Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
What's your strategy to cash in on this downturn?
Old 10-09-2008, 09:48 PM   #1
Thinks s/he gets paid by the post
thefed's Avatar
 
Join Date: Oct 2005
Posts: 2,203
What's your strategy to cash in on this downturn?

Just in the ladt 3 months or so, I've devised a new strategy for hedging my losses in this down market.


I have been buying in after every 2% or more down day. 2% down= .4% of my cash I'll buy in with, and proportional thereafter...i.e a 8% down day would equal buying in with 1.6% of cash reserves

I am only 25 and plan on 20 more years of investing. As such, I KNOW I shouldn't be too worried, but it's hard to take the emotion out of this. I've busted my butt to pay down all my debts, become self-sufficiently self employed, and begin socking away bigger and bigger portions of my income....only to see 35% of my last 7 yrs of savings disappear in this last year or so.

BUT, I have had a 50/50 cash/equities split since last october when I though things got crazy....so I'm trying to hedge my losses by buying in heavily on the way down.

What's your strategy?
__________________

__________________
thefed is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-09-2008, 09:50 PM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,074
Quote:
Originally Posted by thefed View Post
What's your strategy?
Prayer and alcohol, and not necessarily in that order.
__________________

__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 10-09-2008, 09:55 PM   #3
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 309
If things get much worse (say Dow under 6000 and TSX in Canada under 8000 from around 9500 now) then we will be basically in uncharted waters. The markets are pricing in a depression and I personally do not think we will have one. As such I will be buying an ETF up here in Canada that has 2X the exposure to any up or downside in the TSX. I'm sure similar products are available in the US. In fact I would consider borrowing to increase my exposure via a HELOC as my home is paid off. In essence I'd be "doubling down". The only risk is if the market never recovers and then it would be fair to say that we would have far greater problems to worry about.
__________________
accountingsucks is offline   Reply With Quote
Old 10-09-2008, 09:59 PM   #4
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Quote:
Originally Posted by REWahoo View Post
Prayer and alcohol, and not necessarily in that order.
Start going to church. You'll get both at the same time.
__________________
ats5g is offline   Reply With Quote
Old 10-09-2008, 10:01 PM   #5
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
Quote:
Originally Posted by REWahoo View Post
Prayer and alcohol, and not necessarily in that order.

First to the OP. Your doing the right thing. Keep it up.


REWahoo:

Alcohol first because I've been saying "oh my God" over and over lately and no one shows up. But when I say "I'll have another Jack" it always shows up.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 10-09-2008, 10:03 PM   #6
Recycles dryer sheets
 
Join Date: Apr 2007
Posts: 292
I have been picking up a little of alternative energy and emerging market ETF's.

GEX, TAN, EEM, FAN, PWND, PIO

It has been like catching a falling knife so far but I think a 10 year hold of alternative energy will be good and I hope that emerging markets will recover faster than US.
__________________
joesxm3 is offline   Reply With Quote
Old 10-09-2008, 10:14 PM   #7
Full time employment: Posting here.
 
Join Date: Nov 2005
Posts: 826
It would be great for us to use the 'crisis' as an opportunity to re-examine some of the fundamental assumptions upon which our society (and economy) are built. For example, is the assumption of an ever-expanding economy consistent with a grossly overpopulated planet with finite resources, especially when expanding economic activity leads to increasing environmental damage? What is a maximally-just and sustainable society/economic system?

It's interesting that both self-described 'conservatives' and 'liberals' both turn reflexively to the gov't to 'fix' our economy. Why isn't it capable of fixing itself without gov't intervention? What if the two tools the gov't conventionally uses to get out of recessions - monetary & fiscal stimulus - don't work? My gut-level feeling is that even if these two tools do work this time around, we are only postponing the inevitable reckoning. Our economic system is not a force of nature. It is something we have (haphazardly) created over the years to serve our needs. If the current system isn't working and is fatally flawed, we should toss it out and create a new one.

How do I benefit from this? Well, wouldn't it be great to leave a healthy, sustainable social and economic system to future generations - something that we can be proud of? :confused: :confused:
__________________
socca is offline   Reply With Quote
Old 10-09-2008, 10:40 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Dallas 'burb
Posts: 9,039
Quote:
Originally Posted by Bikerdude View Post
Alcohol first because I've been saying "oh my God" over and over lately and no one shows up. But when I say "I have another Jack" it always shows up.
Just looked...I'm almost out of Jack!
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 10-10-2008, 01:46 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by socca View Post
It would be great for us to use the 'crisis' as an opportunity to re-examine some of the fundamental assumptions upon which our society (and economy) are built. For example, is the assumption of an ever-expanding economy consistent with a grossly overpopulated planet with finite resources, especially when expanding economic activity leads to increasing environmental damage? What is a maximally-just and sustainable society/economic system?
My basic math shows that there is about 120 people per square mile, or roughly 230,000 sq feet to house, feed, recreate, transport each person.

We use roughly 13 terra watts of energy, a relatively small fraction of the amount that earth gets from the sun.

Why is earth grossly overpopulated?
__________________
clifp is offline   Reply With Quote
Old 10-10-2008, 01:51 AM   #10
Full time employment: Posting here.
 
Join Date: Jan 2006
Posts: 899
I have been buying here and there. Nothing planned or systematic. I still have a modest amount in cash.

MB
__________________
mb is offline   Reply With Quote
Old 10-10-2008, 01:54 AM   #11
Full time employment: Posting here.
Helena's Avatar
 
Join Date: Aug 2006
Posts: 597
I'm debt free and have been in cash since I retired last year.
Not only have I not lost a penny, my nest egg has increased.

Now diss me for being a deflationist... as usual.
__________________
Helena is offline   Reply With Quote
Old 10-10-2008, 02:28 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Dec 2007
Posts: 4,764
Im fully invested now. Been buying on the decline. Who knows maybe I threw money down a hole and its never coming back Then again maybe this is a huge buying opportunity and years from now I will look like a genius.
__________________
Notmuchlonger is offline   Reply With Quote
Old 10-10-2008, 04:25 AM   #13
Dryer sheet aficionado
 
Join Date: Sep 2008
Posts: 31
My strategy, I'm still at 0% equities. For many reasons...

-The 80's and 90's excesses still haven't been worked off.

After the credit bubble of the 20's, it took until the early 1950's for the market to break even.

After the advance in the 60's, it took 14, 16 years to break even.

The long term chart of the S&P doesn't look good. Two huge credit bubbles at the end. The S&P could go to 6 or 700.

-Commodities are in a long term up cycle. That's not good for stocks. We're maybe half way through the commodity bull market (historically they last 18-22 years).

-We still haven't really capitulated. We've had these down 600 point and 700 point days. The Dow has lost 3,000 points in 15 trading days. Down 5,700 points in a year, still the same mood on CNBC. Nothing has really changed (save for the CNBC cheerleaders getting truely scared).

It's going to take more time for things to shift. Maybe a rally in a month or two. Maybe a relief rally going into next year, but then people see that things aren't working. And we go down lower still.
__________________
John23 is offline   Reply With Quote
Old 10-10-2008, 04:40 AM   #14
Dryer sheet aficionado
 
Join Date: Sep 2008
Posts: 31
Another possibility...

-Stock valuations eventually get over done on the downside. The mirror of what happened on the upside.

KO and others were trading at 30 or 40 p/e at their height. At the low point of pessimism, who's to say it can't trade at 8 or 10?

The pro's were screaming..."XYZ can't be worth 50 times earnings". But then the stocks kept going up, defying expectations.

Could certainly happen on the downside. This time screaming.."but it's a steal at 12 times earnings". But the investing public doesn't buy in (too much pain). That might be a couple years out by now.
__________________
John23 is offline   Reply With Quote
Old 10-10-2008, 05:07 AM   #15
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,829
My asset allocation has shifted more than 7% from 45:55 (equities:fixed) to below 38:62. I haven't rebalanced yet and won't rebalance while the market is rapidly crashing or plummeting as it has been this week.

When the markets start to stabilize or even climb again and I feel confident that we are no longer in the middle of such a rapid crash, I will rebalance according to my plan. But, that is all.

I am not willing to take much risk and so I don't expect to make a lot of money off this. I'd be really glad if I could mitigate my losses, though. I suppose gaining enough to offset inflation would be too much to ask.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 10-10-2008, 07:12 AM   #16
Full time employment: Posting here.
 
Join Date: Oct 2002
Posts: 717
I doubt if I'll be able to profit from the downturn. I'm focused on limiting losses and preparing myself for the next phase which has different rules.
__________________
Random Reinforcement is Highly Addictive.
riskadverse is offline   Reply With Quote
Old 10-10-2008, 07:17 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,432
Quote:
Originally Posted by REWahoo View Post
Prayer and alcohol, and not necessarily in that order.
Ditto. But you already knew that.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 10-10-2008, 08:21 AM   #18
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by John23 View Post
After the credit bubble of the 20's, it took until the early 1950's for the market to break even.
I've heard this a gazillion times in the last few days and it's very misleading.

With dividends reinvested, it was back to break-even in 1944. Not great, but a heck of a lot better than the 1955 claim.

Keep in mind also that if you were fortunate enough to go all-in at the bottom in 1932, an 89% drop from 1929 peak to 1932 trough means you turned $1,000 in 1932 to about $9,000 in 1944 with dividends reinvested. Doesn't seem like waiting until 1955, or even 1944, was a good idea.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 10-10-2008, 08:47 AM   #19
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,687
I sold all of my stocks in 2007, particularly not liking the finance sector. I posted many times in 2007 at the time to derision on the subject.

Beginning at the end of '07 I began to add 1 percent of my portfolio to the stock market as the ultimate bottom is very hard to determine. I purchase individual stocks, I am looking for stocks with great cash flow and great credit strength. Dividends are nowhere nea thought the 1974 bottom or the 1981 bottom so do not be surprised as the risk premium is recreated in the stock market for dividends to be higher than we are used to recently.

If the market whee to fall 90 percent -- 1 percent investment at the bottom is equal to 10 percent at the top, so buying for 10 months at the bottom of a 90% decline with 10 percent of my portfolio should 1930's recur will give me the same net equity in companies as if I had invested 100 percent in equities in 2007.

In general I am in agreement with Ben Graham in keeping investments between 25-75 percent equities with 25 percent when you feel overvalued and 75 percent when cheap and 50 percent as a normal load. by the time I get to 25 percent in January 2011, I will evaluate the market to determine if a larrge purchase is warranted based on prices at that time
__________________
Running_Man is offline   Reply With Quote
Old 10-10-2008, 09:20 AM   #20
Recycles dryer sheets
Canadian Grunt's Avatar
 
Join Date: May 2007
Location: Edmonton
Posts: 197
I started cashing out my bonds a while ago and buying stocks with good yields. I am now 100% stocks and buying every two weeks with my free cash. In retrospect, I started buying a little early, but who knew the markets would go so low.

If the market doesn't turn in 10 years I guess this will be a bad strategy, but logic dictates that if you want to buy stocks it should be now, in the Bear, not during the recovery. I am hoping my stock yields, which are pretty good, will hedge me in a protracted bear.

No guts, no glory!
__________________

__________________
it's the journey that matters
Canadian Grunt is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Downturn in RV Industry haha Other topics 28 05-21-2008 12:16 PM
Has the downturn stopped anyone from ER nun FIRE and Money 44 01-23-2008 06:47 AM
Cash is king in the real estate downturn Orchidflower FIRE and Money 19 01-17-2008 10:07 PM
cash on cash rate - what should it be DollahBillYall Young Dreamers 20 06-15-2007 07:14 AM
Japan - Their 20 year Downturn and their Investors............. Cut-Throat FIRE and Money 30 10-31-2005 04:13 AM

 

 
All times are GMT -6. The time now is 10:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.