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Old 02-11-2013, 10:15 AM   #21
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This is a good point and got me to do some homework.

We are not currently at a new high in the SP500 when one includes dividends and inflation. The last high was in August 2000 and we would have to be about 7% higher to reach this.

Since 1951 based on monthly data, we have had an average of 22% of those months being monthly highs. So monthly highs are not really very rare, but note they do tend to cluster.
We haven't breached the 2007 (unadjusted) highs either - intraday of 1565.15 and closing high of 1530.23.
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On May 30,2007, the S&P 500 closed at 1,530.23 to set its first all-time closing high in more than seven years. The highest level reached was 1,565.15 on October 9, 2007.
from Wikipedia.
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Old 02-11-2013, 07:14 PM   #22
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So, in case anyone is interested in the followup to the story, here's what happened. I did some more careful calculating and found that the latest run-up of the last few weeks has pushed my target 70/30 Equity/Fixed allocation into actually being 80/20. Maybe that was why my vague sense that something was too risky for my taste was tingling so much. I rebalanced back to my target 70/30 and I feel much better. Thanks for all the timely advice.
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Old 02-11-2013, 09:29 PM   #23
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What would stop me from reducing my AA here are the alternatives. Cash gives an assured loss to inflation and bonds are at relative highs.

Not a pretty picture.
Given bond yields, I see cash as a protection against a market correction (allows you both to use it to fund expenses and to pick up stocks at a discount). I'm almost in as much cash as bonds, but I see this as temporary, even if it lasts another 2-4 yields since we are at negative yields/zero bound.
In normal times, most of my cash would be in bonds, BTW.
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Old 02-12-2013, 06:51 AM   #24
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Before you do anything, watch the interview with Bill Miller on Wealthtrack from last week. I think he makes a pretty convincing case that equities will generate better returns than fixed income in the near term. If I were to change my AA from its current 56/38/6, I would probably be increasing equities rather than decreasing equities.

While I am in bonds right now, they scare me so I am in intermediate term bonds. probably should be shorter though.
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Old 02-12-2013, 07:45 AM   #25
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Yes, just to be clear, I am NOT suggesting I pull completely out of equities or try to time the market with a strategic sell out now and buy in later. I am just suggesting I am contemplating a shift to a less aggressive AA, but acknowledging at least in part this may be because equity markets are near all time highs. I am concerned about how do I tease out is this really because I think it's time to make an AA shift, or is it at least in part because these valuations are making me nervous. Or maybe those are the same thing.
I definitely would not consider you a market timer based on this. Pretty prudent in most cases to make your AA more conservative as you near retirement.
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Old 02-12-2013, 09:37 AM   #26
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I recently went to a more conservative AA of 50/50 and feel good about it. Of course you will miss some potential upside $ if the market keeps climbing (the wall of worry). But if it tanks you will be in a better place and have dry powder to throw in.
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Old 02-12-2013, 01:30 PM   #27
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So, in case anyone is interested in the followup to the story, here's what happened. I did some more careful calculating and found that the latest run-up of the last few weeks has pushed my target 70/30 Equity/Fixed allocation into actually being 80/20. Maybe that was why my vague sense that something was too risky for my taste was tingling so much. I rebalanced back to my target 70/30 and I feel much better. Thanks for all the timely advice.

Yes that is not market timing it is rebalancing, and perfectly acceptable. I believe the official rules for the "I am not dirty market timer club". Are you are allowed to rebalance up to quarterly (although there is no benefit doing more than once a year). And change your asset allocation once a year.

Of course I have never been a member of the club, so the rules probably have changed
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