About Our $29,325 Experiment

If we were to take our money off the table at the close on Tuesday, it would be a $28,670 experiment and we would book a tax-loss carry forward to offset other gains earlier in the year.

But that’s the thing about investing in stocks:  Unlike roulette or other ‘games of chance’ the high art to investing is spotting WHEN to take the money (and hopefully profits) off the table.

It’s a two-edged sword, though:  If you had decided to ‘play the long game’ and had bought at the highs of 1929, you wouldn’t have gotten your money back until the 1950’s.  So our topic this morning is all about timing.

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Comments

About Our $29,325 Experiment — 3 Comments

  1. “We don’t know whether to expect help from FEMA”

    Don’t expect any help from FEMA…

    My Niece lives in Tennessee.. a few years ago they were hit with a freak tornado .. it destroyed their home they were staying at a shelter..
    FEMA came in and said they were there to help.. my niece was all hopeful that they were there nothing to worry about. FEMA would help them relocate and give them some financial assistance ( like they promised..) to help with their needs..
    So they went out to their home and was in the process of collecting anything that was still salvageable when deluge of rain hit and the rest flooded away..
    Still she was hopeful for the assistance they were told was available to them..
    When the time came.. they did get financial assistance.. a twenty dollar bill and a heartfelt good luck..
    So.. just saying if they have to be called in.. the odds are that assistance won’t be there.. I also heard several similar stories from people in New Orleans during the Katrina disaster.. in the event of a true catastrophic event.. the odds are the ones you will see lending a hand is the Mormon Churches Yellow Shirt group. They go where they are called to lend a helping hand..
    https://www.lds.org/topics/humanitarian-service/helping-hands?lang=eng&old=true

  2. On your point of an investor not breaking even on a 1929 long position until the 1950’s, dividend yields were quite larger in the early 20th century versus today. If an investor held out and reinvested dividends at the prevailing market prices through the 1930’s, they would have broken even after 10 years. I used Robert Shiller’s publicly available market data (goes back to 1871) to do this calculation. The dataset is available here: http://www.econ.yale.edu/~shiller/data.htm

    This may also be of help backtesting the aggregate market thesis that you’ve developed.

    • Very useful, Marvin. However, in order to be really precise (as I get time) we would have to note the inflation level from the market low period. That’s because at the extreme end, say 1933, the inflation rate to 1943 was 33.87% according to Fed data records.

      I’ll take a look at the Shiller data at time allows, but it is not too useful for Aggregate backtesting, since the markets then were fairly unified around the single indicator (DJIA) rather than dispersed as broadly as today.