Make It Stop!!!!!

[COcheesehead]

Perfect storm for anyone retiring now who did not plan for SORR.
As of this morning my equities sit at 16% of my portfolio. Some of that was planned with my rising equity glide path strategy. Some Mr Market took back.
I can withstand more pain, but I wonder how many others can or will even want to.

 

[atmsmshr]

Gotta thank forum members for discussing, sharing real life experiences and providing financial advisor / academic references on risk tolerance for retirement portfolios over a persons lifetime. Those ideas helped me to more rationally define my personal risk tolerance and proper asset allocation on the eve of retirement - specifically with the specter of a bear market immediately following becoming self-unemployed. Wouldn't ya know it - the bear came out of hibernation - but I am not worried about portfolio thanks to the forum.

Now if only some key pension fund managers (e.g. Chicago, Kentucky) in governments had read up on the forum.

Never underestimate the collective wisdom of experienced perspective in a group.

 

[Toocold]

It'll be interesting to see how low it goes this time. Even more importantly, I think we still haven't experienced a full on recession with layoffs across multiple sectors. I hope this is just a (short-term?) investment hit and we'll be able to recover but our government's response to date has fallen far short of what's needed.

 

[mrWinter]

I did not know this previously:

"While the impact of flu varies, it places a substantial burden on the health of people in the United States each year. CDC estimates that influenza has resulted in between 9 million – 45 million illnesses, between 140,000 – 810,000 hospitalizations and between 12,000 – 61,000 deaths annually since 2010."

Why isn't everybody quarantined every flu season, and why doesn't this tank the stock market every year?

It's the speed of the spread, and the inability of the hospitals to handle the huge influx of critical patients. Yes we get the flu every year, and those cases are spread out over 4 months or however long. And because we have it every year the hospitals and medical systems can handle it. But the speed with which this is spreading means the system is goign to get a huge shock, and will be on top of existing flu and other normal problems. There won't be enough ICU units and people will be on cots in hallways in the hospitals, dying because there aren't enough ventilators. That's what's going on in Italy now from what I hear, and they are now establishing procedures to define how to prioritize who gets medical equipment like respirators. So some 75 year old just won't get treatment at all so that a 40 year old gets the respirator, and instead is just left to deteriorate in the hallway.

I don't think there is anything that can be done to stop the spread. It's just a matter of how quickly it spreads. I think the goal now is to flatten the curve:

https://qz.com/1816060/a-chart-of-the-1918-spanish-flu-shows-why-social-distancing-works/


I'm thinking the economic pain is just begining, and this is going to get much worse before it gets better. I'm having a hard time not putting my money where my mouth is and selling a bunch of equities now.

 

[Rainbowdash]

I'm heavy on equities and witnessing the significant decline in my networth. But after going thru 2008-2009 recession, I'm a lot more comfortable with this decline that hasn't finished yet, looking forward to those dividend payouts to buy more at discounted prices. [emoji16]

 

[jollystomper]

My personal opinion, and I've stated it more than once on these boards and when talking to people contemplating retirement (early or otherwise), is that if your financial plan for retirement can't survive a 40% drop in equity prices, you are either over-allocated in equities, or you don't have enough money yet to retire.

+1

When planning for my retirement, I would look at my equity allocation in my AA, and model what would happen if its value dropped in half. When I was comfortable with the result, I felt comfortable about retiring.

I am going to ride this and keep things as they are. I do have the benefit of a pension, and currently over 5 years of cash, that will cover our expenses. Almost all of my bond allocation is in a stable value bond fund which is returning over 3%. If my equities fall to half off of the peak, it will not impact my retirement. Not that I am happy about my falling assets, but it is not keeping we awake at night.

I am considering to start dollar cost averaging into the market again. DW's SS (which we just started and were not spending) and her part time income, which we do are not spending now, are candidates..In addition, I started the year looking at paying off my mortgage (but I am now wondering if I should instead average this money back into the market as well. These are monies we can set aside for 10+ years (assuming we live that long), so it is tempting to do this.

 

[mrWinter]

I told these young dentists, who aren't that young anymore, that you don't really know your risk tolerance until you see your portfolio decline 40% or more over two years. I am certain a few of them are starting to get it now.
It's all part of the fun of growing up.

I have to admit, this is more difficult than I thought. Though it's not that I hate seeing the money go and want to sell for cash and keep what I have now, it's that I really think things are going to get worse before getting better, and I want to sell now, and buy back in lower. It just seems like a hugh opportunity to miss, but I realize I'm putting myself at risk in gambling that way. I guess I'm claiming I have a more accurate picture of the future then the rest of the market, but with all my in-laws on facebook claiming the coronavirus hysteria is invented by the democrates to make trump look bad, it doesn't really seem like too much of a stretch to think I could know better than the facebook average.

 

[Toocold]

I still think that the majority of the pundits believe that the virus and/or oil situation will end by summer -- China just said something similar. The black swan event will be if both of these situations go on for years... I don't think that has yet been priced in.

 

[njhowie]

The black swan event will be if both of these situations go on for years... I don't think that has yet been priced in.

No, the black swan event is that both are happening right now. Neither was anticipated and market was at all-time highs just a few weeks ago.

 

[mrWinter]

I still think that the majority of the pundits believe that the virus and/or oil situation will end by summer -- China just said something similar. The black swan event will be if both of these situations go on for years... I don't think that has yet been priced in.

I hope so. Do you think they are already pricing in a big economic lock down like Italy is currently going through for the next three months? No travel, all vaction or travel based business eating a 3 month minimum loss, many going out of business. Schools closing, and many workers taking leave to care for kids. All that reduced income driving significantly reduced spending. No trade with Europe at all for months, and how bout the rest of the continents as this spreads across the globe? On the surface this just sounds like a much more tangible loss in the economy than the big credit kerfluffle of 2008.

 

[Freedom56]

It's going to get worse. Mom and pop investors who for a long time bought in to buy and hold forever just kept contributing as Buffett, Bogle, and others told them. However, looking at the bottom line on their portfolios and seeing it drop by 25% in under a month has to have many beginning to panic, as seen in some of the comments here and elsewhere. Same as 2009, retirement plans are going to change for many. At some point others will no longer be able to handle the pain, even if it's just on paper, throw in the towel, adjust their plans accordingly, come to terms that either they have to go back to work, or simply will no longer be able to retire. We've seen this before, it's going to happen again. How low will the markets go before they go higher once again? That's anyone's guess.

We're now beginning to see the downside aspect of how index funds work, how they can drive the markets lower, just the reverse of how they work on the way higher. Fund inflows make the funds blindly purchase all stocks in the index according to their weightings. This drives the entire market higher. Mom and pop continue sending in their monthly automatic investment, along with others who see the indexes going higher, which begets more buying, driving the markets even higher. Now, on the way down, just go in reverse. Mom and pop have held on for a long time. At what point do they freak out and throw in the towel?

Here are the stats (net) for the past few weeks:

03/04/2020 Equity Fund Outflows -$20.3 Bil
02/26/2020 Equity Fund Outflows -$22.1 Bil
02/19/2020 Equity Fund Outflows -$2.1 Bil
02/12/2020 Equity Fund Inflows $4.7 Bil
02/05/2020 Equity Fund Inflows $3.4 Bil

We have not hit peak hysteria yet, but it's coming.

People can invest how they want. I personally would never touch equity or bond funds. But use this opportunity to buy quality individual bonds or preferred stocks well below par as these funds are forced to liquidate.

 

[tulak]

That you can lose money in the market, potentially everything.

That's a bit extreme. You're not going to lose everything if you're invested in index funds.

You should always expect up to a 50% decline in your equities. If not, then you don't have the right AA. I agree that many will bail, because they will want to wait it out. And many won't time getting back into the market and will be worse off for selling.

 

[retire202052]

Switching to Fidelity Gov MM fund........not sure where the bottom will be on this thing.....

 

[Vincenzo Corleone]

That's a bit extreme. You're not going to lose everything if you're invested in index funds.

You should always expect up to a 50% decline in your equities. If not, then you don't have the right AA. I agree that many will bail, because they will want to wait it out. And many won't time getting back into the market and will be worse off for selling.

How does this reconcile with your post: https://www.early-retirement.org/fo...ing-to-cash-jitters-102287-6.html#post2376062

 

[njhowie]

That's a bit extreme. You're not going to lose everything if you're invested in index funds.

Fine - pick a number, how about losing 50% or 75% or 80%? Would that make you feel much better? Still too extreme? I don't think so.

 

[njhowie]

People can invest how they want. I personally would never touch equity or bond funds. But use this opportunity to buy quality individual bonds or preferred stocks well below par as these funds are forced to liquidate.

I completely agree with you, on many things you're posting here, and have similar holdings and approach to investing.

However, the majority of folks are putting their money into equity and bond funds and that's going to drive the markets. The $5 trillion at Vanguard and $6 trillion at BlackRock go a long way showing it.

 

[tulak]

Fine - pick a number, how about losing 50% or 75% or 80%? Would that make you feel much better? Still too extreme? I don't think so.

I think I did: "You should always expect up to a 50% decline in your equities."

Market corrections happen. It's not the first or last time. It's not fun, but it's also not the end of the world.

It even looks like it'll be a nice day here in the hotspot of WA. Probably a nice day for a bike ride!

 

[Toocold]

I hope so. Do you think they are already pricing in a big economic lock down like Italy is currently going through for the next three months? No travel, all vaction or travel based business eating a 3 month minimum loss, many going out of business. Schools closing, and many workers taking leave to care for kids. All that reduced income driving significantly reduced spending. No trade with Europe at all for months, and how bout the rest of the continents as this spreads across the globe? On the surface this just sounds like a much more tangible loss in the economy than the big credit kerfluffle of 2008.

To a degree. I think the market is pricing in significant slowdown in trade but my argument is that it's priced for short term and manageable. For example, if the above happens and (for the sake of argument) it lasts for the next 3 years, equities and bonds (as credit default will spike up) are significantly overvalued. On the other hand, if it only lasts one more week because someone figures out how to treat covid-19 and everything goes back to normal, both are undervalued at this time. Right now it seems like it's priced for a month or two.

If every government puts in aggressive protocols like Taiwan (preparation) or S. Korea (after the fact) or China (once an epidemic occurred) the timeline will be shortened but it's not happening, especially in the US.

 

[kgtest]

Here's some fear factor... "What Bill Gates is afraid of"

Full Story:
https://www.vox.com/2015/5/27/8660249/bill-gates-spanish-flu-pandemic

Synopsis: Risk of nuclear event, low, risk of pandemic bigger than Ebola > 50%.

I know this is kinda fear factor, but perspective is very important. LMK what y'all think in an IM plz. I realize not all are William Gates fans but the dude is a genius who has undeniably impacted every human being and realizes he has that power and continues to try and harness that gift.

 

[FREE866]

I always wondered what this message board would be like in a bear market and thought "these guys will be calm and rational"

 

[Fermion]

I always wondered what this message board would be like in a bear market and thought "these guys will be calm and rational"

This is pretty calm. Wait until you see DOW 10,000 and cities declaring bankruptcy because their planned 9% market return on their pension fund isn't working out for them, then see what the message board is like.

 

[Freedom56]

I completely agree with you, on many things you're posting here, and have similar holdings and approach to investing.

However, the majority of folks are putting their money into equity and bond funds and that's going to drive the markets. The $5 trillion at Vanguard and $6 trillion at BlackRock go a long way showing it.

It doesn't matter what other people do. To be an adept investor you have to do your own research and pick your own securities. Bond funds create great opportunities. I just completed about $1.1M in trades today picking up beaten down preferred stocks and corporate notes that funds have been unloading to deal with redemptions. I still have a lot more dry powder to buy in the coming days as my money market yields will dwindle to near zero. Today's trades add over $78K to my annual income not including the capital gains that I will realize when the the securities mature or sooner if I choose to sell out. I don't know if this a bottom for some of the notes and preferred stocks that I bought, but the prices were certainly better than paying for securities well above par with paltry yields

 

[W2R]

This is pretty calm. Wait until you see DOW 10,000 and cities declaring bankruptcy because their planned 9% market return on their pension fund isn't working out for them, then see what the message board is like.

+1

Yeah, things got pretty crazy here in late 2008 through early 2009. IMO it's nowhere near that bad (on the forum), so far.

 

[Freedom56]

+1

Yeah, things got pretty crazy here in late 2008 through early 2009. IMO it's nowhere near that bad (on the forum), so far.

I think people got a little spooked last night with the speech. He sounded like he was going to choke. It was not delivered well and added to a lot of confusion.

 

[Clone]

Too Soon?