1970's

Snags read a couple of Nick Murray's books, take two aspirin and call your clients in the morning. Nick is a master at using market history to comfort clients.

  Realize that this bear, while in some ways unprecedented, has much in common with previous bears. Break it down this way: All bear markets have four parts : market dislocation, recognition of the problem causing the dislocation, (hi, my name is S&P and i've got a bear on my back. Hi S&P!), solution to the problem(usually gov't intervention) and finally, recovery. Right now we are in the solutions phase. This could be it, the market has bottomed, orrrrrrrr, there could be more problems ahead. Kinda like, the patient had a heart attack, we're dealing with it, there could be further complications, but we expect a full recovery.   The answer is have an honest conversation with your clients about their risk tolerance. rebalance their portfolios accordingly. Don't be afraid to take loses where appropriate. And most importantly develope a strategy.   The seventies downturn had a lot in common with the tech bubble bursting in the 2000/01 time frame. During the seventies it was the nifty fifty that led us down. A group of fifty blue chips to which normal valution rules no longer applied. Just like the techs of the late nineties, normal rules of valuation, sales, earnings etc, didn't apply to the valuation of the nifty fifty. Gravity didn't apply. Or so investors thought. They found out that not only did gravity still exist, they found out that gravity is a merciless bitch. The market didn't move up for ten years. Still, smart buy and hold investors found a way to gain almost 7% a year compounded by investing in dividend paying stocks. Like I said, get a strategy.

I just found this--the market is boring today so I started looking around this forum.

While it is true that the losses of the 1970s were recouped very quickly, it took about twelve years for the recouping to begin.   As BondGuy says in a sideways market one needs to have a strategy---mine was option writing.  Completely covered for ultra conservative clients and partially uncovered for more agressive clients.   Brokers who got in trouble in the early '80s got there because what had worked for their entire career no longer worked.  I talking about selling naked calls.  From the advent of the CBOE in 1973 until the straight up rally that started in early September of 1982 selling naked calls was the greatest idea since sliced bread.  Printing money.   Then it didn't work---in fact it was the dumbest idea one could think of.   When you think of the fundamentals it is difficult to come up with a reason to not believe that we could be going into a similar decade or so of malaise.   We went sideways from 1968 to 1982--why could it not do it again from 2008 to 2022?   Answer, it could.  What are you going to do to make money for your clients at a time when equities may go sideways and bonds go down?

[quote=Provocative Put]

  We went sideways from 1968 to 1982--why could it not do it again from 2008 to 2022?  [/quote]   As of now, we have essentially just gone through a sideways 10 year period.

[quote=snaggletooth][quote=Provocative Put]

  We went sideways from 1968 to 1982--why could it not do it again from 2008 to 2022?  [/quote]   As of now, we have essentially just gone through a sideways 10 year period.[/quote]

1998 to 2008 that's true.  How about 2007 to 2008?

What's your plan if the market trades between 7500 and 9500 until 2022 before blows out again?

What’s your plan if the market trades between 7500 and 9500 until 2022 before blows out again?

  My plan is to get up early everyday.  Work hard.  Take vacations.  Spend a lot of time with my family.  Play some hoops and other sports.  Pick up golf when my body won't allow me to continue being an athlete.   Drink some beer.  Make love to my wife.    I never will know what the market will do tomorrow, so I have no idea why the fact that the market might do that will impact my plans.  It also may increase 20% + for the next 3 years.  It may decrease 50% next year.    I don't know what strategy will yield the best results for my clients over the next 10 years.  Do you?  I don't care about a trade that will make someone $10,000 today.  Neither do my clients.  My clients care about maximizing their chance of achieving their goals.   I'm not saying that there aren't people who want to make trades that will net them a lot of money today.  It's just that those people aren't a good fit for my practice.  They would be much better served with you, Putsy, as their advisor.

[quote=anonymous]What’s your plan if the market trades between 7500 and 9500 until 2022 before blows out again?

  My plan is to get up early everyday.  Work hard.  Take vacations.  Spend a lot of time with my family.  Play some hoops and other sports.  Pick up golf when my body won't allow me to continue being an athlete.   Drink some beer.  Make love to my wife.    I never will know what the market will do tomorrow, so I have no idea why the fact that the market might do that will impact my plans.  It also may increase 20% + for the next 3 years.  It may decrease 50% next year.    I don't know what strategy will yield the best results for my clients over the next 10 years.  Do you?  I don't care about a trade that will make someone $10,000 today.  Neither do my clients.  My clients care about maximizing their chance of achieving their goals.   I'm not saying that there aren't people who want to make trades that will net them a lot of money today.  It's just that those people aren't a good fit for my practice.  They would be much better served with you, Putsy, as their advisor.[/quote]

Somebody, perhaps you, keeps saying that your clients won't complain because their goal is not to make money so they won't care if they lose.

What is their goal?

It sounds like you might have only one client--your mother--and her goal is to support you by paying fees.

I'd be interested in hearing how you will tell a client that they met their goals if they spent ten years in the market and it went up a bit and down a bit but after a decade it had gone exactly nowhere.

Please make a fool of me and explain what I'm missing.

Put,   Who is to say anonymous' clients' growth assets are 100% invested in the stock market?  What if they own a business?  Real estate?  Partnerships?  Is it safe to say that there are other places for one's money to grow outside of marketable securities?   I know anonymous sells a fair amount of whole life insurance.  Clients always see their cash surrender value grow ever year in these policies.  So, I would think that his clients can still see their goals met in spite of the DJIA being flat over the forseeable future.

You don’t need me to make a fool of you.  You do it well by yourself.  What you are missing is that every client is an individual.   Clients don’t usually come to me and say, “I have $100,000.  Please help me invest this.”  Well, they do, but that’s not how I work.

  Instead, it's me asking about their goals and objectives and their time horizon and risk tolerance, etc.  I find out where they want to be.  I found out where they are now.  We then put together a plan of action to get them from Point A to Point B.  Is getting to Point B even possible based upon their risk tolerance and time horizon?  If not, Point B needs to be moved.  If it is possible,  our focus is on getting to Point B.  My job is to do everything in my power to get them to take action on the things that will get them to Point B.   Of course we want to make money.  Making money usually makes accomplishing goals easier.   However, we aren't trying to make money just to make money.  If that was the case, we could forget about goals and just put everything in CD's.  This will guaranty that they will make money.  It may also guaranty that they won't accomplish their goals.    "I'd be interested in hearing how you will tell a client that they met their goals if they spent ten years in the market and it went up a bit and down a bit but after a decade it had gone exactly nowhere."   Much of this is out of my control.  I may have a client who needs a 9% return to achieve their goal of retiring in 10 years.  If we have a sideways market over the course of the next 10 years, guess what, they won't achieve their goal.   There's nothing that I can do about it.  We just try to make things a possibility when a possibility exists and quickly tell people when they aren't realistic.   My natural inclination is to have clients invest in as conservative of a manner as possible that will still allow them to achieve their goals.  Often, investing conservatively won't allow them to achieve their goals.  This means that they have to invest more aggressively and they may fall short and there is largely nothing that we can do about it.   I'm constantly underpromising.  I don't have to go back to my clients with apologies.    There is one thing that I can do that will guaranty that my clients will have more money.  I get them to invest or save more.