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Old 03-24-2018, 09:19 AM   #281
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.....

The economy is in no condition to endure a falling stock market, and what to me is just a mathematically logical consequence of a large stock market break seems to be totally dismissed, so if the market would turn up from here I will be genuinely happy.

.....
Could you elaborate, as to possible consequences.

I can only guess, a run on stock market (huge daily drops), and recession, but the mathematically logical consequence
is an intriguing statement.
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Old 03-24-2018, 09:39 AM   #282
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In answer to your question of why I believe the economy in no position to endure a dramatic break in the stock market - I will present a few of my concerns:

For most of the period in which the stock market statistics which support a passive indexing approach to investing occurred, the United States had an economy that when you subtract annual government increase debt from the increase GDP, not adjusted for inflation, you had a net positive number. Indeed from 1950 to 2007 a period of 57 years there were only 6 years that had a negative number and those were relatively small amounts — 1981, 1986, 1990, 1991, 1993, 2002.

Since 2008 3 of those years have seen a net number in excess of one trillion dollars, meaning the amount of borrowing and spending caused by the Federal Government borrowing was not even met with any increase in the nominal value of goods produced. This is a greater than 10-1 expansion in the amount of nonproductive borrowings.

The borrowings instead have been positively reflected in the value of stocks, so that those values have increased to a record 137% of GDP. This has become a feedback loop that will be interrupted if the stock market were to have a dramatic break. It would be in essence an erasure of the value of the debt issued and at this point the negative effects would feed each as the ineffectual nature of the debt becomes very clear on the stock market, GDP and the level of government debt. Since these have now become a dependent network on each other, they would network equally on the way down.

The view of a long term steady always increasing stock market is what has allowed the US economy to maintain, but in reality since 2008 it has been returning less than the amount borrowed to help the economy and that is without having to pay any interest on that debt, which is not even part of this equation. At 100% + of debt to GDP each 1% increase in interest will consume 1% of GDP for non-productive spending. At this point, a fall in the stock market is unaffordable, but if it does occur it exposes what is clearly there to see.
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Old 03-24-2018, 11:27 AM   #283
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In answer to your question of why I believe the economy in no position to endure a dramatic break in the stock market - I will present a few of my concerns:

For most of the period in which the stock market statistics which support a passive indexing approach to investing occurred, the United States had an economy that when you subtract annual government increase debt from the increase GDP, not adjusted for inflation, you had a net positive number. Indeed from 1950 to 2007 a period of 57 years there were only 6 years that had a negative number and those were relatively small amounts — 1981, 1986, 1990, 1991, 1993, 2002.

Since 2008 3 of those years have seen a net number in excess of one trillion dollars, meaning the amount of borrowing and spending caused by the Federal Government borrowing was not even met with any increase in the nominal value of goods produced. This is a greater than 10-1 expansion in the amount of nonproductive borrowings.

The borrowings instead have been positively reflected in the value of stocks, so that those values have increased to a record 137% of GDP. This has become a feedback loop that will be interrupted if the stock market were to have a dramatic break. It would be in essence an erasure of the value of the debt issued and at this point the negative effects would feed each as the ineffectual nature of the debt becomes very clear on the stock market, GDP and the level of government debt. Since these have now become a dependent network on each other, they would network equally on the way down.

The view of a long term steady always increasing stock market is what has allowed the US economy to maintain, but in reality since 2008 it has been returning less than the amount borrowed to help the economy and that is without having to pay any interest on that debt, which is not even part of this equation. At 100% + of debt to GDP each 1% increase in interest will consume 1% of GDP for non-productive spending. At this point, a fall in the stock market is unaffordable, but if it does occur it exposes what is clearly there to see.
+1 Thought provoking and nicely laid out argument!
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Old 03-24-2018, 12:04 PM   #284
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... At 100% + of debt to GDP each 1% increase in interest will consume 1% of GDP for non-productive spending...
That is for new debts to be issued. For existing debts, when inflation which accompanied interest kicks in, paying them with cheaper and diluted dollars helps.

That's why I own very little bonds right now. It's 2.7% to be exact.

Cash is 31% right now, with a big percentage in I-bonds. A large percentage of the cash is used to secure out-of-the-money put options that give high returns, but of course with some risks. And then, some cash is truly idle with very low yields.
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Old 03-25-2018, 06:03 PM   #285
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That is for new debts to be issued. For existing debts, when inflation which accompanied interest kicks in, paying them with cheaper and diluted dollars helps.

That's why I own very little bonds right now. It's 2.7% to be exact.

Cash is 31% right now, with a big percentage in I-bonds. A large percentage of the cash is used to secure out-of-the-money put options that give high returns, but of course with some risks. And then, some cash is truly idle with very low yields.
You and I have similar approaches (well, except that I rarely do options trading). While I am overall 34% "fixed", but only 1.2% of my overall portfolio is in traditional bond funds. I have 11% in inflation adjusted treasuries (tips, I-bonds), and a whopping 21% in cash (CD's, high yield savings, 401K money market funds). Raising rates is making this a more comfortable strategy.
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Old 04-04-2018, 10:52 AM   #286
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OK as of 11 AM this morning with the S&P500 at around 2600 I am back to 25% stocks as I took the simple route for now of buying the index and came back up to my minimum holding of stocks as the market was easily able to handle the bad news. While stocks do not appear cheap and debt is an issue, there is also possible increases in inflation that need to be met and that is through stock ownership, so for now the big decline I felt could be imminent I will take that risk on. Overall the market is about 100 S&P points lower than when I got out, but that is really not a factor in this decision. And I am not loading up on stocks, merely going back to what I previously had been willing to call my minimum.
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Old 04-04-2018, 11:08 AM   #287
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OK as of 11 AM this morning with the S&P500 at around 2600 I am back to 25% stocks as I took the simple route for now of buying the index and came back up to my minimum holding of stocks as the market was easily able to handle the bad news. While stocks do not appear cheap and debt is an issue, there is also possible increases in inflation that need to be met and that is through stock ownership, so for now the big decline I felt could be imminent I will take that risk on. Overall the market is about 100 S&P points lower than when I got out, but that is really not a factor in this decision. And I am not loading up on stocks, merely going back to what I previously had been willing to call my minimum.
Thanks for the real-time update Running Man.

Ha
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Old 04-04-2018, 12:30 PM   #288
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OK as of 11 AM this morning with the S&P500 at around 2600 I am back to 25% stocks...

... Overall the market is about 100 S&P points lower than when I got out, but that is really not a factor in this decision. And I am not loading up on stocks, merely going back to what I previously had been willing to call my minimum.
It doesn't matter what prompts it, whenever I buy back at a lower price than what I sold something at, I call it a successful trade.

Some people call it "dirty market timing", but I think that is when you lose money. If you are successful in making money, it's "clean market timing" as you help damp out the market fluctuations by being a contrarian. You sell when people flock to buy, and you buy to help people when they panic.
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Old 04-04-2018, 03:43 PM   #289
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I am currently at 3% as of Monday. I tried to put 10% into SPY, but missed the bottom with my limit order by about 20 cents and will not chase it here. I would like to be at 50% or so in the near future, but will be weighted towards Financials and Healthcare.
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Old 04-15-2018, 08:15 PM   #290
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Running_Man welcome back to equities. I agreed with you in 2007, and at that point had been 100% in stocks. But reading WSJ everyday and watching financial markets at the time there was a lot of bad news. To me it was overwhelming at that time. I had a financial advisor then as my company paid for it, and he lectured me about too much equity in asset allocation, even though my timing horizon was 10-15 years, before my move out and of course likewise disagreed with my withdraw. Anyway my point is I think it's fine to act when you have research, knowledge, rationale, etc., but even more so because if you felt this way and didn't act and drop happened image the regret.
I've been in the market and reduced stocks to CDs for about 5% but that was as much about gains of last year and shorter time horizon AA move. Except for Trump tariff talk I just don't see the negatives anything like 2007 times. Sure rates have risen but only towards more normal from QE depressed levels, and inflation just starting to show target range. I expect good Q1 earnings, that should drive near term, and am hopeful talking will resolve trade disputes before any meaningful damage is done.
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Old 04-16-2018, 08:36 AM   #291
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Dr Mark Mobius an octogenarian money manager is predicting a 30% market haircut. Everyday some fed banker says rates will go up faster & higher. Then another fed banker says the rates won't go up. Whats that ticking sound? Hope all the lug nuts are tight.
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Old 04-16-2018, 09:42 AM   #292
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Dr Mark Mobius an octogenarian money manager is predicting a 30% market haircut.
Gosh dang it! I was hoping for something a bit more severe. 30% is sort of "regular."
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Old 04-16-2018, 10:05 AM   #293
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Gosh dang it! I was hoping for something a bit more severe. 30% is sort of "regular."
I'm forecasting a 90% haircut. Feel better?
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Old 04-16-2018, 10:13 AM   #294
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Dr Mark Mobius an octogenarian money manager
why isn't he retired?
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Old 04-16-2018, 10:24 AM   #295
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The predictions of David Tice:
12 April 2018 Take your money and run. Market is pretty dangerous. Could lose 20 to 25%
9 Dec 2017 Stocks could go higher, but then succumb to a market that is going to suck. As deep as 50%.
28 Aug 2014 30% to 60% decline for stocks. Gold will go far above $3000 an ounce
10 Oct 2012 This is like 2008 right before the market crashed.
28 Jan 2010 the S&P 500 will sink to 400, while gold will skyrocket to $2500 an ounce
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Old 04-16-2018, 10:45 AM   #296
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The predictions of David Tice:
12 April 2018 Take your money and run. Market is pretty dangerous. Could lose 20 to 25%
9 Dec 2017 Stocks could go higher, but then succumb to a market that is going to suck. As deep as 50%.
28 Aug 2014 30% to 60% decline for stocks. Gold will go far above $3000 an ounce
10 Oct 2012 This is like 2008 right before the market crashed.
28 Jan 2010 the S&P 500 will sink to 400, while gold will skyrocket to $2500 an ounce
Thank you for posting. These guys know nothing but eventually like a broken clock.......
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Old 04-16-2018, 11:11 AM   #297
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The predictions of David Tice:
12 April 2018 Take your money and run. Market is pretty dangerous. Could lose 20 to 25%
9 Dec 2017 Stocks could go higher, but then succumb to a market that is going to suck. As deep as 50%.
28 Aug 2014 30% to 60% decline for stocks. Gold will go far above $3000 an ounce
10 Oct 2012 This is like 2008 right before the market crashed.
28 Jan 2010 the S&P 500 will sink to 400, while gold will skyrocket to $2500 an ounce
does he still manage the prudent bear fund, bearx?
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Old 04-16-2018, 02:23 PM   #298
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Netflux adds another 2 millions boobtube subscribers. Now thats progress.
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Old 04-17-2018, 11:19 AM   #299
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I have not had time to read 15 pages of responses to OP's Q.

The way that I see it is that OP is correct to pull out of that stock market if he/she can not absorb the risk associated with equity ownership.

Most of us here have read about time horizon, risk assessment, asset allocation etc. and have decided that owning stocks in the long term (whatever that is) is a good bet. Not all feel this way. That's OK with me.
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Old 04-17-2018, 03:40 PM   #300
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I have not had time to read 15 pages of responses to OP's Q.
OP had no questions and somewhere along in the 15 pages bought back into the stock market.
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