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Betting on the Market 1997 Frontline Stock Market Documentary


berkshire101
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That was awesome.  Really, really awesome.  Thank you for posting. 

 

I can't tell if the people interviewed seem crazy because I know how the story plays out, or if I would have looked at them the same way watching this video in 1997.  I'd like to think I could have identified this bubble somewhat, but that might be naiveté. 

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Really enjoying this.

 

Lynch says some of his best gains came after three years.... rumors have swirled that a majority of his gains were from owning mutual conversions.  These are banks that aren't allowed to sell until three years after their IPO, coincidence?  He owned something like 350 of 360 over the tenure of his fund.

 

I remember the market in 1996.  I went canoeing up in Northern Ontario with some friends and their fathers.  Two of the fathers couldn't stop talking about the market and how incredible it was.  At the time I would look up quotes from my favorite tech companies in the business section each morning.  I remember watching Gateway computer rise like a rocket, it just never stopped going up.  My grandfather was heavily invested, he did phenomenal for himself.  I wanted to open a brokerage account and get in on the action, my dad didn't ever follow through with that request.  It worked either way, my grandfather gifted me some of his stocks to pay for college.  I had completed almost all of college by 2002 when things finally crashed, lucky timing..

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A few other thoughts.

 

-Japan still hasn't recovered from the highs they talk about in the show.

-We still haven't hit the cheapness of the early 1980s that they talk about.  I guess technically we're still in a giant bull market?

-Boomers didn't believe SSN would be around now, they don't seem to think it'll last.  Seems like this prediction has been wrong.

-For boomers this is really an incredible market.  Since the early 1980s huge gains.  Yes there have been crashes but we always recover quickly.  If one were to look back I don't see any reason to not invest 100% in stocks, they always go up even over this long period.

 

I wonder if the market will ever get cheap again.  I can be persuaded with the globalization argument that now the world can buy the NYSE in a few clicks so there is that much more demand with a smaller supply.  But at the same time I can somewhat see this weird Japan type of experience in the future as well.  Japan as a country didn't stop functioning, but valuations have just crept down forever.  While some say Japan will never recover (I disagree), I can see the same argument applied to the US.  The US market will never fall and stay down like Japan.

 

Maybe the end of the video will be a prophecy come true, maybe we'll finally hit that valuation wall and stocks won't recover for the duration of the Boomer retirement.  I really don't know. 

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It boggles my mind that people were investing (and still do) Tens of Thousands of dollars with absolutely zero due diligence. Heck I just spent 2 hours researching mechanical keyboards trying to understand every difference between models. That was a $130 decision.

 

$10,000 is something like 400 hours of work.

 

It's seeing your friends and coworkers make tons of money that sucks you in. I think there's someone's name on this board that's "Innerscorecard". I think that's a great concept.

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It boggles my mind that people were investing (and still do) Tens of Thousands of dollars with absolutely zero due diligence. Heck I just spent 2 hours researching mechanical keyboards trying to understand every difference between models. That was a $130 decision.

 

$10,000 is something like 400 hours of work.

 

It's seeing your friends and coworkers make tons of money that sucks you in. I think there's someone's name on this board that's "Innerscorecard". I think that's a great concept.

 

Haha, thanks.

 

I'll always remember what Peter Lynch said about people spending way more time researching the purchase of a kitchen appliance than stock purchases of many times that amount. The illogical way people manage their money in general is just mindboggling. People spend years at stressful and disliked jobs, and then fritter away or mismanage the fruits of this hard labor on a whim.

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A few other thoughts.

 

-Japan still hasn't recovered from the highs they talk about in the show.

-We still haven't hit the cheapness of the early 1980s that they talk about.  I guess technically we're still in a giant bull market?

-Boomers didn't believe SSN would be around now, they don't seem to think it'll last.  Seems like this prediction has been wrong.

-For boomers this is really an incredible market.  Since the early 1980s huge gains.  Yes there have been crashes but we always recover quickly.  If one were to look back I don't see any reason to not invest 100% in stocks, they always go up even over this long period.

 

I wonder if the market will ever get cheap again.  I can be persuaded with the globalization argument that now the world can buy the NYSE in a few clicks so there is that much more demand with a smaller supply.  But at the same time I can somewhat see this weird Japan type of experience in the future as well.  Japan as a country didn't stop functioning, but valuations have just crept down forever.  While some say Japan will never recover (I disagree), I can see the same argument applied to the US.  The US market will never fall and stay down like Japan.

 

Maybe the end of the video will be a prophecy come true, maybe we'll finally hit that valuation wall and stocks won't recover for the duration of the Boomer retirement.  I really don't know.

 

At its core, regular index investing (depositing the same amount in a fixed asset allocation of index funds every month) requires you to buy completely blindly of valuation. Historically, when people have bought completely without minding valuation, bad things have happened. But maybe this time will be different? Looking back at the past, asset allocation and rebalancing of market-cap weighted indexes has been the optimal strategy for people living their lives, or at least the people who have been able to stick with it.

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A few other thoughts.

 

-Japan still hasn't recovered from the highs they talk about in the show.

-We still haven't hit the cheapness of the early 1980s that they talk about.  I guess technically we're still in a giant bull market?

-Boomers didn't believe SSN would be around now, they don't seem to think it'll last.  Seems like this prediction has been wrong.

-For boomers this is really an incredible market.  Since the early 1980s huge gains.  Yes there have been crashes but we always recover quickly.  If one were to look back I don't see any reason to not invest 100% in stocks, they always go up even over this long period.

 

I wonder if the market will ever get cheap again.  I can be persuaded with the globalization argument that now the world can buy the NYSE in a few clicks so there is that much more demand with a smaller supply.  But at the same time I can somewhat see this weird Japan type of experience in the future as well.  Japan as a country didn't stop functioning, but valuations have just crept down forever.  While some say Japan will never recover (I disagree), I can see the same argument applied to the US.  The US market will never fall and stay down like Japan.

 

Maybe the end of the video will be a prophecy come true, maybe we'll finally hit that valuation wall and stocks won't recover for the duration of the Boomer retirement.  I really don't know.

 

At its core, regular index investing (depositing the same amount in a fixed asset allocation of index funds every month) requires you to buy completely blindly of valuation. Historically, when people have bought completely without minding valuation, bad things have happened. But maybe this time will be different? Looking back at the past, asset allocation and rebalancing of market-cap weighted indexes has been the optimal strategy for people living their lives, or at least the people who have been able to stick with it.

 

Completely agree with the first part of your statement – but I doubt that it will be different this time. My 2 cents on it:

 

Think about the most undoubted statement out there: You can never (yes, people really say "never") loose in the long run by buying and holding the index; or – the slightly more conservative variant – by holding 60/40 stocks and bonds. Now think about where stocks are, think about where bonds are and think about how comfortable you'd feel holding 100% cash for a prolonged period (let's say 10 years – when the demographics in the developed countries and China will become really ugly). It doesn't take a lot (e.g. 1-2 decades of deleveraging) to crush this giant bull market. I just can't understand why people don't think about this. In retrospect, there might be a point in time where we will say that the most dangerous thing happening to us was the post 2008 recovery. People stared into the abyss… – and nothing happened. People who bought "the dip" are considered geniuses right now. I bought equities from 2009 on and felt like a genius because I made 30+% returns almost every year; that is until late in 2014 when I finally asked the question: What if we only stopped the clock for a few years by inserting an insane amount of liquidity into the system? I don't think that you can repeat that. There is such complacency out there.

 

I'm afraid that before the end of this decade we're going to see "the death of equities" (with it the "death of indexing") and the "death of derivatives". My best guess is that the coming bear market has to last for so long that people completely loose faith in stocks – like they did in the 1930s; only that this time government bonds (around the world!) look very dangerous, too.

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At its core, regular index investing (depositing the same amount in a fixed asset allocation of index funds every month) requires you to buy completely blindly of valuation. Historically, when people have bought completely without minding valuation, bad things have happened.

 

Say what?

 

Everyone who dollar-cost-averaged into index without looking at valuation has done well. It does not really matter when they started. Of course, it required that you put the money in every year, not to panic and sell. But return has been OK even if you started buying in 1999 (and bought through 2000-2003 ;) ).

 

Japan is the only counterexample I know. Even in Great Depression it may have worked - if you had money to DCA all through it.

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Great documentary. Nice to see some familiar faces. 8)

 

Yeah, I also bought Iomega in 1995 or so. Sold at a gain... If only I bought BRK or index then and just held.  ;)

 

The interesting part is also that this shows 1996-97. There were another 3-4 years of tremendous bull market in the future. So actually both trade-trade-trade bulls and perpetual doom and gloom bears look silly in retrospective.

 

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I'm afraid that before the end of this decade we're going to see "the death of equities" (with it the "death of indexing") and the "death of derivatives". My best guess is that the coming bear market has to last for so long that people completely loose faith in stocks – like they did in the 1930s; only that this time government bonds (around the world!) look very dangerous, too.

 

I would love to see the death of equities so I can buy in bulk for cheap  ;D. Man that would make me a lot of money!

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Thanks for posting. Great revisit to irrational exuberance. I had my share of naivete and stupidity then.

 

I distinctly remember an otherwise smart professional cheering Greenspan on, for AG was the hero many attributed the up-up-and-away investment returns to. QCOM was selling for 100's of times earnings. Also, since I worked in the brick-and-mortar world, remember several dotcom types take pity on my situation. "What's wrong with retiring at 30?". hmm..

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