Going to 100% cash

[audreyh1]

Quote:

Originally Posted by Ronstar Maybe Dex is right. Can the upside potential of increased corporate earnings (the only positive news) be greater than the downside risk of rampant unemployment, dismal real estate market, huge government debt, probable tax increases, and the uncertain outcomes of the new government programs?

Only if you limit your view to the US. If you broaden your view to include the global economy, you'll realize that there are actually quite a few healthier economies that US/multinational companies sell into, and these are and have been contributing significantly to their continued profitability.

Audrey

[dex]

Quote:

Originally Posted by Carnage Could someone explain to me why you wouldn't stick it all in either bonds or CD's in the short-term? I've never quite understood why you concede even the low interest you would get there versus nothing with cash.

I have used them in the past. I'd rather have the options that cash provides at this time.

[dex]

Quote:

Originally Posted by audreyh1 I do think it very likely that we have a strong market selloff over the next few months (it already started as foretold by astrology just after the 8-10 Bradley Turn Date - it seems like everyone read the same script and decided to sell off big on 8-11). We are back below the bearish 50/200dma cross, the dreaded "Hindenburg Omen" has raised it's ugly head (last seen in 2008), it's the 2nd year of a Presidential cycle, which usually have horrible Sept/Oct periods - so all my technical analysis buddies are on bearish red alert. But - I'll ride it out. That's what I designed my portfolio to do. I expect more rollercoasters between now and 2017 or thereabouts. But as you can see from the past, we have had some pretty strong bull runs within our current "secular bear market" since 2000, so far rebalancing has been pretty effective (knock on wood) in spite of some brief periods of significantly reduced net worth.

It sounds as if you drank my Cool-aid. I don't follow Bradley or E-waves.
What technical analysis board/site do you read?

[DoingHomework]

Is it wrong to hope for a bit of a downturn for a few years while I accumulate?

Seriously though, I'm not beyond a bit of timing when things just start looking silly. But I try to see the silver lining no matter what the market is doing. Being properly diversified just means that downturns in one area present an opportunity to rebalance and take profits in another area.

[ziggy29]

I'm down to about 40% invested and that's my comfort level now. Much more than that and I'd be losing sleep over another 2008-09 style crash (and the economic relapse is making that more and more likely though far from a sure thing). Much less than that and I'd lose sleep over missing out on a big rally should it come.

[donheff]

Quote:

Originally Posted by dex Also, my going to 100% cash does not mean I will be in it for a long time; such that it would erode a life style. It might be easier to understand, if I were to say I'm going to 100% cash and then re-balance after that.

Aha, I assumed you were in cash for the long haul, not just market timing. I would lose even more sleep with that approach. When do you get back in? Lets say the market steadily improves instead of double dipping - in December we are at 11,000, 12,000 next summer. Do you figure things have turned around and jump back in (the typical sell low, buy high scenario of panic sellers) or do you keep waiting for 6,000 again?

[REWahoo]

Dex, over your investing history have you frequently made big moves such as this one, or is going to 100% cash something entirely new and different for you?

I'm asking because of the subject matter of two recent threads you've started:
http://www.early-retirement.org/foru...use-51058.html
http://www.early-retirement.org/foru...ght-51409.html

Any possibility your emotions rather than analysis are influencing your decision-making?

I'm not attempting to be snarky with these questions, simply asking if you've considered this in your reasoning....

[ziggy29]

Quote:

Originally Posted by DoingHomework Is it wrong to hope for a bit of a downturn for a few years while I accumulate?

Well, there are a lot of moving parts here. In theory, for some who is young and will be accumulating for decades, a long period of low stock prices in the accumulation phase is likely a good thing 20, 30, 40+ years from now.

But in a long period of depressed stock prices and a prolonged economic downturn, that's a moot point if you can't feel secure with your job (and thus your ability to actually buy more cheap shares). And that causes a "loss of sleep" for different reasons. That's not a "will my retirement savings erode" concern; that's a "will I have a job tomorrow" concern.

[MichaelB]

Quote:

Originally Posted by dex It might be easier to understand, if I were to say I'm going to 100% cash and then re-balance after that. Hussman Funds - Bear Market Insights

Dex, you clearly intend to reinvest at some point. Do some do you have a plan for specific asset classes or funds, and specific prices?

[dex]

Quote:

Originally Posted by donheff Aha, I assumed you were in cash for the long haul, not just market timing. I would lose even more sleep with that approach. When do you get back in? Lets say the market steadily improves instead of double dipping - in December we are at 11,000, 12,000 next summer. Do you figure things have turned around and jump back in (the typical sell low, buy high scenario of panic sellers) or do you keep waiting for 6,000 again?

Mentally, I am prepared to be in cash until the end of the year. I'll be watching along the way for an entry point. My weighting would be heavier in High Yield Corp bonds than stocks - if any. This would provide me with a good interest rate and some appreciation if there is a rally. There may be rallies in the future but they will have lower highs and of shorter duration than the recent one.

[dex]

Quote:

Originally Posted by MichaelB Dex, you clearly intend to reinvest at some point. Do some do you have a plan for specific asset classes or funds, and specific prices?

See above post and I would look at PEMDX.
I sometimes use foreign currencies. If there is a downturn the US$ could strengthen. Again, you have to see what happens.

There will be another secular bull market. And when there is blood in the streets and people are swearing off the stock market that might indicate the bottom of the secular bear market.

[ziggy29]

Quote:

Originally Posted by dex Mentally, I am prepared to be in cash until the end of the year. I'll be watching along the way for an entry point. My weighting would be heavier in High Yield Corp bonds than stocks - if any. This would provide me with a good interest rate and some appreciation if there is a rally. There may be rallies in the future but they will have lower highs and of shorter duration than the recent one.

But if the economy clearly double dips (I think it's started) and stocks crumble, wouldn't that also tank junk bonds?

Or is it your theory that the desperate quest for yield will prop them up long enough to give you an out without losing your shirt?

[DoingHomework]

Quote:

Originally Posted by ziggy29 Well, there are a lot of moving parts here. In theory, for some who is young and will be accumulating for decades, a long period of low stock prices in the accumulation phase is likely a good thing 20, 30, 40+ years from now. But in a long period of depressed stock prices and a prolonged economic downturn, that's a moot point if you can't feel secure with your job (and thus your ability to actually buy more cheap shares). And that causes a "loss of sleep" for different reasons. That's not a "will my retirement savings erode" concern; that's a "will I have a job tomorrow" concern.

I was being a bit facetious. But in all seriousness, with (very early) retirement 7 years away for me, and the doomsayers predicting 8-10 years of depressed prices followed by a major boom, I'm (selfishly) having a hard time getting too depressed about that happening. Of course, I'll take 20% a year for the next 7 years too.

[dex]

Quote:

Originally Posted by ziggy29 But if the economy clearly double dips (I think it's started) and stocks crumble, wouldn't that also tank junk bonds? Or is it your theory that the desperate quest for yield will prop them up long enough to give you an out without losing your shirt?

HYB MF prices track with the stock market. Recent yield spreads do indicate that people desperate for yields do increase their price. I like HYB MF because their prices move slower than stock prices - giving you more time to get out plus their higher interest rates soften any losses you might have in the purchase price.

Janus, FAGIX and Vang.

[audreyh1]

Quote:

Originally Posted by dex It sounds as if you drank my Cool-aid. I don't follow Bradley or E-waves. What technical analysis board/site do you read?

Well, I didn't drink your cool-aid, I have been aware of all this stuff for years. Mostly I read the Morningstar Fidelity Forum and there are quite a few T/A investor posters who trade in and out of the market very rapidly.

But didn't you notice that my actions are exactly the opposite of yours? That I'm hanging in there with my planned asset allocation and riding out the rollercoasters, rebalancing as needed.

Audrey

[Purron]

Summer's almost over -- get ready Brett Arends' ROI - MarketWatch

Quote from article:
Hold plenty of cash. And be ready to, um, "embrace volatility."

[dex]

Quote:

Originally Posted by audreyh1 But didn't you notice that my actions are exactly the opposite of yours? That I'm hanging in there with my planned asset allocation and riding out the rollercoasters, rebalancing as needed. Audrey

Are they really? All I am doing is re balancing in a slower time frame than you.

You probably pick a time in the year to analyze at your portfolio. If it is out of your balance you sell one asset and buy another; maybe in the same day. But the transaction is the same as mine - e.g. sell stock fund (to cash) buy bond fund (with that cash).
I'm doing the same thing but over a longer period of time - selling everything this week to buy later.

[FIYes]

I certainly have no idea which way the market is headed in the next couple of years---however since I don't plan to access the funds I have in the market for another 10 years, I plan to stay with what I have. If I needed to access these funds in the near future then I might have a different reaction.

[ziggy29]

Quote:

Originally Posted by dex Are they really? All I am doing is re balancing in a slower time frame than you.

Is it really "rebalancing" to go 100% cash very quickly?

To me it sounds more like a combination of market timing eventually followed by dollar cost averaging back into the market over a prolonged period of time.

Now "market timing" has a dirty word -- but I've adjusted my AA on the fly over the last 3 years; something I never used to do but I'm not comfortable in this market with this volatility to "set and forget" the 60-70% equity AA I used to have. So I guess that's a bit of market timing too (though I try to base mine mostly on valuations then on emotion).

Having said that, I had one of those "100% cash moments" on Halloween 2007 with the Dow at 14,000, so I'm not immune to these nagging feelings either. In hindsight that would have looked like a brilliant move had I done it, my retirement would be looking a lot better today (assuming I knew when to get back in) and maybe I could have gotten rich with a newsletter even if I couldn't ever repeat that luck prescient call. I will say that I am more willing to adjust my AA out of equities a bit if I feel that way again (I have a little for the last few months but not extremely), but I think my core comfort level is 40-60% in stocks these days based on economic conditions and current valuations.

[haha]

I beleive that this thread shows that as a group we have matured since the unpleasantness of several years ago. Around fall 2007 there were some bearish posts, which were mostly greeted with hoots and derision.

Now most of us seem to realize that "who knows?" Anything could happen, including another crash. But it doesn't have to happen, and there there are costs to preparing for a crash that does not come-so it's kind of "do whatever you want, George".

Ha