How Low Dow?

[nun]

With the Fed blowing air into a balloon with a hole in it how low do you think the Dow will go in the next year

 

[HFWR]

Isn't How Low Dow a Chinese dish?

 

[RockOn]

I'll go second, 9,000 if the meltdown occurs, 11,500 if we muddle through. Meltdown would be more bank failures and severe panic selling.

 

[REWahoo]

Nun, that's the trouble with being totally out of the market. No one knows whether it's going lower or going up from here...

 

[bbbamI]

Isn't How Low Dow a Chinese dish?

Crap, you beat me to it!

 

[73ss454]

After much thought I think it could go lower but then again it may go higher.

 

[nun]

Nun, that's the trouble with being totally out of the market. No one knows whether it's going lower or going up from here...

Sure no one knows, but what do you think.....

 

[Bestwifeever]

I don't know, how low Dow now?

 

[retire@40]

There are only a few places for money to flow:

Cash Investments - Interest rates are too low, no good.

Real Estate - Are you kidding me? Very few buying opportunities to make money. Plus, who wants to be a landlord now?

Precious Metals - Gold already skyrocketed. Plus, overall gold is not a good long-term investment.

Stock Market - Process of elimination, here we are.

 

[packrat44]

Silver is looking good.

 

[nun]

There are only a few places for money to flow:

Cash Investments - Interest rates are too low, no good.

Real Estate - Are you kidding me? Very few buying opportunities to make money. Plus, who wants to be a landlord now?

Precious Metals - Gold already skyrocketed. Plus, overall gold is not a good long-term investment.

Stock Market - Process of elimination, here we are.

Is anyone just sitting on the sidelines for a while until the volatility has subsided? How about putting money into extra mortgage payments rather than a market that looks like it will fall over the next six months.

 

[FIREd]

I tend to agree with retire@40.

Cash pays less and less, some bonds look expensive, commodities are through the roof, even some foreign markets look pricey at this point. So that leaves just a few possible investments that look *relatively* undervalued (though not necessarily cheap): US stocks (preferrably of the dividend-paying kind), REITS, and select high quality bonds (like munis). All offer relatively high dividend yields right now and in these uncertain times, I want some income to dull the pain.

Vanguard Equity Income: Yield 3.19%
Vanguard REIT Index: 5.15%
Vanguard tax exempt intermediate: 3.65%
compared to:
Vanguard Prime money Market fund: 3.20% and marching lower.
Interestingly, VG Federal money market fund, which carries no credit risk, actually pays a higher interest rate than VG Prime right now.

As for paying extra towards the mortgage, I rejected the idea for many reasons, one of them being that I want my assets to remain as liquid as possible in times like these. Borrowing against home equity is becoming harder as is selling a home. But I would find paying off credit cards and auto loans very tempting right now (if I had such debt) in order to improve my monthly cash flow.

 

[DblDoc]

Periodic investing as usual here. Marches investment made yesterday. Perfect timing!! No newsletter though cuz I don't think anyone would pay for one that said have an AA plan, invest once a month with whatever you have, rebalance annually. Rinse and repeat...

DD

 

[innova]

Dow will be approaching 13000, and this will go down as the most overrated thing since global warming.

All you pessimists should rejoice if it does go to 9000 - what a bargain that will be!

Either way, I'm a passive indexer who doesn't change my strategy based on which way the winds of panic are blowing. My guess is purely for fun.

 

[nun]

Dow will be approaching 13000, and this will go down as the most overrated thing since global warming.

All you pessimists should rejoice if it does go to 9000 - what a bargain that will be!

Either way, I'm a passive indexer who doesn't change my strategy based on which way the winds of panic are blowing. My guess is purely for fun.

I'm interested at what point a passive investor becomes a market timer. It takes nerves of steel to watch the stock market fall and do nothing, even though this is the definition of passivity.

For 20 years I've been a passive investor in index funds, buying each month through 401k etc and with after tax funds. After the Dow hit 14000 and then fell to 13000 I moved 30% of my investments into fixed and cash, not looking for growth, just preserving capital, I went from 80/20 equity/fixed and cash to 50/50. I've continued buying through the fall, but the first time the Dow hit 12000 I moved another 20% into inflation linked bonds. Not exactly a market timer, just getting out at a previously decided point.

I have plenty of after tax savings so now I'm looking at putting my monthly savings towards my mortgage. This market is just too volatile; 3% daily swings just don't give me any confidence in the foundation it's sitting on.

 

[nun]

The poll is interesting, basically we have Bulls and Bears. If we assign OMG as
a Dow of 9500 the average comes out to 10919.

Sounds like a sensible number to me.

 

[Notmuchlonger]

"It takes nerves of steel to watch the stock market fall and do nothing, even though this is the definition of passivity."

Not really. To me OMG means something else for this thread than 9500

 

[lazygood4nothinbum]

that's not nerves of steel. that's me not knowing what i'm doing.

 

[FinanceDude]

"It takes nerves of steel to watch the stock market fall and do nothing, even though this is the definition of passivity."

Not really. To me OMG means something else for this thread than 9500

I think OMG may be a point lower than October 9th, 2002, when the Dow hit 7286..........

 

[nun]

"It takes nerves of steel to watch the stock market fall and do nothing, even though this is the definition of passivity."

Not really. To me OMG means something else for this thread than 9500

Sure but I couldn't bring myself to use 3000

 

[innova]

I'm interested at what point a passive investor becomes a market timer. It takes nerves of steel to watch the stock market fall and do nothing, even though this is the definition of passivity.

Well, to be honest I'm not not doing anything - I continue to buy to my asset allocation per 'the plan' I've laid out. My IPS contains several references to statements made in trying times, and I'm overwhelmingly convinced that in the long run I need to stick to my AA and not try to outguess the market.

For 20 years I've been a passive investor in index funds, buying each month through 401k etc and with after tax funds. After the Dow hit 14000 and then fell to 13000 I moved 30% of my investments into fixed and cash, not looking for growth, just preserving capital, I went from 80/20 equity/fixed and cash to 50/50. I've continued buying through the fall, but the first time the Dow hit 12000 I moved another 20% into inflation linked bonds. Not exactly a market timer, just getting out at a previously decided point.

This shows that you had an asset allocation you weren't comfortable with given your age, invested assets, etc. What you've decided now is that 50/50 is your comfortable allocation going forward. It also implies that you are only willing to risk 20-25% loss at most.

Now the question: Will you change your AA when the market turns around? If so, you are market timing and I'd advise you that its hazardous to your wealth, no matter how 'obvious' market events look after the fact. Nobody saw BSC tanking, and nobody will see the next big rally coming either.

I have plenty of after tax savings so now I'm looking at putting my monthly savings towards my mortgage. This market is just too volatile; 3% daily swings just don't give me any confidence in the foundation it's sitting on.

The best way to reduce the volatility of your portfolio is to stop looking at it every day. Quarterly should suffice. Of course, I don't always follow my own advice in that regard

Dozens of 'severe market events' have happened before. Beware of the 'its different this time' mentality. The sun will rise tomorrow.

 

[nun]

This shows that you had an asset allocation you weren't comfortable with given your age, invested assets, etc. What you've decided now is that 50/50 is your comfortable allocation going forward. It also implies that you are only willing to risk 20-25% loss at most.

I was comfortable with my AA given the expanding economic bubble. I'm 10% down since 14000 and given the markets volatility I feel much happier with a 30/70 mix. I'll get back in when the StDev of the Dow comes down.

 

[innova]

I was comfortable with my AA given the expanding economic bubble. I'm 10% down since 14000 and given the markets volatility I feel much happier with a 30/70 mix. I'll get back in when the StDev of the Dow comes down.

You are ignoring a very important history lesson by acting this way. Just know what you are getting yourself into.

There is no bell that signals when the market is about to turn. Missing just a handful of the best single days in the market will drastically cut into your returns. Despite all you think you know, you or anyone else cannot predict with any reliability the direction or magnitude of market moves any more than you can predict the outcome of a individual flips in a series of coin tosses.

Please do yourself a favor and look at the long term growth charts for various portfolios 'growth of 10,000' which includes dividends. You will see that events like we are in right now, 2000-2002, 1987, etc are but minor blips in a long-term upward trend.

Hate to say it, but you sold low, and you'll probably buy high as a result of your timing. If the nation's largest pension funds cannot improve their returns from market timing, what makes you think you can?

 

[nun]

You are ignoring a very important history lesson by acting this way. Just know what you are getting yourself into.

There is no bell that signals when the market is about to turn. Missing just a handful of the best single days in the market will drastically cut into your returns. Despite all you think you know, you or anyone else cannot predict with any reliability the direction or magnitude of market moves any more than you can predict the outcome of a individual flips in a series of coin tosses.

Please do yourself a favor and look at the long term growth charts for various portfolios 'growth of 10,000' which includes dividends. You will see that events like we are in right now, 2000-2002, 1987, etc are but minor blips in a long-term upward trend.

Hate to say it, but you sold low, and you'll probably buy high as a result of your timing. If the nation's largest pension funds cannot improve their returns from market timing, what makes you think you can?

I know all of this, but fear and a lack of confidence in this market has driven me to the sidelines. I think the Dow will fall, I don't know to where, but its on its way down. This has all taught me that I'm a 50/50 investor not an 80/20.

 

[SecondCor521]

Still 100% Vanguard index funds, except a small 401k that is in SWPIX that I invest 20% of my paycheck into every two weeks.

My wild side invested a little dry powder in VTSMX yesterday in my efforts to be a dirty market timer. That's why the market went up.

2Cor521