Dry powder...when is the time?

[RockOn]

Quote:

Originally Posted by Animorph RockOn, My feeling is that the problems (including reduced consumer spending which I seldom see mentioned) are just starting to be recognized, so we have a way to go. But, who knows? I have been constantly amused by the pudits saying the worst is now behind us and the market should head up now! I think most people are quick to look for the upside and reluctant to consider the downside. One of these days they'll be right. My situation is sort of unique, in that I just retired at 53 with one son in college and another going in two years. I'll have a heavy cash outflow for the first few years. That's half the reason I have so much cash now. I'm perfectly happy to just hang on to it and spend it to zero before I touch any stocks. So I don't have to worry about getting it all back in before the market goes up too far. I just hope they are back up within 3 to 4 years! I plan to fiddle with the cash allocation throughout retirement, or until I get tired thinking about it. I'd like to increase cash when the market is above the value I planned for (an early withdrawal really), and put that cash (if any) back in according to the above plan when the market has declined. I don't want to carry a bunch of cash for 40 years. Dan

We are in about the same boat, one in college, one about to go. I'm 53 and see the same problems in the economy. I also have quite a bit of cash. I also like to watch the value and am not a true B&Holder. I do some closet timing and always have.

Anyway, good luck and let me know when you see the "all clear".

[mathjak107]

if you miss the turn around by 1 week typically you cut your gains that year by 8%. if you hang back and miss the quarter you miss 14% on average and add 1-1/2 years to your recovery

[RockOn]

Quote:

Originally Posted by mathjak107 if you miss the turn around by 1 week typically you cut your gains that year by 8%. if you hang back and miss the quarter you miss 14% on average and add 1-1/2 years to your recovery

That could be true but it seems high to me. Are you saying get it all in now?

[mathjak107]

im trying to get most of it in over the next 3-4 weeks. im hoping i dont miss the turnaround and it would serve me right for even attempting this.

turn arounds happen way before there is even a light at the end of the tunnel. they begin with nothing even on the radar.

[cute fuzzy bunny]

Quote:

Originally Posted by Animorph When it hits 20% that's a pretty good low.

Thats what I said about the Nasdaq a few years ago when it plunged through 3000 and then 2000 and then 1200. I mean, hell...it was 5000 just a few months back and I didnt think it was overpriced until it topped 3700.

So nibbling is always nice, but I might wait a while before I threw in the anchor.

[RockOn]

Quote:

Originally Posted by cute fuzzy bunny Thats what I said about the Nasdaq a few years ago when it plunged through 3000 and then 2000 and then 1200. I mean, hell...it was 5000 just a few months back and I didnt think it was overpriced until it topped 3700. So nibbling is always nice, but I might wait a while before I threw in the anchor.

Catchin the fallin knife. I've been burned to. I think I'm going to space it out over the next year and see what happens. If the market gets started on a big rally that hurts emotionally though. Being out when things are going up can be more stressful than being in when it's going down.

[Dawg52]

Quote:

Originally Posted by Retire Soon The ideal time to buy is when most of your cousins, uncles and friends have told you they've sold all of their stock and they proclaim with strong conviction that they'll never, ever buy stocks again.

I almost feel this way. But, I'm trying to be strong and just hold my nose from the smell of my reeking stocks. Got some cash but a little too timid to buy anymore. Maybe that is a good buy signal for you guys.

[W2R]

Quote:

Originally Posted by Dawg52 I almost feel this way. But, I'm trying to be strong and just hold my nose from the smell of my reeking stocks. Got some cash but a little too timid to buy anymore. Maybe that is a good buy signal for you guys.

Hang on. No panic allowed. Remember, buy low, sell high. Maybe it is a good time to think about asset allocation.

Surely some of your holdings are doing well. As I recall, you have approximated Wellesley with two ETF's, correct? Wellesley is up slightly today, compared with yesterday, and those ETF's probably are as well.

[prgsdw]

I'm staying on the sidelines right now and probably for the next few months at least. Wife and I find ourselves currently set up in about 55% cash / cash equivalents. We're still dollar cost averaging into the market via 401k's and IRA's, but for other cash, we're staying on the sidelines. Currently buying some I bonds and sloshing cash into money market funds. Have 2 cd's coming up in the next 6 months that were at 5.1% and 4.31% (no penalty for early withdrawl)...so will need to decide then if the time is right or if I'm going to continue to stay out with that money.

[Notmuchlonger]

Quote:

Originally Posted by mathjak107 if you miss the turn around by 1 week typically you cut your gains that year by 8%. if you hang back and miss the quarter you miss 14% on average and add 1-1/2 years to your recovery

Are you serious? Thats hard to believe its thats much.

[Dawg52]

Quote:

Originally Posted by Want2retire Surely some of your holdings are doing well. As I recall, you have approximated Wellesley with two ETF's, correct? Wellesley is up slightly today, compared with yesterday, and those ETF's probably are as well.

DVY sucked today as it owns a good chunk of financials. I own a few other stocks to counter this and some have held up and some have not. Not a good day is relation to how the DOW held up.

Oh well, I think I'm gonna change my avatar to the born loser. Better fit for me.

[W2R]

Quote:

Originally Posted by Dawg52 DVY sucked today as it owns a good chunk of financials. I own a few other stocks to counter this and some have held up and some have not. Not a good day is relation to how the DOW held up. Oh well, I think I'm gonna change my avatar to the born loser. Better fit for me.

Don't be silly. It's just a lousy day. Can't last forever, right? When they do go back up (and they will, at some point), it may be time to go to a more conservative asset allocation.

[Ronstar]

Quote:

Originally Posted by Dawg52 DVY sucked today as it owns a good chunk of financials. I own a few other stocks to counter this and some have held up and some have not. Not a good day is relation to how the DOW held up. Oh well, I think I'm gonna change my avatar to the born loser. Better fit for me.

Its been a few bad months. But 20 years from now we'll remember this as a minor correction. And dont change your avatar - I like the one you have now.

[megacorp-firee]

Quote:

Originally Posted by RockOn . Being out when things are going up can be more stressful than being in when it's going down.

how true.
Why agonize on the way down AND on the way up? Stick to your plan (unless you think the rules of the game have substantially changed) (he says with a grimace ).

[mathjak107]

Quote:

Originally Posted by Notmuchlonger Are you serious? Thats hard to believe its thats much.

yep its true, the average first year recovery is in the 30% range. the biggest moves are the first week and quarter. ill try to find the web site again with the back-up figures who did the study


i look at it this way, the proper thing to do is do nothing in market drops and ride it out. so that being the case if i called it lucky and got out in november any point i get in before the recovery starts is a whopping bonus of more shares. . i dont have to catch the bottom. even if i missed buying 10% lower and the market fell after i bought so what. do you think 10 years or 15 years from now the extra couple of % will amount to a hill of beans.

15 years ago i think we stood at 3300, today its near 12,000 . did catching the bottom of the last downturn at that time really matter? at 2% interest pretty soon on money markets and cd's its worth the wait, get in a little early and wait for the party to start. its worth giving up a little interest and not missing that first turn around week when it eventually happens

[BUM]

Don't do what I'm doing. I've kept my dry powder so long, that now its not as explosive as it used to be (when it was earning 5.4%)!

did buy some WB yesterday though...

[maddythebeagle]

Quote:

Originally Posted by mathjak107 at 2% interest pretty soon on money markets and cd's....

maybe by the end of the day

[JohnEyles]

Quote:

Originally Posted by Retire Soon The ideal time to buy is when most of your cousins, uncles and friends have told you they've sold all of their stock and they proclaim with strong conviction that they'll never, ever buy stocks again.

Don't forget the taxi drivers !

[haha]

Many stocks have bottomed, at least for now. Interest rates are low and getting lower. This is not the typical condition for a crash. Look at Kraft, look at GE, look at JNJ, look at any number of quality cash generating stocks and you will find that they are sitting out most of the recent 6 months volatility.

Commodity stocks including energy as well as financials are a different story. Here, one can either do analysis and pass on anything even slightly suspicious, take small bets on very beaten down stocks that you think are good, or bypass this area entirely and stick to consumer products etc.

Over any reasonable amount of time you are not going to lose money with this approach, even though according to forecasters ECRI their index of leading indicators in now in recession territory.

I always hold back some "strategic cash", but right now it is less than my usual allocation. You don't always get to buy quality companies at reasonable prices. I might feel differently if I were planning to buy a grab bag of good and bad companies, like some random index.

Ha

[headingout]

I agree with others who are buying now (incrementally, not burning all your powder at once). The analogy that works for me is waiting in a crowded airport on Friday night: would you rather get on a flight with 2 stops that guarantees you'll get home, or risk not catching any flight at all? In other words, I'd rather get into a down market too early, rather than too late. I am DCA'ing my dry powder, about 5%/week. Started in late January, will run out end of April. There is the risk that the market goes way down and stays down after that, but I'd rather be in than out, think current prices are low, and see some support.