Market Crash Probability

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  • เผยแพร่เมื่อ 23 ธ.ค. 2024

ความคิดเห็น • 281

  • @Pensioncraft
    @Pensioncraft  3 ปีที่แล้ว +8

    Become a PensionCraft Patreon member and gain access to a library of exclusive videos and content, chat with me and other members on our chat forum and take part members-only live Q&As. patreon.com/pensioncraft
    Support us on TH-cam and help us remain independent th-cam.com/users/pensioncraftjoin

    • @fredwinslow744
      @fredwinslow744 3 ปีที่แล้ว

      Why not just calculate all periods December to January ? Why skip so much data ?

    • @Ru4444
      @Ru4444 3 ปีที่แล้ว

      Sooooo should i be worried about a crash?

  • @Ru4444
    @Ru4444 3 ปีที่แล้ว +9

    This guys voice is very soothing... my anxiety of the stock market goes away when i hear his voice..

  • @AlmofidBdarija
    @AlmofidBdarija 3 ปีที่แล้ว +110

    The only channel in youtube i visit for rational academic information without bias, clickbaits and stupid 🚀 emojis.

    • @jeffp3674
      @jeffp3674 3 ปีที่แล้ว

      +1000

    • @ihabiano
      @ihabiano 3 ปีที่แล้ว

      True!

    • @danielclarke2264
      @danielclarke2264 3 ปีที่แล้ว +1

      Pension Craft to the moon!

    • @CaseyBurnsInvesting
      @CaseyBurnsInvesting 3 ปีที่แล้ว

      🚀🚀🚀🚀🚀

    • @nicksundby
      @nicksundby 3 ปีที่แล้ว

      The only other one that may have some value is Trader University, although it is somewhat focused on Bitcoin.

  • @atul9380
    @atul9380 3 ปีที่แล้ว +5

    This has to be some of the best statistical analysis on TH-cam. I see I’m not the only one who enjoys seeing charts created using R. Thanks Ramin

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Thanks @Atul that's very kind of you to say! Ramin

    • @jc4evur661
      @jc4evur661 2 ปีที่แล้ว

      @@Pensioncraft Every time I watch your vids I focus on that freckle/mole on your nose. Having suffered from skin cancer myself I'd seriously suggest you visit a dematologist just to make sure it's not.

  • @ii7990
    @ii7990 3 ปีที่แล้ว +38

    Your videos are some of my favorite on TH-cam.
    Thank you for making these.
    It's soooo refreshing to have financial content on TH-cam that's not click-bate 'the sky is falling'.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      I i - thank you so much. I am glad you enjoyed it

  • @dswainentertainment3891
    @dswainentertainment3891 3 ปีที่แล้ว

    This is good analysis sir, market can crash 10% plus, so why pe dislike, they don't no about market. Thanks sir.

  • @azizpunja6538
    @azizpunja6538 3 ปีที่แล้ว +2

    No one can predict the markets and looking back at history and trying to do so is largely a waste of time.
    Today, if you are already in the market (and the market is currently highly valued) it makes sense to hold a larger amount of cash to reinvest again when the market falls and is less expensive. Interest rates are low so the cost of holding cash is relatively low.
    Take some profits now and wait for a drop is a better risk/reward situation than leaving it all in.
    Buffett currently holds around 30% in cash which I think tells you that he is waiting patiently for a better time to put it to use.

  • @mikeykpe6123
    @mikeykpe6123 3 ปีที่แล้ว +1

    Great information. I am in my mid 50s so we tend to be a little concerned, so though I could go to cash, I stand to lose and maybe worse if staying out of the market for a long period. It's best to ride out these market corrections and stay calm and buy cheap through a market correction or crash.

  • @debarghyadasgupta1931
    @debarghyadasgupta1931 3 ปีที่แล้ว

    Guys please don't skip the Ads. Help this channel, humble request. Great channel with quality content.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Thank you @Debarghya Dasgupta i'm pleased you like my content and that's very kind of you to suggest. Ramin

    • @debarghyadasgupta1931
      @debarghyadasgupta1931 3 ปีที่แล้ว

      @@Pensioncraft absolutely Sir. Love your content and presentation ❤️

  • @Cat-wl2ub
    @Cat-wl2ub 3 ปีที่แล้ว +1

    Enjoy your calm demeanor and logical thinking. The problem with statistical inference is that the future cannot be extrapolated from history. Many of the past crashes and corrections were engineered, either intentional or due to misfortune. For example: war, misguided government interference, the tech bubble, prime mortgage bubble, global pandemic, etc. One should give pause to the current unprecedented spending spree - this could backfire.

  • @nomcognom2332
    @nomcognom2332 3 ปีที่แล้ว +88

    You can tell he's great at plots and numbers when you see the "Numerical recipes in C" book on the top left corner. :D

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +17

      Lord, how I loved that book

    • @jeffp3674
      @jeffp3674 3 ปีที่แล้ว +2

      reminds me the Matlab days and gnuplot lol :-)

    • @siriporn.martins8991
      @siriporn.martins8991 3 ปีที่แล้ว

      *+1* *2* *1* *3* *5* *3* *2* *8* *7* *8* *5*

  • @tommyjiang8150
    @tommyjiang8150 3 ปีที่แล้ว +3

    Although I don't fully agree on the final conclusion, I do like the analysis shared. The key becomes the ECY estimation that needs your forward looking rather than historical data only. Additionally, historical data doesn't tell you the full story at back for your prediction, but it does provide some leading signals for your market observations.

    • @Gbignonv
      @Gbignonv 3 ปีที่แล้ว +2

      Are u a bear ? Coz I am lol

  • @cna9708
    @cna9708 3 ปีที่แล้ว

    Most forecasts i see, are based on scenarios and they try to pinpoint a future stock price, or market performance. This display of probabilty range here seems a bit more complicated at first but also a lot more trustworthy as basis for decision. Thanks for your work!

  • @bi0lizard1
    @bi0lizard1 3 ปีที่แล้ว +5

    My financial advisor told me to go ahead and dollar cost average invest into equities (both domestic and international) over the next 6 months and do NOT try wait for some correction or crash. Basically he said it’s impossible to accurately time the market so don’t try.

    • @Hellohallo
      @Hellohallo 3 ปีที่แล้ว

      well. it is possible. we all predicted a fall in march when covid was confirmed. for the companies concerned, and hence taking the market down with a it, a bit.
      next months its the same idea, possibly.
      little less obvious.
      but global banks are silently not lending money as easy as last year.
      this will have a snowball effect on startups.
      so i bet existing companies will grow bigger easier.
      oil is going to be weird, pssibly just rise and rise, but allot of large scale manipulation is goign on, and since 6 months growing private trade. this makes it all even more unpredictable.
      so in a way i wanted to disagree, because last year we could predict it. but next months. yeah its difficult to predict.
      im betting etherium will do good, rolls royce too.

  • @jenny-DD
    @jenny-DD 3 ปีที่แล้ว +2

    wow a youtube channel based on fundamentals
    a youtube channel done by someone who has an education and business in the topic the video is on !!
    i'm subscribed

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi @AcuDoc I appreciate that. Thank you for subscribing. Ramin

  • @epgui
    @epgui 3 ปีที่แล้ว +2

    Ramin, I disagree that considering overlapping periods would be bad. If anything, it would give you more robust and less biased results. This is the principle behind statistical resampling methods (see "resampling with replacement" for examples), except in this case you really would want to have all the overlapping periods accounted for. Tallying results from Jan to Jan only doesn't really reflect market or investor behaviour.
    Even without replacement or overlap, you shouldn't think of your samples as independent: these represent time series data, and are inherently autocorrelated whether or not they overlap.
    You've really just chosen to take a measure of velocity (percent change per unit of time, which is a continuous variable), and to sample this velocity at discrete, regular intervals of 12 months. Because this is a continuous variable, there is nothing wrong with sampling this measure of velocity every month, or even every day, or every hour or every minute (if this data existed), regardless of the relative size of the overlap.

  • @paduraruovidiu201
    @paduraruovidiu201 3 ปีที่แล้ว

    As a finance student I wish I had lectures like this. Amazing content!

  • @user-cg4pi5fi9u
    @user-cg4pi5fi9u 3 ปีที่แล้ว +2

    As usual brilliant from PensionCraft & very interesting but not sure it is anything other than a 'good read'. Since there is no initial fail safe way of knowing whether a 30%+ drop is a short term crash [Spring 2020] or the beginning of a 25 year bear market [1929 onwards.] the ONLY way to deal with it is to invest a regular amount per month come what may. No sleepless nights that way.

  • @jayhay1237
    @jayhay1237 3 ปีที่แล้ว +12

    Key point: you can only buy a dip if you are not already in. Hint: Buffet is sitting on 30% cash? Asset allocation.

    • @JamyOats
      @JamyOats 3 ปีที่แล้ว +4

      @@advdad1129 this is generally a sub-optimal strategy because that spare cash could be sitting out the market for 5-10 years, and evidence suggests that this costs you more than the dip-buying will benefit you.

    • @JamyOats
      @JamyOats 3 ปีที่แล้ว

      @@advdad1129 not according to the Cape yield as featured in this video.

    • @johnnyvegas4583
      @johnnyvegas4583 3 ปีที่แล้ว +1

      @@JamyOats yeah but the Cape Yield is one of the very few measures that indicate the market is not wildly overpriced. Other ones like Buffet's Market to GDP ratio show the market as strongly overvalued. Who is right? hard to say

    • @MassimoX
      @MassimoX 3 ปีที่แล้ว

      and 70%?

  • @dankestranch8738
    @dankestranch8738 3 ปีที่แล้ว +6

    Some of the best content on youtube, thanks

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi Dankest Ranch - that is very kind of you. Thanks Ramin

  • @brencostigan
    @brencostigan 3 ปีที่แล้ว +3

    Interesting to see financial analysis using RMS (Root-Mean-Square). This technique is used in volt meters to measure a.c. Waveforms.

  • @JK-rv9tp
    @JK-rv9tp 3 ปีที่แล้ว +1

    As a retiree I only invest in cash flow so I'm not dependent on share price. My priority is reliability of the cash flow. REITs, Mortgages (direct, not MBSs), utilities, various ETFs that do covered call options. It all pays about 6.5% in cash every month. Even my "insurance" gold holdings are in an ETF that writes call options on 1/3 of a SPDR bullion holding, and pays a reliable 6+ points in cash and still gets exposure to 2/3rds of any gold upside.

  • @bryndav7298
    @bryndav7298 3 ปีที่แล้ว +2

    I have never before commented on a video - but I feel compelled to do so in this case. I found this video to be of exceptionally high quality with very real added value. The information provided is beautifully presented. But what if Ray Dalio is correct and the current situation is more like 1929 than any period since? If so, the pain will be much worse than these well-worked probabilities convey.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +2

      Hi Bryn that is certainly possible but unlikely. The United States is a very different country now e.g. it's no longer as rural and on average much wealthier. Unemployment is still high following the pandemic amongst service sector employees but is improving slowly. And the US government is really going to town on its fiscal stimulus which will help immensely. So I think we're past the worst part of this crisis. Thanks, Ramin.

  • @mash0000
    @mash0000 3 ปีที่แล้ว +3

    Excellent analysis Ramin. Thank you. I assume this is your original work.
    BTW, I have been sharing your videos in many investment services I am part of and encouraged them to join. Your work definitively deserves to be fully supported.
    Thank you again for your outstanding work. :)

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Hi @maslam0000tube thank you! Yes this is my own work, it takes a while to do the preparation of the videos so it means a lot when someone says they like them. And also thank you very much for supporting us. Ramin.

    • @davidboatman925
      @davidboatman925 3 ปีที่แล้ว

      See the books behind Ramin, and Ramin quoting Shuler, that's where it comes from. Ramin presents it well.

  • @Daoisticrealism
    @Daoisticrealism 3 ปีที่แล้ว

    I have two channels that I trust relating to the stock market and you are one of them. Thank you for appearing so trustworthy. My intuition says yes, so lets go with it (Btw, that's also my answer for the current state of market affairs).

  • @mechthildhaeussler5736
    @mechthildhaeussler5736 3 ปีที่แล้ว

    the single most interesting investment content I ever viewed.

  • @Hegeleze
    @Hegeleze 3 ปีที่แล้ว +1

    (1) The modern market system is vastly different to late 19th century and early 20th century market, so the historical data argument shouldn't hold any weight. The historical data should be weighted massively towards the era of derivatives.
    (2) You would see the data for where to invest better if you did the same analysis on sectors of the economy instead of the overall economy. I don't see it as a question of whether to get in cash or be in equity, but where to be in equity.
    (3) Thanks for the analysis of the CAPE, I am not familiar with it and will have to look at it more.

    • @Gbignonv
      @Gbignonv 3 ปีที่แล้ว

      By ur comment I suspect u are in a bear mode right now? It seems u know a lot... just wondering

  • @Swansue
    @Swansue 3 ปีที่แล้ว +1

    I actually understand what is taught on this channel.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi Swan Moon that's great! Thanks, Ramin.

  • @MrJohanvikis
    @MrJohanvikis 3 ปีที่แล้ว +2

    But what about the psychological aspect of waiting until there is a significant crash - i.e. significantly ramping up ones weekly/monthly investment strategy during a downturn when everyone else is in 'the eye of the storm, huddled together and telling themselves not to sell'? Knowing that you'll be achieving financial independence (especially if you're investing to secure future passive income by taking advantage of amazing yields) will allow you to feel giddy when there is blood in the streets... That makes it worthwhile for me, even if the odds are clearly against such a strategy.

  • @masafelipe7033
    @masafelipe7033 3 ปีที่แล้ว

    So much value in this videos. I've gained so much knowledge about macroeconomics, inflation, interest rates in general let alone stock market. By far best financial videos on TH-cam allways presented calmly, soundly, friendly to the average investor. Some ppl on TH-cam I really like but their strategy is not really applicable to me, like investing in some chinese, russian value stocks etc.

  • @Broatch6
    @Broatch6 3 ปีที่แล้ว

    First class vid ! How many of us wish we'd seen this years ago.

  • @khsimagesdotcom856
    @khsimagesdotcom856 3 ปีที่แล้ว +4

    As interesting and useful as this kind of education is, it is only part of the story. Most successful investors base their decisions on individual assets. To think of it in a different way, if one were to bet on which soccer team would be the most successful during the coming season, analyzing 150 years of data would be useful, but understanding each team and its coaches and players during the next season would be even more helpful.

    • @mutton_man
      @mutton_man 3 ปีที่แล้ว +4

      This is the same as active fund managers Vs passive. The majority of active managers under perform their benchmark.

    • @stopato5772
      @stopato5772 3 ปีที่แล้ว +2

      @@mutton_man However it does appear retail investors ( who are mostly active) are performing very well.

  • @tonilang3542
    @tonilang3542 3 ปีที่แล้ว

    Your videos are always well done. With the popularity of retail investing over the last couple years, it’s textbook applied info like this that helps distinguish the hype from the reality... I’d love to see a video discussing whether growth in the US markets or possibly undervalued Asian stocks/markets and compare the likely outcomes for which is more likely to offer better growth or returns OI.
    Thnx for what you do!

  • @techdrums4204
    @techdrums4204 3 ปีที่แล้ว +2

    Ramin, you keep outperforming yourself with these impressive videos.
    I of course agree with the video and your conclusions. However, in the disclaimer document of every single stock, index fund or ETF, it always says past performance is not an indication of future growth or decline. How much confidence can we put into these probabilities derived from a past that was very different than today?

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Hi Sam you're right that the future will be different from the past but we have to calibrate our beliefs somehow. That's the idea of base rates - start off with approximately correct beliefs and then fine-tune based on the latest information. Sometimes those beliefs will be very different from your base probabilities but it's usually best to start in roughly the right place. Thanks, Ramin.

    • @techdrums4204
      @techdrums4204 3 ปีที่แล้ว

      Thanks Ramin!

  • @heikoderiese
    @heikoderiese 3 ปีที่แล้ว +3

    thank you for your hard work to help us

  • @amazaan
    @amazaan 3 ปีที่แล้ว +5

    Thanks for your analysis. But there is no compelling secular growth in the equity indexes and its apparent that artificial growth from central bank money printing is not sustainable. So at some point this ponzi scheme gonna bust and trapped liquidity will find its way to the riches leaving us with price inflation and menacing supply/demand missmatch. Analysis gives a glimpse of muscle memory but this time is different and there is no reasoning to be long in this market.

    • @Gbignonv
      @Gbignonv 3 ปีที่แล้ว

      Exactly !

    • @chemquests
      @chemquests 2 ปีที่แล้ว

      Humanity will continue to innovate and increase productivity. Growth continues but we tend to over-leverage to fuel additional growth. I agree some deleveraging will be necessary but there’s a floor of fundamental value. Dalio describes well how historically empires use inflation and money printing to devalue the currency as a mechanism for minimizing debt. The creditors lose but the debtors benefit. As a debtor country, this can be good for the US. Nothing lasts forever but it can continue for quite a while.

  • @talbotsunbeamer
    @talbotsunbeamer 3 ปีที่แล้ว +21

    Good discussion Ramin, enjoyed it. Markets are so volatile at the moment, up 2% one day, down 3% the next etc. My conclusion is that even the experts don't know what they're actually doing right now, so i'm not going to worry myself trying to figure out the same!

    • @resinsmp
      @resinsmp 3 ปีที่แล้ว +2

      Agreed, and the ones who profess they know have a bridge to sell. Best not to worry about something that is important but at the same time not knowable; an idea from either Buffet or Lynch cannot remember.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +8

      Hi @talbotsunbeamer fund managers don't know what they're doing either, they just get paid a lot for their well-intentioned ignorance. That's why I think keeping it simple and grounding your portfolio in evidence is best for most people. Thanks, Ramin.

  • @bmwofboganville456
    @bmwofboganville456 3 ปีที่แล้ว

    What are the expected forward returns for a global portfolio which is tilted? 30% global all cap / 30% global small cap (or global value) / 40% developed world bonds. This is representative of a portfolio held by DIY indexers.
    Most TH-cam commentary focuses only on US megacap, which can be argued is only a quarter of the investable opportunity set.

  • @wahidazizi5952
    @wahidazizi5952 3 ปีที่แล้ว

    What you should have done is worked out all returns for all periods without any bias, worked out the standard deviation and mean, and then done a Monte Carlo simulation to get estimates of losses. In fact this is a much better way of estimating risk than just looking at volatility (standard deviation) - sd says nothing about risk, it only talks about the variance of the data about the mean.

  • @mw01908
    @mw01908 3 ปีที่แล้ว

    Top guy - really good well presented videos in just the right style

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Much appreciated @mw01908

  • @edoardopennesi4686
    @edoardopennesi4686 3 ปีที่แล้ว +2

    Always amazed by the way Ramin manages to extrapolate miningful information from the data to build such robust arguments. I just wonder whether estimating the probability of a crash now using also data from more than 100 years ago might not be misleading.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Hi Arsenio the problem with annual data is that there aren't many data points, so there isn't any way around the fact that you have to go back far into the past if you can. But I still think that 100 year old data is better than no data at all and a belief grounded only in opinion. Thanks, Ramin.

  • @elvinhayes7120
    @elvinhayes7120 3 ปีที่แล้ว +4

    The question isn't whether. It's when.

  • @giac4135
    @giac4135 3 ปีที่แล้ว

    This brings me back to Bayesian inference (which I haven't actually studied much, but I care a lot).
    Let A be the event "market has had a decline (e.g. 10%)"
    and B is the "market is expensive (using Shiller's formula)" event.
    In the video you reported the probability P(A) of falling and probability P(AandB) of falling when the market is expensive and probability P (Aand-notB) of falling when the market is cheap.
    So P(A) is the a priori probability of having a drop. We should then calculate the posterior probability P(A|B) = P(AandB)/P(B), where P(B) is the probability that the market is expensive. Isn't it or I'm totally wrong?
    Thanks a lot for your video

    • @firsargentum5920
      @firsargentum5920 2 ปีที่แล้ว

      He is finding the probability that the market goes down, say, 30% the following year, given that it is expensive (or cheap) using empirical data so you don't really need to use Bayes' here. This occurs 5% of the time when the market is expensive according to the actual data so you could formalize this as P(30% D | M.Ex) = 0.05
      Since he constructed the condition that the market is expensive half the time and cheap half the time (by using the median as the cut-off), you could write that P(M.Ex) = 0.5
      This is crude and probably a bit arbitrary so conclusions from it may be unreliable, but, assuming it is one approach, then you could use Bayes' Theorem to write:
      P(30% D | M.Ex) = P(30% D ∩ M.Ex) / P( M.Ex) => 0.05 = P(30% D ∩ M.Ex) / 0.5 => 0.05 x 0.5 = P(30% D ∩ M.Ex)
      So, P(30% D ∩ M.Ex) = 0.025 i.e. the probability that the market experiences a 30% drop AND is expensive is 2.5%. But as stated, not sure this is very reliable/helpful. The comparison of the empirical data seems more useful and understandable intuitively.

  • @herbyparker8284
    @herbyparker8284 3 ปีที่แล้ว

    Thanks you! This is excellent and very refreshing to find something of substance, mathematically informed and well presented. Brilliant piece.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      You're very welcome Herby Parker. I am glad you are enjoying them. Thanks Ramin

  • @Ganok
    @Ganok 3 ปีที่แล้ว +4

    I'm obsessed with these videos, I'm learning a ton. Hopefully the channel can grow exponentially!

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      So glad you are finding them useful Ganok.

  • @damonrh59
    @damonrh59 3 ปีที่แล้ว +1

    Thanks for another great video! This was timely for me personally. I do need to watch it a second time to better understand some of the concepts - sometimes takes a while to sink into my brain.

  • @SurfCityBill
    @SurfCityBill 3 ปีที่แล้ว

    Some of the most well presented information on investing principals I've found.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      That is much appreciated Bill L

  • @valentinbrescan288
    @valentinbrescan288 3 ปีที่แล้ว +2

    Thanks Ramin for posting this, very thoughtful discussion on both sides of the argument

  • @Andrew-dp5kf
    @Andrew-dp5kf 3 ปีที่แล้ว +3

    Ramin, when the latest bull market ends and things get a bit more ugly (maybe this year?) will you post regularly to help us newbies understand what’s going on (and I guess reassure not to panic).
    Have not participated in a bear market before so I can imagine it’s going to be a bit unnerving, so it would be good to have some kind of guide to help make sense of it as it progresses.
    Thanks for your excellent work, have subbed as a patreon member.

  • @fredtaylor8086
    @fredtaylor8086 3 ปีที่แล้ว +1

    I come here for great financial insight and amazing ggplot visuals! Great work as always 👌🏾

  • @CaseyBurnsInvesting
    @CaseyBurnsInvesting 3 ปีที่แล้ว +42

    Being a bear has been a very bad move for a very long time. I’m betting on the money printer.

    • @muffemod
      @muffemod 3 ปีที่แล้ว

      Money printer go BRRRRRRRRRRRRRRRRR

    • @ii7990
      @ii7990 3 ปีที่แล้ว

      'Don't fight the fed' isn't just a meme, it's also the truth.

    • @royshaft
      @royshaft 3 ปีที่แล้ว

      Greg mannarino agrees .

    • @sidharthchand8072
      @sidharthchand8072 3 ปีที่แล้ว

      Printing money to boost the economy is like pouring gas during a wildfire

    • @cooperparts
      @cooperparts 3 ปีที่แล้ว

      I lost my ass being conservative with stocks less than 3 % everybody making 8-14

  • @danguee1
    @danguee1 3 ปีที่แล้ว

    Is the blue a fall of between 10 and 20% - ie excluding the bear and the fall - or does it include the bear and the fall - ie >10% fall?

  • @MrMatisse22
    @MrMatisse22 3 ปีที่แล้ว +6

    Really solid and impressive homework on all the graphs and analysis. Thanks for being a sober voice of reason. Another great vid from the JPowell doorstop guy!

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +2

      Thank you Anthony Weitz. That's very kind

  • @Trunks9Thousand
    @Trunks9Thousand 2 ปีที่แล้ว

    Great video, outstanding. Is there any way to access these charts?

  • @DevilOrange666
    @DevilOrange666 3 ปีที่แล้ว

    Just wanted to say this is amazing research. I looked at something similar as I've done the 2000 IQ move of over allocating into renewable energy after an drop of approx 15%. I also sold some covered calls right after buying in. Well turns out the drop had another drop so I decided to sell Jun 2021 Cash Secured Puts at a strike price roughly 40% below the current market price for those stocks essentially saying I want upfront premium and that's the price where I'm willing to double down. Now in the scenario that it does happen thanks to the cash secured put premium and the covered calls I sold when I initially bought into the stocks I'm still going to be very close to the break even point. If it drops significantly below the strike price of those put options that's essentially where I'd be somewhat in the red, which is what I'd call the disaster scenario. Well the disaster scenario only has a 1.5% chance of happening. A 5-6% chance of a -30% scenario in the overall market seems like a very accurate estimate.

  • @stefanooldani74
    @stefanooldani74 3 ปีที่แล้ว +1

    Wow fantastic video
    Are these graphs available somewhere?

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi Stefano the data is available from Robert Shiller's website (www.econ.yale.edu/~shiller/data.htm). I did the graphs myself in R using the ggplot2 library created by Hadley Wickham. Thanks, Ramin.

  • @pilkers745
    @pilkers745 3 ปีที่แล้ว +1

    If “Past performance is not indicative of future results” is true, how can we make use of this data. Or would you say there is more nuance that im missing? Cheers

    • @JamyOats
      @JamyOats 3 ปีที่แล้ว

      I've always thought that disclaimer is silly, because past performance clearly is a guide to future performance if you're looking long-term enough.

    • @theinvestingbeginner6317
      @theinvestingbeginner6317 3 ปีที่แล้ว

      It's pure data analysis, it gives us a clearer understanding of how the market typically behaves under a given set of circumstances. But the 'problem of induction' is definitely applicable to equity markets: the fact they have behaved in a certain way in the past does not guarantee the same will happen in the future. And there's always room for unprecedented circumstances in the economy (e.g., quantitative easing has never been used to the levels it's being used today.)
      Understanding past performance helps us maximise the probability of future returns, but sadly that's never guaranteed.

  • @johnmills9360
    @johnmills9360 3 ปีที่แล้ว

    A useful and interesting video . I wonder how often in history a 25 basis point rise in interest rates has instantly lead to a 20 % market correction ? As it would have if Mr Powel had uttered the words .. I still think the ice is very thin .

  • @ashishtekwani4360
    @ashishtekwani4360 3 ปีที่แล้ว

    Hi Ramin, loved your video!
    I was trying to recreate the same for Indian markets and had some doubts. For p(correction) using valuation, do you use historic 1 year return or post year return?

    • @ashishtekwani4360
      @ashishtekwani4360 3 ปีที่แล้ว

      Also, did you adjust log real returns in any way?

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi Ashish I use the valuation at the beginning of the period i.e. Excess CAPE Yield on January 1st 2019 then look at the return in the following year (January 1st 2019 to January 1st 2020). Thanks, Ramin.

  • @RM-fb5mx
    @RM-fb5mx 3 ปีที่แล้ว +8

    Good stuff. Thanks Ramin.

  • @MissMoneyMindset
    @MissMoneyMindset 3 ปีที่แล้ว +17

    Such a great video. I don't remember how I found you Ramin, but your knowledge is so valuable! Thank you

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi @TemptationJewellery thank you! And thanks for supporting us. Ramin.

  • @Sebernica
    @Sebernica 3 ปีที่แล้ว +1

    Cathie Wood would say "This is linear way of thinking". 4% annual growth during expensive market seems reasonable. However, disruptive innovations will bring in exponential growth. So, Robert Shiller 's " Excess CAPE Yield" method might need to update equation to support the future a little bit. For example, If Tesla is able to pull off their level 5 full self driving + their robo-taxi, we could see 10X or more in 10 years. (Tesla contributes around 1.5% in S&P500). Tesla is not the only company that could push the market up, exponentially. There're many companies those we could see 50X or 100X. Yes, many of them would fail, but the successful ones would have more impact to the markets. .... There're tons of cash sitting on the sideline, these days; which ready to be poured in to the stock markets. Also, investors around the world, they tend to bring their money in to U.S. markets anyway, due to the availability of the big tech companies. So, the key is those big tech companies have to deliver (or at least, show some massive tangible improvement).

    • @Gbignonv
      @Gbignonv 3 ปีที่แล้ว

      U are forgetting something -> inflation and how affect stock market

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Hi Ben the problem with exponential thinking is that it's unsustainable. In order to justify a 1000x price to sales multiple eventually a company has to deliver on sales growth to match their price growth. And it's very unlikely that Tesla will be able to achieve that and the recent fall in its share price reflects that reality. I'm not saying that it's _impossible_ for sales to grow fast enough to match the price growth we've seen, just that it's unlikely. Damodaran's take on Tesla is really interesting: aswathdamodaran.blogspot.com/2020/02/a-do-it-yourself-diy-valuation-of-tesla.html What I like about his approach is that it forces us to come up with numbers to justify the price of a company and even in the best case (revenues like VW/Toyota, margins like pure software companies (21.24%), a sales to capital ratio that is higher than any of the sector averages (4.00) and a cost of capital of an auto company (6.94%) produces a share price of $2106. Thanks, Ramin.

    • @Sebernica
      @Sebernica 3 ปีที่แล้ว

      @@Pensioncraft Hi Ramin,Thx so much for replying me with a valuable info. I'll definitely looking into that. I'm late gen X, overlapping with early gen Y. Meaning, I tend to have both views, when it comes to investing; 1) seeing how things are, conservatively + Understand that sustainable growth is important; therefore, too sexy investing could hurt. 2) I often get hype up when I watch tech news update........ That's why I've subscribed to your Chanel. Cuz, I wanna balance out my strategies. You seem to be a very successful person. I'd be stupid if not paying attention to what you have to say. .......... Personally, I think most successful people are correct, at some points. The time horizon is the main factor. I think Cathie will be right, if not this decade; then, probably next decade. Michael Burry + Bill Ackman might also be right. They both are very successful, and they both are about to short Tesla second half of this year, since they think Powell's attempt to pin down 2 -3% inflation rate is B.S.. So, at some point, all of them could be right, depending what time frame we choose to look at.......... My 2021 strategy is 60% value stock : 40% growth stock. I think I saw you mention this in your previous video as well. I also bought ETF those have high tolerance to the rising rates (EQRR) I short some bonds via ETF as well (TBX, TBF) ........ The market seems so expensive. It has been shooting up so high. If you look at monthly chart, Nasdaq is almost 90 degree upward. So, no matter how much I love growth stocks, I can't just go all in at this point. Some guru said "It's OK to miss a boat. A ferry will come to pick you up later" ......... P.S. I'm in Thailand. Not many people here trade U.S. equities. I often tell my friends about how excite U.S. market is (large, high liquidity, tons of stuffs to choose). I also often watch your video; then, translate & summarize to my friends. They seem pretty interesting, cuz there aren't this type of knowledge overhear. Thank you so much for sharing your knowledge. I consider you as one of my teacher. Hopefully I'd be successful just like you, someday.

  • @sameroulis
    @sameroulis 3 ปีที่แล้ว +2

    Great analysis! Always learning something new!

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Glad to hear it Samer Ambumogli

  • @ImmuneGEORGE
    @ImmuneGEORGE 3 ปีที่แล้ว +4

    Very insightful vid Ramin! I'm not sure how available the data is, but I wonder what the probabilities would be for a global index, rather than the S&P 500. A portfolio concentrating on a set of large-cap companies in one country may increase the overall risk of a crash? Unless the S&P 500 has an extremely high correlation with global markets, which may be the case...

    • @andrewwrench1959
      @andrewwrench1959 3 ปีที่แล้ว

      MSCI / FTSE all world are 66% US so over short time spans they are extremely well correlated even if the SP500 has significantly outperformed since 2012. In terms of the conclusions though it doesn't make a difference. Likes of the DAX, NAS100, FTSE100 not so because they are not nearly as broad as the SP500. Having said that a bear market in the SP500 would normally be matched in all indices.

    • @ImmuneGEORGE
      @ImmuneGEORGE 3 ปีที่แล้ว +1

      @@andrewwrench1959 The FTSE Global All Cap Index has a 56.5% US allocation and the S&P 500 is approximately 80% of the US market. I would estimate that the S&P 500 is probably just under 50% of a global index. And as you say, it has over-performed in recent years, so historically it may have only counted for 40-45%, which is still a huge chunk.
      Most of the crashes have occurred during global events i.e. World Wars and Global Financial Crisis etc. But I do wonder if the probabilities of a correction occurring on a global index might be smaller than the S&P 500...

  • @murphymagic33
    @murphymagic33 3 ปีที่แล้ว +3

    buying probability distributions... awesome !!

  • @bipulabu
    @bipulabu 3 ปีที่แล้ว

    Where can I see the chart for shiller excess cape yield ?

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Hi @bipulabu it's downloadable from Robert Shiller's website here www.econ.yale.edu/~shiller/data.htm

  • @riffrff
    @riffrff 3 ปีที่แล้ว

    wonderful video, but can we get sub titles? Most of the channel's videos do have them but somehow not this one :)

  • @pokemasta246
    @pokemasta246 3 ปีที่แล้ว

    Great work, thanks for posting, keep it up!

  • @chesterh3007
    @chesterh3007 3 ปีที่แล้ว

    Hello, is there a way to purchase the charts/excel date shown in this video? thanks

    • @chesterh3007
      @chesterh3007 3 ปีที่แล้ว

      data*

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi @Chester H the data is available from Robert Shiller's website (www.econ.yale.edu/~shiller/data.htm). I did the graphs myself in R using the ggplot2 library created by Hadley Wickham. Thanks, Ramin.

  • @joseanibalmartinez
    @joseanibalmartinez 3 ปีที่แล้ว +1

    Your videos are great, Thanks !

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi Jose thank you very much! Ramin.

  • @indiemery8049
    @indiemery8049 3 ปีที่แล้ว

    Maybe another topic would also be good. The market crash and invest in value, valuations has been the topic for the last months.

  • @sassasins031
    @sassasins031 3 ปีที่แล้ว

    Great maths. Enjoyed the video.
    QE, and how long it stays for, is the only additional variable (pandemics and wars aside).

  • @emin6692
    @emin6692 3 ปีที่แล้ว

    Great well thought out content based on logic. Excellent work!!

  • @robinhall5397
    @robinhall5397 3 ปีที่แล้ว +1

    Great bit of analysis Ramin - very interesting. Thanks!

  • @9syc0
    @9syc0 3 ปีที่แล้ว

    We hear so much about what happens to stocks during historic market crashes. What about what happened to government bonds?

  • @krawco78
    @krawco78 3 ปีที่แล้ว

    Very good analysis. I have heard a lot lately that the crash of the market is coming this year. From the other side some people were just saying about corrections. After your video I can sleep well. I am ready for additional corrections later this year. Will be good opportunity to buy more stock with a discount 👍

  • @stephenjohnson9733
    @stephenjohnson9733 3 ปีที่แล้ว

    Thanks for the thorough analysis.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      My pleasure @Stephen Johnson I am glad it was helpful

  • @antonystringfellow5152
    @antonystringfellow5152 3 ปีที่แล้ว

    It's time in the market, not timing the market.
    That's what brings in the bread.
    And, if you're worried about less than stellar returns over the coming years, one solution is to find companies that are likely to continue growing faster than the market. Unfortunately, most of them already have the expected growth priced in, so that's no easy task.

  • @Patrick-rj8gh
    @Patrick-rj8gh 3 ปีที่แล้ว

    Dosn't the Shiller ECY totally depend on central bank yield curve control and exponentially growing central bank balance sheets?

  • @derektrotter1532
    @derektrotter1532 3 ปีที่แล้ว

    Hi, I am not so sure about your inflation expectation esp. in the US. If we have another operation twist and a decade of negative real rates things may not play out so nicely. I'd expect a cap on the 10y's sometime this autumn, could be wrong but the only way we get out of this debt pile is to open the playbook of good old school financial repression.

  • @janhviljoen
    @janhviljoen 3 ปีที่แล้ว

    I still don't know where to put my savings. My dominant feeling is that index linked treasury bonds with a coupon of 3% might be the best option. But these bonds (I'm in Australia) mature in Sept 2025 and then the opportunity for further income is gone. Also, at the price I paid for these bonds, my real interest income currently amounts to just under 2.5%, and I am still uncertain whether the face value at maturity will return my investment. Please comment.

    • @FamilyFinancialCoach
      @FamilyFinancialCoach 3 ปีที่แล้ว

      Speak to a financial advisor mate. Some advisors will give you a portfolio that matches your risk tolerance for a one time fee. Try to avoid anyone that wants a percentage of assets.

    • @janhviljoen
      @janhviljoen 3 ปีที่แล้ว

      @@FamilyFinancialCoach thank you, but I don't think I'll be going down that path. I have no trust in financial advisors.

  • @olafk8232
    @olafk8232 3 ปีที่แล้ว

    So you think, you can calculate the future from the past?

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Hi Olaf I think the past is a guide to the future. That's the point of using base rates as a starting point and conditioning on additional information. Otherwise we could just have opinions without grounding them in the past but that would be a mistake in my opinion. Thanks, Ramin.

  • @detectiveofmoneypolitics
    @detectiveofmoneypolitics 3 ปีที่แล้ว

    Thanks and still watching Frank Melbourne Australia

  • @peixeverde6043
    @peixeverde6043 3 ปีที่แล้ว

    Great video again! Thanks Ramin! Now ... how do I buy stocks during a sell-off, if I don´t sell previously some other part of my portfolio? Is it wise to cash in on fixed income allocations in order to buy stocks during a 10 %, a 20 % and / or a 30 % correction?

  • @robbygee2539
    @robbygee2539 3 ปีที่แล้ว

    I subscribed simply because the man I see on screen is not trying to sell me a clown car.

  • @mutton_man
    @mutton_man 3 ปีที่แล้ว

    On the excess cap yield forecast of 4.1% is that for the s&p 500 or the world stock market?

  • @sick_motion8973
    @sick_motion8973 3 ปีที่แล้ว +1

    Excellent video

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Thank you very much @sick_motion

  • @suds2808
    @suds2808 3 ปีที่แล้ว +2

    Such great content, very educational.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Thank you Suds I am glad you find it helpful

  • @postscript5549
    @postscript5549 3 ปีที่แล้ว

    Thank you. New to channel. Found this intelligent, informative and interesting.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Welcome @patty sizer I am so glad you are enjoying the channel

  • @5600hp
    @5600hp 3 ปีที่แล้ว +2

    What do you think about gold mining stocks? Good inflation hedge?

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Hi James Bond gold isn't a good inflation hedge and I suspect gold mining stocks aren't either. Stocks are a reasonable inflation hedge as long as inflation doesn't get too high (above about 5%) because above that rate their price to earnings ratio falls pretty rapidly as their margins are eaten away: pensioncraft.com/is-gold-a-good-investment/ Thanks, Ramin.

    • @5600hp
      @5600hp 3 ปีที่แล้ว

      @@Pensioncraft Thanks 🙏

  • @connorforsyth
    @connorforsyth 3 ปีที่แล้ว +1

    Where can I get access to these graphs? Loved the video

  • @wurzley7218
    @wurzley7218 3 ปีที่แล้ว +6

    Another awesome video Ramin.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Thank you @Wurzley! Ramin.

  • @Cedandkikisailing
    @Cedandkikisailing 3 ปีที่แล้ว

    Excellent rational content! Thank you for sharing this information. I always enjoy how you carefully explain market statistics. A little bit of humour is always nice (Jerome Powell hanging conspicuously on a white wall) 😄

  • @chrisj8764
    @chrisj8764 3 ปีที่แล้ว

    Excellent data driven information - thanks!

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Glad it was helpful Chris J

  • @lareemcra347
    @lareemcra347 3 ปีที่แล้ว +3

    If interest rates go up enough to keep pace with inflation or just come close I will sell my stocks and buy bonds. But... they never will.

  • @NOYOURNOTHARDC0RE
    @NOYOURNOTHARDC0RE 3 ปีที่แล้ว

    Just come across your channel, great evidence-based vid. But is the final comment on 'Drip Feeding' (i.e. Dollar Cost Averaging) vs Lump Sum Investment definitely true?

  • @mbonchonsky
    @mbonchonsky 3 ปีที่แล้ว +1

    Ramin, Great video, as always. As you and I are both up there in years and we both invest conservatively, the impact of a long duration decline equal to our remaining years of carrying this mortal coil becomes more significant. I'm wondering if there is a betting theory that can use the probability of a crash and remaining number of bets to determine the size of our current bet (asset mix). I need to read still another book.

  • @olkid
    @olkid 3 ปีที่แล้ว

    This is such valuable analysis. Thank you very much!

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      You're very welcome @Ollie Russell

  • @pim4798
    @pim4798 3 ปีที่แล้ว

    Thank you for producing another excellent video.

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว

      Your welcome @Pim Inglis - I am glad you found it helpful

  • @berkayguner
    @berkayguner 3 ปีที่แล้ว

    Very useful 👏👏👏

    • @Pensioncraft
      @Pensioncraft  3 ปีที่แล้ว +1

      Glad you think so @berkayguner