Current Thoughts on the Markets?

[pb4uski]

....I got out in late 2000 and back in, in April or 2003. Also, out in late 2007 and back in, in Summer 2008. .....

If you got back in during the summer of 2008, how did you feel about your decision in early 2009?

S&P 500 index was 1,267 on July 1, 2008 (summer of 2008) and 735 on Feb 1, 2009? a 42% decline.

 

[Sunset]

I think the market will drop a lot, but then I've been expecting this for about 2 years.... thankfully I have kept my stock allocation maxed out.

Its quite possible it will generally be flat for years, instead of a drop, because everyone seems to jump in and buy when it goes down 5%.

I do have a reserve of cash, to buy some broad based etf's should prices tank, but its only about 2-4% of assets, so no big bet here.


In the meantime, I'm playing with a measly 10K, and when a stock drops I buy options (in IRA) and when the stock goes up $4 I sold the options.
Now I should have waited as the stock kept going up, so I could have made more than 16%.
Good news is the stock is headed down again, so I am hopeful I can repeat the exercise

 

[dallas27]

Who me? Perhaps you didn't not get it. Nothing I did had any more luck involved with it that buy and hold.







Ha ha. Thanks for the tip, professor. Rim shot!

No, not talking to you, didn't even read your post. Maybe you're not the focal point of others thoughts.


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[Ticker]

I got out last week. still have a few stocks and mf's, but I don't like what I see in the earnings, forecasts, and overseas markets. This strong dollar doesn't look like it will weaken anytime soon, and my expectation is that the market will react even more negatively in the immediate future. dropping oil prices also concern me. I did have a fairly good run so far this year, but I am getting concerned about capital preservation.

 

[Lsbcal]

If we get a decline it should not be too severe because the yield curve is quite steep I.e. not likely to be a recession. I would guess a decline of 10% max. Valuations are high but not at nose bleed level like in 2000. But I would not be surprised at a having a decent year. How is that for hedging?

 

[cooch96]

Its quite possible it will generally be flat for years, instead of a drop, because everyone seems to jump in and buy when it goes down 5%.

+1

 

[DEC-1982]

My guess is the market will go down 8-10% within 12 months and then come back up. But like most retirees, I am not betting on it.

 

[eta2020]

Markets will do great for people with plan and ability to stick with it.

 

[Running_Man]

I am presently still invested 50% equities as I have been since my last change at S&P500 2020. I am very much underweight oils & energy MLP's as I sold them off towards the end of the year in anticipation of a very bad market year for these companies, which I have commented on in several threads. While much better values than 8 months ago, they are not quite where I would be interested in them.

Central banks have begun to lose control of markets as a couple of the major pieces they put in motions - investment in commodity production has resulted in prices that do not support the present level of debt many of these companies hold. The response to this point has been to double down on financing these companies, and so as long as they can continue to procure long term debt in excess of 15 years for less than 2% the collapse of some of these companies will not occur. However this is also keeping commodity production levels very high which just increases the pressure on the companies and will ultimately pressure their debt without price relief.

So what happens? The central banks of the world need commodity prices to stop falling, if China was to go into a major slump, the central banks will be unsuccessful and ultimately there will be major pain in the US and Europe. If China, which is using up all their financial reserves by directly buying stocks to support the market, can mitigate the issues we will continue to limp along and maybe even ignite a major bull move. However the idea that low commodity prices will provide a headwind to economies is being proved as wrong as GDP has been falling from initial estimates from before the drop in oil prices not increasing as should have been the case. If commodity prices reverse the US stock market should strengthen and old Yeller will lift rates 1/4 percent by year end.

The biggest risk is a continued collapse in commodity prices which will ultimately lead to a major debt default which causes a panic in markets and large unpredicted drops from which none will have the ability to react. This will also destroy the reputations of central bankers as being able to manage things and panic would be the rule of the day.


As for debts Japan cannot possibly pay theirs, Greece cannot pay theirs and Russia is probably not too far behind. At the corporate level BHP Biliton is unable to pay their debts at present commodity prices as is Conoco and several other very large companies.

Overall, there is considerable risk the market could have a very sharp drop, but I am not sure enough to sell half of my equities which would be my move if I believed with conviction we were vastly overpriced. Instead I see a fairly priced stock market with an overblown debt market that could implode if reflation cannot happen. This situation is very similar to the housing situation in 2007, with the exception that the Central Banks are far more aware of the risks of continued price drops in the area of concern and the next level of interaction from the price fall is actually at the producer level and not the consumer level, which probably means a more drawn out issue.

 

[hnzw_rui]

Currently at 90/10 in the accumulation phase so this actually works out well for me (~25 years to retirement).

 

[GrayHare]

Stocks look toppy. Historically the year before a presidential election year is rarely a good one for equities. I rebalanced by selling stock during the spring. If things look grim enough the Fed will crank QE back up.

 

[hesperus]

I've noticed some folks here talking about getting 'out' of equites completely based on what they're hearing/seeing... I don't know how easily they are doing that. For me, the capital gains I would face if I tried to do this would be huge, to the tune of mid six figures. If I somehow, magically, had the good fortune to know for sure that the market will crash by, say 20%, I'd do it, no question. But for me, without having that crystal ball it makes more sense to stick with an allocation model through thick and thin. I may add sectors that are undervalued, and shave some off of sectors that are overvalued, but more or less, I'm all in. My main 'sleep well at night' plan is always holding about 18+ months of living expenses in cash, which can also be used as dry powder when such a drop occurs.

 

[Sunset]

I've noticed some folks here talking about getting 'out' of equites completely based on what they're hearing/seeing... I don't know how easily they are doing that. For me, the capital gains I would face if I tried to do this would be huge, to the tune of mid six figures. If I somehow, magically, had the good fortune to know for sure that the market will crash by, say 20%, I'd do it, no question. But for me, without having that crystal ball it makes more sense to stick with an allocation model through thick and thin. I may add sectors that are undervalued, and shave some off of sectors that are overvalued, but more or less, I'm all in. My main 'sleep well at night' plan is always holding about 18+ months of living expenses in cash, which can also be used as dry powder when such a drop occurs.

Unfortunately I cracked my crystal ball, so I will hold onto my stocks for the ride.
I do have some cash to pick up deals if things go south.
And I have cash to use for spending expenses.

These are 2 separate amounts, as a single amount cannot do both jobs

 

[ejman]

I'm not sure I would get out of my taxable equities even if I knew for certain a 20% drop was imminent. Particularly since 20% drops (and recoveries) seem to happen with great regularity. Between fed cap gain tax and Oregon's high tax rate it wouldn't take much to get a 30-35 % tax haircut if I were to sell all my taxable equities. On the other hand If I knew for certain a 75% drop is about to happen...

 

[eta2020]

Thanks to all my life being 100% in equities we currently get dividend yield which easily
covers all our expenses. Hence we could care less if market goes 30% down or up.

Good luck market timers!

 

[pb4uski]

While I believe in equities and maintaining a consistent AA and rebalancing as needed, what I have observed is that those who try to time the market frequently make a pretty good call on when to get out, but have much difficulty deciding when to get back in and miss a good portion of rallys.

 

[marko]

Thanks to all my life being 100% in equities we currently get dividend yield which easily
covers all our expenses. Hence we could care less if market goes 30% down or up.

Good luck market timers!

+1. Pretty much the same here but with 70/30 or so
I always view it as owning 'income property' (without the hassles). The value of the property might go up or down, but the rent keeps coming in.

Still, it is hard sometimes to watch the value temporarily drop; as noted however the over-time trend has been upward for the past 100+ years.

 

[nash031]

This might be my final post before I get mowed down in a fusillade of orthodoxy and asset allocation but I got out in late 2000 and back in, in April or 2003. Also, out in late 2007 and back in, in Summer 2008. Dare I say A) look at the charts and B) "read da papers." The 200 Day Rambling Average is a pretty good indicator of what's going on and, yes, what is likely to happen in the useful future.

I am not claiming Nyaa nyaa! Market Timing works, buy & hold is bad. Just saying buy and hold can kill you depending on your situation, just as some form of prudent, reasoned timing can slay buy and hold at points along the spectrum.

I don't know when you got out, let's call it October 2000 when the market was at 1311 from a peak of nearly 1500. Back in in April of 2003 means you were in around 975 (on 1 Apr) from a low of 815.

Out in late 2007, I'll give you the peak of ~1475, back in summer 2008 means you bought in at 1150 before the market dropped to 800 again.

Doing as well as you did, you missed 3 out of 4 peaks and valleys by 15-30%. I wonder how taxes impacted your gains? Did you sell and buy at any other times, or just those two you mentioned?

CAN is a weak work because a lot of things CAN happen. The problem is that in order to slay buy-and-hold, you gotta get it right when compensating for taxes and fees too.

Some folks can do it. Many more THINK they can do it, but never really look to see. I'm in the bigger group that doesn't care to try to predict the unpredictable (yet!). Being in accumulation allows me to let it ride without worrying too much.

 

[eta2020]

The buy and hold does not take any special skills and beats 90% of the market.
Cause you get High fund return instead of Low investor's return and it takes almost no skills.

Just How Dumb Are Investors? - MoneyBeat - WSJ

 

[marko]

Thanks to all my life being 100% in equities we currently get dividend yield which easily
covers all our expenses. Hence we could care less if market goes 30% down or up.

Good luck market timers!

Seems that when the markets go way down, I find myself reviewing my dividends (and cap gains to a lesser degree) which I view as a fairly reliable income stream.

Sort of comforting for the reasons you state. I say to myself, 'well...I'll still get paid every month while waiting for the upturn...'

 

[lawman3966]

The dumbest thing a person can do is think they are smart. And dumb luck usually reinforces it. Consider yourself ahead and stop gambling.


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While I generally agree with the above, one thing comes to mind about buy an hold. While Buy and Hold has mostly worked for long periods in the U.S., that may be a form of luck in and of itself.

Had we decided to "hold" in response to the Japanese stock market's troubles in the 90s, we might not be feeling very smart right now.

Like it or not, there is some luck/faith/hope in the investing philosophy that holds that "things eventually get better" if you just sit tight. So far, it's worked in the U.S. It worked for a while up until 1990 in Japan too, though.

I also hope that buy and hold continues to work over long periods when invested in U.S. equities. But, we shouldn't deny that there is a wager embedded in that approach that assumes that the troubles that have afflicted foreign markets over long periods won't happen here.

 

[eta2020]

.

Like it or not, there is some luck/faith/hope in the investing philosophy that holds that "things eventually get better" if you just sit tight. So far, it's worked in the U.S. It worked for a while up until 1990 in Japan too, though.

I also hope that buy and hold continues to work over long periods when invested in U.S. equities. But, we shouldn't deny that there is a wager embedded in that approach that assumes that the troubles that have afflicted foreign markets over long periods won't happen here.

You are correct. I think worst stock market was Austrian where buy hold had 100 plus years of negative returns.

One should certainly diversify between US, Developed Markets, Emerging Markets, Dividend growth, Wide Moat etc etc and I am talking about being 100% in equities.....which may not be best AA for most of the people.

If you add to it REITs, CDs and bonds diversification gets even wider.

But cool head, plan a ignoring emotions ... sticking to plan is simple way to make great returns no matter what AA one selects.

It is way more about discipline then having skills IMO

 

[haha]

This may not be very smart, but I almost always refuse to realize a short term capital gain. (All my comments here relate only to my taxable account, which unfortunately is by far my largest.) I may feel that I really should grab this gain while I have it, but in the past I have sometimes acted on that impulse only to pay a tax and then see the stock's price continue to increase. OTOH while it annoys me to pay LTCG taxes, I will and often do so. This year it worked the other way. I had a 75% quick ST gain on an oil issue bought last fall.I elected to wait and then the gain dissipated.

It seems that opinion here is fairly equally divided about the future of oil prices. I admit that I have no special insight, but US and much other non-OPEC production will come down, and unless we are facing a very different future and likely one that cannot be borne, crude price will have to increase. Just avoid bankruptcies and things should work out well enough.

When a commodity price is low, there are always hundreds of learned reasons why this is so. But the price always manages to go back up anyway. Even coal may, but this one is too scary for me. Various kinds of government action while unlikely could permanently damage coal prospects. And in any case, natural gas will have to increase first.

Gold miners are even more bloodied than oil and gas, and will likely deliver even better returns when they reverse. A big difference though is that oil has an immediate and obvious offtake from stocks and production. Not so with gold, so it is inherently more speculative. But I bought miners before only because they were cheap, and did fine and now I am going to rinse and repeat. ( I hope anyway)

Ha

 

[HFWR]

Well, many of us have been wringing our hands about the market being frothy/overvalued/high pe10, etc.

We should be feeling good about now...

 

[nash031]

Well, many of us have been wringing our hands about the market being frothy/overvalued/high pe10, etc.

We should be feeling good about now...

Why is that? Because the market's less than 2% off its all-time high? I'll bet it sets another before it goes down 5% to below 2000. Know how I know? I don't.