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sschullo

2019 YTD Returns! Wow!

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12.0% as of last Friday's close. 

First, a little history of my 70/30 portfolio. From 2009 through 2018 the returns ranged from -2% to 13.9%. 

In 2019, my boring portfolio is on track to break my 2009 record of 13.9%. Right now it is about 12.0%. Both stocks and bonds soared because according to some, the feds lowered interest rates which increased the value of my bonds and their returns. Also, from what I heard corporations are using both the tax cuts and the low-interest rate money to borrow and buy back their stocks, which would increase their stock value too. But there are many factors involved and to try and speculate what is going on is fruitless. All we can do is to diversify and create the stock-bond split according to your age and need for the money.  Since we are teachers here, there are exceptions to this rule. For example, if both you and your spouse have huge pensions, heck, you can ignore this rule of thumb entirely because you don't need the money for retirement. Or if you have a high-risk tolerance and love the volatility, you can also ignore this rule of thumb. For me, I have better things to do that experience volatility and I need my investments for retirement. 

2000 to 2002 the financial crisis was caused by the tech bubble. In 2008, the financial crisis was caused by the real estate bubble with so-called free money flooding the market. A similar situation may be happening now especially this last run of the interest rate cuts. We are not there yet, but I think we may be the beginning of another bubble. The S&P 500 PE ratio is about 23 right now. Back in the last 1990s, it was up to 32. It is one indicator of a bubble. 

We have experienced the longest bull market in history! I am old enough to remember 1974-1975, the energy and inflation crisis, the 1987 crash, the technology, and the real estate bubble, all of these crashes were n asty. During those wild days of the tech bubble, I made more money in my portfolio on many days than a year's worth of my teacher's salary! I vividly remember the thrill, excitement and the rush of those huge gains in my portfolio. What goes up must come down and then absolute dread with the tech bubble crash and dealing with cancer. In 2008, I had fixed the errors of the past and I sailed through the 2008 crash with only a loss of 11.8%. But in all cases, the markets recovered and grew, and luckily my cancer was treated successfully. 

 

 

 

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Of course these returns could plunge (or jump) in the next month, but so far, that "wow!" rings true.  My 75 stock/25 bonds and cds portfolio is up 17.4% through the end of November.  

 

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1 hour ago, whyme said:

Of course these returns could plunge (or jump) in the next month, but so far, that "wow!" rings true.  My 75 stock/25 bonds and cds portfolio is up 17.4% through the end of November.  

 

If the markets plunge, it has been expected but if it jumps again this month along with the PE ratio we are getting into bubble territory. 

Wait a minute, the markets did plunge a year ago only in December but they all bunched back quickly at the beginning of this year. 

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Yes, it is worth remembering that the strong gains this year are partly due to the fact that the market took a (relatively shallow) dive late last year.  My portfolio was down 5% or so for calendar 2018.

 

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This screen sh_t from the NYT shows that as we get to the bottom in mid-Dec, the 1 year return and the YTD return will be even higher than it is now. After the first Q of this year, the S&P 500 has had a gradual, rather bumpy increase. 

2030870748_ScreenShot2019-12-01at2_59_31PM.thumb.png.79370bca91c24aa9476e6e3ccc36fbe7.png

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Vanguard Total Stock Index up 27% YTD without a stumble along the way but :

Vanguard’s chief economist and investment strategist warned in mid-November:Our near-term outlook for global equity markets remains guarded, and the chance of a large drawdown and other high-beta [more volatile] assets remains elevated and significantly higher than it would be in a normal market environment. (Marketwatch, 11/19/2019)High-quality fixed-income assets, he says, “remain a key diversifier.”

 

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