What if the Bulls are Wrong about 2007

[ScaredtoQuit]

In only a little over a week, 2007 is looking a lot worse than we thought it would be. Some think it will be even worse. Check out this article.

http://www.marketwatch.com/news/story/if-bulls-wrong-about-2007/story.aspx[...]

mod EDIT: Shortened link - BMJ

 

[Nords]

In only a little over a week, 2007 is looking a lot worse than we thought it would be. Some think it will be even worse. Check out this article.

Well, gosh, if I needed to take my entire portfolio out of the market this week then I'd really be screwed. Luckily it's been pretty fully invested for the last 20 years and should be pretty fully invested for the next 60. Of course the next 51 weeks could be a huge buying opportunity, too.

Like any working (non-retired!) journalist on a deadline, Paul Farrell's article is somewhere between "Chicken Little" and "Permabear". I think the focus should be on his last paragraph: "So, what's the best way to protect yourself in 2007, whether a rally or meltdown? Next week we'll update our five 'lazy portfolios,' simple well-diversified portfolios of no more than 11 no-load low-cost index funds that take advantage of the entire spectrum of stocks and bonds, without playing the 'Mad Money' game."

Whew. Pretty stunning insights. Until next week, I'm holding my breath...

 

[Running_Man]

Luckily it's been pretty fully invested for the last 20 years and should be pretty fully invested for the next 60. Of course the next 51 weeks could be a huge buying opportunity, too.]Luckily it's been pretty fully invested for the last 20 years and should be pretty fully invested for the next 60. Of course the next 51 weeks could be a huge buying opportunity, too.

If you are fully invested how can you take advantage of a buying opportunity

 

[Empty Pockets]

If it's down, I'll be buying cheap. Don't plan on selling any stock for a long time anyway.

 

[brewer12345]

I think Shiller has been overdoing it. He does point to some troubling issues (housing, risky assets bid up, etc.). But the kind of disaster secnario he envisions seems awfully unlikely without some kind of very serious external shock.

FWIW, I have a bunch of cash to put to work (about 20% of the portfolio) and I don't see that many attractive places to put it. I plan on buying a few things taht look good and sitting on the rest in short term stuff until the next downdraft.

 

[JohnDoe]

If you are fully invested how can you take advantage of a buying opportunity

Sell bonds, buy equities...aka rebalance.

 

[CCdaCE]

I think Shiller has been overdoing it.

You mean Gary Shilling ? Shiller, as in Robert J. Shiller, Irrational Exuberance fame, gets enough press as it is.

heh.

Predictions predictions. I can almost taste the fruitless market timing.

-CC

 

[unclemick]

Hmmm

As long as they have electricity and backup batteries for the computers at Vanguard - my Target Retirement will rebalance it's little heart out - bull or bear, rain or shine, dead of night, etc, etc, yadda yadda.

heh heh heh heh - I of course may piss and moan( should the bear appear) - and do nothing just stand there ala Bogle.

 

[uncledrz]

FWIW, I have a bunch of cash to put to work (about 20% of the portfolio) and I don't see that many attractive places to put it. I plan on buying a few things taht look good and sitting on the rest in short term stuff until the next downdraft.

I've kept some powder dry myself, and also cannot see what I can say are attractively priced assets to purchase. Add Brewer and Tio z and probably a few million others, and you'll have some volitality, but suport as well.

Translation--yeah the market will go up and it will go down, keep long term and you'll do fine.

 

[dex]

Not to worry you more but recently 13 wall street firms were positive on the 2007 stock market. The last time this happened was in 2000.

 

[cute fuzzy bunny]

If it's down, I'll be buying cheap. Don't plan on selling any stock for a long time anyway.

Ding! Ding! Ding! We have a winner.

Down markets are only a problem if you're a net seller into those markets. For those of us still investing, they're a terrific buying opportunity.

But people are amazingly reverse wired when it comes to investing and real estate. Run like hell when everything goes on sale and whip out your checkbook when prices are soaring.

Because it simply MUST keep going in the same direction indefinitely, right?

As I tell my wife regularly, this is sort of a zero sum game...some idiots have to lose their money so we can make it...

 

[kcowan]

Also never forget the motivation of the writers. Lots of paper to fill every day.

I think that there is some irrational exurberance at work. But there is no vapour like there was in 2000 with the "new economy". I mean ultimately it is the attitude of investors like us collectively that will determine what happens.

Most of us are expecting a correction and are sitting on some cash waiting for it. But what helped to fuel the real estate boom was the money from 2001 escaping the stock market and looking for a safe haven, and the cheap money generated leverage. Now the real estate boom is over so where is the money headed now? Heat seekers will find their place...

 

[73ss454]

Ding! Ding! Ding! We have a winner.

Down markets are only a problem if you're a net seller into those markets. For those of us still investing, they're a terrific buying opportunity.

But people are amazingly reverse wired when it comes to investing and real estate. Run like hell when everything goes on sale and whip out your checkbook when prices are soaring.

Because it simply MUST keep going in the same direction indefinitely, right?

As I tell my wife regularly, this is sort of a zero sum game...some idiots have to lose their money so we can make it...

As they say in the car business, "There's an ass for every seat"

 

[rockyj]

In only a little over a week, 2007 is looking a lot worse than we thought it would be. Some think it will be even worse. Check out this article.

http://www.marketwatch.com/news/story/if-bulls-wrong-about-2007/story.aspx[...]

mod EDIT: Shortened link - BMJ

Farrell's own conclusion from the same article:

"So, what's the best way to protect yourself in 2007, whether a rally or meltdown? Next week we'll update our five " lazy portfolios," simple well-diversified portfolios of no more than 11 no-load low-cost index funds that take advantage of the entire spectrum of stocks and bonds, without playing the "Mad Money" game.

That's your best protection,..."

In other words "Stay diversified and stay the course."

what kcowan said- more redux on a deadlilne.

 

[Gone4Good]

Not to worry you more but recently 13 wall street firms were positive on the 2007 stock market. The last time this happened was in 2000.

Yup. And the S&P 500 was trading at a 38 PE in 2000 vs. 18 today.

 

[Nords]

If you are fully invested how can you take advantage of a buying opportunity

Sell the rest of our Tweedy, Browne Global Value from our taxable account, with its 1.38% expense ratio, and buy an index ETF. It'd probably be something like a DOW dividend fund (DVY) or small-cap value (IJS).

I'd also consider cashing in a stock or two if I felt there was a better opportunity elsewhere. Although we have 10% of the portfolio in individual stocks, I can see the eventual end of that phase of my investing education.