Is the stock market over heating?

grey_gym_sock

pqrdef wrote: »

Assuming the invention of interplanetary travel.

well, if starting drawdown at 55, it only needs to last about 65 years, or about 30 years before you can get a high annuity rate with the remaining pot.

when you look at projections for withdrawal rates and whether you'll run out of money (e.g. firecalc), then there's not a lot of difference (according to the model) between lasting for 30 years and lasting forever.

the model is unlikely to be valid for durations longer than the lifetime of the sun.

more relevantly, the model may need adjustment in the shorter term if exponential economic growth proves to be unsustainable. exponential growth in energy use will be unsustainable much sooner. and how much economic growth is possible without using more energy?

Ark_Welder

grey_gym_sock wrote: »

the model is unlikely to be valid for durations longer than the lifetime of the sun.

Depends on whether it goes the same way as the News of the World.

atush

A_Flock_Of_Sheep wrote: »

Nikkei 225 down again - over 3% today - making a fall of circa 10% over the last few days.

My sheepdog predicts the FTSE will fall again tomorrow. Bring on the tank.

So, after panic selling Japan last week, now Japan is falling further. What should you do?

If you believe in Japan, buy?

jimjames

A_Flock_Of_Sheep wrote: »

Nikkei 225 down again - over 3% today - making a fall of circa 10% over the last few days.

My sheepdog predicts the FTSE will fall again tomorrow. Bring on the tank.

I hope so.

Money sitting waiting to be invested so I'd prefer to get it in with a bargain!

A_Flock_Of_Sheep

jimjames wrote: »

I hope so.

Money sitting waiting to be invested so I'd prefer to get it in with a bargain!

I know I invested in Late March and April and have sold on. Now the cash is sitting in the holding tank. Like I say a massive 30 - no 60% landslide tank is just what I need.

pqrdef

gadgetmind wrote: »

Or mathematics including Monte Carlo analysis.

The maths will produce any answers you like, depending entirely on what assumptions you plug in.

gadgetmind

pqrdef wrote: »

The maths will produce any answers you like, depending entirely on what assumptions you plug in.

The assumption is that the future will have world wars, global depressions, major collapses across multiple asset classes, runs on banks, sovereign defaults, rampant protectionism, hyperinflation, stagflation, booms, busts, and everything else that we've seen in the past.

If we plug that in, we don't get the answer we like, we get the answer that history teaches us.

Of course, we could say that this time is different ...

bigadaj

gadgetmind wrote: »

The assumption is that the future will have world wars, global depressions, major collapses across multiple asset classes, runs on banks, sovereign defaults, rampant protectionism, hyperinflation, stagflation, booms, busts, and everything else that we've seen in the past.

If we plug that in, we don't get the answer we like, we get the answer that history teaches us.

Of course, we could say that this time is different ...

Yes but using Monte Carlo you aren't coming out with a single answer. You are determining what level of probability you are happy accepting at achieving a. Defined outcome.

In this instance this presumably translates as achieving a defined rate of return based on current knowledge, the range of events that have occurred in the past and the probability of that happening based on what, a few hundred thousand model runs?

Perfectly justifiable and correct, though risk and probability are difficult things for many people to accept and understand. However using such a model ten years ago how confident would we be that base rates wouldn't be at 0.5% currently? I think the answer is pretty damned confident.

mystic_trev

A_Flock_Of_Sheep wrote: »

My sheepdog predicts the FTSE will fall again tomorrow. Bring on the tank.

Your sheepdogs got ticks

gadgetmind

bigadaj wrote: »

Yes but using Monte Carlo you aren't coming out with a single answer. You are determining what level of probability you are happy accepting at achieving a. Defined outcome.

You are coming up with a single answer that's the result of many hundreds of simulated runs.

Perfectly justifiable and correct, though risk and probability are difficult things for many people to accept and understand.

And for those people, the lower (but guaranteed) income of an annuity may be best.

However using such a model ten years ago how confident would we be that base rates wouldn't be at 0.5% currently? I think the answer is pretty damned confident.

Neither Monte Carlo, nor the backtesting used by Firecalc, require accurate predictions of that kind, nor any prediction other than that there will be good times and very very bad times during any given 30 year period.

As I say, anyone who denies the simple truth of this, or just can't get their head around it (even after using firecalc and playing with the advanced options) should maybe go the annuity route.