Is this rally for real?

ziggy29 said:
But I do think there may be some merit in using an "adjustable asset allocation" model based roughly on market valuations. Yes, in the short term if you reduce your allocation to equities in a frothy market you may lose some near-term gains if momentum keeps going, but looking at history the worst markets have come off of extremely high valuations and have often led to steep declines that produced attractive valuations poised for a new bull run.
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I modeled out a strategy that reduced equity exposure when PE-10 was high and increased exposure when PE-10 was low. The results were positive. It didn't always increase returns, but it did reduce volatility. What was most surprising to me, is that it didn't help out as much in the tech bubble as I would have thought. Valuations were high for so long that you ended up getting out too early. While you missed the big sell off you ended up increasing your equity contribution into the next downturn. Net, net, you didn't end up any better off but you had a much smoother ride.

A concern I have with this strategy is that it is backtested against a world where equities always recover. Historically you have always been rewarded (eventually) for throwing money at declining stock prices in the US. There is no rule of nature that says this must be true. It's kind of like the quants building RMBS models using historic data that never showed a nationwide real estate decline. Just because it hadn't happened, didn't mean it couldn't. Same too with a 30 year period of declining equity prices. (shout out to Haha :))

One of the things I'm thinking about now is to reduce my equity exposure if the equity market pushes my withdrawal rate down. Right now I'm looking at a 2.7% WR ceiling and originally planned on 3%. I'm thinking about moving the excess portfolio balance into long-term TIPS. The idea is that I'd still be taking 3% from my originally planned asset allocation, only now I'd have additional money tucked safely away for the long-term. In reality all I would be doing is taking my equity allocation down along with my starting WR. I haven't thought through this in any great detail, but it is something I'm considering.
 
I don't really care what the reason is, as long as it is up, and I can include it in the 4% SWR of the current portfolio size. Dow up near 200 points!

PS. Actually, I do care. Another electronic part maker just upped its guidance. :dance: Its stock is up 10% today. Up 2.5x since I bought a year ago. Darn, why didn't I put everything in it? :facepalm:
 
This could get interesting. If concerns about sovereign contagion move to the background, investor attention can return to quarterly earnings where were pretty fantastic. Down 8% on great earnings could turn in to rocket fuel.
 
. . . Yrs to Go said:
This could get interesting. If concerns about sovereign contagion move to the background, investor attention can return to quarterly earnings where were pretty fantastic. Down 8% on great earnings could turn in to rocket fuel.
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It's possible, but I don't think the rocket can get too high until we start seeing the improved earnings translating to a significant uptick in hiring.
 
But we always talk about how hiring always trails behind company profits. Is it safe to assume it is the same this time? I am willing to bet my money that it is. Well, 70% of my money anyway.
 
I think the markets are up because of the snow-out in DC. The politicians and the bureaucrats are all at home and not doing anything - great for profits and productivity around the world.

Just watch what happens when they return...
 
Man! You know how to scare a bull.
 
ziggy29 said:
It's possible, but I don't think the rocket can get too high until we start seeing the improved earnings translating to a significant uptick in hiring.
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That's certainly part of the "wall of worry" we're climbing. First folks poo-pooed strong earnings because they were driven by cost reductions. "You can't cut your way to prosperity". Now that revenues are growing, the concern is that the economy will falter without job creation. Time will tell.

But one encouraging thing is that worker productivity is off the charts. So either business has figured out how to be much more efficient in the past 12 months or they are simply working their people to death. If the latter is the case (which is more plausible then the former) then new hiring should be right around the corner.
 
Globally the trend looks to be down...

Im not sure where were going short term, but long term Id rather be safe than sorry:greetings10:

http://chart.bigcharts.com/custom/w...d=3463459&symb=GDOW&comp=&type=256&mocktick=1

I sold another 3% of stocks today, now at 35%...

The market rallying on more bailout news doesn't do much to change my out look:nonono:
chart.asp
 
Well I bought 3.5% VT and VWO this morning, Im 35% international, overweight EM...

I guess Im a short term bullish bear:rolleyes:

So you should SELL SELL SELL:ROFLMAO:
 
Yes, this thread was begun more than 10 months ago and I think by this time we can conclude that this rally was real.

I will attempt to refrain from the "Whee!!!" but one of the highlights of each day these days, is to check my portfolio balance. :D :dance:
 
Quit with the dancing and joyous exclamations y'all! You're going to jinx it. :bat: I'd like the run to at least go high enough to let me rebalance again before we give it all back!

Audrey
 
audreyh1 said:
Quit with the dancing and joyous exclamations y'all! You're going to jinx it. :bat: I'd like the run to at least go high enough to let me rebalance again before we give it all back!

Audrey
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:dance: :dance:

nyah, nyah, can't stop me, I'm gonna be happy anyway! :D

Hey, if/when it goes down, it's just a buying opportunity. :) :greetings10:
 
I am at >70% equity and you say "buying"? With what money? You want me to keep on w*rking to get fresh money to buy?
 
I just now recall that some of the cash was exchanged for RV. Darn! So, that was part of the reason my AA was slightly messed up. :facepalm:

But wait! That "right" RV being offered on the market was also that "unexpected event" you talked about. Yes? :dance:
 
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