Time to seriously consider getting defensive?

[robnplunder]

I want to be leading the herd. How do I do that?

Or if I follow the herd from a long distance, then will I be in the right phase again? Or at least stay back enough to see them go off the cliff?

Man, this is not at all easy.

Bulls can be herded. Bears will eat you for lunch. It's silly Wednesday (saw a post by a 20 year wanting to retire in 2 years with forex trading).

 

[NW-Bound]

The stock price IS the poll!

Yes. Then, the time to sell can't be too far away.

I have also noticed that there are more and more new posters joining, and many plan to retire soon. More and more people are announcing new financial milestones being reached. Heck, even a guy like me who stopped working 2 years ago keeps setting new highs. Call me a pessimist, but I do not like this. People are just too darn happy. I have seen this before. Life cannot be rosy all the time.

I am going to wait a little more though, and will start to write more covered calls to hedge. That is to give time for the herd to catch up. I do not want to get all out of the market, nor think that's the right thing to do.

 

[Lsbcal]

Yes. Then, the time to sell can't be too far away.

I have also noticed that there are more and more new posters joining, and many plan to retire soon. More and more people announcing new milestones being reached. Heck, even a guy like me who stopped working 2 years ago keeps setting new highs. Call me pessimist, but I do not like this. People are just too darn happy. Life cannot be rosy all the time.
....

One might have gotten out a bit too soon in the 1990's with these observations.

 

[ejman]

I really don't understand all the angst on this topic.

1) Have an asset allocation you are comfortable with.

2) if the AA drifts outside your rebalancing parameters, rebalance.

3) If the AA hasn't drifted outside your rebalancing parameters, do nothing.

The above approach has worked just fine for me thru the crashes/bears of 1987, 1990,1994, 2000-2002, 2008.

Dunno, sometimes we overthink things.

 

[NW-Bound]

One might have gotten out a bit too soon in the 1990's with these observations.

Yes, that too. I remember when the bears accepted defeat being the time the market peaked. Everybody got stocks, there were no new buyers.

Later, I remember the same thing about the housing bubble. You can't lose with houses, they all said.

 

[Major Tom]

Call me a pessimist, but I do not like this. People are just too darn happy. I have seen this before. Life cannot be rosy all the time.

True, but it could go on being rosy for quite a while yet. In the few market run-ups during which I was paying attention (both equities and real estate), I remember things feeling heady, frothy, whatever you want to call it, for quite a long time, before more moribund times prevailed.

 

[NW-Bound]

I really don't understand all the angst on this topic...

No, not really angst for me, as I have been through some rough time before, and with less money than now, and while having higher expenses. I just want to beat the "herd", the unkempt masses.

Yes, one can be right but too early. Patient, patient... Investing is a mental game for me.

 

[inquisitive]

I do not know of an overriding investor sentiment poll, but there are many fragmented polls. Perhaps one can tabulate them to find a majority consensus to act against.

Here's one for example (it is neutral right now): Sentiment Survey | AAII: The American Association of Individual Investors.

Yes, was familiar with that one. They are too educated for me to do anything based on it.

 

[NW-Bound]

I do not follow these polls, other than occasionally run across a mention in the media. But how about this one: Fear & Greed Index - Investor Sentiment - CNNMoney?

According to the above poll, the fear-greed indicator is in the "fear" region right now, and the put/call-option indicator is in the "extreme fear" range. Darn! I recently wrote covered calls on two leveraged ETFs to hedge, so I am actually in the herd. Darn!

Anyway, in 2000 one can get plenty of indication from anecdotes. We had taxi drivers, hair dressers, bar tenders all talking about buying dot-coms or Internet stocks and making money over fist. However, we are nowhere near that point right now.

So, I think I may just sit back and patiently wait, while being thankful for what the market god is giving me. A correction may come, and I already have cash to buy. Other than a correction, is there any reason to expect a crash? I do not see any.

And by the way, trading before/after a crash is extremely lucrative, but a 10% correction is harder to make good money out of. And trading a correction would not get me but 1% or 2% extra gain for the portfolio, unless one goes 100% between cash and equities, and I never do that. Still, I would try to get that extra bit of money for fun. Maybe it can pay for an extra travel trip or two.

 

[CaliforniaMan]

I do not follow these polls, other than occasionally run across a mention in the media. But how about this one: Fear & Greed Index - Investor Sentiment - CNNMoney?

According to the above poll, the fear-greed indicator is in the "fear" region right now, and the put/call-option indicator is in the "extreme fear" range. Darn! I recently wrote covered calls on two leveraged ETFs to hedge, so I am actually in the herd. Darn!

Anyway, in 2000 one can get plenty of indication from anecdotes. We had taxi drivers, hair dressers, bar tenders all talking about buying dot-coms or Internet stocks and making money over fists. However, we are nowhere at that point right now.

So, I think I may just sit back and patiently wait, while being thankful for what the market god is giving me. A correction may come, and I already have cash to buy. Other than a correction, is there any reason to expect a crash? I do not see any.

That is one very interesting observation. I too remember this "group" was buying anything back then. I get the impression that this same group is now buying nothing, preferring to talk instead about the 1%-ers, market manipulation, government manipulation, and the great fall coming to even things out.

Am I correct in this perception or all wrong?

 

[NW-Bound]

... preferring to talk instead about the 1%-ers, market manipulation, government manipulation, and the great fall coming to even things out...

I don't like the sound of that. What do you mean? Them coming for us with pitchfork?