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Old 10-28-2013, 07:48 PM   #41
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Maybe I'm a pessimist...but I keep telling DW that just wait....

Some day (I'm thinking within the next 1-4 years), interest rates will rise, and all sorts of bad things will happen. Markets will go down, people will stop spending, businesses will stop investing, and I think one unique thing will happen that we have not seen in a very long time...

Anyone under the age of 50 likely does not remember what it's like to have double-digit interest rates like we did in 1980. Even if we only get to 7-8%, it will be major sticker shock to the youngsters as it pertains to house and car loans. Those with variable rate mortgages are going to REALLY be in trouble. Imagine your variable mortgage rate resetting such that your payment goes from $1,200/month to $1,800/month...yikes! What will happen when workers want to relocate (either to find a job out of college, transfer to a new job in another city, or even transfer to a different city for the same MegaCorp) and find that the house they can afford is 2/3 the size/quality of the one they are used to? Yes, for internal transfers the company will help pay...but that will likely get nipped in the bud also due to the high cost. Over the past 10-15 years we've been so used to easy money that we think nothing about moving...but that won't be so easy IMO if rates double from their current position.

Personally I'll be largely unaffected other than through high inflation...which can usually be partly offset by higher yields on safe investments (I remember having a Gradison Cash Reserve guaranteed account in 1980 that paid 11% guaranteed). Most people, however, don't have that luxury.
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Old 10-28-2013, 07:57 PM   #42
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At my office too many of the folks pulled out of the market at the beginning of the gov'ment shut down... Now they're regretting it.
Here is your chance. Ask them if they are going to buy a bit soon.
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Old 10-29-2013, 08:13 AM   #43
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I'm not exuberant but I feel content. The market has pushed my investments well beyond the minimum I felt I needed. I'm not doing anything but my standard rebalancing. I'm also starting to look at the big influx my Megacorp is going to pay into my 401K in December (they pay their match in a lump sum once a year) to determine if I need to do anything with its allocation.

It is interesting to me how divorced the market has become from personal economic lives. It used to be that bad economic news like companies laying off people, high unemployment, slow job growth would bring the market down. Now those are seen as "good" things as the market seems to feel that these things will keep the current government stimulus going, and this keep money flowing into the market. While I personally benefit from this,it does not bode well for peoples lives. It makes one wonder if there will be a slow glide down or a steep fall off a cliff when this music stops.
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Old 10-29-2013, 10:22 AM   #44
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It is interesting to me how divorced the market has become from personal economic lives. It used to be that bad economic news like companies laying off people, high unemployment, slow job growth would bring the market down. Now those are seen as "good" things as the market seems to feel that these things will keep the current government stimulus going, and this keep money flowing into the market. While I personally benefit from this,it does not bode well for peoples lives. It makes one wonder if there will be a slow glide down or a steep fall off a cliff when this music stops.
Unless you are selling stock into this rise, I cannot see how you can personally benefit from what will soon be seen a bubble like all other bubbles, and soon to be more than reversed.

Ha
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Old 10-29-2013, 11:13 AM   #45
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I have been rebalancing and deconcentrating, but I think the vast majority of the retail rubes have yet to jump into the equity pool.
Oh, the rubes have been coming, and in almost record numbers. Their ineptitude is the one constant you can count on.

$277 billion into stock funds so far this year; highest since 2000 - The Tell - MarketWatch
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Old 10-29-2013, 11:34 AM   #46
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I updated this "decades" chart. It is just the SP500 plotted on semi-log but cut up to overlay each decade since the 1940's. Also includes dividends and inflation.

You can see we've had quite a ride but the slope we are on is not something that is unusual. Markets like this have been seen in practically every decade and have gone on for longer too. Of course, this does not show valuations which is another story.


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Old 10-29-2013, 11:54 AM   #47
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Heh heh heh... There's a market timer in all most of us, just waiting to get out make a post. Heh heh heh...

Just this morning, I saw a Web site headline saying "Soft economic data supports Fed continued stimulus, boosting stocks". I do not feel good about this. Not so good economy, so stocks go up? There's something not right about this.

As I have been trimming some stocks for their individual reasons, I thought about buying something else, but perhaps should refrain now. Stock AA was 70%, but has been headed towards 65%. Is that market timing or tactical AA allocation? Or is it just being chicken?
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Old 10-29-2013, 12:28 PM   #48
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...(snip)...Stock AA was 70%, but has been headed towards 65%. Is that market timing or tactical AA allocation? Or is it just being chicken?
My rebalance plan has been to not go above 65% and I sold 1% yesterday to get back to that. I do not rebalance when the market goes down.

On a personal level we all have to deal with greed and fear. I'm considering reducing the equities even further as the portfolio goes beyond where the risk is warranted to have the spending levels we would like.
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Old 10-29-2013, 12:58 PM   #49
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On a personal level we all have to deal with greed and fear. I'm considering reducing the equities even further as the portfolio goes beyond where the risk is warranted to have the spending levels we would like.
If I can sustain 3.5%WR, I will be content. Of course, I still like to make more money. It's the way to gauge if your reading of history is correct, as it is unfolding before you. However, I do not, and never, swing for the fence.

If fixed-income investments pay a decent return, I would not think of going as high as 75% in stocks. But looking at large and seemingly safe (?) companies paying 3 to 4% dividend, it is tough to sit on as much cash as I do now.

It ain't easy!
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Old 10-29-2013, 01:09 PM   #50
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I am not exuberant at all. I started investing in 2000 and my own experience taught me that what the market giveth, the market taketh away soon enough. So I have a strategy of harvesting gains when the market gets overbought, and this is no exception.
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Old 10-29-2013, 01:11 PM   #51
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I am not exuberant at all. I started investing in 2000 and my own experience taught me that what the market giveth, the market taketh away soon enough. So I have a strategy of harvesting gains when the market gets overbought, and this is no exception.
Translation: "I'm a dirty market timer" - not that there is anything wrong with that, of course...
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Old 10-29-2013, 01:18 PM   #52
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Translation: "I'm a dirty market timer" - not that there is anything wrong with that, of course...
Of course saintly indexers could call it "rebalancing". Then it would be alright.
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Old 10-29-2013, 01:55 PM   #53
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... my own experience taught me that what the market giveth, the market taketh away soon enough...
So, now the market giveth, then you taketh!

Is the market god a vengeful one, such that he will get back at you next time?
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Old 10-30-2013, 09:18 AM   #54
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Interesting Hulbert article on sentiment indicators and current market at: Wall Street is way too bullish - Mark Hulbert - MarketWatch
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...the irrational exuberance that is very much in evidence right now tells us little more than that the market is vulnerable to a short-term decline lasting little more than a month — maybe three.

Note carefully that this does not mean that such a pullback couldn’t develop into something more major. When the next bear market does eventually begin, of course, it will start with a short-term decline. My point instead is that, if a bear market does begin, it won’t be because of exorbitant levels of bullish sentiment.
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Old 10-30-2013, 09:26 AM   #55
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....imagine your variable mortgage rate health insurance premiums resetting such that your payment goes from $1,200/month to $1,800/month...yikes! ....
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Old 10-30-2013, 09:33 AM   #56
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Interesting Hulbert article on sentiment indicators and current market at: Wall Street is way too bullish - Mark Hulbert - MarketWatch
The author added:
There is no shortage of possible fundamental factors, and I’ve mentioned several of them in recent columns. But fundamentals tell us more about where the market might be in three to five years’ time than it does in a month.

So, yes, current sentiment situation is alarming — if you’re a short-term trader. If you’re a longer term investor, you should be focusing on fundamental factors rather than worrying about current sentiment levels.
Same as some earlier posters, I expect that a correction may happen anytime now, just as it did happen in the past. But being a long-term investor who looks at fundamentals, I would want to know if I should rebalance into equities again when that correction occurs. I do not follow Hulbert to know what he wrote before, but what else I have read did not have any bad prognostication about the world economy.
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Old 10-30-2013, 10:21 AM   #57
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Of course saintly indexers could call it "rebalancing". Then it would be alright.
I've been pulling money out of equities this year to maintain my 40% equity asset allocation. I usually only do it once per year but this year I'm slowly moving my 401k balance to my Vanguard IRA. If figured there's no reason not to rebalance as I do it. My IRAs hold all of my CDs so it works out perfectly.
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Old 10-30-2013, 10:40 AM   #58
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Unless you are selling stock into this rise, I cannot see how you can personally benefit from what will soon be seen a bubble like all other bubbles, and soon to be more than reversed.

Ha
Rebalancing a conservative AA in a rising market after rebalancing that conservative AA during the last crisis has personally benefited me. When the bubble pops, those with something and no debt are still going to be relatively better off than those with much less and lots of debt.
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Old 10-30-2013, 11:12 AM   #59
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Yet another all time high net worth yesterday. Simply unbelievable! It is like a dream come true (for the time being! ). What goes up, must come down, but meanwhile this is great daydream fodder.
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Old 10-30-2013, 12:46 PM   #60
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Rebalancing a conservative AA in a rising market after rebalancing that conservative AA during the last crisis has personally benefited me. When the bubble pops, those with something and no debt are still going to be relatively better off than those with much less and lots of debt.
Your first statement is selling into this rise. Your second statement is true, but irrelevant to the question.

Ha
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