Down Day in the Market !

[Chuckanut]

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Originally Posted by haha I have no idea what will happen, but stocks on sale? Not to this cheap-ass shopper. I do have dry powder, but not for deployment here or anywhere near to here.

Agreed. It's as though we were paying the full MSRP for an item, and suddenly some renegade company starts selling it for 5-10% under MSRP. A better price, but certainly no deal. I may nibble when I can at least get a Costco price or, even better, a "we made far to many of these things and the inventory costs are killing us" price.

[copyright1997reloaded]

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Originally Posted by NW-Bound In the long run, stocks have been proven to outperform other assets. So, why not be 100% and call it quit? Obviously, one needs to have some money set aside for rainy days. But instead of having a certain percentage in cash, how about having a certain dollar amount that is tied to one's needs. Or if one has plenty of assets, there's no need for any cash. I am thinking of an argument for a higher stock AA, not lower. PS. There are posters who are not in the accumulation phase yet are 100% in stock.

Interesting thought, and I've been pondering this over the last six months. Once one has a certain amount in cash/bonds that can produce a certain income flow, why have more? That is, if you have enough income from the fixed income specified term investments, let the rest ride in equities. For me, that realization came when my pension plus 4% from cash/fixed plus social security was enough (if needed) to satisfy a budget (if I were to actually have one).

[NW-Bound]

In my case, last year's expenses were 2.5% WR. That is just a bit more than the S&P dividend. If I draw SS early, between SS and dividend I would not need to sell principal at all. I could be OK with 100% in stocks.

The portfolio volatility would be a lot higher. But for a Lamborghini that you lose in bad years, you gain a Rimac in good years. You still need a strong stomach.

But then, you do not have the fun of trying to sell high/buy low, er, rebalancing.

I dunno. Something seems or feels wrong.

[donheff]

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Originally Posted by haha I have no idea what will happen, but stocks on sale? Not to this cheap-ass shopper. I do have dry powder, but not for deployment here or anywhere near to here. Ha

I might start buying in dribs and drabs when we hit -20%. I suspect that won’t happen in this round so I will just sit tight.

[gayl]

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Originally Posted by Another Reader That's a good pension. Did you work for CoCo County?

yeah but maybe I was misunderstood? My 457 was 80k in 2008. My pension just hit $33,935.80 last year (2017) so although it gives plenty to live on, it's not exactly one of the more lush ones out of Coco County. Still enables me to save / invest 1250 month bc I left after paying off house.

Are you another Coco Co retiree?

[Mdlerth]

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Originally Posted by Running_Man I just saw a segment on CNBC they went outside and asked random people on the street what they thought, not differnt passerbys said 1) It always goes up in the long term so I am not worried 2) It was a bubble everyone knows the stock market was in a bubble so it will go down but it will come back it always does. 3) you must think of the long term it’s what Warren Buffet always says 4) the majority of people don’t think long term, I do and will not sell The level of complacency is so high this is going to be a bad downfall, I change my forecast to at least a 50% decline based on the antedotical evidence I see

I don't follow this reasoning at all. Your four excerpts all seemed like mature assessments; isn't this how you would want people to react?

In the long past, market declines and liquidity shortages used to trigger crazy behaviors which would cause the very catastrophes they wished to avoid. That's why they called them "Panics". (The term "Depression" was coined because our leaders were trying to avoid the word "panic", fearing it would lead to civil unrest.)

When most people do NOT panic, why isn't that an encouraging sign?

[Running_Man]

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Originally Posted by Mdlerth I don't follow this reasoning at all. Your four excerpts all seemed like mature assessments; isn't this how you would want people to react? In the long past, market declines and liquidity shortages used to trigger crazy behaviors which would cause the very catastrophes they wished to avoid. That's why they called them "Panics". (The term "Depression" was coined because our leaders were trying to avoid the word "panic", fearing it would lead to civil unrest.) When most people do NOT panic, why isn't that an encouraging sign?

First of all depression was used centuries ago to accurately call a downturn in the economy as a depression - it was only after 1930's that politicians feared a depression would signal upcoming despair that recession was born. Panics were always used to call short term sharp drops in the market.

If no one is afraid of drops and the stock market drops anyway, that means a level of selling by weak hands has actually not yet begun. Eventually levels get hit where confidence is eroded and people feel all the years of saving is going down the tube and sell to keep something. At the point where everyone "knows" the stock market is too risky stocks are a very good buy. It is easier to pick these points out over tops but the action I see means this was a very big top requiring a big drop to shake overwhelming complacency out of the market.

[W2R]

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Originally Posted by frayne HOLY COW, said tongue in cheek. It is kind of funny and we all expected it but I have to laugh at the talking heads on the boob tube trying to explain away the reason for reversion to the mean.

Yes, Holy Cow indeed!!! And OMG, here we go again today - - the Dow is already down over 300 points this morning. Pass the popcorn. This is amazing to watch.

[Rickt]

Now NASD is also in the correction territory <10.1%>
Looks like we are heading down some more.........

[HadEnuff]

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Originally Posted by MichaelB I think rebalancing is something one does to maintain a specific risk profile in the portfolio. It does not feel good, because it involves selling assets that have performed well to buy assets that have not. Behaviorally, it is contrary to one's instincts, so it feels bad, but it is a critical success factor for portfolio survival. How does it help to continually quantify the current loss in value? Doesn't this just open the door to reacting in some way that is not part of the plan and becoming part of the herd?

I think for some of us it has just the opposite effect. Joking about stuff we wouldn't buy anyway, and sharing the joke with others, whose investment savvy I've come to respect, helps me to stay the course.
I knew this was coming, but not when. I have had a plan in place for years for this occurrence. Now that the sh!t is hitting the fan, I have to trust the plan.
I wasn't going to ever buy that Porsche anyway.

[NgineER]

I've had cash sitting on the sidelines too long and buy orders I set up are starting to fire off, -10% have hit, next -15% and -20%. Maybe I am too enthusiastic, time will tell.

[Mdlerth]

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Originally Posted by Running_Man First of all depression was used centuries ago to accurately call a downturn in the economy as a depression - it was only after 1930's that politicians feared a depression would signal upcoming despair that recession was born. Panics were always used to call short term sharp drops in the market.

A brief history of economic euphemisms from the NYT:

https://www.google.com/url?sa=t&rct=...x-P68dvbAblE2n

The circumlocution industry continues its vertiginous augmentation.

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If no one is afraid of drops and the stock market drops anyway, that means a level of selling by weak hands has actually not yet begun.

Is this really true? Surely the weakest hands are the first to sell. And if the market drops further but no one who's left is afraid of drops, what would prompt them to sell (and thereby pile on the panic)?

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Eventually levels get hit where confidence is eroded and people feel all the years of saving is going down the tube and sell to keep something.

This makes sense. But still I don't see this exhibited in any of your excerpts.

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At the point where everyone "knows" the stock market is too risky stocks are a very good buy. It is easier to pick these points out over tops but the action I see means this was a very big top requiring a big drop to shake overwhelming complacency out of the market.

Perhaps it isn't "complacency" being shaken out as much as it's just a routine reversion to the mean.

[Amethyst]

We still need stuff done on the house. If this is a real downturn, maybe contractors will start returning calls. Dead people's used jewelry might come down in price too. (I returned a 1940's necklace I received for Christmas, and lo and behold, it came back up on the web site for more than the cost to buy it for me).

[easysurfer]

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Originally Posted by W2R Yes, Holy Cow indeed!!! And OMG, here we go again today - - the Dow is already down over 300 points this morning. Pass the popcorn. This is amazing to watch.

Down over 400 points as I type. Might run out of popcorn.

[Rickt]

I thought bonds were going to rise when the stocks drop.....but why are the bond funds going down (although not as much) as well along with the stock funds?

[NW-Bound]

Higher interest rate and inflation will mess both of them up, although at this point I'd rather have the drop of bonds than stocks.

[Free bird]

Were all in the feds petri dish.

[Running_Man]

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Originally Posted by Mdlerth Perhaps it isn't "complacency" being shaken out as much as it's just a routine reversion to the mean.

If this is your view, I believe you are in the majority position, probably 95%+ investors agree with you.

The type of drop that has occurred though is far from routine after an unprecedented historical uptrend with no declines as every small decline was met with buying and new highs , and the reaction that I find as bemusement and a total lack of concern indicates to me it is an unhealthy view of the stock market that is going to result in severe punishment for the average investor.

[NW-Bound]

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Originally Posted by Free bird Were all in the feds petri dish.

Powell has not said anything yet. Is it just what investors think he will do?

Maybe the market rout will scare enough spenders so that inflation remains tame. Then interest rate will not have to be raised, and the bull market party continues?

How cruel is it that when investors get money from the market, the moment they want to "blow some dough", they get punished? You can have money, but you cannot spend it.

[Free bird]

Zirp experiment has unknown consequences.