The purpose of SWR analysis

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JWR1945
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The purpose of SWR analysis

Post by JWR1945 »

The purpose of SWR analysis

In the How do we handle dividends? thread, hocus made a very interesting comment:

I believe that you are right that high-dividend stocks have (at least sometimes) a higher safe withdrawal rate than S&P 500 stocks. I believe that the problem you are having analyzing the matter is that you are trying to apply an inappropriate analytical method. You need to step back, think through carefully what it is that you want a SWR analysis to do, and then reassess some things that you believe you have known for sure for some time now. It is the things you think you know but actually don't (I don't mean you personally) that are getting you stuck.

The purpose of a SWR analysis is to determine your portfolio allocation....

I think that hocus has overstated his point. (He has a good one.) I consider the take-out number to be an important part of any safe withdrawal rate study. There was great benefit when the original studies showed the dangers of making withdrawals of 7% to 10% (nominal). OTOH, I think that determining your portfolio allocation is a very good application of any safe withdrawal rate study.

Certainly, there are many factors worth considering including non-mathematical ones.

I think that monitoring portfolio safety is a worthwhile goal of safe withdrawal rate analysis.

Are there others?

Have fun.

John R.
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Post by hocus »

I think that hocus has overstated his point. (He has a good one.) I consider the take-out number to be an important part of any safe withdrawal rate study. There was great benefit when the original studies showed the dangers of making withdrawals of 7% to 10% (nominal). OTOH, I think that determining your portfolio allocation is a very good application of any safe withdrawal rate study.

OK, JWR. I don't mean to say that determining the take-out number does not have significant value. One of the things that impressed me about intercst's web site when I discovered it was that his take-out number was the same as mine. So I shouldn't discount this. It was a big deal to me once upon a time, and it is no doubt important to others today.

The reason for my comment is that I went through the exercise of determining the take-out number a long time ago. It's not a question that excites me so much today. But there is a lot of stuff that comes into play in determining the portfolio allocation that I do not yet have a firm grasp of. Personally, that's what I would prefer to be exploring at this point in time.

My contention is that intercst got the take-out number correct and the portfolio allocation entirely wrong. It is safe to take 4 percent, but not with the portfolio allocation he recommends (at least not today).

Certainly, there are many factors worth considering including non-mathematical ones.

In the event that this is a reference to anything that I have said, I would like to say for the record that I do not believe that it is appropriate to consider non-quantifiable factors in a safe withdrawal rate analysis. My argument has been that all data that bears on the question should be considered (whether easily available or not). I do not at all favor the idea of turning SWR analysis into some sort of subjective exercise.

I view it as an exercise in subjectivity to choose to include data on some aspects of the question and not others. So I maintain that it is intercst who is being subjective. My approach is to let the data speak for itself, and not engage in any personal decisions as to whether to include data or not--to just include all factors that bear on the question. I am not at all saying to include non-mathematical factors.

For example, the question of the extent to which investors with a 74 percent stock allocation will remain in stocks in the face of a sharp downturn in prices is quantifiable. There is data available on this question. StubbleJumper has told us that the one reseacher who has access to the data is not likely to share it with us, and that is a practical problem. But the reality is that it, if we had the data, we would know with mathematical precision what effect this factor has on the SWR for 74 percent stock allocations.

The fact that the data is hard to get does not change the way that the analysis should be done. If we don't have easy access to the data, we can't just pretend that the factor does not exist. We must find second-best data or make a reasonable estimate of the effect that the data would show if we had it, or at least note in our results that we know that they are not accurate because we did not include all the relevant data. It is analytically wrong to ignore the factor just because it presents some practical obstacles.
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Post by Dagrims »

For example, the question of the extent to which investors with a 74 percent stock allocation will remain in stocks in the face of a sharp downturn in prices is quantifiable. There is data available on this question. StubbleJumper has told us that the one reseacher who has access to the data is not likely to share it with us, and that is a practical problem. But the reality is that it, if we had the data, we would know with mathematical precision what effect this factor has on the SWR for 74 percent stock allocations.


Two comments:

1. I don't see how this data could possibly be gathered with any sort of confidence. I suppose that surveys could be conducted, but that's not hard, verifiable data. How could you identify those investors that have 74% stock allocations? Or 63%? Or 35%? Most investors probably could not state their own allocation percentages. Intuitively this just seems exceedingly difficult.

2. I need to go link searching, but I read on-line recently that over the past two+ years there has not been a significant outflow from equity mutual funds from individual investors. Perhaps 'buy and hold' has really become the preferred course and investors are maintaining their allocations even in the face of a bear market (although their actual allocation has probably changed since the value of their equity has declined).

Chris
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Post by wanderer »

Two comments:

1. I don't see how this data could possibly be gathered with any sort of confidence. I suppose that surveys could be conducted, but that's not hard, verifiable data. How could you identify those investors that have 74% stock allocations? Or 63%? Or 35%? Most investors probably could not state their own allocation percentages. Intuitively this just seems exceedingly difficult.

2. I need to go link searching, but I read on-line recently that over the past two+ years there has not been a significant outflow from equity mutual funds from individual investors. Perhaps 'buy and hold' has really become the preferred course and investors are maintaining their allocations even in the face of a bear market (although their actual allocation has probably changed since the value of their equity has declined).

Chris

wanderer would be flabbergasted if the following were not true:

1. the detail exists. in incredibly granular detail. "Hard" and "verifiable" would not begin to describe it. in detail not even dreamt of on this board.

it is reposited (if that's a word) in databases at Vanguard and Fidelity. I bet they know to 6 significant digits the average churn of investors and their investments. if they don't, their marketing arm isn't doing their job. Every time the modify their fee schedule and their fund offerings, I guarantee they do a market study and do a bunch of proformas analyzing the impact of interest rates and rates of return and volatility.

Right now, I can open up Vanguard and see my allocations, the dates of all purchases and sales back 9 years, comparison of my performance and that of the funds I own to various benchmarks over various lengths of time. I have never found an incorrect statement from Vanguard. I guarantee that these guys are slicing and dicing this 3 ways to Sunday.:wink:

How else would you determine each of those key variables and initiate a marketing campaign based thereupon? How else could you run this business profitably in such a competetive environment on such a low margin?

2. Actually, I saw something, Mauldin at millenium wave, that said equity fund net outflows were the order of the day. Sure seems like bonds (and real estate) are a lot more popular than when I was mocked for raising the issue. I do agree there is a perception, maybe valid, that stocks are for the long run and hence BAH prevails. I am certain that Vanguard/Fidelity databases show the truth in excruciating detail.

3. the odds of seeing these databases? Nil. They are of strategic importance to these firms - costly to create and probably detrimental to divulge.

fwiw and all my opinion;-).

wanderer
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Post by hocus »

Perhaps 'buy and hold' has really become the preferred course and investors are maintaining their allocations even in the face of a bear market

Dagrims:

I don't say that it's impossible that that will continue to be the case (although I have my doubts). But this argument is a "this time it's different" claim. A safe withdrawal rate analysis uses historical data to make assessments of what is likely to happen in the future. If you believe that the future is going to be unlike the past, then you should not be using SWR analysis to inform your investment decisions.

I have no problem with someone saying that they don't use SWR analysis. My complaint is when someone says that he places great confidence in SWR analysis, but that, because he doesn't like the results he obtains when looking at all factors that bear on the question, he is going to select only those factors needed to produce a result he finds agreeable. Either you believe that the past tells us something about what the future may hold or you do not.

I don't see how this data could possibly be gathered with any sort of confidence.

I doubt that you are going to be able to come up with data that provides complete confidence anytime soon. But how much confidence can you have in results that simply ignore a factor that obviously has a bearing on the question? Any reasonable adjustment you come up with is going to increase your confidence in your result.

It was recently pointed out that one good thing the intercst study does is tell you the upper limit of the safe withdrawal rate for a 74 percent stock allocation. This is indeed a valuable insight. Before the study, it was possible to imagine that you could afford to take more than 4 percent from a 74 percent stock portfolio. Looking at the study, you know this is not so. Knowing that intercst failed to consider several factors can cause you to lower the SWR for that allocation, but it can never cause you to increase it. (The one exception is that it is possible that the SWR for that allocation is higher than 4 percent at times of low stock valuations, but that doesn't apply today).

So you know that the number is something less than 4 percent, but you do not know exactly what. Today, we are at the high end of the valuations examined in the 130-year period. Since you are at the limits of the valuation spectrum for which the study remains valid, you know that any factor other than valuation ignored in the study will cause a drop in the SWR below 4 percent. One such factor is intercst's failure to look at the experiences of individual investors. So you know for certain that today the number is something less than 4 percent..

If I knew the exact number, I would provide it. The data needed to calculate it is not available, so I cannot. This is why it is so silly for intercst supporters to demand that I formulate some sort of study myself. How can I do that when the data needed to know the precise number does not even exist? This is a nonsense demand.

But I can say with certainty that, had intercst considered all factors bearing on the SWR for a 74 percent allocation, his study would have produced a number below 4 percent. It is likely that the adjustment needed to incorporate this factor is greater than what you would intuitively expect. The study is datamined, so any missing factor causes surprisingly large changes in the results. In all likelihood, the adjustment required is significant.

We can't come up with a precise number today, but we can take a reasonable guess at what the effect was. Say that there were 100 investors who retired in 1929 with a 74 percent stock allocation, planning a 30-year retirement. Each lived through the 90 percent drop in prices that followed. If only 3 lowered their stock allocation, then you can have 97 percent confidence in the 4 percet number. If 20 lowered, you can have 80 percent confidence. If 70 lowered, you can have 30 percent confidence.

It seems highly unlikely to me that only 3 lowered their allocation during a 90 percent drop in prices. I just try to imagine what would happen if we experienced a 90 percent drop in prices today. That would bring the DOW down to something in the neighborhood of 1500. I strongly believe that more than 3 percent of investors with 74 percent stock allocations would lower them if we suffered a price drop of that magnitude. Many people would not be thinking 30 years out in that sort of circumstance; they would be more concerned with having their money last five years than having it last 30 years. So the SWR for that allocation is not 4 percent.

History may not repeat. I personally do not think it will. But a calculation of the SWR based on what happened in the past does not produce a SWR of 4 percent for a 74 percent stock allocation.
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Post by Dagrims »

1. the detail exists. in incredibly granular detail. "Hard" and "verifiable" would not begin to describe it. in detail not even dreamt of on this board.

it is reposited (if that's a word) in databases at Vanguard and Fidelity. I bet they know to 6 significant digits the average churn of investors and their investments. if they don't, their marketing arm isn't doing their job. Every time the modify their fee schedule and their fund offerings, I guarantee they do a market study and do a bunch of proformas analyzing the impact of interest rates and rates of return and volatility.


I understand your point and agree 100% that Vanguard and Fidelity know exactly the asset allocation and churn of their investors. But they can't possibly know what else each one of those investors is invested in, whether it's TIPS, cash, CDs, real estate, other mutual funds, individual stocks, 401(k) plans, etc. There's no way that Vanguard can tell you what your overall investment allocation is; only your allocation in Vanguard product. That's the point I'm trying to make - I believe that very few investors have all their investments with one company or in one product.

My wife and I currently have investments in the following areas:

residential real estate - two properties
individual stocks - about 12 within Roth IRAs and a brokerage account
two 401(k) plans - some company stock, a bunch of S&P index, dollops of various mutual funds
taxable accounts with three mutual fund companies - this was a mistake made a few years ago, but I'm having a difficult time convincing the wife to consolidate and/or switch these
REITs
savings account
deferred comp - earning interest at about 4%

Who's going to know what my investment allocation is? It's difficult for me to calculate, and it changes frequently as markets increase and decline. One of my goals is to simplify all this; I've done a lot of reading but have much more to do. I'm also considering getting into commercial real estate at some point, so that will further complicate this calculation.

I will assert again that it's nearly impossible for any one organization to compile the data required to peg those investors with 74-26% allocations and then track their investment decisions.

Chris
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Post by Dagrims »

Say that there were 100 investors who retired in 1929 with a 74 percent stock allocation, planning a 30-year retirement. Each lived through the 90 percent drop in prices that followed. If only 3 lowered their stock allocation, then you can have 97 percent confidence in the 4 percet number. If 20 lowered, you can have 80 percent confidence. If 70 lowered, you can have 30 percent confidence.

It seems highly unlikely to me that only 3 lowered their allocation during a 90 percent drop in prices.


If the majority of investors would have kept their 74% stock allocation, the market would not have declined by 90%. That's one point that makes this very interesting - an individual's predilection for keeping their stock allocation high is not the main determination of future performance. Instead, it's the masses' decision whether to keep their allocation or move to alternate investments that has a primary affect on each individual. One could have a steel-lined stomach for risk and refuse to lower his allocation, but if everyone around him is bailing out of stocks, this steadfastness does little good.

Chris
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Post by StubbleJumper »

I will assert again that it's nearly impossible for any one organization to compile the data required to peg those investors with 74-26% allocations and then track their investment decisions.


Chris,

You are absolutely correct. There is no way that a brokerage dataset would be able to peg investors as having exactly 74/26, 80/20 or 90/10 allocations. However, with the mind-boggling amount of data that they possess it is still possible to make some interesting observations about individual investors' behaviour which may provide some insight as to how well average individuals would adhere to the SWR approach that is proposed by REHP.

As an example, you could do something as simple as divide the universe of investors into age groups and observe the percentage of investors that increased their stock allocation in response to a market decline, those that maintained their allocation, those who did nothing (ie, neither bought nor sold stocks, thus their allocation would decrease), and those that unloaded stocks to purchase fixed income. Who knows what the results would be? Perhaps we would find that many investors in the 50s and 60s took advantage of a "cheap" market and increased their allocation......however, I tend to side with Hocus on this issue and suspect that there would be quite a number that ran like hell to the sidelines.

So you're right, you cannot answer the question perfectly, but if the data were available to the public, it would make a very interesting study!
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Post by wanderer »

chris -

first, i must confess we are rather unusual in that we have everything except the real estate at vanguard. i think you might be surprised at the success that financial services firms had cross selling (hence the decline and fall of glass-steagall, banks selling insurance and securities and hedge funds...) in the late 90s. also, we long ago transferred our 403b balances to vanguard so we are definitely a unique case again.

your point does bring up one of the ultimate unrealities or the re*p - which is that some large percentage of people have half or more of their assets in real estate or some non-75/25 invt. again, worthy of further study.

let's say, using shiller, that 50% was in some sort of real estate and the remainder in some form of cash or bonds or equities. as imperfect as it is, maybe we could treat whatever was there as some sort of proxy for the investors total worth and see how they handled the money.

or we could look at the data from ICI and treat the entire US mutual fund industry as one investor and see how "he" behaved. Imperfect but interesting, i would think...

wanderer
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Post by hocus »

If the majority of investors would have kept their 74% stock allocation, the market would not have declined by 90%.

I'm reluctant to raise this question because it sends things on a tangent. But I would love to know the answer, so I'll toss it up and see if anyone wants to take a swing.

Stock prices tend to go up when middle-class demand for stocks increases, in bull markets; and stock prices tend to go down when middle-class demand for stocks diminishes, in bear markets. Still, for each share of stock that someone buys in a bull market, there is someone who sells a share in a bull market. And for each share of stock that someone sells in a bear market, there is someone who buys a share n a bear market.

Does anyone have a sense who it is who is doing the selling in bull markets and the buying in bear markets? Is it wealthy investors who provide the counter to the desires of middle-class investors? Is it the financial institutions making a market in the stock?

This has long been a puzzle to me. Middle class participation in the market waxes and wanes. But the number of shares generally (not counting for things like new issues and buybacks) stays the same. What group is it that is doing the opposite of what the middle-class investors are doing?
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Post by JWR1945 »

Part of it is middle class investors: those who have been in the market before prices went up and those who have stayed in the market when prices have come down.

I think that it is best to focus on the money that goes into the market or comes out of it...as opposed to the number of shares. When money is coming into the market, somebody is encouraged to give up a few shares because the price is high enough.

It really does not matter who it is. In some cases people just need money and sell shares regardless of what the market is doing (plus or minus a few weeks). That has been my situation several times in the past and I have been happy to sell for a profit. But there are also people who would prefer to convert to more secure investments. Often, these are retirees.

The important thing is that enough new investors are bidding up prices. I suspect that some of the competition for shares is from wealthier investors and from institutions. (When I look at mutual fund investment styles, I see no reason to think that the professionals...as a whole...are that good at investing.) It could be that we notice middle class investors because there are so many of them (us) and because their (our) combined buying power is so big.

When the price gets high enough, even the most reluctant stockholder will sell a few shares. The amazing thing, of course, is that there are enough buyers to bid prices high enough.

During a bear market, there are an unusually large number of sellers...competing with each other by lowering prices. In terms of the number of people involved, the middle class draws attention to itself. But again, I do not think that the wealthier investors, institutional investors and mutual fund managers do any better. It is just that they do not attract as much attention.

Forbes Magazine publishes lists of the 400 wealthiest people in the country each year and they celebrate how many of the names change from year to year. New people create fabulous amounts of wealth...often in the first generation. The United States does not have an aristocracy, a stagnant class of the rich. More interesting, however, is that most of the people who were in the Forbes 400 in any particular year would have done better in the following year if they had invested in index funds instead of retaining their existing holdings.

I realize that I have not answered your question. I do not know the answer. I am not convinced that the distinction of middle class investors is key. It may just be that newer and more experienced investors are better descriptions. Of course, the vast majority of the newer investors...both entering into the stock market and exiting the stock market...are in the middle class. They are more visible. They are easier to see (and measure) than the others.

Financial instruments are strange animals. The higher the price, the more attractive they become to many. The faster the prices increase, the greater the demand.

Have fun.

John R.
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Post by wanderer »

What group is it that is doing the opposite of what the middle-class investors are doing?

value investors/contrarians?

one more thing on who has data for investor activity - it sounds like certain folks have almost no mutual funds but have individual corporate securities so i'd venture a guess the ameritrade types would have the data for them...

wanderer
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Post by hocus »

I realize that I have not answered your question.

You did provide a possibly significant clue, JWR1945. You suggested that retirees behave differently than non-retirees in their stock acquisition behavior. That's a possible explanation of the puzzle.

It could be that this is a matter of demographics cycles rather than a matter of wealthy investors behaving differently than middle-class investors. Perhaps the stock purchases we hear about in Bull Markets are being matched by less commented-on sales by retirees, and the sales we hear about in Bear Markets are being matched by less commented-on purchases by retirees.

Financial instruments are strange animals.

This is what I was getting at. We frequently use metaphors from the world of products and services to describe what goes on in the stock market, and those metaphors are often useful. But there are also questions for which the use of those metaphors can be misleading. My concern here is that we use the metaphor of "supply and demand," but the phrase has an entirely different meaning when it comes to stocks than it does when you are selling cans of orange juice.

If you are currently selling 1 million cans of orange juice, and you run an ad campaign to increase demand, you might be able to sell 3 million cans a few months from now. An increase in demand can be met with increased production.

That is generally not true for stocks. When you hear people say "there were a lot of buyers in the market today," that is not strictly true. There are always just as many buyers as there are sellers. I view this as a fact with some interesting implications.

We often hear about how participation in the stock market increased throughout the 1990s. A higher percentage of the population now owns stocks, and a higher percentage of the average investment portfolio is comprised of stocks, and so on. Anecdotal evidence supports the statistical claims, so I presume that all this is true. But when middle-class workers are doing all this buying, who is doing all the selling that is required for the transactions to be completed?

Leaving aside the question of new issues, there were just as many sales of stocks in the 1990s as there were purchases. If there was an incredible number of purchases, there was also an incredible number of sales.

Stocks are not like orange juice. You don't place an order to increase the output by 2 million when demand picks up. The underlying asset--corporate entities--exists in roughly the same numbers in both bull and bear markets (this is not strictly true, and that's one of the things that makes the question a particularly difficult one for me). You don't pump out more stocks when demand for them goes up. So how is the increased demand satisfied? Through diminshed demand somewhere else! I personally do not see how this could not be so.

Every time there is this thing called a Bull Market among the group that I am referring to as middle-class investors, there is a Bear Market going on in some other group (perhaps it is retirees) that is strong enough to counter the Bull Market we all are hearing about. Unless the issuance of new shares in a Bull Market is great enough to meet the increased demand for stocks without the need for some particular group to be doing an awful lot of selling, that is. And if the number of new issues is great enough to meet the increased demand, that raises other interesting implications.

I'm over my head in asking this question, JWR1945. I appreciate you engaging me, and also you saying that you don't know the answer. I don't know the answer either. It's a puzzle to me. I ask the question because my experience has been that solving puzzles often helps me enhance my understanding of something. My sense is that I would possess a stronger grasp of the realities of stock investing if I could solve this puzzle. All I have been able to do so far is pick up a clue here and there. You have provided me a new clue, and I'm grateful for that.
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Post by Bookm »

Greetings all. It's been interesting reading this thread. I got stuck on something hocus wrote. You said that there are just as many buyers as there are sellers, and just as many sales of stocks as there were purchases in the 1990's. But this made me wonder what happens to all the shares of a company that gets hit with news that makes people who own its stock want to drop it like a hot potato. An image of the Duke brothers from "Trading Places" yelling, SELL, SELL!!! comes to mind. Lets say five million outstanding shares are sold. Not every single one of those five million shares are bought. Where do they go? Isn't this what makes a stock's price depreciate? Everyone's selling, but they can't find as many buyers, thereby reducing the number of outstanding shares in the public's hands. Does the company then hold onto these shares, or the brokerage firms?

And when the opposite happens, a company gets a big contract, or they release outstanding sales numbers, they become the day's hot stock. And buyers are swooping in as fast as possible. Doesn't the stock's price increase due to the demand for its shares? I know there are investors out there that wait for that stock to hit a high target that they might have set then sell. But aren't some of the shares these buyers are buying the shares that aren't outstanding, that aren't onwed by the public?

Please keep in mind that I'm not a business major, just an average investor trying to make sense of this aspect of the market. Maybe I just misunderstood what I thought I learned.

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Post by WiseNLucky »

Lets say five million outstanding shares are sold. Not every single one of those five million shares are bought. Where do they go?


Actually, they ARE all bought, even if the shares have to be bought by a "market maker". What happens is that the price changes enough to make it happen. Let's look at very simplistic examples.

Imagine yourself standing on the corner selling dollar bills. If your asking price is $1.10, you will be standing in the cold and no trades will take place. Drop your price to $1.00 and some people will stop by, but there won't be much enthusiasm. Drop further to $.90 and you will do a booming business.

By contrast, a share of stock doesn't have a fixed value. It does have some intrinsic value (dividends, potential appreciation due to anticipated earnings, etc), but each person has to assess what that value is, TO THEM.

Now you're standing on the street corner with lots of other people. You decide to buy a share of stock. You see what someone is asking, and decide whether you are willing to pay that price. If you are, a deal is struck. If not, you pass and let others have a chance.

If no one bites, and the person holding that stock really doesn't want to own it any more, he will gradually reduce the price until it hits a level where someone is willing to buy it.

The same could happen in reverse. You want to buy stock but no one seems to be selling. You gradually increase your offer price until someone bites.

On any given day, all the buyers and sellers have different ideas as to what a particular stock is worth, and that value changes as little bits of information, whether true or not, hit the floor. So the price moves up and down as different deals are made.

If something big happens, then you could develop a situation where there is a big difference between the number of people who want to sell a stock and the number of people who want to buy. But the same process would still work. The price would move, very quickly, to the point where buyers and sellers agree. At the end of the day, though, the number of buyers and sellers is the same.

In the case of a disaster, like WorldCom, the price might settle at someplace near zero or barely above. There is always someone willing to pay something. Or holders will be unwilling to sell at such a low price and so will continue to hold.

Same on a buy side. This sometimes happens on an IPO. More people want the stock than those that want to sell, but if the offer keeps going up, someone will eventually decide that the price offered is too good to pass up, and they will sell.

So hocus was right. With some exception for new issues, the number of shares out there stays the same. In a bull market, someone is selling the shares that bulls are buying. But it just might be other bull riders that want to move to a different mount. Sell Intel and buy Microsoft. This creates, in a way, imaginary wealth.

I'm sure there was a lot of that going on in the bull market of the 90s. I would like to think that there was someone intelligent out there moving to cash or bonds in the height of the bull, and there was, but not as many as there should have been. So we all floated each other's corks higher by adding more water to the pool in the form of our wages, or pulling cash out of savings instruments or (gasp) borrowing.

In a bear market, someone is buying the shares that bears are selling, either with cash they took out at the top (rare) or from the sale of other issues, or from wages (us DCAers). And a lot of that imaginary wealth disappears.

The wealth is not necessarily imaginary. Someone who bought for the first time in 1995 and sold in 2000 has some real wealth to show for it. Someone who bought for the first time in 2000, well, contributed to the wealth of the first person.

I've made this very simple to reduce typing time. The process is actually more complicated, but this should help get the idea across.

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Post by therealchips »

Deleted duplicate. I got a message saying that my post had not been transmitted successfully, when actually it had been. Sorry.
Last edited by therealchips on Sat Feb 01, 2003 6:19 pm, edited 1 time in total.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
therealchips
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Post by therealchips »

deleted duplicate.
Last edited by therealchips on Sat Feb 01, 2003 6:17 pm, edited 1 time in total.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
therealchips
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Post by therealchips »

Deleted duplicate
Last edited by therealchips on Sat Feb 01, 2003 6:11 pm, edited 1 time in total.
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
therealchips
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Post by therealchips »

You did provide a possibly significant clue, JWR1945. You suggested that retirees behave differently than non-retirees in their stock acquisition behavior. That's a possible explanation of the puzzle.

I suggest also that the behavior of American investors differs from that of other investors in buying and selling American equities. Certainly we hear about "foreign selling" although quantitative data seems unavailable. Here are a couple of quotations about foreign investors repatriating their capital.

From Economic & Investment Summary, August, 2002
This selling pressure produced unusual price declines fueled by margin calls, mutual fund redemptions ($48 billion in June and July - the largest two month total on record) and foreign selling because of the declining dollar and stock prices. http://www.americancapitalmanagement.com/summary.html

From Thoughts on the Global Markets A declining dollar should benefit large-cap multinational company earnings. But, potential net foreign selling could limit the rally in this asset class despite better earnings and valuations. Now that U.S. corporations appear less productive, profitable, and transparent, the U.S. market has less appeal to foreign investors. The recent decline in the dollar confirms this change in foreign investor sentiment. http://www.vankampen.com/newscenter/com ... SESSION=NO
He who has lived obscurely and quietly has lived well. [Latin: Bene qui latuit, bene vixit.]

Chips
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