OT: I am not an economist, but I feel a major stock market correction coming soon!

[Jerademan74]

As soon as any hint, or actual action of an interest rate increase occurring, I would expect perhaps a 10 to 20% correction in most us indexes. That is not a surprise, but I am feeling like it may happen by May / June time period. What do others feel?

 

[BobPSU92]

Everyone seems to be saying this.

 

[Michael.Felli]

Maximillian Cohen: Restate my assumptions: One, Mathematics is the language of nature. Two, Everything around us can be represented and understood through numbers. Three: If you graph the numbers of any system, patterns emerge. Therefore, there are patterns everywhere in nature. Evidence: The cycling of disease epidemics;the wax and wane of caribou populations; sun spot cycles; the rise and fall of the Nile. So, what about the stock market? The universe of numbers that represents the global economy. Millions of hands at work, billions of minds. A vast network, screaming with life. An organism. A natural organism. My hypothesis: Within the stock market, there is a pattern as well... Right in front of me... hiding behind the numbers. Always has been.

 

[dwiz]

When idiots who know nothing start selling, that's when I start buying. It's worked damn well.

 

[Blueblood4eva]

I have been thinking that for years and been wrong. How can you analyze what is controlled and not allowed to happen within the bounds of all logic? Economists are akin to weatherman. They are experts after the fact.

 

[dwiz]

I have been thinking that for years and been wrong. How can you analyze what is controlled and not allowed to happen within the bounds of all logic?

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

 

[Lion78]

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

Of course index funds don't charge anything in the way of fees, though Vanguards are about average with other passively managed funds. Better than some, worse than some.

 

[dwiz]

Of course index funds don't charge anything in the way of fees, though Vanguards are about average with other passively managed funds. Better than some, worse than some.

Which funds charge less than vanguard? I had admiral shares, but I'm curious if there is anything lower. Mine is something like .0025%

 

[Coultr77]

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

How exactly does an index fund beat the market?

 

[Blueblood4eva]

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

Interesting and I agree. I have just two individual stocks and Ford is one for the same reason as you. I also have Lockheed Martin because I worked there and knew how well positioned they were in the industry. I was stunned however when it was up 75% the last year or two in a Democratic administration. I asked my nephew who works for Raytheon what the heck was going on in the industry. He said they were selling big time in the Middle East. I said thanks a lot, but I know it is usually not the latest technology. I did go to 50% cash a few years ago expecting the whole thing was built on air through quantitative easing and our Govt. propping the market up by investing in it. The collapse never happened. Yet.

 

[Coultr77]

Maximillian Cohen: Restate my assumptions: One, Mathematics is the language of nature. Two, Everything around us can be represented and understood through numbers. Three: If you graph the numbers of any system, patterns emerge. Therefore, there are patterns everywhere in nature. Evidence: The cycling of disease epidemics;the wax and wane of caribou populations; sun spot cycles; the rise and fall of the Nile. So, what about the stock market? The universe of numbers that represents the global economy. Millions of hands at work, billions of minds. A vast network, screaming with life. An organism. A natural organism. My hypothesis: Within the stock market, there is a pattern as well... Right in front of me... hiding behind the numbers. Always has been.

 

[dwiz]

How exactly does an index fund beat the market?

They attempt to mirror the market, but they've been stronger in winning stocks and less invested in the losers, therefore they beat the market. Also, idiots are paying brokers 20% to "manage" their money, aka "make lots of trades" that cost the investor, while Vanguard just goes with what has worked for 25 years. I can't believe people still pay "money managers" now when it's obvious they just move the money around to make transaction fees and historically, it's proven they do not make more money than index funds.

 

[Coultr77]

They attempt to mirror the market, but they've been stronger in winning stocks and less invested in the losers, therefore they beat the market. Also, idiots are paying brokers 20% to "manage" their money, aka "make lots of trades" that cost the investor, while Vanguard just goes with what has worked for 25 years. I can't believe people still pay "money managers" now when it's obvious they just move the money around to make transaction fees and historically, it's proven they do not make more money than index funds.

Can you reference me to anything showing that they are less invested in losers? Do brokers really charge 20% percent, who would pay that?

 

[Art]

They attempt to mirror the market, but they've been stronger in winning stocks and less invested in the losers, therefore they beat the market. Also, idiots are paying brokers 20% to "manage" their money, aka "make lots of trades" that cost the investor, while Vanguard just goes with what has worked for 25 years. I can't believe people still pay "money managers" now when it's obvious they just move the money around to make transaction fees and historically, it's proven they do not make more money than index funds.

If an index fund is beating its index by anything significant, you might want to reconsider your investment in that fund.

 

[Safety Blitz]

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

Spot on dwiz.
I've been using Vanguard funds for about 30 years. Lowest fees in the industry. I have about 10 funds active, which provides the flexibility to make adjustments as needed. I wouldn't invest a plugged nickel with any of my local brokers. All they do is churn accounts and collect commissions. Their clients rarely make any money, even in good times. Vanguard's Health Care Fund has been great for me for the past five years or so. I've tinkered with a few individual stock in small amounts over the years. My record there sucks big time.

 

[GregInPitt]

As soon as any hint, or actual action of an interest rate increase occurring, I would expect perhaps a 10 to 20% correction in most us indexes. That is not a surprise, but I am feeling like it may happen by May / June time period. What do others feel?[/QUOTE


I agree, you are not an economist. And when the majority of non-economists feel as you do it's a sure bet that you will be wrong.

If anyone could accurately predict the market they would be retired at an early age.

Some theories, such as when interest rates start to rise that it will trigger a SM correction, get so ingrained in peoples minds that they become obsolete and when the event actually does happen it becomes a non event and the cause effect relationship is broken. You'll have to wait and see like the rest of us.............

 

[Nitwit]

Etfs are better then mutual funds from an expense perspective. I am only invested in funds of stocks with increasing annual dividends. I'll maintain the same number of shares no matter what the market value and just use the dividend income as I get older. The share price can go up or down as I'm not cashing out. It's the yield that's important.

 

[Jerademan74]

Well, with the market indexes all up over 1% today, my prediction for a major correction is surely not in the immediate future

 

[jj410]

As soon as any hint, or actual action of an interest rate increase occurring, I would expect perhaps a 10 to 20% correction in most us indexes. That is not a surprise, but I am feeling like it may happen by May / June time period. What do others feel?

No one can predict the stock market with any consistency, least of all economists.

 

[jj410]

Can you reference me to anything showing that they are less invested in losers? Do brokers really charge 20% percent, who would pay that?

The 20% may refer to the cut of profits. For example, if you are making 10% a year but paying 2% in commissions or fees, you are losing 20% of your profits. The effects of this are hugely magnified because of compounding.
By definition, a low cost indexed fund will beat the average managed fund and average investor because of the effects of fees.
One example:
Assume returns are 6.5% a year and the indexed fund or ETF has annual expenses of .4% compared to a 1.4% for a managed fund. Two investors - one in index funds the other in managed funds - make a one-time investment of $100,000. Over 30 years, that 1% difference in annual expenses will net the indexed fund investor $146,000 more than the managed fund investor.

 

[Elwood Blues]

No evidence of a collapse today - Dow up 230+

 

[kgilbert78]

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

My brother the CPA (PSU '82) says this all the time....

 

[Doc-M]

If you think a significant stock market correction is coming soon, raise cash by selling part of your investments. Keep 5 to 10 % caish anyway.

One makes big money by investing in growth stocks but with a higher commensurate risk. On the other hand, investing in dividend paying stocks carry less risk with slower growth in invested capital.

Read John Templeton and Peter Lynch if you are new to investing. Invest you must or you will come to grief.

Most money managers charge about 1% depending on the amount in portfolio if you do not wish to manage on your own. It is much easier to self-manage money by creating a portfolio of stocks, etfs, or mutual funds.

In the long run, stocks are the best. Only game in town for me.

There are always opportunities, for example energy represented major value just a few weeks ago. It may do so again if there is a pullback.

You can make a lot of money by investing in energy stocks, world is going to need energy forever. Buy large companies that pay dividends (CVX, RDSB, XOM), invest dividends in growth energy companies. Stick with energy never wavering! Learn more and more about energy. You can do the same for other areas of economy as well.

Waiting for correction in the market, it already happened in energy, it may happen again. Remember all percentages are measurements of relativity.

One eats, one sleeps, one enjoys Penn State football, and one invests. Integrate investing in stock market in your day- to -day life, take equity in America, if want to become rich.

 

[ForesterGump]

I wonder when the last year was when a market guru hasn't said we were in for a market correction. They didn't happen. My theory is that things changed in 2008. There's been a paradigm shift, and old rules no longer apply. People's mindsets of being mega consumers seems to have shifted. Also, the world situation has changed.

Where are you going to put your money if not in the market? Bonds don't offer growth, and they're getting hammered right now. Foreign markets? China's is closed, Japan and Europe is a mess. The ruble is tumbling as is the Euro. As currencies crumble, that money is coming into the US market. It's the largest market in the world and it is very liquid. In order for the market to correct, there has to be a reason for money to leave the market. I don't see it any time soon.

Money will leave the market when/if Europe becomes stable, China opens up its stock market, BRIC becomes relevant, retiring boomers pull money from the market, or interest rates go up. China opening up markets is about the only one that I see would have much impact. Even at that rate, China's stock market is 1/10th of the US stock market. The US has 45% of the world stock market and 25% of the world bond market. Just remember that every month that 401k money goes somewhere.

 

[Michael.Felli]

Just curious, this thread began with a prediction. I was wondering who you guys feel has the best gauge on the economy (US and the world). In other words, who do you guys listen to when they speak? Who is the most accurate?

 

[zwick99]

Everyone seems to be saying this.

1. not everyone
2. none of the people saying it are telling you WHEN. Their opinion is wothless wthout the when.

 

[zwick99]

Spot on dwiz.
I've been using Vanguard funds for about 30 years. Lowest fees in the industry. I have about 10 funds active, which provides the flexibility to make adjustments as needed. I wouldn't invest a plugged nickel with any of my local brokers. All they do is churn accounts and collect commissions. Their clients rarely make any money, even in good times. Vanguard's Health Care Fund has been great for me for the past five years or so. I've tinkered with a few individual stock in small amounts over the years. My record there sucks big time.

Flawed logic. You don't have to use a full service broker.

The second flaw is dwiz actually had a 500% return on the individual stocks. THAt pretty much trashes his opinion that buying individual stocks is for suckers.

 

[zwick99]

Index funds. If you're not an insider, you really can't win. Individual stocks are for suckers. I've bought 2 in my life: Ebay @11 (because they had paypal) and Ford @ $2.50 (because they didn't take the bailout). If you haven't thoroughly researched an individual stock, you should not be buying it. Vanguard funds take next to nothing as fees and they beat the market in nearly all their index funds. If you're paying a stock broker in this day and age, you're just giving up your money. Give it to your heirs as cash instead, because you're just putting your broker's kids through college.

1. Stupid post. THe two individual stocks you listed are up about 500%. KInd of trashes all your points. Vanguard S/P 500, RUssell 2000, Russell 3000, Nasdaq 100, QQQ are not up that much.

2. YOU might want to move into the 21st century. You can buy indivdual stocks without high broker fees. YOU could have bought 10k worth of AAPL in 2000 which isnow worth about a MILLion . If you bought online or used a discount broker(online) the commission could be about $10.

 

[zwick99]

How exactly does an index fund beat the market?

MOst of them don't beat the market. THey try to mirror the market.

An S/P 500 fund is a composite of the 500 biggest companies. There is no guesswork and the lower costs get passed to the consumer. The big gain is the lower costs get compounded and can add up to hundreds of thousands or millions for an investor.

 

[fairfaxlion2]

Just curious, this thread began with a prediction. I was wondering who you guys feel has the best gauge on the economy (US and the world). In other words, who do you guys listen to when they speak? Who is the most accurate?

Although they always choose their words so carefully that they are hardly saying anything, the people with the best gauge on the economy are usually the leaders of the IMF, World Bank, and Fed (and their counterparts in major countries).

 

[NitneLiun]

The Fed has created huge bubbles in the equities and bond markets. All bubbles burst at some point.

The German bond market is starting to show some real weakness. That is probably a pretty good sign that the U.S. Treasuries markets will decline soon. Equities will fall after the bond bubble bursts.

 

[Louisville JD]

When you read stock recommendations on this board, then you know a correction is coming! From your initial comments, the reverse is more likely based on sentiment theory.

 

[tototootsi]

There may well be a big correction coming... up to 20%, but it won't last long and the market will be up low double digits by year end. If you can time the correction you can make a lot of money. If you can't stay invested.

 

[jjsocrates]

As soon as any hint, or actual action of an interest rate increase occurring, I would expect perhaps a 10 to 20% correction in most us indexes. That is not a surprise, but I am feeling like it may happen by May / June time period. What do others feel?

http://en.wikipedia.org/wiki/Self-fulfilling_prophecy

Here's how the price of a stock is determined: Present Value of all Future Cash Flow earnings. However, its damn hard to predict the future value of a company's future cash flows, so stock fluctuate based on economic conditions and generally, how people think the company will do. So it is very much based on the expectations of millions of people, and when you average all of that together - you get the current price.

Picking individual stocks, therefore, unless you are an insider - is nothing more than luck or chance. 50%/50% flip of the coin. If you think you know something about a stock, guess what - so do millions of other people, and the stock price already reflects that.

Trying to predict or time the market? Pure foolishness.

Just put your money in a balanced portfolio of stocks, bonds and cash - the mix of which will depend on how old you are and when you need the money. Periodically adjust it to keep that mix, but don't do anything dramatic based on how everybody else feels about the stock market or because you have a hunch about a particular stock.

As for fees - a passive stock fund earning 7% a year with 0.5% fees is identical to an active stock fund earning 8% a year with 1.5% fees. Keep that in mind - if you're paying somebody to beat the market for you, make sure their fee is less than how much they are beating the market by!

Since I work in this industry, I won't hype up any specific companies. But I can tell you that people who trade frequently instead of just buying and holding tend to see their gains eaten up by transaction costs.

 

[indynittany]

When idiots who know nothing start selling, that's when I start buying. It's worked damn well.

The converse of this is also valid.

 

[indynittany]

The Fed has created huge bubbles in the equities and bond markets. All bubbles burst at some point.

The German bond market is starting to show some real weakness. That is probably a pretty good sign that the U.S. Treasuries markets will decline soon. Equities will fall after the bond bubble bursts.

This!!!!

 

[Jerademan74]

After reading everyone's comments, only one thing was clear: a correction WILL occur, but unless we can predict when, then keep your money invested in a relatively safe portfolio of stocks, bonds and some cash. The market will respond almost immediately after the next statement by the Fed that warns of a rate increase. I am thinking of converting most of my stocks into cash upon this warning, then buying back after the sell-off seems bottomed out. Of course, those are all bold statements, as NOBODY knows when these events will occur, which is why investments should always be for the long term, unless you'll need the money short-term!

 

[zwick99]

After reading everyone's comments, only one thing was clear: a correction WILL occur, but unless we can predict when, then keep your money invested in a relatively safe portfolio of stocks, bonds and some cash. The market will respond almost immediately after the next statement by the Fed that warns of a rate increase. I am thinking of converting most of my stocks into cash upon this warning, then buying back after the sell-off seems bottomed out. Of course, those are all bold statements, as NOBODY knows when these events will occur, which is why investments should always be for the long term, unless you'll need the money short-term!

Even if we knew when most investors should probably should still hold . THe next variable that nobody knows is how much of a correction. Would it be smart to trigger a capital gains tax of 15% on a 10% correction?