A Simple Investment Strategy That Worked in 2019: Buy Almost Anything | Hacker News Reader

A Simple Investment Strategy That Worked in 2019: Buy Almost Anything

nytimes.com

64 pointsKFC_Manager54 comments

Sure didn't help that 2018 ended with everything being down 15-20%, this year was more of a rebound than a continuous healthy market.

Thank you! This is such an obvious point and yet it's hardly ever mentioned.

It may seem intuitive, but it's actually entirely arbitrary to pick 12/31/2018 through 12/31/2019 as the time period for a returns analysis.

>> "...it's actually entirely arbitrary..."

This is one good objection to the article.

Another objection is that they have spun "central bank inflates financial asset bubble which is correlated across all asset classes" as a good thing.

And it seems to have never crossed the credulous author's mind that asset classes with correlated gains also have correlated losses.

Even by the NYT's extremely-naive standards of thinking critically about financial markets, this is a weak effort.

Not just ended with every down, but made a significant fraction of that drop happening on a single day (Dec 24th).

It was a good day to do tax loss harvesting...

I've seen a few people online giving up jobs, retiring early because they make enough money trading or investing now. Deja vu all over again.

I've seen it too, and some of them are doing it on the leaner side (<$500k) on the assumption that if things get bad they can just work a little to make up any shortfalls.

I confess that is my outlook — that I could go back to work to make up for unforeseen shortfalls. (Not retired yet, BTW, but I think about it.)

To be sure, jobs could become scarce, unemployment skyrocket — always in motion the future is....

But for myself there is another factor that has been weighing more heavily on me which is, what do I want to do with the time I have left on this planet? I'm not sure if that is orthogonal to the market rally of the past decade and if it has more to do with my age though.

> But for myself there is another factor that has been weighing more heavily on me which is, what do I want to do with the time I have left on this planet?

Please work on solving climate crisis.

Yes, it is related to the rally (we saw this in 06/07). And the time at which jobs become scarce is the time your portfolio is down 50-60% in six months, and you are taking income from a rapidly shrinking pile.

Don't risk everything you have for something you don't need.

> To be sure, jobs could become scarce, unemployment skyrocket — always in motion the future is....

The problem with that plan (go back to work if investments tank) is that the risks are correlated; if the market crashes, jobs become scarce.

Your primary and backup plan are likely to fail at the same time.

I wonder where they are retiring. 4% of $500k (considered a "safe" withdrawal for retirees of traditional retirement age) is $20k/year. Even if you own your home outright, thats pretty light anywhere in the US.

Likely planning on heavy withdrawals for a few years until social security kicks in.

Would be interesting to imagine a world where US retirees are subject to the same safety nets as younger Americans.

From what I've seen some end up in very non-traditional housing situations abroad or in the states like one woman lives in a train car. The ones who blog about it also pick up side jobs (blogs, gig jobs, light freelancing) to make up a few thousand at least a year. And then none of them have kids or plan on having kids.

Yeah, I remember.

What's the strategy that will work in 2020 Sell everything perhaps....

Or are we setting the stage for the Roaring Twenties? Or did we just exit that decade?

Maybe the (20)20's will be seen as the Great(er) Depression. Perhaps we're a decade out of phase with the last century.

I remember in 98 a lot of investment managers said we're in a bubble and went conservative. They missed out of a lot of upside and many got fired. Nobody knows whats going to happen this year, probably depends mostly on the election.

That is my frustration: I've been too conservative too early and missed a chunk of the rally. Only a manager of my own investments so not likely to be fired. ;-)

If you had been too conservative for all 2018 you'd also have missed out on the few down days that eliminated all gains that year. So even if you sat out for a year due to your imprecise prediction, you'd have come out ahead of others who owned stocks.

Problem is predicting which 8-12 month period the down days will happen. Seems like it should be reasonable to able to do that, but predictions of weather patterns over the same time range seem more accurate.

Over time, there have been a lot more up days than bad days, but the bad days are really bad.

I remember somewhere that tabulated how much you’d have if you only sat in on the top 100 UP days and top 100 DOWN days, you’d have massive losses. But overall, things go up.

So sitting out the market in hopes of missing a down day only works if you know what the down days are, otherwise you’re missing out on the gradual average UP days.

Usually known as "time in the market beats timing the market."

I like that. It bothers me when people say “I have $5k, and I’ll invest $1k of it every month for 5 months to average my ins”.

It is simple. You lower rates, and you borrow demand from the future. Well we lowered rates to zero, and started handing cash out to everyone...and now central bankers are talking about even more money...at some point, you have borrowed everything you can from the future.

I don't think the real effect will be significant, it will hit hardest in countries that didn't see much failure in GFC (the UK is the obvious one) because people need to switch jobs/businesses need to fail to increase productivity. But you can't postpone this forever.

Just generally too: financial markets aren't working very well. There is infinite capital for some borrowers, and no capital for borrowers that have fine credit but require some thought on the part of creditors. Infinite capital for WeWork. No capital for small business.

All this stuff is patently obvious btw. The issue people have is that they think tomorrow will never come.

I read about this guy who made a fortune in the stock market. His secret? He always sold too soon.

That is, trying to sell at the top means that you sell too late, and therefore that you take at least part of the drop. And the drops tend to be much more abrupt than the climbs. Taking the first part of the drop can mean losing your shirt; it can cost you a big part of the gains.

Hmm. I wonder if I should actually take my advice? I'm pretty long on the stock market at the moment...

I dont see how predicting a little before the top is any easier than predicting the top.

You don't predict "a little before the top". Instead, you buy a stock that you think is undervalued. It goes up until you don't think that any more. Instead, you think it's fairly valued, maybe even a bit overvalued. Sell then. Don't wait because it's still going up.

Now, if you're a mutual fund investor, this is a bit harder. But if you think the entire market is overvalued, it might be time to sell, even if it's still going up at the moment.

Note well: I am not a financial advisor. This is not investment advice, just the thoughts of some random nobody on the internet.

If they are setting themselves up to live off a 3-4% withdrawal rate they should be safe otherwise it's quite the speculation. Maybe it will work out "No body knows nothing"-- John Bogle

3-4% withdrawal rate is not safe in an era of negative rates and high asset prices.

The Trinity study (which is where the oft-quoted 4% rule seems to have originated) is assuming a max of about 30 years of withdrawals before the money is depleted. If people are retiring early, it isn't clear what a reasonable withdrawal rate would be.

>...The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living. The withdrawals may exceed the income earned by the portfolio, and the total value of the portfolio may well shrink during periods when the stock market performs poorly. It is assumed that the portfolio needs to last thirty years. The withdrawal regime is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period.

https://en.wikipedia.org/wiki/Trinity_study

(Also the wikipedia article has a number of criticisms of the study.)

This is a misleading story. Yes, the stock market rose significantly in 2019. But it had also dipped severely at the end of 2018. When you account for that dip, stock performance has been average.

Example: On Dec 21 2018 SPY (S&P 500 ETF) was trading for $240.70. Today it is trading for $323.07, which is a huge 34% jump. But on Sep 21 2018 it was trading for $291.99. Compared to that high, the increase is a mediocre 10.6%

10.6 is mediocre? I would take those returns every single year.

Then invest in the stock market. Even accounting for the dotcom crash and the 2008 crash the stock market has gone up around 10% every year when you average it out.

It has averaged close to 5% from January 2000 to now...

The 2000's were a bad decade for investing. You had the dot com crash, followed by 9/11, and then the financial crisis. I "saved" a ton during that time, but the returns were mediocre. The 80's, 90's and most of the 2010's were much, much better for market performance, closer to the average of 10%.

See https://www.macrotrends.net/2526/sp-500-historical-annual-re...

That’s true. unfortunately you can’t cherry pick with foresight what decades you want to skip when investing.

They'd be fantastic if you could get them every single year. Given the wide variance in annual returns, they're nothing special.

https://www.macrotrends.net/2526/sp-500-historical-annual-re...

Not to dispute the numbers, just the interpretation, as in I think a low-double digit return in ~16 months is still something to write home about, especially considering that as recently as August 2019 there were bonds worth $17 trillion returning bellow 0 numbers (that amount is now down to $12 or $13 trillion if I’m not mistaken, but it’s still a lot). Which is to say that the market is crazy and that past ways of looking at things no longer apply.

All the while corporate earnings didn't go up. Go figure.

At this point, with so much stimulus, I'm wondering if the next crisis will be a deflationary one, like everyone is expecting (i.e. a stock market crash, people fired, credit frozen) or the inflationary type (long drag of stagflation).

Whatever it is, because of the titantic trillion dollar deficit and already low interest rates, we will have no way of dealing with it from a macroeconomic sense.

There’s a lot of policy changes that could be done to press the Accelerator pedal on the economy. Let in 10 million new immigrants. Eminent domain a hyper loop from New York to LA. Rollback building restrictions in the bay area.

Don’t forget giving money to poor people.

Just think of the wage growth and increased recreation if anyone could say “screw it” to bad employers and still have a roof over their head.

Give people a year off for parental leave, then young people get a 1yr placement in increasingly senior positions.

Don't we already heavily subsidize poverty via welfare programs? I don't see how throwing even more money at a problem would have a different outcome.

https://www.fastcompany.com/3049642/how-to-fight-poverty-its...

Interesting article, thanks for the link. Would you be in favor of scrapping all social programs and instead and replacing them with something similar to a negative income tax? It seems reducing regulatory burden and possible points of corruption could really help those in need

If "we" == "USA", then no you don't "heavily subsidise poverty". As for empirical evidence that "throwing more money" at it gives an improved outcome, you can look at basically any country in Western or Northern Europe.

I did some quick research by googling poverty rate in {country} USA: 12.3% Spain: 12.1% France: 14.1% Norway: 0.2% Germany: 15.7%

Besides Norway, they all seem relatively consistent. I initially thought this might be due to their oil reserves but it seems oil rich US states are still in the 11-12% range

Of those, Norway probably has the strongest social programs. It also has the lowest population by a lot.

Poverty rates are almost by definition useless metrics to compare by here, because they are computed from the gross income distribution.

Poverty aid programmes are almost all focused on reducing the cost of living for poor people, which has literally zero effect on poverty rates.

Subsidized housing/childcare/healthcare, food stamps, progressive taxation, you name it, they all leave gross income unaffected yet give a large increase in quality of life and discretionary income.

Not only that, but removing all of the artificial tariffs. Normalizing trade to where it was before trump would have serious upside and his successor will likely do it day 1. Legalize weed at the federal level and even more upside. Etc. what that president won’t have is a Fed with any ability to lower rates as by then they will be 0.

'China is bad' is a bipartisan stance now. I doubt any successor will back down. Warren wants to go even further with cutting ties to China, haven't heard much from the rest of the pack (admittedly, I don't pay attention too much at this stage)

China is definitely bad. I have been furious with how they steal and abuse international laws for well over a decade now. But their blockages on soy and other American exports are a large factor in the US subsidies for farmers. I’d rather those farmers be able to make a living without subsidies. The sad fact though is those markets have moved onto other sources now and regularizing trade might do nothing for them. That’s the legacy of trump.

Boy, if only that were the exact campaign of a specific 2020 tech branded candidate. I'd be on board in a heartbeat.

Ehh, come on, crises come and go. Humanity will not give up so easily, you can always at least have the next iteration of money. It's only a question of the path. We can start with the most basic question: will it be inflationary or deflationary? Already that is hard to say, and may depend on the currency.

I'd say at least in the beginning it would be deflationary because existing and "approved" monetary tools are close to being maxed out and it'll take time for common people and governments to accept money handouts and other hardcore stimulus plans.

Obligatory read by Ray Dalio on "monetary policy 3":

https://economicprinciples.org/downloads/MMT_%20MP3_MK.pdf

Except... There were significant performance disparities and risk profiles for each of these asset classes that nominally "went up"

where could I read/learn more about these ?

To consider the flip side of a coin. This is the continued devaluation of monetary instruments.

You can look at as the s&p500 rose by 29%. Or you can look at it as "The USD" buys 23% fewer shares than last year. (ideally this would be adjusted for profit growth and inflation too)

IMO this is totally expected given negative interest rates and QE.

Reply on news.ycombinator.com