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Any upside in the next 6 months?
Old 10-02-2012, 08:58 PM   #1
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Any upside in the next 6 months?

Alright boys and girls, I am going to change my asset allocation to 40% bonds because I see no major upside in the next 6 months in equities.

1. Europe -- all knowledge of bailouts is known.

2. US -- either taxes are going up or spending is going down or both. Either way that's less money for folks to spend.

3. Grid-lock in the Federal government which I'm agnostic about, but that does not mean any upside.

4. QE III is announced, so we all know about that.

Can anybody convince me otherwise? Thanks (I think ).

I'm announcing this change here mostly because if I announce it, I will really follow through on it.
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Old 10-02-2012, 09:05 PM   #2
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So what was your AA?
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Old 10-02-2012, 09:08 PM   #3
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31% bonds.
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Old 10-02-2012, 09:16 PM   #4
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I'm always bearish, except when it comes to med's. So I'm not a good one to give advice.
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Old 10-02-2012, 09:29 PM   #5
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According to Lsbcal's chart @ this thread How far we've come ... (now what??) the equity market shown by the blue line might continue to follow the red line so one might expect another 12 to 18 months or so of equities increasing in which case your move to bonds might be a bit early. On the other hand, it might not be so...
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Old 10-02-2012, 09:34 PM   #6
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Alright boys and girls, I am going to change my asset allocation ....
Do you mean you are market timing and lightening up in stocks? or is your target 40% bonds and you are out of whack with your target so you are selling stocks/buying bonds to get back to your target AA?

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Old 10-02-2012, 09:43 PM   #7
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Alright boys and girls, I am going to change my asset allocation to 40% bonds because I see no major upside in the next 6 months in equities.

1. Europe -- all knowledge of bailouts is known.

2. US -- either taxes are going up or spending is going down or both. Either way that's less money for folks to spend.

3. Grid-lock in the Federal government which I'm agnostic about, but that does not mean any upside.

4. QE III is announced, so we all know about that.

Can anybody convince me otherwise? Thanks (I think ).

I'm announcing this change here mostly because if I announce it, I will really follow through on it.
Is this another edition of your market timing newsletter?

I have no idea what is going to happen in the next 6 months. The impending "Fiscal Cliff" has been screamed about almost as loud as Y2K was back in 1999. We all know how 1999 turned out, followed by 2000.......

Alls I know, it that it could get very interesting......

BTW - I think Bernanke will have your back on those bonds for at least the next couple of years. Probably a pretty safe move.....
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Old 10-02-2012, 09:44 PM   #8
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I mean I am market timing and lightening up on stocks unless you all can convince me otherwise.

Deep background: We made our number a few years ago, so we don't really to take the risk of just 31% bonds even though I have generally laughed at risk in the past. Also, though we are still working, maybe we'll quit our jobs in the next year.
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Old 10-02-2012, 09:45 PM   #9
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Is this another edition of your market timing newsletter?
Only if I go through with the changes.

Or maybe I am having a Dex moment.
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Old 10-02-2012, 09:52 PM   #10
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I won't dissuade you. I would like to lighten up on equities too, but I am in a bind as to what to sell.
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Old 10-02-2012, 09:53 PM   #11
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Heh, Dex.

I must be a premature member of the dirty old man club, because I tend to think along the lines of Ha: watch valuation more than anything. The junk bond (and pretty much all bond) market is getting over-valued, but I don't as of yet see it in the equity market.
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Old 10-02-2012, 10:04 PM   #12
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I'd dump some equities if I didn't have to put the proceeds in cash, bonds, RE or Venezualen Breaver Cheese futures (and we like all kinds of beavers up here).
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Old 10-02-2012, 10:34 PM   #13
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Alright boys and girls, I am going to change my asset allocation to 40% bonds because I see no major upside in the next 6 months in equities.
Even if stock prices stayed flat or dipped, wouldn't your dividend yield in equities come pretty close to matching your bond yields? A dip in stock prices is just that--you'll be even again when they go up. I just can't see a great case for bonds right now.

Factor which might improve stock prices in the next 6 months: A resolution to "fiscal cliff" situation.
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Old 10-02-2012, 10:40 PM   #14
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Alright boys and girls, I am going to change my asset allocation to 40% bonds because I see no major upside in the next 6 months in equities.

1. Europe -- all knowledge of bailouts is known.

2. US -- either taxes are going up or spending is going down or both. Either way that's less money for folks to spend.

3. Grid-lock in the Federal government which I'm agnostic about, but that does not mean any upside.

4. QE III is announced, so we all know about that.

Can anybody convince me otherwise? Thanks (I think ).

I'm announcing this change here mostly because if I announce it, I will really follow through on it.
Not trying to convince anyone of anything but interested in hearing more about your reasoning:

1. By adding bonds, you are taking on interest rate risk (how much depending on your duration) and possibly credit risk (depending on which bonds you buy) - in effect exchanging one risk for another

2. You mention the US and Europe, but not other developed markets or emerging markets or other asset classes for that matter

3. You mention no "major" upside but not that you are expecting downside?

4. Why six months as a time horizon? It gets you past the US election, the US "fiscal cliff" and possibly some developments in Europe (or not) but I'm not sure what else?

5. there is also the much debated "missing the best days" arguement: Missing Best & Worst Days of S&P500 | The Big Picture Note: the more interesting/important points are made in the comments linking to some earlier Mebane Faber articles which suggest that this is not a point to worry about at this stage of the US market

I wouldn't mind finding some other asset classes that show positive real returns but its hard.
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Old 10-03-2012, 04:20 AM   #15
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while im at the most conservative level of my life right now its more by design then fear .

i will say this though.

dont fight the fed... the fed has all but sent out sky writing planes to say buy equities.

they are trying to push more and more of all that money being hoarded on the sidelines into equities and the more and more johnny come latelys that see everyone else making money the higher we can go.

something like the permanent portfolio may not be a bad idea . just bet on everything and let the winners just seek themselves.
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Old 10-03-2012, 06:31 AM   #16
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31% bonds.
A 9% increase in bonding holding is not significant by any means. A 60/40 (equity/fixed income) is considered moderate. Our equity exposure is currently under 40% based on risk tolerance and financial goal. The current or projected political or financial climate does not play a significant role in our current asset allocation.
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Old 10-03-2012, 06:34 AM   #17
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Heh, Dex.

I must be a premature member of the dirty old man club, because I tend to think along the lines of Ha: watch valuation more than anything. The junk bond (and pretty much all bond) market is getting over-valued, but I don't as of yet see it in the equity market.
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Even if stock prices stayed flat or dipped, wouldn't your dividend yield in equities come pretty close to matching your bond yields? A dip in stock prices is just that--you'll be even again when they go up. I just can't see a great case for bonds right now.
I'm with these guys. I also suspect that as a result of time alone the overall economy will improve in the next administration (no matter who wins) and equities will continue to rise for a while. If not I'll just hop in the seat next to Sam on the roller coaster.
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Old 10-03-2012, 07:06 AM   #18
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I dunno.
A coupla trillion of investor dollars sitting on the sidelines.
Billions and billions in cash on corporate balance sheets.
Stocks generally undervalued.
Economy slowly, slowly, slowly advancing.
No more talk about a double-dip.
Clarity/more certainty after the election (either way)

Someone recently posted on this forum a quote about "more money being lost in trying to time a market than was lost in the market".

Just my humble opinion...YMMV
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Old 10-03-2012, 07:28 AM   #19
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I think that deciding a target AA and re-balancing when it gets out of balance in a disciplined manner will outperform market timing over the long run. Perhaps you are smart enough to make the wise calls as to when to get out and when to get in at the right times. but I know that I am not and I know that most people are not.
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Old 10-03-2012, 07:35 AM   #20
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I'd dump some equities if I didn't have to put the proceeds in cash, bonds, RE or Venezualen Breaver Cheese futures (and we like all kinds of beavers up here).
Venezuelan Beaver Cheese futures aside (), my dilemma is pretty much the same as yours. About the mutual funds I have owned prior to my ERing 4 years ago, one stock fund's NAV is at its highest point now since early 2008. One (muni) bond fund's NAV is at its highest point since mid-2003 (a bond market high point in the first decade of the 2000s). The other (muni) bond fund's NAV is at a high point it has not reached since late 1998. As a result of my mutual funds being at high points, my AA percentages have not really changed enough to rebalance.

As I have posted in another thread, I have been draining my munis to take into account I am in lower tax bracket. But the big question I ask recently whenever I consider selling something is this: "What would I buy?" The only reason I would sell is if I expected some big drop which I could then buy it back soon at much lower prices to offset the lost dividends.
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