Going to 100% cash

[dex]

I started selling my remaining mutual funds and will probably be in 100% cash by Thurs. or Fri.

Bottom line - the downside risk out weights the upside potential.

I'll post more after I'm finished selling.

 

[Bikerdude]

I started selling my remaining mutual funds and will probably be in 100% cash by Thurs. or Fri.

Bottom line - the downside risk out weights the upside potential.

I'll post more after I'm finished selling.

So by going all cash I assume (correct me if I'm wrong) you expect something bad to happen, just not sure what?

 

[REWahoo]

Dex, be sure to let us know when the coast is clear and we can get back in...

 

[brewer12345]

I await your more detailed explanation with interest. Specifically, how did you make this determination?

 

[dex]

So by going all cash I assume (correct me if I'm wrong) you expect something bad to happen, just not sure what?

I did a post awhile ago with some reasons. I do not have a specific political or other event in mind - I don't really watch that.

Capital preservation is key for me. At this point in time I see the upside potential limited and not worth the risk. That is the hart of investing the risk/reward analysis people do. I'm guessing people staying in the market see it the other way. The reward for staying in is greater than the risk (loss of $).

Some on this board posted that they got out in April (I think) that was a good time - I wish I did. I'm guessing they are happy they got out at that time.

 

[Dawg52]

Too bad you didn't sell all on 8/09. The DOW was pushing 10,700 then.

 

[novaman]

I went 80% cash 20% bonds last September when the DOW was at 9750. I'm still waiting for the other shoe to drop. What do you see that is making you want to do this? and why not put some in bonds?

 

[LOL!]

Hmmm, everything I've bought since May is up ... as much as 18+%. I've got no more money to buy, so I can't move the market upwards just by myself.

But I do like these kinds of declarations. It's the ol' Wall of Worry which I think is necessary. Thanks for the thread!

 

[brewer12345]

Frankly I am a lot more dubious about the bond market these days than anything else. Tight spreads and low govt rates are not recipes for good returns in all but a few environments.

 

[haha]

Hmmm, everything I've bought since May is up ... as much as 18+%. I've got no more money to buy, so I can't move the market upwards just by myself.

Take out a margin loan and do what you can.

Ha

 

[dex]

I went 80% cash 20% bonds last September when the DOW was at 9750. I'm still waiting for the other shoe to drop. What do you see that is making you want to do this? and why not put some in bonds?

I posted some reasons before. There are others - if you want.
Look back to the beginning of July for the S&P. The 50 day moving average crossed below the 200 day moving average. Then go back on the chart to see what happened in the past when that happened.

I was in about 40% cash prior to today.

If you want to see what other individual investors are doing - it looks as if they are getting out.
http://www.nytimes.com/2010/08/22/business/22invest.html

 

[LOL!]

Took out a $50K 401(k) loan. Is that good enough?

 

[LOL!]

If you want to see what other individual investors are doing - it looks as if they are getting out.
http://www.nytimes.com/2010/08/22/business/22invest.html

That's one interpretation, but another is that they (individual investors) just looked at the performance numbers of the funds in their 401(k)s and switched to the top performers over the last 1- or 3-years. They probably don't even know the difference between a stock fund and a bond fund.

For a different take on the same report, there is this: Tom Petruno: Many investors still buying stocks - latimes.com

I'm not saying you are not doing the right thing, since I cannot predict the future.

 

[nun]

Hang on let me get my chronograph out.

I've been selling stocks for the past couple of years to make extra mortgage payments and buy bonds and keep me at 50/50. If the stock market takes a crash I'll use a mix of cash and bonds to buy equities......to keep me at 50/50

 

[Stevewc]

Took out a $50K 401(k) loan. Is that good enough?

This thread kind of has me wondering and caught me by surprise.
But do tell, what's with the loan and what do you plan to do with it?
If it has anything to do with investing?
Don't mean to over step with the questions.
Steve

 

[Stevewc]

I started selling my remaining mutual funds and will probably be in 100% cash by Thurs. or Fri.

Bottom line - the downside risk out weights the upside potential.

I'll post more after I'm finished selling.

Are you willing to pay taxes on capital gains with this move?
Tax bracket info would probably play into decisions here also.
Just questions that come to my mind on a sell or no sell.
Steve

 

[dex]

For a different take on the same report, there is this: Tom Petruno: Many investors still buying stocks - latimes.com

That's not a different take - it is a different analysis - stocks Vs bonds.

The focus of the NTY article was about taking $ out of stock mutual funds.

I'm not saying you are not doing the right thing, since I cannot predict the future.

The right thing is determined by the investors assessment of the market - it can be different.

What am I risking if I am wrong - the opportunity cost if the market goes up?

People question why get out of the market. My guess is they want to know what that person sees that they may not.

Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?

 

[LOL!]

This thread kind of has me wondering and caught me by surprise.
But do tell, what's with the loan and what do you plan to do with it?
If it has anything to do with investing?
Don't mean to over step with the questions.
Steve

Essentially, yes it has to do with investing which is expensive in the 401(k) and cheaper outside the 401(k). I sent you a pm with more details.

 

[dex]

Are you willing to pay taxes on capital gains with this move?
Tax bracket info would probably play into decisions here also.
Just questions that come to my mind on a sell or no sell.
Steve

I don't think taxes should play into the decision. Maybe if you are trying to decide between 12/31 and 1/2.

 

[haha]

What am I risking if I am wrong - the opportunity cost if the market goes up?

You know your position, and selling may be best for you. But what I would would be losing-not risking, but losing- is CG tax on $175,000 net gain, plus higher ordinary tax from having my ordinary income bumped into a higher bracket, plus paying a lot more for my Medicare premium next year, and likely some other socialist bullsh*t that I have forgotten to mention.

Ha

 

[haha]

If the Bush tax cuts are not extended, don't the CG tax increase and individual tax rates go up next year?

Not if I never pay them. Who knows- it may be best to take gains this year, but it would be a bitter pill to swallow voluntarily.

Ha

 

[REWahoo]

Why are there no questions on why people are staying in the market? What do the people staying in the market see that those getting out do not?

I can't speak for others who are staying in the market, but I don't see anything clearly enough to make any moves at all at the moment. But then I've never been able to see the future of the market and stopped trying to time it a couple of decades ago.

 

[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?

 

[dex]

Not if I never pay them. Who knows- it may be best to take gains this year, but it would be a bitter pill to swallow voluntarily.

Ha

FYI to others - I deleted my post that haha quoted - I didn't research the tax cuts before I wrote it and I got too lazy to look it up.

 

[Bikerdude]

What am I risking if I am wrong - the opportunity cost if the market goes up?

Heck, if you're right not only do you have a lot of dry powder, but you can start a newsletter.