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Old 09-30-2014, 01:40 AM   #81
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Friday I followed Running Man lead and sold 10% of my equity portfolio. I intend to sell an additional 10% in the next week or so. The will drop my AA from 75/10/15 to 60/10/30. The lowest equity percentage since shortly after I retired in 2000.

I have mentioned this before but I reviewed Running Mans 2007/08 stock posts along with several forum members who I thought I had particular keen insights. Essentially he warned about the coming housing crisis in number of cogent posts. They struck me as smart at the time but we were both relatively new the forum, and I'm not going to make major decisions based on some random guy.

Seven years later I know the guy better and understand his skills. So I'm paying more attention. I am not saying that he is Warren Buffett, but it is frankly insulting to lumping the many successful investors on the forum with the rest of the world. For the most part we've been doing it for 25 years, and we have accumulated pretty good size nest eggs.

Personally, I find it much easier to recognize a market bottom than the a top. I'm value investor so I almost always buy too soon and often sell too soon also.

In my case I've been nervous about since near the end of 2013. I thought the gains of 2012 brought the market up to fair value. 2013 was the typical overshooting that markets do. This years 10% gain in the SPY would be fine if it wasn't right after the 2013 blowout year. I'm looking for the market to pull back about 1/2 the 2013/2014 gains over the next 6 months. So I'll start buying when at the S&P 1600-1700 range.

While I think US stocks are expensive on an absolute basis. On a relative basis they are still cheaper than bonds. If the market does rally past 2000, I'll start buying back in at 2050 to 2100.

The actual catalyst for selling Friday was not Running Man's post which I missed since I wasn't following the forum very closely when he made original post. But rather an article last was speculating that the Alibaba IPO was the top of the market. Alibaba attracted a lot of hot money, which means that there is a less money to propel the shooting stars stocks upwards. Frank Ma was featured on 60 Minutes last night which is pretty much a classic lagging indicator.

Most of my 15% in cash is sitting in 3-5% Pen Fed CDs. My biggest hesitation to doing this is I have no idea what to do with this 15%. I am not adverse to switch semi-permanently to a 60/40, if there were bonds or CDs I wanted to buy.
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Old 09-30-2014, 05:28 AM   #82
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While I think US stocks are expensive on an absolute basis. On a relative basis they are still cheaper than bonds. If the market does rally past 2000, I'll start buying back in at 2050 to 2100.
If you think the market is expensive/risky at 1980, what makes you think that you will be comfortable buying back in at 2050-2100, especially after missing the gain up to that level?
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Old 09-30-2014, 07:25 AM   #83
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If you think the market is expensive/risky at 1980, what makes you think that you will be comfortable buying back in at 2050-2100, especially after missing the gain up to that level?

For pretty much exactly the reasons Running Man said, the S&P 2000 appears to be an important psychology barrier for the market. If the market zooms past it, than we are wrong and its time get back on the train.

We'll have a 20-30% correction of that I'm sure, if we have at S&P 2000, 2500, 3000 or 2717.23 I am not sure. I think the probabilities that we will see S&P 2100 before S&P 1700 is just about 50/50
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Old 09-30-2014, 11:01 AM   #84
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...
In my case I've been nervous about since near the end of 2013. I thought the gains of 2012 brought the market up to fair value. 2013 was the typical overshooting that markets do. This years 10% gain in the SPY would be fine if it wasn't right after the 2013 blowout year. I'm looking for the market to pull back about 1/2 the 2013/2014 gains over the next 6 months. So I'll start buying when at the S&P 1600-1700 range.

While I think US stocks are expensive on an absolute basis. On a relative basis they are still cheaper than bonds. If the market does rally past 2000, I'll start buying back in at 2050 to 2100.
...
This seems really bizarre logic to me. I understand your point that if you think equities are too expensive you want to reduce your risk, and when they are a bargain you want to increase your exposure. OK, the buy low sell high thing. But how do stocks get into a buy range when they get to 2050-2100? They are even more expensive than now. I get the impression this is all pure numerology stuff. Magic numbers and psychological barriers. As sensible as hearing about Fibonacci Series and double tops. You might be right that that the market is too high, I don't know, but I really do not see any logic to this. It seems to me to point out the failure of all timing schemes. You got to find a time to get back in when you get out. Sometimes you get lucky and buy lower but getting whipsawed is too often what you get instead.
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Old 09-30-2014, 09:48 PM   #85
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By coincidence, I converted some equities to cash on Friday, too, but for other reasons. I was about 99% equities, now about 56% equities.

Reason: I am planning to retire at the end of Feb (end of Dec, if there are problems). I plan to do a big back-door Roth conversion of my t-IRA over the next three years to avoid the Tax Torpedo. I will not take SS until I turn 70 in 3 years, so in the absence of other income (worst-case), we need to live and also pay taxes on the conversion in the meantime.

Since this is a short-term bridge, this money should be cash or maybe some in laddered CDs. I don't want to face a possible big drop in value while this is going on. Normally, I have no qualms about being 100% in equities. Since January, the pot is up 21%, which is way ahead of my conservative projection, so it does not bother me to be out of the market for now. We are also taking out a new HELOC on our almost-paid off mortgage while I am still working, to preserve some options. When that comes through (Chase bungled our application), I may put some back into mutual funds, maybe with a bond component. As we are changing from accumulation to distribution, our AA will be changing.
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Old 09-30-2014, 11:10 PM   #86
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This seems really bizarre logic to me. I understand your point that if you think equities are too expensive you want to reduce your risk, and when they are a bargain you want to increase your exposure. OK, the buy low sell high thing. But how do stocks get into a buy range when they get to 2050-2100? They are even more expensive than now. I get the impression this is all pure numerology stuff. Magic numbers and psychological barriers. As sensible as hearing about Fibonacci Series and double tops. You might be right that that the market is too high, I don't know, but I really do not see any logic to this. It seems to me to point out the failure of all timing schemes. You got to find a time to get back in when you get out. Sometimes you get lucky and buy lower but getting whipsawed is too often what you get instead.
I am definitely not a technician, although I do believe that good technician can make money. I could call this rebalancing toward a more conservative AA, but this not being really truthful. Based on a variety of factors I think the market is overvalued and the upside reward is lower than downside risk.

The market is not nearly as overvalued as it was in Jan 2000, when I sold my tech stocks and bought bonds. Nor is nearly as undervalued as it was in the Q1/2009, when was buying as much as I could. So this is a low conviction move on my part. Still I can't ignore that many of the signs that made me nervous in 99 and 2000 are present in today's market. The only sign I had the market was going to go down in 2007/08 were Running Man's posts.

So why buy at 2050+? The simple answer is the greed will overcome fear on my part and I rather not miss potentially a 25-50% move.
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Old 10-01-2014, 06:32 AM   #87
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Reason: I am planning to retire at the end of Feb (end of Dec, if there are problems).
Hey Gypsy Ed, is this definite? Do you know where you're going to live?
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Old 10-01-2014, 10:03 AM   #88
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I consider adjusting my AA every year or so to be the only form of market timing that I'm comfortable with.
But as you know, that's not timing because it's not based on a prediction. It's based on maintaining your portfolio allocated the way that your plan has it allocated.

Some people (like the OP) disguise market timing by discussing it as an "allocation shift" based solely on a prediction of what the market will do.

Those are not equivalent in any way.

Most of us bogleheadish type investors change our allocations very few times over the course of decades, and then only as it suits our individual needs, not because the market is at the proverbial "all time high" nor based on correlation, P/E, or other relatively meaningless (in the long term) number.
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Old 10-01-2014, 10:07 AM   #89
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I am definitely not a technician, although I do believe that good technician can make money. I could call this rebalancing toward a more conservative AA, but this not being really truthful. Based on a variety of factors I think the market is overvalued and the upside reward is lower than downside risk.

The market is not nearly as overvalued as it was in Jan 2000, when I sold my tech stocks and bought bonds. Nor is nearly as undervalued as it was in the Q1/2009, when was buying as much as I could. So this is a low conviction move on my part. Still I can't ignore that many of the signs that made me nervous in 99 and 2000 are present in today's market. The only sign I had the market was going to go down in 2007/08 were Running Man's posts.

So why buy at 2050+? The simple answer is the greed will overcome fear on my part and I rather not miss potentially a 25-50% move.
An awful lot of dangerous behavior here, if you ask me (you didn't). Good luck!
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Old 10-01-2014, 12:21 PM   #90
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You guys are nuts, make a plan, stick to it, and if you change the plan implement it over time, well into the future, never based on recent analysis.

We are steering cruise-liners here, not dinghies.



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Old 10-01-2014, 01:22 PM   #91
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Hey Gypsy Ed, is this definite? Do you know where you're going to live?
Well, there is this great bridge....
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Old 10-01-2014, 01:32 PM   #92
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Hey Gypsy Ed, is this definite? Do you know where you're going to live?
According to DW: most of the year in Bellingham, winters in Tucson.
I want to investigate Ensenada, La Paz and Lake Chapala.
For sure, I want to do a Rainbow Tour and visit friends and family around North America and elsewhere, too.
Always wanted to do the Thunder Run to DC for POWs. We'll see.
Hope to see Jerry Jeff's birthday party in Gruene, TX, next year. Otherwise, Belize again.
We shall see.
Man plans, God laughs.
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Old 10-01-2014, 01:56 PM   #93
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I'm 60/40 and I'm resisting the urge to do anything at all.
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Old 10-01-2014, 02:08 PM   #94
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According to DW: most of the year in Bellingham, winters in Tucson.
I want to investigate Ensenada, La Paz and Lake Chapala.
Well, at least you've narrowed the list. That's a good start.
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Old 10-02-2014, 09:25 AM   #95
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According to DW: most of the year in Bellingham, winters in Tucson.
I want to investigate Ensenada, La Paz and Lake Chapala.
Having a husband and wife living in different countries year-round will be expensive!
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Old 10-02-2014, 09:28 AM   #96
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Having a husband and wife living in different countries year-round will be expensive!
Maybe not, depending on the bridge availability in both locations.
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Old 10-02-2014, 09:52 AM   #97
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I'm 60/40 and I'm resisting the urge to do anything at all.
I'm with ya....
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Old 10-02-2014, 10:24 AM   #98
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If one expects a certain outcome and it does not come to pass you have to be willing to admit you are wrong. That I am always willing to do.
You're getting righter as this week wears on.
Ford is about 20% discount from the 52-week high. I'm expecting a decent correction.
Your call is looking like pure genius.
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Old 10-02-2014, 11:08 AM   #99
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Your call is looking like pure genius.
Time will tell, but SPY has had dozens of dips like this in the past 5 years. Would getting out each time, and then getting back in at a higher price have been 'genius'? I doubt that. How can we know that this one will be different?


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Old 10-02-2014, 02:20 PM   #100
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You're getting righter as this week wears on.
Ford is about 20% discount from the 52-week high. I'm expecting a decent correction.
Your call is looking like pure genius.
Right or wrong, I could not resist buying Ford and Tesco yesterday.
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