5% to I and 5% to S - 20% to the C,F,I & S.

However, when I looked at my quarterly statement it showed 92% to the G Fund with 2.0 % going to the C,F,I and S funds. And, get this...the L fund and the 2010L showed 74% for the G Fund and more to the 4 other funds.

I'm leaving my TSP alone. The way I figure it if they at TSP change my allocations to 92% G and 2% for C,F,I & S I think this is a good thing for me.

Revelations & Neo-Socialism

Fed Peasant
DOD
Fri Sep 19, 2008 9:42 AM

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I have known for a long time that sometimes the markets are efficient & sometimes they are not. Sometimes the markets are rigged & sometimes they are not. Right now, they are both inefficient & rigged!!! What have CEOs & boards of directors been doing? Did the CPAs give us an accurate & honest report? Did the regulators do their jobs prudently? Did the congress pass laws, or abolish old laws, which were necessary. Did lobbiest for financial concerns have too much "sway"? (corruption) No more can we beat outselves on the chest & applaud our free market capitalism. We are having a socialist economy brought to us during a reign of "conservatives". As a small investor & tax payer, I did not approve the "investment" of my money in AIG. They must be out of their minds.... no joke!! Now more than ever, I am making selective investments overseas. The USA is not a prudent, worthwhile, & rationale choice.

Re: Revelations & Neo-Socialism

worker
government
Fri Nov 21, 2008 10:04 AM
CPA's do not prepare statements. They audit those statements and certify them based on tests via statistical sampling. (simplified explanation) The statements are still the responsibility of management.
The regulators cannot do their jobs properly for 2 reasons. Number one is that there are not enough of them. Number 2 is that we have an administration that does not want their friends regulated properly. The heads of these agencies are political cronies who make sure the rules and written reports do not damage their friends. Hopefully, this will change January 20, 2009.
I will not comment on the rest of your article as what you are saying makes no sense.

Yup...buy stocks now amd international fund

Supervisor
DOL
Fri Sep 19, 2008 9:50 AM

Post Reply

Yup, if you are in the G fund, get out...and buy S, C, and I funds ASAP.

On another note, I noticed as usual - when the international fund gets whacked in the market - the value per share really drops, too...however, the reverse is not true. Wednesday (9/17) it falls .56 and yesterday it goes up only .45. I am so sick of Barclays turning everything to their advantage.

Thansk, Paul

running out of money

contract administrator
department of Ag
Fri Sep 19, 2008 10:00 AM

Post Reply

I haven't quite figured this chart out. Let's say there was a big drop in S&P one day and it keeps dropping and dropping. Pretty soon a person could be out of money before it recovers enough to make your money back. So what good is a 27% increase a year latter if you are out of money?

Re: running out of money

CPA
Treasury
Fri Sep 19, 2008 1:04 PM
The only way you would "run out of money" is if the S&P went to zero. If that happened, then running out of money would be the least of your worries.

Buying Stocks at Point of Maximum Pessimism

Research Analyst
Education
Fri Sep 19, 2008 10:42 AM

Post Reply

The chart prepared by Dan Weiner is informative, but the analysis is somewhat misleading. When stocks fall
over 20% as they did on 10/19/87, they need to go up over 40% to get back to even. So, the 27% gain a year later still did not recoup the losses. I believe it about a year and half then, and it took about 5 years after the long 2000 to 2003 decline. Nevertheless, the conclusion that investors might be better off leaving the money in the market at this point might be correct. However, the notion that steep losses (that have actually been accumulating for about a year) might be regained a year from now is probably overly optimistic.

Re: Buying Stocks at Point of Maximum Pessimism

IT Specialist
Private Sector
Fri Sep 19, 2008 7:12 PM
That is true if you were already in the market and didn't buy on the drop. However, if you were not yet invested in the S&P, or even had some money in it already, if you dumped a bunch more in on 10/20/1987 after the major one day drop, you would be farther ahead one year later. In other words, if you didn't take advantage in any way of the buying opportunity and just held tight, your analysis is correct in that you wouldn't be ahead 1 year later.

Re: Buying Stocks at Point of Maximum Pessimism

Engineer
DOD
Mon Sep 22, 2008 10:33 AM
Those are some strange math skills you're displaying there, Research Analyst. When the index fell 20.5% in 1987, it was at 79.5% of its previous value. Thus, it would have to increase by 100 divided by 79.5, or about 25.8%, to get back to its previous value. Since it was actually up by 27% a year later, it had reached 1.27 times 79.5, or about 101%, of its pre-drop value. I sure hope your research analyses for Education don't involve any mathematical calculations.
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