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Sort of hoping the sky IS falling
Old 09-14-2008, 10:25 PM   #1
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Sort of hoping the sky IS falling

Not really, and I don't wish anyone any bad luck. However, and even though I don't really consider myself a market timer, through a series of fortunate (?) circumstances I have a significant amount of investable cash sitting around in MM funds. I have been re-reading Bernstein and Bogle, and am fairly convinced that even at it's current level the market is overpriced compared to historical averages. According to Bernstein, over the long term we should either be looking at decreased growth in the market, or there will be a significant event that will bring prices down further so they can begin to grow at historical levels again.

I'm thinking we might be looking at something like that significant market lowering event. My question is do you think the market will drop even further, like into the low 10k or lower range for the Dow, or do you think it will stay around 11K for a while, then start the long, slow growth process? I know I should DCA my funds, but this is so very very tempting...
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Old 09-14-2008, 10:32 PM   #2
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What do YOU think harley? You mention a "significant market lowering event." What did you have in mind? How much lower? Why do you think you should DCA?
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Old 09-14-2008, 10:33 PM   #3
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Originally Posted by harley View Post
My question is do you think the market will drop even further, like into the low 10k or lower range for the Dow, or do you think it will stay around 11K for a while, then start the long, slow growth process? I know I should DCA my funds, but this is so very very tempting...
Temptation can be rewarding...or humbling.

But hey, you're the guy with the time machine, you tell us!
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Old 09-14-2008, 11:01 PM   #4
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What do YOU think harley? You mention a "significant market lowering event." What did you have in mind? How much lower? Why do you think you should DCA?
Bernstein was using the Great Depression as an example. I don't think we're looking at anything like that. However, having lived through the 70s, 80s, and 2000 stock market meltdowns I am aware things can fall significantly. I'm wondering if the banking/credit/housing crisises will combine to drive the overall market down even more significantly. If so, people who are still accumulating will have a much better chance of getting the historical returns than they would if the market levels and then starts it's predicted slow climb. And I could jump in at the very bottom and make a killing!

As to what I think, I think I should do the smart thing and DCA over the next year. That way I'll most likely catch any big correction, and if I see things starting to zoom up I can always jump in the deep end.

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Temptation can be rewarding...or humbling.

But hey, you're the guy with the time machine, you tell us!
That's boont, and I think it's only a one day machine.

As I said above, I know what I should do. I was just looking for opinions so I could justify holding cash for a while longer to see how low things could go. I'm approaching a self-imposed deadline for starting to allocate the cash, and getting nervous as I always do when playing with big numbers.
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Old 09-14-2008, 11:10 PM   #5
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As I said above, I know what I should do. I was just looking for opinions so I could justify holding cash for a while longer to see how low things could go. I'm approaching a self-imposed deadline for starting to allocate the cash, and getting nervous as I always do when playing with big numbers.
I'd hold the cash awhile.
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Old 09-14-2008, 11:25 PM   #6
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I'm wondering if the banking/credit/housing crisises will combine to drive the overall market down even more significantly. If so, people who are still accumulating will have a much better chance of getting the historical returns than they would if the market levels and then starts it's predicted slow climb. And I could jump in at the very bottom and make a killing!

"people who are still accumulating" only benefit for the period their periodic retirement investments coincide with the down market. But yes, for the period the market is down, accumulators would benefit by buying into their IRA's, 401k's, etc., at lower prices.

As far as jumping in at the very bottom (good luck with that!), that pertains to folks with cash heavy allocations not just accumulators. Either accumulators or decumulators might be cash heavy right now and therefore be able to jump in with both feet at any time they're "sure" they're catching the bottom.
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Old 09-14-2008, 11:27 PM   #7
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That "jumping in at the bottom" bit was sarcasm. One thing I know I can't do is time the market that well. But I'm sort of hoping I can avoid getting in just in time for another major downturn.
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Old 09-14-2008, 11:36 PM   #8
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That "jumping in at the bottom" bit was sarcasm. One thing I know I can't do is time the market that well. But I'm sort of hoping I can avoid getting in just in time for another major downturn.
Some knowledgible/smart folks (certainly not me!) on this board will tell you to lump sum in because the market goes up more often than down. But, of course, you have to catch that rising market which, even if the odds are with you, isn't at all guaranteed. So, do you feel lucky today?

I'd DCA at this time. I'm a "decumulator" at this time and enjoying RE. Still, I've had a little extra cash and have been buying into some depressed areas in small amounts but, so far, have only been rewarded with ongoing downtrends or, at best, level trends. So, for me, this time around DCA is working better than lump sum. Your results may vary.
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Old 09-15-2008, 12:04 AM   #9
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Some knowledgible/smart folks (certainly not me!) on this board will tell you to lump sum in because the market goes up more often than down. But, of course, you have to catch that rising market which, even if the odds are with you, isn't at all guaranteed. So, do you feel lucky today?

I'd DCA at this time. I'm a "decumulator" at this time and enjoying RE. Still, I've had a little extra cash and have been buying into some depressed areas in small amounts but, so far, have only been rewarded with ongoing downtrends or, at best, level trends. So, for me, this time around DCA is working better than lump sum. Your results may vary.
I don't any longer have significant money is cash or bonds, as I have mostly invested it in stocks. And it is mostly but not entirely lower than when I bought. I will have a big cash slug when I tender a stock that was bought out.

Most anything can happen, but the way I feel is that with respect to most of what I bought I would be more upset to have not bought at its current price than to buy and see it go down. Of course if we get the black death, cancel that sentiment!

I am pretty much a sector market timer, and value investor. I expect to add value by being right more than I am wrong on timing, on sector and subsector and company choice, and by not making really big errors.

Times like now when I have perhaps prematurely spent cash are not great for me, but I have been here often enough before and it has always worked out.

I hate treasury bonds at current interst rates and only hold them as temporary parking. It remains true that they have been the best investment for almost a year.

Ha
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Old 09-15-2008, 07:06 AM   #10
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Not really, and I don't wish anyone any bad luck. However, and even though I don't really consider myself a market timer, through a series of fortunate (?) circumstances I have a significant amount of investable cash sitting around in MM funds. I have been re-reading Bernstein and Bogle, and am fairly convinced that even at it's current level the market is overpriced compared to historical averages. According to Bernstein, over the long term we should either be looking at decreased growth in the market, or there will be a significant event that will bring prices down further so they can begin to grow at historical levels again.

I'm thinking we might be looking at something like that significant market lowering event. My question is do you think the market will drop even further, like into the low 10k or lower range for the Dow, or do you think it will stay around 11K for a while, then start the long, slow growth process? I know I should DCA my funds, but this is so very very tempting...
Maybe you are better at market timing (gambling) than I am. I never seem to have much luck at it. I have been DCA'ing a substantial amount each month on the 14th, though sometimes I have jumped the gun and DCA'd on the 13th and once even on the 11th (but almost always wished I hadn't).

So, this morning according to my plan I bought a chunk of VTSAX (Vanguard Total Stock Market Index) and VFWIX (Vanguard All World Ex-US Index). The purchase should go through at closing this afternoon. Maybe I have stumbled on a blue-light special this time! Or, maybe I will regret not waiting if this is the beginning of a larger, overall market decline.

There is more to decide than "should I DCA". If the answer is "yes", then you also need to decide how much and for how long you will DCA. I spread it out over about 11-12 months, which I felt was long enough that I would not invest everything at the absolute bottom of the market and be kicking myself for decades.

In fact, the market during the past year hasn't been great, but it has varied up and down enough that I am glad I DCA'd just because I am not beating myself up over bad timing.
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Old 09-15-2008, 10:14 AM   #11
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There is more to decide than "should I DCA". If the answer is "yes", then you also need to decide how much and for how long you will DCA. I spread it out over about 11-12 months, which I felt was long enough that I would not invest everything at the absolute bottom of the market and be kicking myself for decades.

In fact, the market during the past year hasn't been great, but it has varied up and down enough that I am glad I DCA'd just because I am not beating myself up over bad timing.
That's pretty much what I figure, too. I've got my AA planned, and am going to start on the 20th of each month, going for a year. I'm just having 2nd thoughts about starting now, with the market in so much turmoil. But I'm trying to remind myself it would probably be better in the long run to DCA over a year of falling prices than a year of rising prices. signed, nervous nellie
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Old 09-15-2008, 10:24 AM   #12
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I spread it out over about 11-12 months, which I felt was long enough that I would not invest everything at the absolute bottom of the market and be kicking myself for decades.
OK.... I'm confused again. (I know, I know. It's probably "confused yet again!") Why would you be kicking yourself over investing at the absolute bottom of the market? BTW, agree 100% with your DCA approach for current conditions. But, if you did lump sum, wouldn't it be a good thing to catch the absolute bottom of the market?
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Old 09-15-2008, 10:31 AM   #13
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Not really, and I don't wish anyone any bad luck. However, and even though I don't really consider myself a market timer, through a series of fortunate (?) circumstances I have a significant amount of investable cash sitting around in MM funds. I have been re-reading Bernstein and Bogle, and am fairly convinced that even at it's current level the market is overpriced compared to historical averages. According to Bernstein, over the long term we should either be looking at decreased growth in the market, or there will be a significant event that will bring prices down further so they can begin to grow at historical levels again.

I'm thinking we might be looking at something like that significant market lowering event. My question is do you think the market will drop even further, like into the low 10k or lower range for the Dow, or do you think it will stay around 11K for a while, then start the long, slow growth process? I know I should DCA my funds, but this is so very very tempting...
Not only will the market drop it has to. The market value of assets has to fall so there is a recapitalization and consolidation of the market. Firms got the clear message from the Fed that the Fed will not be a party in Moral Hazard (even though they have already been a party). This means capital will only be deployed for fair value assets. Fair value in this market must include a risk premium so there will be plenty of discounting in the market as weaker firms go bankrupt and their assets are absorbed by the survivors. More banks will fail and with it many low grade companies that can't gain access to capital.

I think the bell weather is when banks fail moving forward and there is no movement in City Group share price. We have not gone through the capitulation phase where everyone gives up and begins to take their money out of the market. Thatís the signal to buy. This will be a long recession. More banks are going to fail and there will probably be a bailout of the Deposit Ins Corp yet to come as they donít have the capitalization to stop runs on the 150 banks currently on their watch list.



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Old 09-15-2008, 10:46 AM   #14
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OK.... I'm confused again. (I know, I know. It's probably "confused yet again!") Why would you be kicking yourself over investing at the absolute bottom of the market? BTW, agree 100% with your DCA approach for current conditions. But, if you did lump sum, wouldn't it be a good thing to catch the absolute bottom of the market?
Oops, *top*, not bottom. I have been trying to switch to decaf and I am about as sharp as a pillow this morning.
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Old 09-15-2008, 12:11 PM   #15
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I have been DCA'ing a substantial amount each month on the 14th, though sometimes I have jumped the gun and DCA'd on the 13th and once even on the 11th (but almost always wished I hadn't).
When I was an accumulator, I DCA'd towards the end of the month, to take advantage of the possible turn of the month effect.
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Old 09-15-2008, 12:22 PM   #16
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When I was an accumulator, I DCA'd towards the end of the month, to take advantage of the possible turn of the month effect.
Hmm! Good idea, and much more logical than the basis upon which I selected my DCA day. I just started on the 14th since I received the majority of that lump sum on Valentine's Day.
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Old 09-15-2008, 12:33 PM   #17
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I'm in the same situation, kinda just waiting. At least I would wait to see what would happen to Washington Mutual or AIG

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Not really, and I don't wish anyone any bad luck. However, and even though I don't really consider myself a market timer, through a series of fortunate (?) circumstances I have a significant amount of investable cash sitting around in MM funds. I have been re-reading Bernstein and Bogle, and am fairly convinced that even at it's current level the market is overpriced compared to historical averages. According to Bernstein, over the long term we should either be looking at decreased growth in the market, or there will be a significant event that will bring prices down further so they can begin to grow at historical levels again.

I'm thinking we might be looking at something like that significant market lowering event. My question is do you think the market will drop even further, like into the low 10k or lower range for the Dow, or do you think it will stay around 11K for a while, then start the long, slow growth process? I know I should DCA my funds, but this is so very very tempting...
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Old 09-15-2008, 12:44 PM   #18
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I'm in the same situation, kinda just waiting. At least I would wait to see what would happen to Washington Mutual or AIG
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