The sky is falling..

R

rayinpenn

Thinks s/he gets paid by the post
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May 3, 2014
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A few years back, when we were in the midst of that “credit crisis” thing, a friend called in an absolute panic. She had just retired and was watching 40% of her equity disappear. I said “we’ve seen this before and it will come back.. don’t panic!” Naturally I suspect she sold and converted her paper losses to real losses. I dont know because we haven’t chatted since.

In September I let my instincts get the better of me and I converted all my 401K holdings to bond funds. Even thought I apparently averted a 20% loss I am unhappy with myself. Buy and hold means buy and hold. In fact I was going to either ask the ER gang when to get back in or simply just buy back in- its all a guess. Then this morning I see CNBC analyst essentially says: “You ain’t seen nothing yet”.. How he feels comfortable making this prediction Im not sure because in reality no one knows. What we do know: The insanity in DC continues and well Im just not having a warm and fuzzy feeling. I know Gutt investing is bad investing - call me human.

My 401K on 1/4/2019 will enter a kind of limbo. It takes a couple weeks after you retire before your request to roll it to gets completed. The Schwab 401k rollover account application is in an email ready for me to complete and submit. I think I’ll wait for the transfer to then to get back in.

More importly I had a great Christmas Eve meal, church service was kid centered, fun and the terrific bell performance got an applause that I could see made the older performer’s day. Guess what else? It isn’t particularly cold here! If the old pooch hadn’t scratched at 4:00AM things would be perfect.

I cant wait to get back in, never again... what can I say “Regrets I’ve had a few...” LOL
 
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In the Great Recession, I did buy some and drove my stock AA to 80% near the bottom of the market. As the stocks rebounded, I started selling a bit too soon. Later, in 2010 or 2011, I regretted not going "all in" and then held out longer for more gains. I recall definitely thinking that if it happened again, I would do that.

In the Great Recession, I did sell quite a bit before the bottom, hence had a lower stock AA to be able to drive it back to 80%. This time, I do not have a low stock AA to start from, and it is still high, so it is not as easy to buy more. But if I had sold, any time I could buy back at a price below what I sold, I called it a success. I do not have to hit the absolute bottom.

Yesterday, during the walk with my wife, I told her of the loss we have had, and of the above thoughts. I told my wife that showed how hard it is to buy low, as well as to sell high. It is very difficult to overcome one's greed and fear. Wouldda, shouldda...

We will be going to my daughter later today, as she is hosting Christmas dinner this year. My in-town siblings will be there, and my nieces and their husbands, my only grandniece. All this market thing is not going to affect the good time we will have together. We are all in good health, and it is obvious that everybody appreciates what we currently have.

Whatever happens, it's not the end of the world. But the title of the thread brings to my mind my favorite Bond movie song: Skyfall.

 
NW-Bound

“We will be going to my daughter later today, as she is hosting Christmas dinner this year. My in-town siblings will be there, and my nieces and their husbands, my only grandniece. <b> All this market thing is not going to affect the good time we will have together. We are all in good health, and it is obvious that everybody appreciates what we currently have. </b>”

Spot on +
 
Last year at this time, the sky was unreachable. It was expanding every day.


We knew something had to happen. Here it is.


Time to test our resolve, especially those of us freshly retired. When we firmly decided to retire this year, I automatically discounted the market 20% because of the recent run ups. So now we are headed into true down territory. We're good to 50%. Hope we don't go that low.
 
This isn't our first trip to the den since the 2009 low.

92bcc3b135cee4a43aba8babfc035457.png
 
^ WOW! Great chart thanks for the picture of the past.
 
rayinpenn said:
In September I let my instincts get the better of me and I converted all my 401K holdings to bond funds. Even thought I apparently averted a 20% loss I am unhappy with myself. Buy and hold means buy and hold. In fact I was going to either ask the ER gang when to get back in or simply just buy back in- its all a guess. Then this morning I see CNBC analyst essentially says: “You ain’t seen nothing yet”.. How he feels comfortable making this prediction Im not sure because in reality no one knows. What we do know: The insanity in DC continues and well Im just not having a warm and fuzzy feeling. I know Gutt investing is bad investing - call me human.
Click to expand...
What I hear is that you are not happy about going against the grain and making a tactical change because you saw valuations too high. That wasn't a gut decision, IMO.

Buy and Hold has different interpretations. Even the eternal buy and holder John Bogle stated that tactical AA change is fine. OTH, there are b&h zealots who would flog you!

I have heard several make the case that going more conservative in early years is a good idea. I guess we are seeing that proof now. So you made a good decision. Bond funds may do very well in 2019, and outperform all asset classes.
 
target2019 said:
... I have heard several make the case that going more conservative in early years is a good idea. I guess we are seeing that proof now. So you made a good decision. Bond funds may do very well in 2019, and outperform all asset classes.
Click to expand...
I think that is a very legit strategy to address SORR.... in effect you have a spending bucket that will cover 5-10 years of spending with the rest in your forever AA. Since SORR is most dangerous in the first 5-10 years the spending bucket mitigates the risk.

So if your WR is 4% and you squirrel 7.5 years into a spending bucket that is 30%... the remaining 70% is allocated 60/40, resulting in a 42/58 AA at retirement that grades to 60/40 over there first. 7 1/2 years as the spending bucket is used.

Had I been aware of that strategy when I retired I we'll might have done that.
 
I've been keeping my equity exposure near 50%. In the first month of '18, it went a few percent above 50% and I was thinking of adjusting. Work got busy, time passed, and I missed the window.

Problem solved. Now I have to decide whether to sell income and buy equities. Maybe not, I'm kind of liking the discussion above about reversing the 60/40 rule early on in retirement. I guess in any case I need to let this play out a bit. We have cash enough for a few years such that we can avoid realizing losses.
 
target2019 said:
What I hear is that you are not happy about going against the grain and making a tactical change because you saw valuations too high. That wasn't a gut decision, IMO.

Buy and Hold has different interpretations. Even the eternal buy and holder John Bogle stated that tactical AA change is fine. OTH, there are b&h zealots who would flog you!
...
Click to expand...

Could you find a link showing where Bogle said that?

I went to the BH forum once, and was so turned off by the zealots that I did not return. But I have respect for Bogle.

We all know about religions with zealots who do crazy stuff that is not taught by their leaders.
 
NW-Bound said:
Could you find a link showing where Bogle said that?

I went to the BH forum once, and was so turned off by the zealots that I did not return. But I have respect for Bogle.

We all know about religions with zealots who do crazy stuff that is not taught by their leaders.
Click to expand...
I went to BH when first looking for guidance. I rarely go back there, but there wiki is very useful.

This SA article mentions what Bogle said. I believe M* has more in-depth interviews where he discusses this a bit more.

https://seekingalpha.com/article/42...-semi-endorsement-valuation-informed-indexing
 
rayinpenn said:
NW-Bound

“We will be going to my daughter later today, as she is hosting Christmas dinner this year. My in-town siblings will be there, and my nieces and their husbands, my only grandniece. <b> All this market thing is not going to affect the good time we will have together. We are all in good health, and it is obvious that everybody appreciates what we currently have. </b>”

Spot on +
Click to expand...

I am surfing the forum while taking a break from cooking. Just finished a Harissa sauce that I will serve with crispy chicken wings. It is of course too early to get the wings baking. My wife is prepping her own dishes, so we will bring them to our daughter in the afternoon.

My son-in-law said he had a bottle of XO Cognac waiting for us. It's the 1st time he bought one to serve, although they have bought me several bottles in the past (which of course I shared). I got the young generation like my son, son-in-law, and nieces' husbands all hooked on Cognac now.

Life is so darn good, and I am so happy.

PS. I learned about Harissa sauce a year ago, and have served it with chicken wings. People ate it up, and I did not make enough sauce. :)
 
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rayinpenn said:
In September I let my instincts get the better of me and I converted all my 401K holdings to bond funds. Even thought I apparently averted a 20% loss I am unhappy with myself. ...................

........................I cant wait to get back in, never again... what can I say “Regrets I’ve had a few...” LOL
Click to expand...


Yup, you're right; this is 'Gut Investing'..... What you need to do is Set an asset allocation that you can live with.... And now that you are retired, it probably should hold more in Bonds..... You may not have enough time for the market to recover....


Personally for myself I hold VTINX -- which is 70% Bonds, I don't plan on doing anything at all. (My best moves have been to do nothing). I don't even have to think about it... I've got enough.... When you've won the game, you've got to know when to stop playing. Why risk money that you need for money that you don't need?
 
NW-Bound said:
I got the young generation like my son, son-in-law, and nieces' husbands all hooked on Cognac now.

Life is so darn good, and I am so happy.

PS. I learned about Harissa sauce a year ago, and have served it with chicken wings. People ate it up, and I did not make enough sauce. :)
Click to expand...

+1 on Cognac. :)

Harissa is my go to for wings and omelettes. :cool:

First downturn since retiring 18 months ago. We can handle a fairly long downturn (not that we want to....). But yeah, waking up each day and seeing several thousand dollars evaporate into thin air is very unnerving. How unnerving:confused: One could not drive a 16 penny nail up my @ss with a spike mall! :eek:

But that's just psychological noise. Life is grand and we are truly blessed many times over.
 
rayinpenn said:
A few years back, when we were in the midst of that “credit crisis” thing, a friend called in an absolute panic. She had just retired and was watching 40% of her equity disappear. I said “we’ve seen this before and it will come back.. don’t panic!” Naturally I suspect she sold and converted her paper losses to real losses. I dont know because we haven’t chatted since.

In September I let my instincts get the better of me and I converted all my 401K holdings to bond funds. Even thought I apparently averted a 20% loss I am unhappy with myself. Buy and hold means buy and hold. In fact I was going to either ask the ER gang when to get back in or simply just buy back in- its all a guess. Then this morning I see CNBC analyst essentially says: “You ain’t seen nothing yet”.. How he feels comfortable making this prediction Im not sure because in reality no one knows. What we do know: The insanity in DC continues and well Im just not having a warm and fuzzy feeling. I know Gutt investing is bad investing - call me human.

My 401K on 1/4/2019 will enter a kind of limbo. It takes a couple weeks after you retire before your request to roll it to gets completed. The Schwab 401k rollover account application is in an email ready for me to complete and submit. I think I’ll wait for the transfer to then to get back in.

More importly I had a great Christmas Eve meal, church service was kid centered, fun and the terrific bell performance got an applause that I could see made the older performer’s day. Guess what else? It isn’t particularly cold here! If the old pooch hadn’t scratched at 4:00AM things would be perfect.

I cant wait to get back in, never again... what can I say “Regrets I’ve had a few...” LOL
Click to expand...

You are unhappy with yourself because you avoided a 20% loss?
I suspect, knowing what I know about you from reading many of your posts, that you'd have been fine either way, in the long run.

May I ask what your "buy and hold" AA would be?
 
HadEnuff: “<p style="color:red;">“May I ask what your "buy and hold" AA would be?”</p>

Warren Buffet said (not verbatim): I buy a great stock at a good price and hold it forever. I feel the same way about index funds. I have a spreadsheet that calculates our holdings value at a click.

The older I get the less I run it. Sometimes inattentiveness is our ally.
 
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rayinpenn said:
HadEnuff: “<p style="color:red;">“May I ask what your "buy and hold" AA would be?”</p>

Warren Buffet said (not verbatim): I buy a great stock at a good price and hold it forever. I feel the same way about index funds. I have a spreadsheet that calculates our holdings value at a click.

The older I get the less I run it. Sometimes inattentiveness is our ally.
Click to expand...

I'm totally confused by your answer. But that's OK...I'm often confused.

Merry Christmas!
 
<b><u>HadEnuff: I'm totally confused by your answer. But that's OK...I'm often confused.
Merry Christmas!</b></u>


Apologies I was rambling a bit. 90% equities 10% cash equivalents.. its enough cash to wait out a several years market drop before selling any equities. in reality I intend on living off the earnings (dividends). If you remember the credit crisis there was a good deal of dividend slashing.

My buy and hold is more about buy in and leave it alone. I didn’t do that.
 
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rayinpenn said:
<b><u>HadEnuff: I'm totally confused by your answer. But that's OK...I'm often confused.
Merry Christmas!</b></u>


Apologies I was rambling a bit. 90% equities 10% cash equivalents.. its enough cash to wait out a several years market drop before selling any equities. in reality I intend on living off the earnings (dividends). If you remember the credit crisis there was a good deal of dividend slashing.

My buy and hold is more about buy in and leave it alone. I didn’t do that.
Click to expand...

Well, I came into RE feeling the same way, that I'd set it, and forget it, other than once in a great while reset AA. But a funny thing happened along the way. I couldn't "forget" it. Interest rates were ridiculously low, and PE ratios were ridiculously (IMO) high, and I found I wasn't sleeping well. I felt greed and euphoria were driving the market into "bubble" territory. I could be wrong, but I bet what you did was something similar to what I did.

According to the various retirement calculators I use, my results don't differ much between 30-60-5, and 65-30-5, so a adjusted my AA closer to the lower end of that, rather than the higher end, substituted some of my bond money with a CD ladder, and waited for the fall.

If the fall never came, I'd still be fine. If it did come, I'd be better off than if I'd "set it and forgot it"... I felt I had the bases covered about as well as I could. I started sleeping better at night.

I wasn't clever enough to reset AA at the top, nor will I be clever enough to buy back in at the bottom, but I didn't set that as my goal, or definition of success. I have bought back in as of the end of business day 12-24, about half-way to my desired AA, and if it falls further, which I expect, I'll buy in some more, but if it doesn't, again I'll be fine, and no harm done, maybe a little benefit vs. not having done anything.

If things get crazy out of whack (IMO) I may once again adjust my AA in one way or another. Maybe even higher in equities than I might have imagined when I retired.

You are a smart guy, you've been around the block a time or two. When that little voice starts saying "this is nuts", I think you should listen to it.

All the best, enjoy your retirement. I'm heading to Florida in a couple of hours.
 
For some reason I decided to turn on some cable news this morning, something I rarely do except for CNBC.

Oh boy. Talk about stoking fear. Fear sells. The host was trying to squeeze a guest talking head into saying this is the end of the world for everyone's retirement. Yelling ensued, breathless hand wringing about leaders, etc. If the sky wasn't falling, they were trying to yank on it as hard as possible.

Off went the TV...
 
NW-Bound said:
I got the young generation like my son, son-in-law, and nieces' husbands all hooked on Cognac now.

Life is so darn good, and I am so happy.

PS. I learned about Harissa sauce a year ago, and have served it with chicken wings. People ate it up, and I did not make enough sauce. :)
Click to expand...

Red Badger said:
+1 on Cognac. :)

Harissa is my go to for wings and omelettes. :cool:
Click to expand...
+1 I just bought an excellent XO Cognac a few days ago. Oddly, at 70 YO I also just got into single malt scotch and sipping bourbon. I like smooth, sweet, complex spirits. A splash of the stuff with a book or TV in the evening caps the day..
 
JoeWras said:
For some reason I decided to turn on some cable news this morning, something I rarely do except for CNBC.

Oh boy. Talk about stoking fear. Fear sells. The host was trying to squeeze a guest talking head into saying this is the end of the world for everyone's retirement. Yelling ensued, breathless hand wringing about leaders, etc. If the sky wasn't falling, they were trying to yank on it as hard as possible.

Off went the TV...
Click to expand...


Turned on CNBC, had to search to find it. They were flashing
- Worst December in 20 years
- 11 of 12 sectors in correction
And lots of other bad stuff...

I did learn something very important that every investor should know. You can lease a Lamborghini for $3,100 a month. I can go about my day without a care knowing that.
 
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