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Old 05-10-2010, 09:52 AM   #161
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It's feeling like a good opportunity to take some off the table for those who are skittish moving forward.
Or at least re-examine your risk tolerance & liquidity needs while last week is still fresh in your memory. (Not that there is a danger that anyone here is going to forget late 08/early 09 in a hurry!)

I gave some serious thought to my AA last week and discussed with DW. We decided to stay put at 60 equities / 40 bonds, and re-balance when our tolerance bands are crossed.
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Old 05-10-2010, 09:52 AM   #162
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What a far cry from just a few short years ago, when the dollar was plummeting and all the pro-Euro folks were saying their was the "world currency of the future"..........'

The USD is far from dead..........imagine that..........
Hmmm, I wonder who here was challenging that argument a year ago? Oh, I remember . . .

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Currency is a zero sum game, if the dollar declines, some other currency or currencies have to appreciate. Most of the rest of the world is a basket case too. Some EU members could be heading for default. The U.K. is in worse shape than we are. It's not clear which currency would benefit at the expense of the U.S. China, maybe, but they are pretty intent on managing their exchange rate (and may need to). It's also possible that China ends up imploding in pretty spectacular fashion.
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Old 05-10-2010, 09:56 AM   #163
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What a gold mine that old thread is. Here's another good one (circa March 2009) . . .

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I have one prediction about which I'm highly confident.

Roubini will be calling for further declines at least 12 months into a sustained market recovery.
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Old 05-10-2010, 10:58 AM   #164
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The market is on fire today! I really wish I had money to invest during the little hicup last week. The EU really came through with some shock and awe.

The Europe Index, VGK ETF, is up 9.20% so far.
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Old 05-10-2010, 11:01 AM   #165
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Somebody explain to me again why the market is supposed to be rational?
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Old 05-10-2010, 11:31 AM   #166
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Somebody explain to me again why the market is supposed to be rational?
At any given time, EMT would claim the market is pricing everything at just an aggregation of what is known.

Which, even though I'm not 100% behind the EMT stuff, would explain in large part why there is so much volatility during periods of maximum uncertainty.
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Old 05-10-2010, 11:35 AM   #167
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I know a lot of folks who sold long-term covered calls in Citigroup at $55 or so hoping to get taken out of their employer stock eventually and earn some extra cash along the way.

Some of those folks left eight figures on the table . . . oops.

I'm a fan of selling stuff I want to sell as soon as I've decided I want to sell it.
Everyone does things their own way. I took over 12 years to divest most of my company stock (although I did sell 2/3 of it the two years around my retirement date) and that worked reasonably well for me. Once I had divested the initial chunk, appreciation of the rest was "icing on the cake". It was a calculated bet. Much less risky than my initial one of having my net worth highly concentrated in company stock for many years, but which ultimately allowed me to retire very early.

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Old 05-10-2010, 11:37 AM   #168
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Somebody explain to me again why the market is supposed to be rational?
It's not. But these recent changes have to do with rapidly changing conditions in Europe, so this time the volatility "makes sense".

Audrey
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Old 05-10-2010, 12:20 PM   #169
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I use index funds for the bulk of my money, but not because I believe in the EMH. It is simply a cheap way to invest with a reasonable algorithm.
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Old 05-10-2010, 01:22 PM   #170
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The stakes of this game of can kicking continue to escalate as the years are passing.
Perhaps, but what is the alternative?

In the case of Greece, a default and a 100% repudiation of its debt wouldn't solve the problem. It would still have an annual deficit of ~8% of GDP. The country is trying to put in place austerity measures that are pretty severe compared to what other countries have done. The problem is, those tax increases and spending cuts exacerbate the problem by further slowing GDP and thus, depressing tax revenues making it ever harder to balance its budget. In other similar cases, the country would try to blunt the impact of contractionary fiscal policy by expansive monetary policy, but Greece doesn't have that option. For their domestic fundamentals, the ECB is running a contractionary monetary regime on top of a massively contractionary fiscal austerity plan. If the European Union didn't do something to help, Greece would probably be forced to leave the EU so it could get some monetary relief. That very well could have been the first step in a broader unraveling of the currency.

Rather than go that route, the EU is providing both liquidity and, perhaps more importantly, monetary easing to give Greece a chance to implement its austerity measures. I also wouldn't call this "kicking the can down the road" exactly.
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Old 05-10-2010, 01:27 PM   #171
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@Running man, would not most likely scenario just be inflating the way out of all the debts? It's easy to repay those loans when everyone's wages and prices jump (perhaps world-wide). In the process, everyone who has been saving will most likely lose the value of their investments, but it will be gradual enough that you will not see any demonstrations on the streets and everyone (including those savers) will just have to keep working longer.
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Old 05-10-2010, 01:33 PM   #172
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@Running man, would not most likely scenario just be inflating the way out of all the debts? It's easy to repay those loans when everyone's wages and prices jump (perhaps world-wide). In the process, everyone who has been saving will most likely lose the value of their investments, but it will be gradual enough that you will not see any demonstrations on the streets and everyone (including those savers) will just have to keep working longer.
In this scenario, it's long-term fixed income holders who bend over. At least corporate earnings are also rising in inflated dollars for stock investors and those in cash can likely get ever-increasing yields (maybe not even with inflation, but they will at least rise more with a spike in inflation).

Someone holding a 30-year bond at 6%, on the other hand, takes it in the shorts.

If you really believe high inflation is coming -- and sooner rather than later -- a mixture of stocks, cash and commodities is probably the best way to go. The problem is, a dip into another deep recession will slaughter such an allocation.

I'll just keep diversifying. Seems like my portfolio targets are looking more and more like the Permanent Portfolio every day -- not there yet but slowly recognizing the value of keeping cash and commodities in addition to stocks and bonds...
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Old 05-10-2010, 08:51 PM   #173
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Don't know about y'all, but today my stock positions are up 4.74%, MFs up 4.80%, and total portfolio up 3.49%. I nearly recovered all my losses on Thu 5/6 and Fri 5/7. Will see what tomorrow brings. Have not bought nor sold a thing!
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Old 05-10-2010, 09:33 PM   #174
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Don't know about y'all, but today my stock positions are up 4.74%, MFs up 4.80%, and total portfolio up 3.49%. I nearly recovered all my losses on Thu 5/6 and Fri 5/7. Will see what tomorrow brings. Have not bought nor sold a thing!
My portfolio has recovered to about the same value as last Wednesday. I don't suppose we are done with this, but so far, so good.
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Old 05-11-2010, 06:52 AM   #175
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There is a Seinfeld episode where George does the opposite of everything he would normally do. Using that theory I moved money from MM->equity funds on Friday.

I watched CNBC, there was 2 guys predicting the future, one predicted 1500 for S&P by
end of the year, the other predicted gloom and doom?

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Old 05-11-2010, 07:49 AM   #176
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Stocks are down this A.M. and the news is full of stories that the "bailout" neither prevents the Euro from declining nor fixes the sovereign debt crisis. These would be valid criticisms if it were designed to do either. Instead it is designed to give countries breathing room to implement their austerity programs. A lower Euro actually helps. The problem would be if countries saw the "bailout" as an excuse to backtrack on the austerity measures. If that happens, then yesterday's plan will have been for naught. But it seems a little premature to call that one.
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Old 05-14-2010, 08:29 AM   #177
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Banks made bad loans, encouraged by the gov...

Bubble bursts, loans default...

Banks shift the debt to Gov...

Gov tries to shift debt to taxpayer...

Responsible people get screwed and madder by the minute...

"Austerity" is not gonna work. People around the world are tired of getting screwed by the Bank-Gov... Same thing...

Stocks and everything else will CRASH HARD!!!!

The global Ponzi is unwinding...

The banks-Fed are losing control of the scam...

War will be the end game...

Depressing, hell yea...

Buy the dips!!!
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Old 05-14-2010, 11:00 AM   #178
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I use index funds for the bulk of my money, but not because I believe in the EMH. It is simply a cheap way to invest with a reasonable algorithm.
If you don't believe in the EMH, what is reasonable about index investing? Without an assumed tight linkage between price and value the whole indexing idea is hollow.

Ha
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Old 05-14-2010, 11:04 AM   #179
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@Running man, would not most likely scenario just be inflating the way out of all the debts? It's easy to repay those loans when everyone's wages and prices jump (perhaps world-wide). In the process, everyone who has been saving will most likely lose the value of their investments, but it will be gradual enough that you will not see any demonstrations on the streets and everyone (including those savers) will just have to keep working longer.
I suppose that is true if you don't mind inconvenient outcomes like the rise of Hitler and WW2. Either extreme deflation or extreme inflation bring down governments and entire political systems.

Ha
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Old 05-14-2010, 11:40 AM   #180
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I suppose that is true if you don't mind inconvenient outcomes like the rise of Hitler and WW2. Either extreme deflation or extreme inflation bring down governments and entire political systems.
Ha
Good news: (very) high inflation does NOT imply WW3 or next Hitler.
Bad news: whether I mind it or not, noone will ask me.
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