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Old 02-23-2020, 05:12 PM   #41
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I attribute the continued rise up until Friday to a combination of a late stage bull buying frenzy that was concentrated in relatively few stocks, central bank liquidity injections, huge normalcy bias, and the soothing "just the flu, bro" messaging from the powers that be who primarily want to keep their jobs and keep the muppets from panicking. Dunno about the liquidity injections (presume they will at least continue), but the rest is looking pretty shaky.

I have liquidated a lot of equity exposure and bought a bunch of puts. Have not had so little equity exposure in my adult life. I managed to suck it up and get through the crash OK by hook or crook, but I am getting too old to go over Niagara Falls in a barrel again. If I am wrong I imagine I will simply have given up some potential return. Worse things have happened at sea. If I am right, I will do what I do best: be a dirty bottom fisher.
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Old 02-23-2020, 05:26 PM   #42
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I attribute the continued rise up until Friday to a combination of a late stage bull buying frenzy that was concentrated in relatively few stocks, central bank liquidity injections, huge normalcy bias, and the soothing "just the flu, bro" messaging from the powers that be who primarily want to keep their jobs and keep the muppets from panicking. Dunno about the liquidity injections (presume they will at least continue), but the rest is looking pretty shaky.

I have liquidated a lot of equity exposure and bought a bunch of puts. Have not had so little equity exposure in my adult life. I managed to suck it up and get through the crash OK by hook or crook, but I am getting too old to go over Niagara Falls in a barrel again. If I am wrong I imagine I will simply have given up some potential return. Worse things have happened at sea. If I am right, I will do what I do best: be a dirty bottom fisher.
One of my investment fears is that instead of having a market that falls, we have one that bounces around along with a quick but sizable uptick in inflation. This would be caused by supply shortages and the need to quickly create secondary sourcing for things - but produced in a much less efficient fashion. In this scenario going all cash results in a portfolio is impacted by inflation.

I've been mostly selling in tax-deferred accounts where there is no tax impact. However, there I am limited in terms of what I can invest in. I can buy TIPs, but not things like Gold. So far, the proceeds are in a stable fund earning about 3%...which is fine as long as inflation remains under control.
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Old 02-23-2020, 06:19 PM   #43
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We will have an influx of a significant amount of cash next week(inheritance) that will change our AA from 51/49/0 to 45/45/10. I was planning to deploy it immediately to our current AA. Then I decided that we should DCA the funds into our AA over the next 10-12 months. Now I think we will sit on it for a bit to see what happens.
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Old 02-23-2020, 09:59 PM   #44
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I think in the US, we will begin to learn more on severity, breath, and depth of corona impacts over the next few weeks. Human impact aside, this will be a good test of market strategies and individual AA. It will also help us identify weaknesses, like supply chains overly dependent on China, that need fixing. Hopefully impacts will be low and learning high and this experience makes us, individuals and industries, better prepared for future catastrophes. We often make silly mistakes during good times but learn, adapt, and become more agile during challenging times. Ultimately, we prevail.

I did start raising a bit of cash over the past few months- more due to late market cycle than virus- and bought some TIPS recently but nothing too far from my normal AA. Will let you know how it goes.

Best luck as we navigate through Spring 2020.
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Old 02-23-2020, 11:56 PM   #45
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DW just went all cash in her retirement account. I disagree with her and am staying all equity in my retirement account.

We'll see soon enough who is the smart one in the family...

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Old 02-24-2020, 12:10 AM   #46
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It does not matter who's right as long as you stay diversified as a couple. I assume that you share.

One thing I like to use something like Quicken is that I can look at the aggregate of our accounts, and see what AA we are at as a whole.
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Old 02-24-2020, 12:58 AM   #47
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There may be a point at which the government can no longer prop up bad debt-ridden banks.
I think the Chinese Govt might be motivated to show that they can create more fiat money that we did in 2008...
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Old 02-24-2020, 12:59 AM   #48
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It does not matter who's right as long as you stay diversified as a couple. I assume that you share.

One thing I like to use something like Quicken is that I can look at the aggregate of our accounts, and see what AA we are at as a whole.
Strangely enough, in our 22 years of marriage, she has always been right about everything. I have no idea how that could be, but I am hoping to break her winning streak before I die.

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Old 02-24-2020, 01:10 AM   #49
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My wife trusts me to manage all of my, her, and our accounts. She's not interested in investment matters. To alleviate my guilt if I make mistakes, I make more conservative choices in her accounts than in mine. In the recent years of this bull market, of course my accounts grew faster.

My wife asked me why her accounts did not do as well. I explained that I used her accounts to hedge against my aggressive accounts, and she was fine with that.

Feeling a bit guilty when my account growth rate was so much higher, I started to have the composition the same by reducing tech stocks in mine, while increasing those in hers. But recently, I have cut back on both accounts to a less aggressive stance.
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Old 02-24-2020, 04:26 AM   #50
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I manage my DGF's account and mine (not to mention my parents/brother's accounts).
I keep the same composition in both our accounts specifically to avoid this type of questioning.
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Old 02-24-2020, 04:51 AM   #51
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This stuff is loose and spreading in Asia, Italy, Malaysia, possibly Africa, probably Hawaii, and I would guess in the lower 48. Sounds like a pandemic to me. The media and gubmint have done their best to keep the party going as long as possible ("just the flu, bro"), but I think the herd is starting to get the vague idea that all is not right. Pretty soon I think they are going to start to panic at real or imagined packs of wolves closing in. When that happens, the very overvalued market is going to have its reckoning.

As far as real world outcomes, there is a lot we really do not know. However, just with what we can see now, this new plague spreads very easily, consumes huge amounts of healthcare resources, and in the event that it becomes widely spread the death rate will rise a good bit because the healthcare system will quickly be overwhelmed. With that very definitely in the range of possible outcomes, how do we value equities? If quarantines and the cancellations of anything involving large groups of people become widespread, what will that mean for the economy? Exercises for the reader. I would suggest that merely including these possibilities in the range of outcomes should result in a materially lower price for risk assets.

I don't care to speculate on the truly awful outcomes (this mutates into something a lot worse). Just based on what we can see now, the valuation of the equity market mystifies me. I think cruise lines, hotels, airlines, movie theaters, restaurants, etc. and all at a huge risk if there are either enforced restrictions on gatherings of people or the populace (like me and many board members) simply starts avoiding these sorts of situations. If you don't see the world that way, I would welcome hearing your arguments why the sun will continue shining regardless of this new plague.

+1 but I would speculate that the virus would be able mutate into other strains. Happens with "flu" all the time. Also since there isn't a way to combat this effectively (yet) and the methods of transmission are not completely understood there is no telling how rampant this could be.



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Old 02-24-2020, 05:11 AM   #52
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From 2/24 NYTimes:

"Covid-19 seems to spread like influenza, through the air, person to person. Unlike Ebola, SARS and MERS, individuals can transmit this coronavirus before the onset of symptoms or even if they don’t become ill. An infected person appears to spread the disease to an average of 2.6 people. After 10 generations of transmission, with each taking about five or six days, that one initial case has spawned more than 3,500, most with no or mild symptoms, yet probably infectious. The fact that mild cases are difficult to differentiate from colds or the flu only complicates the diagnosis."

With outbreaks in South Korea, Iran and Italy, it appears this is now a pandemic. Markets responded today with South Korean and Italian stock indexes both down 4% and broader markets down 2-3%.
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Old 02-24-2020, 05:15 AM   #53
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I think I may go to a stronger cash position. And unlike the only other time that I tried market timing (y2k), this time it should be easier to recognize when to get back into equities - when the coronavirus news stops.
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Old 02-24-2020, 05:41 AM   #54
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I am definitely not an alarmist by nature - I stayed long through every reset in the stock market over the last 45 years ...

BUT, in non taxable accounts - tIRA and rIRA - is this a good time to be thinking about an "all out" move?
I've also been a non-alarmist. I was 100% equities since my first paycheck, through thick and thin. Until last year. I was 4 years from retirement at the time and decided it was time to started moving toward a more conservative allocation. I had started that transition.
But last week I really accelerated it. I moved ALL of my 401K into stable value. Here were my reasonings.

1. It costs nothing. No fees or tax consequences. The only cost is opportunity cost - if the market goes up while I'm out.

2. While my 401K is now 0% equities, I'm still almost 40% equities overall. That is more conservative than I had planned, but isn't stuff cash in the mattress crazy.

3. It seemed like we are at a tipping point with COVID-19, where it could be contained / burn out - or it could cause a pretty massive impact on the economy. It seemed like we would know which way it was going to tip in short order - a month or two. I thought I would rather just sit out for a month or two, and then re-assess. If the virus burns out and the market goes up 5% in the next month, missing that is not the end of the world to me.

Being a non market timer my whole life, I felt pretty foolish transferring so much to stable value. But, I'm at the point where I've "won the game", and really don't need to take the risk.

If I was my 30 year old self, I would probably have said just don't worry about it and let it ride.
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Old 02-24-2020, 06:11 AM   #55
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I think I may go to a stronger cash position. And unlike the only other time that I tried market timing (y2k), this time it should be easier to recognize when to get back into equities - when the coronavirus news stops.
Was thinking the same thing, since no tax consequences for me, but decided to stay put, besides the already 5.5% transfer to Tsy.
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Old 02-24-2020, 07:04 AM   #56
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I think I may go to a stronger cash position. And unlike the only other time that I tried market timing (y2k), this time it should be easier to recognize when to get back into equities - when the coronavirus news stops.
Not so sure about that. Even after the ¨news stops¨, it will take some time to know the total effect on corporate earnings.
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Old 02-24-2020, 07:15 AM   #57
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I went from 100% equities to 60% equities and 40% cash last week. Looked like it was a bad move early on, but I think that after today I will be ahead...

But I've got to figure out when to get back in. I'm considering adding back 10% back in after each 5% drop, but don't have a plan yet... In the end, I wouldn't be too worried either if I stayed 60% equities, but with retirement looming 5-10 years from now, it would be good to catch an updraft when that happens again.

Does anyone else have a good plan for when to add back in?
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Old 02-24-2020, 07:16 AM   #58
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Not so sure about that. Even after the ¨news stops¨, it will take some time to know the total effect on corporate earnings.
Hmmm. And I thought that I had this all figured out.
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Old 02-24-2020, 07:16 AM   #59
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Most flu seasons peak in February and end by April. I am not too familiar with Covid-19 enough to speculate that this will be the case, but if it is, then this may be a temporary situation.

For me, I haven't sold anything but I am taking my time investing a rather large cash position I already have.
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Old 02-24-2020, 07:20 AM   #60
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I went from 100% equities to 60% equities and 40% cash last week. Looked like it was a bad move early on, but I think that after today I will be ahead...

But I've got to figure out when to get back in. I'm considering adding back 10% back in after each 5% drop, but don't have a plan yet... In the end, I wouldn't be too worried either if I stayed 60% equities, but with retirement looming 5-10 years from now, it would be good to catch an updraft when that happens again.

Does anyone else have a good plan for when to add back in?
This is the stuff I was worried about at the beginning of Feb, but everyone was saying it was no big deal, just the flu bro. I tried my hand at shorting the cruise lines but they didn't crash. I bought puts on S&P500 and they dropped in value fairly quickly as the S&P500 went on to new highs and Tesla to $960, Microsoft to some trillion and a half or something. There were 100 more articles on Kobe's death than on the virus.

Turns out supply chains and world trade might matter.

I would add back in when the top 5 headlines are back to things the Kardashians are wearing.
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