A Dip or a Blip?

Seeking Alpha has not been accurate, I stopped following them. I missed making money on TESLA because of them.
 
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Llep said:
Did you have those 10% bands in 2009 when things were sharply dropping? I hold 50/50 with 5% bands that I was thinking of increasing. What was 2009 like for you and rebalancing? Sounds like we both quit work 52ish. I hope if and when I make it to 67 I can say I have been well served too.
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Yes, I did. Actually the band limit forced me into rebalancing (stocks to bonds) in 2007. As a result of that rebalancing I got to the 2008 debacle already light on stocks. I was just about ready to pull the trigger for my first ever rebalancing of bonds to stocks (with great trepidation!) in March of 2009 when things started turning around.

I should also mention that almost 50% of my liquid NW is in automatically rebalancing Vanguard funds (Wellesley, Wellington and Target Retirement Income) so that the effects of market volatility are not as pronounced as they would be if I owned pure stock and bond funds.
 
As we are way overdue for a correction, I am guessing there will be one. Though I said the same thing last year.
 
I'm leaning towards bear, as an increasing number of folks I know who got out of the market during 2008-2009 and swore they would never go back in are now talking about getting back in. So you know what that means. :)
 
One of the analogies I read in some book was this one: Consider someone walking across a large field with a 10-month-old Labrador Retriever on a 100-foot leash. The person is walking at a steady 3.5 MPH – that’s the steady growth of the economy. The puppy is going to be all over the place, sometimes lagging behind and sometimes running far ahead and it is impossible to foresee what direction the puppy is going to run. That’s the volatility of the stock market. But the puppy is going to average over time a steady 3.5 MPH because he’s on that leash.
 
Walt34 said:
One of the analogies I read in some book was this one: Consider someone walking across a large field with a 10-month-old Labrador Retriever on a 100-foot leash. The person is walking at a steady 3.5 MPH – that’s the steady growth of the economy. The puppy is going to be all over the place, sometimes lagging behind and sometimes running far ahead and it is impossible to foresee what direction the puppy is going to run. That’s the volatility of the stock market. But the puppy is going to average over time a steady 3.5 MPH because he’s on that leash.
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That's a good analogy. Another one I heard years ago: the market is like walking up a flight of stairs while playing with a yo-yo. The yo-yo goes up and down all the time. But the overall trend is up.
 
I have a special circumstance ...had some megacorp lump sum rollover from recent retirement so have been waiting for corrections, even those that are only a day long :) While not very scientific, I plan to buy in only at 10% each drop till I reach my desired AA. Limit to 10% in order to slow my enthusiasm for buying a bit off whatever the high had been ....:)
 
Are you waiting for a correction of 10% or more? If you only add 10% each drop it will take ten corrections and we haven't had one in > 8 yrs.
 
jazz4cash said:
Are you waiting for a correction of 10% or more? If you only add 10% each drop it will take ten corrections and we haven't had one in > 8 yrs.
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https://www.yardeni.com/pub/sp500corrbear.pdf

Not sure you're correct. According to Yardeni research above, I think it shows 4 corrections of 10-20%, and two other 9.8% declines, since 2009.

You may be thinking how long the "Bull Market", without a 20%+ decline, has been going.
 
ejman said:
Yes, I did. Actually the band limit forced me into rebalancing (stocks to bonds) in 2007. As a result of that rebalancing I got to the 2008 debacle already light on stocks. I was just about ready to pull the trigger for my first ever rebalancing of bonds to stocks (with great trepidation!) in March of 2009 when things started turning around.

I should also mention that almost 50% of my liquid NW is in automatically rebalancing Vanguard funds (Wellesley, Wellington and Target Retirement Income) so that the effects of market volatility are not as pronounced as they would be if I owned pure stock and bond funds.
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That's interesting - you didn't actually rebalance in March 2009?

How could you have been light on stocks in 2007? Such that you didn't rebalance in 2008?

I had 5% rebalancing bands. I ended up rebalancing 3 times - twice in 2008 and once in early 2009 using bonds to buy stocks. That was certainly catching the falling knife! It paid off in the long run, but as a consequence I increased by bands to 8-10% because I didn't want to be rebalancing that often during a big crash.
 
audreyh1 said:
That's interesting - you didn't actually rebalance in March 2009?

How could you have been light on stocks in 2007? Such that you didn't rebalance in 2008?

I had 5% rebalancing bands. I ended up rebalancing 3 times - twice in 2008 and once in early 2009 using bonds to buy stocks. That was certainly catching the falling knife! It paid off in the long run, but as a consequence I increased by bands to 8-10% because I didn't want to be rebalancing that often during a big crash.
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No, I did my big rebalance bonds>stocks in 2007 as the market was soaring then. So went into 2008 close to my target and like everybody else watched what seemed at the time like the end of the world (financial wise) approaching. By February - March 2009 the limit of the 10% rebalance band had been reached (and actually surpassed, things were moving quickly then) and with much trepidation and fear I was putting together the trade orders (bonds to stocks) when things started turning around. I decided to wait a while which of course was a dumb move as buying stocks at that time would have been a brilliant move in retrospect.

Also half of my liquid NW is in balanced funds so volatility is lower than in a traditional stock/bond portfolio.

I guess the lesson for me is I really have to follow mechanically the band guidance! The bands know! :)
 
imoldernu said:
I'd love to hear from my more financially savvy friends, how they see the future of the market... just your personal thinking about the future. Tomorrow... One Month... One Year... Five years.

What, if anything would cause you to make a change in your current basic plan... ie. how big a dip? %?
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To take a swing at imoldernu's questions, I offer the following.......

I think financially, the market is on a rock solid base. We will drift sideways and occasionally up, with an occasional dip, but, certainly no "crash". I base this on meta data from various sources. Most importantly, to me, is the recent changes (over the last 3 years) to employee 401k "auto signup" and "annual 401k % increase" "for" the employees benefit. The new/next generation are looking at what the boomers accomplished and are either voluntarily, or involuntarily placing their bets on the market. The ask/bid prices, the P/E ratios, etc, etc are rising/inflated based on simple "market demand". Occasionally a true "market maker" will evaluate the actual P/E of some companies and they will place "mega bets" that will affect the market, but, for the most part, I see the "base" of the market being well and regularly fed by "new money" from the new generations coming after the boomers. This will maintain the base, and, to some degree increase it.

I do believe that there are a lot of "savers" eagerly waiting for the Fed to raise up interest rates, and, as the interest rates climb, the savers are going to move en-mass to CD's, treasury's, etc. I think it will happen over a long enough of a timeline that it will have minimal impact on the market. Maybe a buying opportunity, or, a great environment to DCA a large chunk into the market. However, none of this is going to happen until interest rates are back above 3 or more percent.

I do not know what shenanigans/hooliganisms the banks/financial entities will cook up in the future. CDO's, MBS's, Derivatives and other "financial Weapons of Mass Destruction", all are just recent inventions that were created for the "good" and then used/deployed by corrupt people. I am sure there will be more, we just have to keep our eyes open and be somewhat suspicious and skeptical when they come our way.

On the question of "how big a dip?", I would answer a 40% dip in equities (total market) would make me drop my AA and "double down" on equities.

My two cents on the "current condition of the market".
 
I would also like to add that 5 or 6 years ago, I looked at the market and predicted that at approximately this year there would be more "sellers" than "buyers" because I expected the retiring boomers to be "cashing out" and/or moving to bonds/treasuries/CD's. I honestly did not know where the buyers were going to come from. At the time, 401Ks were mostly voluntary and I did not think enough of the younger generations were going to "pick up the pace".

However, the rules for "401K auto enrollment" were introduced in 2008 with introduction of the Pension Protection Act, but, "auto enrollment and auto increase" did not get legs until just about 5 years ago.

And now, presto/change-o, the new rules are being aggressively adopted by most medium to large companies giving them the option to pre-enroll new employees and the option to automatically increase the % contributed of both new and existing employees. Wow!!! Suddenly an "ocean of buyers" was created!!

And these new buyers are just "pumping dollars" into whatever funds their 401K has available. Their dollars, the company match, and profit sharing dollars are being poured into the markets. At this point, I think we may, for a brief time, have more buyers than sellers. The boomers will pick up the pace and this will reverse a little, but, as I said, I do not see this "crashing" in any way.
 
Interesting analysis. I largely agree. With the following additional somewhat cautionary anecdotal info. Before ER, I spent a while, even before giving official notice, mentoring three millennials at work. They were all auto enrolled in 401K, and two had put in some additional contributions as well. All three in the target date funds, and this despite a recent lawsuit, of which they were clueless, against our 401k provider for excessive fees in those funds. (We all got a small amount from the settlement, even w/o being in those funds, but the contribution description was vague so the 'kids' did not know what it was until a few of us old farts explained). I also showed them how the historical performance of these funds lagged a pretty simple AA that I had had for yrs in a combo of other funds available in the plan. They were still scared and concerned about what to do, these are not stupid people re work but have little financial education, so they just "liked" the name "target date" and felt it was somehow "safer". So, to your analysis, I do wonder what these employees will do when interest rates do rise if they ever do, move to bonds perhaps, since that will be in their minds "safer' yet. Or perhaps just become disenchanted with 401k's in total as their performance lags. Combine such disenchantment with boomers who did not plan well draining their accounts in the early years of their retirements, and we could still get a "crash' of some kind at some point.
 
gcgang said:
https://www.yardeni.com/pub/sp500corrbear.pdf

Not sure you're correct. According to Yardeni research above, I think it shows 4 corrections of 10-20%, and two other 9.8% declines, since 2009.

You may be thinking how long the "Bull Market", without a 20%+ decline, has been going.
Click to expand...

You are correct...I was thinking of the Bull Market run and I do think the difference between 9.8 and 10.0 is noise, but my point was whether the poster actually meant waiting for a correction to buy or just waiting for a dip. In the correction scenario, they would've only put 60% of their lump sum into the market in 8 years so I assume they meant buying on dips.
 
mamadogmamacat said:
Interesting analysis. I largely agree. With the following additional somewhat cautionary anecdotal info. Before ER, I spent a while, even before giving official notice, mentoring three millennials at work. They were all auto enrolled in 401K, and two had put in some additional contributions as well. All three in the target date funds, and this despite a recent lawsuit, of which they were clueless, against our 401k provider for excessive fees in those funds. (We all got a small amount from the settlement, even w/o being in those funds, but the contribution description was vague so the 'kids' did not know what it was until a few of us old farts explained). I also showed them how the historical performance of these funds lagged a pretty simple AA that I had had for yrs in a combo of other funds available in the plan. They were still scared and concerned about what to do, these are not stupid people re work but have little financial education, so they just "liked" the name "target date" and felt it was somehow "safer". So, to your analysis, I do wonder what these employees will do when interest rates do rise if they ever do, move to bonds perhaps, since that will be in their minds "safer' yet. Or perhaps just become disenchanted with 401k's in total as their performance lags. Combine such disenchantment with boomers who did not plan well draining their accounts in the early years of their retirements, and we could still get a "crash' of some kind at some point.
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I think they're much better off with the target date funds which will auto adjust and feeling "safer" will encourage them to stick with the plan. If they used an AA of their own choosing without you there to mentor them, they'd be more likely to panic and make a bad choice. I think if you compare target date funds there is only general consensus of the concept and the actual AA's for a given date vary widely. Plus it sounds like the custodian has not been employee-friendly in the past which is all too typical. Are you leaving your funds with them post-retirement?
 
Not enough fund choices plus they eliminated Vanguard funds several years ago, so no, not leaving funds there. Will be interesting to see how those target date funds do post the lawsuit. So far, in the almost three yrs since, they still lag, but not as much.
 
The little blip made me money. I finally exited my trade. I bought some IWN shares base on the recommendation from a little blonde gal, I forgot her name, she was on CNBC.
 
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