Down Day in the Market !

[frayne]

No thanks. As I have said several times, I am a good ways out from having to withdraw, so I am comfortable with my current situation and AA.

Sorry this current market has made everyone so touchy. Not trying to be condescending or (actually) suggest Fischer, just that some may need to re-evaluate their tolerance to market swings.

Hey no big deal and please don't take my comment personal. Actually I could give a sheet less if the DOW tanks 10K or goes up another 10K, it's all just entertainment at this point.

 

[VanWinkle]

Hey no big deal and please don't take my comment personal. Actually I could give a sheet less if the DOW tanks 10K or goes up another 10K, it's all just entertainment at this point.

Entertainment like fingernails on a chalkboard for some people. I always am aware of people that need their portfolio to draw a decent living in support of SS payments. Not everyone has enough to lose 20% of their stock portfolio, or enough to not own any stocks.

 

[TNBigfoot]

What hurts this correction is almost any AA except cash is getting slammed. Last July, I rebalanced to 50/50 And also started a 5 yr CD ladder with ~ 12% of portfolio to hedge against just this. I lost out on the run up but now close to break even and still generating some return.

 

[NW-Bound]

I can take this market gyration and still make jokes, not because I am so rich or have a fat pension that I can say I do not care if the market drops 10K points.

It's because I have been through episodes in my life where my own life was endangered, and it was not always for medical reasons.

As I often make jokes here, as long as I am alive and have my 25' motorhome as the housing of last resort, it's not so bad. If one has never been through rough periods, he is more afraid of the unknown. On the other hand, some people are not afraid because they do not know that bad things can happen. That's not good because they are unprepared.

I have in my mind the worst case. It's highly unlikely, from a financial standpoint for me, and I think I can still handle it. Call me the adventurous type, but I am actually not that daring. As I said, I simply went through something like it before.

 

[Free bird]

Stocks catching a bid at 10% haircut. See if it sells off to 15% & see how robust the buying is. Still think 2400-2500 is the buy zone. Then the blow off top next year.

 

[Free bird]

Futures are green.

 

[Souschef]

The thing that blew my mind was my biggest IRA was 796 on 12/31/2017 and closed at 804 on Friday.
But I agree, as my DW pointed out, she felt sorry for anyone forced to cash out now.

 

[CaliforniaMan]

There are many reasons I can think of that does not allow one to fine-tune any method.

There's only so much one can get out of a limited set of stock data. One of the first exercises to a student of statistics is to find out how many tosses it takes to be sure to a certain level that a coin is a fair one (meaning having a 50/50 chance of head/tail). Unless a coin is heavily loaded and obviously wrong, you would not be able to know with just 10 tosses.

The market is not a stationary process. Its characteristics change with time. Take something as fundamental as the P/E. Some people say that high P/E is here to stay, some say it may go back. Who knows? International stocks used to be uncorrelated with US stocks. Globalization now drives them up/down together.

Just now, the people who bet that low volatility is the new paradigm made good money for 2 years, and lost their pants overnight when volatility came back.

So, as long as one does not take an extreme position, he will survive. He may be right one year, then wrong the next. He will not be wiped out.

...

I think the part of your statement I bolded really says it all. We can use historical data to get us into the ballpark of reasonableness. But more than that we are just fitting to data, and not gaining any useful insight. Since the market really is not a stationary process, we can never have but the roughest of ideas of what the "optimal" asset allocation will be. Pick something and relax. Whatever you pick you are more than likely wrong than right anyway. But if you pick well enough you will be dead before you are poor

 

[shotgunner]

Last week was a wild ride. Fear of another 2008/2009 is/was in the back of my mind even though I know I would survive and stay retired if it happened. Today I am not thinking about what the market will do. Yesterday I got a phone call from a childhood friend, he told me if I wanted to say goodbye to a woman I grew up with and was close to her family in my youth I needed to get up to a County Hospice House as she has hours to days to live. Stage 4 lung cancer, never smoked. She turns 53 today. Another old friend from childhood will soon be gone. I am sad but I am determined to find some joy today even if it is treating myself to a meal out, a visit with another old friend or both. I am ever thankful for my blessings in life, the stock market in the short term is just drama.

 

[IMATERP]

Last week was a wild ride. Fear of another 2008/2009 is/was in the back of my mind even though I know I would survive and stay retired if it happened. Today I am not thinking about what the market will do. Yesterday I got a phone call from a childhood friend, he told me if I wanted to say goodbye to a woman I grew up with and was close to her family in my youth I needed to get up to a County Hospice House as she has hours to days to live. Stage 4 lung cancer, never smoked. She turns 53 today. Another old friend from childhood will soon be gone. I am sad but I am determined to find some joy today even if it is treating myself to a meal out, a visit with another old friend or both. I am ever thankful for my blessings in life, the stock market in the short term is just drama.

Your priorities are in order...

Money is only beneficial to enhance or sustain one's quality of life. God isn't interested in the amount of assets we have when we pass.

I

 

[EastWest Gal]

Last week was not unexpected. There was a huge spike in the market toward the end of last year. DS moves more money into his Roth IRA at the end of last year but chose not to invest it immediately. He’s only 25 so is focusing on equities.

He was watching the market and didn’t want to jump in. At the end of the second 4% drop, we discussed market correction and he bought some VTI.

I doubt the correction is done, so we’ll see if there is more of a buying opportunity ahead.

The news sources I tap are kind of ho-hum about the market. They talk about the correction, not about recession. Seems appropriate to me. This corrections is a normal thing, not unexpected. And when a 1000 point drop in the Dow is 4% and not 8%, it is not that big a deal.

 

[Golden sunsets]

It’s pretty simple.

Above CAPE10 25 my AA is 50/50. Below CAPE10 18 my AA is 60/40. There is a linear ramp between the two, so that at CAPE10 23.5 my AA would be 55/45.

These CAPE10 numbers were picked by looking at 1995 and later graphs, so it already captures some of the accounting changes post 2001. In my AA spreadsheet I have an entry for CAPE10 and I get the data from http://www.multpl.com/shiller-pe/ .

I generally rebalance annually (if needed) when I withdraw funds and after distributions are paid out, but if the equity market suddenly dropped 20% or more during the year it would probably trigger another rebalance. It’s the same as my previous rebalancing scheme although it might have me rebalancing very slightly sooner. If you look at CAPE10 swings they tend to be long and gradual. So I don’t expect a large influence on the timing of rebalancing.

Normally AA changes would be very gradual, but if there is a big selloff like 2008, AA would go to 60/40 quickly, and then gradually reduce if the stock market recovered.

Thanks for sharing. My own AA, which is currently at 53/42/5 is set to change annually by 1% from equities to bonds until I reach 50/45/5. There it will sit indefinitely. My rebalance bands are +/- 2.5% and I generally rebalance just after the first of the year. My last rebalance was on 1/3. I've been thinking about introducing a PE component, thus my interest in your methodology.

My most immediate task is to calm DH's fears after reading today's papers and listening to various TV pundits. He just said to me, "Let's sell it all and go gold". He said the same thing in October of 2007


Sent from my iPad using Early Retirement Forum

 

[copyright1997reloaded]

My most immediate task is to calm DH's fears after reading today's papers and listening to various TV pundits. He just said to me, "Let's sell it all and go gold". He said the same thing in October of 2007


Sent from my iPad using Early Retirement Forum

I know there are a lot of people like this...but why is it an all or none decision?

 

[frayne]

Last week was a wild ride. Fear of another 2008/2009 is/was in the back of my mind even though I know I would survive and stay retired if it happened. Today I am not thinking about what the market will do. Yesterday I got a phone call from a childhood friend, he told me if I wanted to say goodbye to a woman I grew up with and was close to her family in my youth I needed to get up to a County Hospice House as she has hours to days to live. Stage 4 lung cancer, never smoked. She turns 53 today. Another old friend from childhood will soon be gone. I am sad but I am determined to find some joy today even if it is treating myself to a meal out, a visit with another old friend or both. I am ever thankful for my blessings in life, the stock market in the short term is just drama.

+1 and very sorry to hear about your friend.

 

[redduck]

Your priorities are in order...

Money is only beneficial to enhance or sustain one's quality of life. God isn't interested in the amount of assets we have when we pass.
I

No, but my children are.

 

[street]

Your priorities are in order...

Money is only beneficial to enhance or sustain one's quality of life. God isn't interested in the amount of assets we have when we pass.

I

Nice and so true.

 

[Free bird]

Klaxon going off. FOMO alert.

 

[NW-Bound]

I know there are a lot of people like this...but why is it an all or none decision?

That's another reason the market goes wacko from time to time.

I no longer wonder why they do that, and instead try to do like Sir Templeton did. He said his job was to help people, and when they wanted to sell, he bought from them. When they clamored to buy, he sold to them.

 

[copyright1997reloaded]

That's another reason the market goes wacko from time to time.

I no longer wonder why they do that, and instead try to do like Sir Templeton did. He said his job was to help people, and when they wanted to sell, he bought from them. When they clamored to buy, he sold to them.

I love that quote.

Since we are doing them:

The main purpose of the stock market is to make fools of as many men as possible.

(Bernard Baruch)

And another one from him that I would be wise to listen to:

I made my money by selling too soon.

 

[Gunny]

Last week was a wild ride. Fear of another 2008/2009 is/was in the back of my mind even though I know I would survive and stay retired if it happened. Today I am not thinking about what the market will do. Yesterday I got a phone call from a childhood friend, he told me if I wanted to say goodbye to a woman I grew up with and was close to her family in my youth I needed to get up to a County Hospice House as she has hours to days to live. Stage 4 lung cancer, never smoked. She turns 53 today. Another old friend from childhood will soon be gone. I am sad but I am determined to find some joy today even if it is treating myself to a meal out, a visit with another old friend or both. I am ever thankful for my blessings in life, the stock market in the short term is just drama.

^THIS. I'm down the equivalent of more than a year's expenses since the top. I've been kind of sweating my next move. Also since the top I lost a HighSchool friend to a heart attack. He was 54 and JUST retired. He was on vacation with his wife in Florida. So, just now rebalanced to 100 % equities as I have a pension I treat as my fixed income. I don't even know why I sweated this correction. It's fundlemental and I don't even need to tap the stash at this juncture. I promise myself to stop watching the market and just stay aware of the economy as a whole. Enjoy my ER and family and let the market take care of itself. RIP, Tim.

 

[audreyh1]

To me that stock market ran up so fast last year and the first month this year, that it's hard for me to get excited about the drop because it seemed like too much too fast anyway.

So we're back to late Nov 17 prices. That's still way higher than Jan 1 2017.

 

[NW-Bound]

I just looked. My stash is back to its value on Dec 18. Still a lot lower than the top on Jan 26. That rise in January was phenomenal.

 

[marko]

To me that stock market ran up so fast last year and the first month this year, that it's hard for me to get excited about the drop because it seemed like too much too fast anyway.

+1 Exactly!
Those of us who follow the market on a regular basis just knew this was too hot to sustain itself.

I view the market trend almost like a steady rising tide. It will eventually go up regardless but there is an ebb an flow to it. A pull-back doesn't mean the tide is going out; it is just reverting to where it should be in the first place.

Patience pays off by knowing that it can get ahead or behind itself but there is an imaginary 'true' line of growth that the market only sometimes follows.

Just my visualization of it. I'm pushed back to October '17 (from August '18's calculated balance)

 

[Andre1969]

Just out of curiosity, does a down market have to last a certain amount of time to officially be called a "Correction"? I've always heard a Correction is when the market drops at least 10%, and this current one was a 10% drop.

However, as of yesterday's close, I think I was only down about 6-7% off my peak in January, so it is clawing back. And who knows? By the end of the month, it could go back into the black. So, years down the road, when we look back on stock market performance, and see a chart spanning many years, this drop may not even show up.

I read somewhere that there have been something like 36 corrections since 1980 (and that includes corrections that have turned into recessions). In my own experience, I've only had three drops in the 2009-now period that would count as 10% plus, and lasted more than a month so that they actually show up in my spreadsheet. The first one was March 2009, the official bottom of the Great Recession. I had actually bottomed out in late November 2008, but then it started to bounce back. But then there was another slide in early 2009 that took me down about 20%. Over the summer of 2010 I was down about 15%, and that lasted a couple months I think. And then in the summer of 2011 I lost about 15% in less than a month. I didn't recover from that one until early 2012.

I heard there was an official correction in early 2016, but I guess I got lucky because that one really doesn't show up as being quite so serious on my records. I mean, it's there...you can see the dip in the line. But, it's not a serious dip.

 

[Gumby]

Cramer's piece intrigued me, so I did some more digging and found this https://www.bloomberg.com/view/articles/2018-02-09/inverse-volatility-products-almost-worked

In short, it seems no one who held these instruments could tell with certainty what the price really was or how it would react to events in motion. If you think that a certain market move should make your instrument go up and it makes it go down instead, I'd say you don't understand enough to be invested in that instrument in the first place. What a mess these people are making.

And the plot thickens. The Wall Street Journal is reporting that

The Financial Industry Regulatory Authority (FINRA) is scrutinizing whether traders placed bets on S&P 500 options in order to influence prices for VIX futures

https://www.reuters.com/article/us-...oking-into-vix-manipulation-wsj-idUSKCN1FX2PJ