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Old 07-12-2019, 03:00 PM   #61
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Do what you feel comfortable with. Reading posts here tells me most members here are way more confident in the markets than I am. I slowly went 95% out of the market over the last year. I have run many scenarios and have concluded I don't need to be in the markets anymore. I have no desire to ride out the next bear market. If I make between 2-3% from now on, I am fine. And yes, I have factored in inflation.
I'd agree with your perception - that there does seem to be a very high (too high?) confidence in the markets here overall. Guess you and I are two of the rare birds that have a somewhat contrarian view. For me, that includes the duration of the current bull, Schiller PE of 30.73 (only at that level 3 prior times in history, and one of those was "Black Tuesday") and the high likelihood of increased volatility as we come into another US election cycle. Maybe I'm just old school, but locking in some profits after a huge run-up and "selling high" seems prudent. Bonds are certainly not that attractive at the moment as they (especially Treasuries in the 'flight to safety') have ALSO been run up to quite high levels, and cash WAS slightly attractive last Q3-4..but is now coming back to earth with rates on even the best CU and MMs dropping quickly.

I'm at roughly 22% equities at the moment, and even that seems risky with valuations where they are. Like you, if I could do 3% (prefer 4% and even better 5%), we'll do fine. So, I'm heavy on CDs, light on stocks and have a decent mix of good bond funds broken out into the short-term, medium term and long-term buckets per the bucket strategy often recommended by people far smarter than I pretend to be..

I've mentioned before that Michael Kitches recommends a "bond tent" (increasing fixed income) just prior to or in ER, and have without entirely realizing it somewhat adopted that strategy. ONCE the market drops heavy (and it will, probably within the next 2 years max), you can always buy back in. (Yes, I know it's hard to determine when to buy - but as I haven't moved huge $$ OUT of the market, don't need to move huge chunks back in). I sure have my eyes on some things I'd like to pick up at 20-40% discounts from these levels..so if I have to be heavy cash and bonds for a couple of years, swoop in and buy good quality investments once they've been beaten down..seems like it'd be hard to go wrong doing so..that way, SORR is minimized in early ER..and there's a very high likelihood (IMHO near certainty) that we will be able to buy at levels far lower than we are now..perhaps in the not too distant future.
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Old 07-12-2019, 03:14 PM   #62
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Originally Posted by The Cosmic Avenger View Post
You had me up until the bold part. That part sounds like market timing, and we've already beaten that subject to death, so I'll just say: I think it's pretty well accepted by most of the people on this forum that rebalancing your AA is the safest way of selling high and buying low.
Well, there's some established literature that states your starting point of investing determines your returns going forward. Said another way, are you confident deploying cash at today's quotes AFTER an 18% YTD run up? I think a reversion to the mean is entirely likely into year end. I could make a case that bonds and stocks are both materially overvalued at current levels.



It's been a good year so I'll take 2% on high cash levels and play it safe. YMMV.
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Old 07-12-2019, 03:19 PM   #63
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Two alternative options that I see:

The better option:
1) Decide on your retirement AA. Sell enough that you have 3 years of expenses in cash. Invest in the rest in accordance with your AA. This could be as simple as buying a target retirement date fund. This one only works if you won't panic and sell in a downturn.

2) Buy an annuity. Your flight to cash is the only reason I recommend this, and I've never recommended it before. Your flight to cash won't ensure that your assets outlive inflation, over the long term. So, if you're subject to too much discomfort during the market downturns, the right annuity, with the right terms and conditions just might be for you.
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Old 07-12-2019, 04:18 PM   #64
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I am a dirty market timer and an individual equity buyer, both of which are somewhat shunned here on ER.

But I am also confident in my ability to be wrong. I know that because I have been wrong before , and I'm guessing (but could be wrong) that will also occur in the future.

In addition, I know that the last many hundred years of history has shown that while there have been major setbacks, the long term trend is upward in terms of the human living condition. We frequently hear about all the bad things that can happen or that are happening, but we don't frequently hear about positive things that can happen or that are happening. All one has to do to see this (if you are willing to actually see) is to look at how technology has improved peoples lives over the last 50 years - in a vast array of areas.

It is because of this that I bet that the super long trend will continue. Could we have a repeat of 2008-9. Sure. Could we have a repeat of the great depression. Yes. Could that wipe me out w/o enough time to recover? Yes. But that doesn't mean it is going to happen today, tomorrow, or anytime close down the road.

So from a personal perspective, I hedge. I have an asset allocation which I try to keep up to date so that I know how much I am risking. I have significant cash/fixed to ride out a storm (or to partake in opportunistic buying). I've even been recently selling to tune my asset allocation down a bit (to get it closer to 60% equities). But I didn't sell out completely. Not now, not in 2016 when the world was supposed to end due to an election, not in 2009, not in 2001 after the dot.com bust and World Trade attack, not in 1998 in the Asian financial crisis, not in the Clinton impeachment saga, not in 1987 when we went down 21% in a single day, not in 1982 when everyone was predicting the death of stocks, not in 1979 when our Embassy was overrun in Iran, not ever.

Each of us has to make our own decisions. Just go into them knowing that you can be wrong. Wrong in the short term, and wrong in the long term.

If you have an equity allocation that doesn't allow you to sleep at night, change it. Just be aware that going 0% equities doesn't guarantee you won't lose. You instead might lose a different way.
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Old 07-12-2019, 05:03 PM   #65
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If you have an equity allocation that doesn't allow you to sleep at night, change it. Just be aware that going 0% equities doesn't guarantee you won't lose. You instead might lose a different way.

You summed it up perfectly!


And I hope I didn't make anyone feel like I was "timing-shaming"! I just know that it's easier to blame yourself and easier to win big or lose big if you are basically gambling on what's going to happen next, even if you estimate the odds correctly. Instead I find that I have much more peace of mind "gambling" that the market will go up in the long term, without worrying about the short term. But if anyone here understands the risks of trading more in the short-term and is fine with them, more power to you!
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Old 07-12-2019, 05:19 PM   #66
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If you are 100% sure the market will go down, you go 100% to cash. In fact, you would short the market and make money instead of holding even.

Conversely, if you are 100% sure the market will go up, you go all in.

As I am never in the above extreme cases, I am always half-way in. But the chance for the market to run up a lot from here is not great, so I am working to reduce my stock AA.

My stock AA has been as high as 80%, and is usually about 75%. I have been reducing it, by selling growth stocks and keeping defensive stocks. My stock AA is currently 66%, and I will reduce to 60% or perhaps even lower to 50%

I am taking my time to do this by writing covered calls with the strike prices lower than I normally set. The market may go down big before I reach my target AA, but I like to do things a bit gradually. That reduces the chance for large gains, but also minimizes the chance of regrets. Nothing is certain in this life.
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Old 07-12-2019, 06:03 PM   #67
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So many good comments here, but I'm old enough to remember one chairman's remark about 'irrational exhuberance', and then what followed. I, too, am in the camp where I don't want to tolerate that free fall drop, and then again, when the likes of Bear Stearns and others, fell by the wayside. This market rationale of 'up is the only way it will go', will surely end after 10 years. Good luck, stay safe, enjoy life. It ain't all about the dollars.
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Old 07-12-2019, 06:29 PM   #68
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Originally Posted by 24601NoMore View Post
I'd agree with your perception - that there does seem to be a very high (too high?) confidence in the markets here overall. Guess you and I are two of the rare birds that have a somewhat contrarian view. For me, that includes the duration of the current bull, Schiller PE of 30.73 (only at that level 3 prior times in history, and one of those was "Black Tuesday") and the high likelihood of increased volatility as we come into another US election cycle. Maybe I'm just old school, but locking in some profits after a huge run-up and "selling high" seems prudent. Bonds are certainly not that attractive at the moment as they (especially Treasuries in the 'flight to safety') have ALSO been run up to quite high levels, and cash WAS slightly attractive last Q3-4..but is now coming back to earth with rates on even the best CU and MMs dropping quickly.

I'm at roughly 22% equities at the moment, and even that seems risky with valuations where they are. Like you, if I could do 3% (prefer 4% and even better 5%), we'll do fine. So, I'm heavy on CDs, light on stocks and have a decent mix of good bond funds broken out into the short-term, medium term and long-term buckets per the bucket strategy often recommended by people far smarter than I pretend to be..

I've mentioned before that Michael Kitches recommends a "bond tent" (increasing fixed income) just prior to or in ER, and have without entirely realizing it somewhat adopted that strategy. ONCE the market drops heavy (and it will, probably within the next 2 years max), you can always buy back in. (Yes, I know it's hard to determine when to buy - but as I haven't moved huge $$ OUT of the market, don't need to move huge chunks back in). I sure have my eyes on some things I'd like to pick up at 20-40% discounts from these levels..so if I have to be heavy cash and bonds for a couple of years, swoop in and buy good quality investments once they've been beaten down..seems like it'd be hard to go wrong doing so..that way, SORR is minimized in early ER..and there's a very high likelihood (IMHO near certainty) that we will be able to buy at levels far lower than we are now..perhaps in the not too distant future.
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Old 07-12-2019, 06:40 PM   #69
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So many good comments here, but I'm old enough to remember one chairman's remark about 'irrational exhuberance', and then what followed. I, too, am in the camp where I don't want to tolerate that free fall drop, and then again, when the likes of Bear Stearns and others, fell by the wayside. This market rationale of 'up is the only way it will go', will surely end after 10 years. Good luck, stay safe, enjoy life. It ain't all about the dollars.
The irrational exuberance comment was off by a few years of continued market gains, but understand your concerns.
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Old 07-12-2019, 10:45 PM   #70
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Originally Posted by 24601NoMore View Post
I'd agree with your perception - that there does seem to be a very high (too high?) confidence in the markets here overall. Guess you and I are two of the rare birds that have a somewhat contrarian view. For me, that includes the duration of the current bull, Schiller PE of 30.73 (only at that level 3 prior times in history, and one of those was "Black Tuesday") and the high likelihood of increased volatility as we come into another US election cycle. Maybe I'm just old school, but locking in some profits after a huge run-up and "selling high" seems prudent. Bonds are certainly not that attractive at the moment as they (especially Treasuries in the 'flight to safety') have ALSO been run up to quite high levels, and cash WAS slightly attractive last Q3-4..but is now coming back to earth with rates on even the best CU and MMs dropping quickly.

I'm at roughly 22% equities at the moment, and even that seems risky with valuations where they are. Like you, if I could do 3% (prefer 4% and even better 5%), we'll do fine. So, I'm heavy on CDs, light on stocks and have a decent mix of good bond funds broken out into the short-term, medium term and long-term buckets per the bucket strategy often recommended by people far smarter than I pretend to be..

I've mentioned before that Michael Kitches recommends a "bond tent" (increasing fixed income) just prior to or in ER, and have without entirely realizing it somewhat adopted that strategy. ONCE the market drops heavy (and it will, probably within the next 2 years max), you can always buy back in. (Yes, I know it's hard to determine when to buy - but as I haven't moved huge $$ OUT of the market, don't need to move huge chunks back in). I sure have my eyes on some things I'd like to pick up at 20-40% discounts from these levels..so if I have to be heavy cash and bonds for a couple of years, swoop in and buy good quality investments once they've been beaten down..seems like it'd be hard to go wrong doing so..that way, SORR is minimized in early ER..and there's a very high likelihood (IMHO near certainty) that we will be able to buy at levels far lower than we are now..perhaps in the not too distant future.
Just a couple of thoughts. Bullish sentiment as measured by the AAII survey is less bullish than historic averages.

And just a note on trying to time the market. As Peter Lynch said, far more money has been lost trying to avoid corrections than in the corrections themselves.

In my view, far better to find your desired AA and stick to it.

Just 2 cents worth.
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Old 07-16-2019, 05:34 PM   #71
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I'm at an all-time high in my IRA and would like to sell all the mutual fund shares I own in it and just stay all in cash (left in my Fidelity IRA account, of course) while I decide on a less-agressive strategy and investigate a safer place to put my money.

This would only be temporary. I'd just like to conserve what I have at the moment so I don't take another big dive the next time something crazy happens in the world (like I did last Fall when everything tanked).

Thoughts on this approach? Makes sense, doesn't it?

It depends on your health, your age and your other assets such as your house.

If your are in poor health, age 85, and no other assets, then your plan has merit because you are not in a position to take risks.

On the other hand, if you are in good health, age 45, and have a $1M house that is paid off, then your plan does not have merit because you are in a position to take risks and get rewarded for it.

If you are in-between these two extremes, there may be nothing wrong in going 50/50 with 50% in cash since the current CD interest rates are 2% plus and the other 50% in a diversified portfolio of stocks and bonds.

It is really your decision ....based on your health, age, financial situation and your risk tolerance.
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Old 07-16-2019, 05:39 PM   #72
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Definitely an attempt at market timing and IMHO a bad move. You should read this:



https://www.edwardjones.com/images/RES-7844-A.pdf
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Just remember ...
Old 07-16-2019, 07:16 PM   #73
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Just remember ...

Just remember that the so-called experts have predicted ten of the last seven recessions. No one can time the markets; anyone that says they can is a liar. If you want to take some profits and free up cash for alternatives to stocks, fine, but going all cash all at once is a big risk.
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I'm already out of the Market and Here's why
Old 07-17-2019, 10:33 AM   #74
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I'm already out of the Market and Here's why

I already have enough in my retirement accounts to support an inflation adjusted spending rate to cover expenses and a generous "play" allowance. I'm one year from retirement - not because I need to keep working, but because I'm enjoying what I'm doing and I want to see the project I'm working on through to completion. I shifted everything out of the stock market into guaranteed return investments. It only gets about 3%, but that's enough for me. I have zero risk appetite right now. I can afford to forgo stronger future gains, but I cannot afford to suffer a significant downturn. Losing 30-50% of my capital would break my retirement spend plan. Eventually there will be another big downturn - maybe I'll get back in the market then.
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Miscellaneous thoughts t think about
Old 07-17-2019, 11:06 AM   #75
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Miscellaneous thoughts t think about

Everybody is a risk taker when the rewards come fast and easy.

Sell when everyone else is buying. Buy when everyone else is selling. Save when everyone else is spending. Spend when everyone else is saving.

If youíve already won the game, stop playing.

Never put your critical mass at risk

The Fed has artificially boosted asset prices, is scared to inflict pain on anyone, and is trying out figure out how the hell they are going to get out of this massive debt experiment theyíve e created.- Barronís letter to the editor

The greatest reason to worry about all these developments is that when investors seek an exit, any crowding of the gate will send markets into a tailspin, as we saw in 2008 and also for tech stocks in 2000
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Miscellaneous thoughts t think about-Part II
Old 07-17-2019, 11:17 AM   #76
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Miscellaneous thoughts t think about-Part II

Paper wealth is not real wealth. Until you sell, you have made nothing.

It is typical of long bull markets that holders fall in love with their holdings and consider capital gains as money in the bank (without actually cashing out and putting cash profits in the bank).

Profit is fact; everything else is commentary

Just remember, Wall Street will never tell you to sell

I prefer to leave the party early, in the knowledge that I can walk away with ease.

itís not about how much you make in the boom times, itís about how much cash savings you keep and what your burn rate from expenses looks like. Liquidity is everything. Lesson for life.

What were we thinking?Ē people will ask. The answer of course: most werenít thinking, they were just hoping they could gamble, win, keep playing and somehow keep the proceeds without ever cashing out. Suffice to say, the odds arenít favorable.

Donít worry about what other people think; most of them are broke.

The key is never risking it all because you donít want to replay the game.

Risk is often silent. By its nature, the existence of risk is not realized until it is too late

Hope is not a strategy.

The best course is for individuals to proactively control and limit risk exposure before loss cycles hit so that we donít lose money and have liquid cash to buy investment assets once they retrace to good value. At that point income yields are two and three times higher than those collected near cycle highs, and we donít waste years just trying to make back losses
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Old 07-17-2019, 11:31 AM   #77
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I already have enough in my retirement accounts to support an inflation adjusted spending rate to cover expenses and a generous "play" allowance. I'm one year from retirement - not because I need to keep working, but because I'm enjoying what I'm doing and I want to see the project I'm working on through to completion. I shifted everything out of the stock market into guaranteed return investments. It only gets about 3%, but that's enough for me. ....
And that's fine if you have figured all fixed income can support you through inflation. Though I am curious when you say 'guaranteed return ~3%'. Is that guaranteed for as long as you might live?



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.... It only gets about 3%, but that's enough for me. I have zero risk appetite right now. I can afford to forgo stronger future gains, but I cannot afford to suffer a significant downturn. Losing 30-50% of my capital would break my retirement spend plan. Eventually there will be another big downturn - maybe I'll get back in the market then.
Again, that's fine based on above, but I really doubt that it is correct that a market downturn "would break my retirement spend plan".

If you can live off fixed income accounting for decades of inflation, you also can live through a big market drop and a 50/50 AA. If you look at FIRECalc, portfolio survive-ability actually drops below about 35% allocation to stocks, and that includes the Great Depression.

So if you are good, you are good - I just don't like those "Losing 30-50% of my capital would break my retirement spend plan." type statements to stand out there unchallenged.

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Old 07-17-2019, 11:37 AM   #78
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...
Hope is not a strategy.
...
And neither is market timing.

Unless you can show us evidence of how us retired people can successfully time the market, rather than platitudes. So far, data says setting an AA and a buy & hold strategy wins.

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Old 07-17-2019, 12:13 PM   #79
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[I]And neither is market timing[I]

I will state this the significant market returns most of us have attained will be gone over a period of weeks / months, at some point in the near future, without cashing them in.

platitudes

No, just over 40 years of trading the markets successfully.
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Old 07-17-2019, 12:43 PM   #80
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[I]And neither is market timing[I]

I will state this the significant market returns most of us have attained will be gone over a period of weeks / months, at some point in the near future, without cashing them in.

...
With words like "significant" and "will be gone" "weeks / months, at some point in the near future", that's not much of a prediction.

How much will be gone? Gone forever? When in the future?

And how do you know when to get back in? Oh, I know, "before it goes up".


Quote:
Originally Posted by MrEd View Post
...

platitudes

No, just over 40 years of trading the markets successfully.
And unless you can transfer the knowledge of this ability to others here, along with enough history to make them feel confident in it, it is just a platitude. I can tell someone that studies show that B&H index beats ~ 85% of active funds over 5 years, and they can easily B&H a couple broad-based index funds.

Maybe you have been successful. Good for you. But what are others to do based on this?

-ERD50
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