Anyone else hoping for a market plunge?

[EvrClrx311]

I'm 36, and in the maximum saving stage (ration of [compounding years ahead] + [rate of money going into savings] is at a peak), so there is evidence that a correction right now (within the next 5 years) would be ideal for me - and I see it coming. If/when it does I'll just continue putting aside as much as I can through it. I'm currently putting away about 10% of my net worth every year (that's dropping 1-2% a year because the market and my saving is outpacing the growth in salary and what I set aside). The longer the market stays up... the more I'm missing on the opportunity to capitalize on the longer term compounding, to a degree. Because of what goes up...

That all said, the biggest thing I'm hoping for, is that my retirement starts on the early stages of a bull market - so I'd love for a bull run to occur sometime in the early 30's. That would benefit me much more So however the market moves between now and then I hope it's looked at as in a lackluster (depressed) state about 15 years from now. That would be ideal for me to go into retirement confident that the wave of prosperity is coming. Also if I'm able to save enough to retire in my 50's on the tail end of a bear market and I'll be golden for the decades to come.

I suppose that is backwards thinking. But we are all a little backwards here

 

[RunningBum]

Once I get to 59.5, I might increase IRA withdrawals while market is down, reinvesting it in taxable accounts. I have to run the numbers, assuming a 2 year rebound, a 20% drop and the reduced taxes vs increased taxes from being in higher tax bracket.

If it's extra money that you're going to invest, why not convert it to a Roth, where it will grow tax free?

 

[teejayevans]

If it's extra money that you're going to invest, why not convert it to a Roth, where it will grow tax free?

With some (bonds) I probably would, but I’d still have to pay taxes, and my normal tax bracket I pay 0% on LTCG and dividends anyway.

 

[FREE866]

Ok, this will be sacrilege to some, but I find myself daydreaming about a stock market plunge. The reason is that it's inevitable that it will occur at some point, there are a lot of indicators saying it should be relatively soon, and the sooner we get there, the sooner there will be buying opportunities and also the sooner we can start recovering from it and moving toward higher highs. As they say, "The waiting is the hardest part."

Anyone else share my daydream?

What are the "lot of indicators that it should be soon"?

 

[GravitySucks]

What are the "lot of indicators that it should be soon"?

Same indicators that said 2013 was to be the end of the bull ...
Nobody knows Nuthin

 

[RenoJay]

What are the "lot of indicators that it should be soon"?

I never responded to this, because it was clear that most people did/do not want to hear it. But now, six weeks later (and at the end of a brutal October in the market) the indicators are that on any normalized basis the U.S. stock market is very richly valued, even after the recent plunge. From MarketCap/GDP, or MarketCap/Disposable Income to CAPE to virtually any metric, the market is high. The only metric I've found where the market looks "reasonable" is forward PE. But that makes a huge assumption that earnings (the "E") are sustainable. I don't believe for a second that they are. Corporate profits are at all time highs, and inverse to the percentage of corporate money that goes to wages. Will that last forever or will people demand higher paychecks? Corporations are more leveraged than they've ever been. That's well and good when interest rates remain at the lowest levels ever, but becomes a huge burden as rates rise. Long story short...there's a ton of debt in the economy, and I maintain my belief (and strong sideline cash position) that reversion to the mean will lop a massive amount off the 10 year bull market. I'm also of the belief it'll take something like 2-3 years of slow, painful drops to get to the bottom, since so many people believe this bull market is forever sustainable and keep buying the dips. Time will tell. But I'm comfortable having removed most of my equity exposure around the time of my original post in last September.

 

[TwoByFour]

I never responded to this, because it was clear that most people did/do not want to hear it. But now, six weeks later (and at the end of a brutal October in the market) the indicators are that on any normalized basis the U.S. stock market is very richly valued, even after the recent plunge. From MarketCap/GDP, or MarketCap/Disposable Income to CAPE to virtually any metric, the market is high. The only metric I've found where the market looks "reasonable" is forward PE. But that makes a huge assumption that earnings (the "E") are sustainable. I don't believe for a second that they are. Corporate profits are at all time highs, and inverse to the percentage of corporate money that goes to wages. Will that last forever or will people demand higher paychecks? Corporations are more leveraged than they've ever been. That's well and good when interest rates remain at the lowest levels ever, but becomes a huge burden as rates rise. Long story short...there's a ton of debt in the economy, and I maintain my belief (and strong sideline cash position) that reversion to the mean will lop a massive amount off the 10 year bull market.

Reversion to the mean? The historical "mean", by which I believe you mean annualized return, is 9.8% (over the last 90 years). The annualized return for the market from 1960 up to October 1, 2018 is 10.1%, which is pretty darn close. You have to remember that the 2000 crash took until 2013 just to recover in real dollars (i.e., inflation adjusted), so that was 13 years of below-the-mean. This decade has been one of correcting the previous decade's horrible performance, so I don't really see that "reversion to the mean" is in play here.

But that being said, I have no idea where the market is going. In any event, I am staying the course.

 

[RenoJay]

Reversion to the mean? The historical "mean", by which I believe you mean annualized return, is 9.8% (over the last 90 years). The annualized return for the market from 1960 up to October 1, 2018 is 10.1%, which is pretty darn close. You have to remember that the 2000 crash took until 2013 just to recover in real dollars (i.e., inflation adjusted), so that was 13 years of below-the-mean. This decade has been one of correcting the previous decade's horrible performance, so I don't really see that "reversion to the mean" is in play here.

But that being said, I have no idea where the market is going. In any event, I am staying the course.

I'm actually referring to reversion to the mean in regards to the metrics I mentioned like total stock market value vs. other measurable metrics such as GDP, disposable income, etc. I used to have a similar thought that "stocks are supposed to return 10% per year." Then I read the constitution and realized there was no such promise.