Looks like the Party is over

[petershk]

Whatever anyone does... My own advice is to plan what you will do separately and well in advance of market behavior and news.

So if you want to sell when things "look like they will get bad" and buy when they "look good again" define bad and good, define what you will do and then execute.

Otherwise you won't be able to distinguish planning from emotional reaction... Your brain is great at making an emotional reaction SEEM like a great plan .

And then consider this... If the market is 10% off it's peak... And whatever plan someone has didn't sell AT the peak and that plan doesn't say to get back in now... At least partially... It sounds like the plan is more likely to sell low and buy high

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[Lcountz]

"And speaking of the 70s, we should now be running out of oil, rather than a worldwide obesity problem we should be having famines, with commodity prices through the roof. Not a joke, people were seriously certain of this and very fearful.
We now have different problems, but still the fear".


And before that, in the 1950s, people built underground bomb shelters.

And in more recent history....remember the Ebola panic last year? OMG we're all gonna die....get the masks, the soap, the suits, stay home don't travel AAAAAAAAGHHHHHHHH!!!!!!!

Ebola? Look it up if you forgot what it is. And that was just last year.

And one of my favorites, shrieked in loud strident tones: "Gold is going to $10,000.00 per ounce!!!!!!"

When the market was going UP UP UP, some of us heard "it's different this time".......

It wasn't.

Now it's going down down down, and some say "it's different this time"...

It won't be.

Besides.....Millions and Millions of Chinese are not going to want to go back to living in huts and eating cold rice and fish heads....they want a Sleep Number bed, a Buick , and ALL the electronic gadgets that the rest of the world is using...along with connectivity....they aren't going to go backwards.

Same for the India.

In 2008 I hid under the bed and cowered. Not this time. I'm going to DCA with extra cash I have, and, probably start this year's Traditional to Roth conversion soon, a few thousand at a time.

But I'll still keep cash for a two year cushion. Luckily, my pension covers all my expenses.

This too shall pass.

This time I'm going to be greedy while others are fearful!!!!

 

[UnrealizedPotential]

I think the party has been over for quite some time. It would not surprise me if we go down another 10-15%. No big deal. This movie has played before. Pass me the popcorn.

 

[eta2020]

I see party over for Oil and Gas driven economy of Russia.

Sanctions, low oil prices, Difficulties in China, Iran sanctions ending few hours ago, funding war in Syria a conflict in Ukraine, restarted Cold War style arms race...... Tomorrow Iran Oil hits the market and oil is likely going even lower.

Looks like Soviet Union in 1987-1988 . Even with PE 7 RSX does not look attractive.

 

[ziggy29]

In reality, this has the potential to make the USA the big winner. China is struggling. Russia will be crippled badly. The USA has a strong oil and gas industry but not nearly as dependent on them than places like Russia or the Middle East. The USA can weather a period of $20 oil. Russia can't. Saudi and Iran, among others, can't for long.

That said, I'm not doing much. I am starting to nibble on more dividend stocks in my taxable account with some "dry powder" now that we are in a 0% tax bracket for qualified dividends.

 

[eta2020]

https://upload.wikimedia.org/wikipedia/commons/b/b0/Crude_oil_prices_since_1861.png

Oil has a long periods of low prices a short periods of high prices.....not so with US Equities.
History of oil prices also applies to Bond yields.

 

[NW-Bound]

Hey y'all, I am back.

I just look at my stash, and figure that if the market drops to 60% of its current value (note that it is its and not it's) I would still have significantly more than what I did at the bottom of 2009. Wow!

I double-checked my arithmetic to be sure - as I have been drinking some merlot while waiting for my jambalaya to cook and may be a bit impaired - and the number was right. So, me worry?

The immediate problem is I have yet no travel plan for 2016 summer. Do I take advantage of the low gasoline price to RV to Alaska (must clear it by the missus), or do I spend a few weeks in Europe while the US dollar is still strong (do not need to clear this with the missus)? Can I do both? Now, this is hard logistically. What's a guy to do?

 

[Willers]

If you've been retired for several years this drop is nothing to be concerned about and you simply stay the course. However, we all know about the studies of sequence of return risk. For those who retired in December, I think it's the hardest.

This...

What most failures in Firecalc have in common is a poor early sequence of returns. An 8% drop in a couple of weeks isn't a great start. This will not, at this point, affect our long-term plan, but will if it continues for several years. Just because I know I shouldn't worry, it doesn't mean it isn't painful to watch.

 

[CaliforniaMan]

...

And before that, in the 1950s, people built underground bomb shelters.

...

Speaking of bomb shelters, attached is the cover from a magazine I kept, bought back in 1961. Lots of "useful" information on how to build and stock a home shelter and "survive" a nuclear attack. I remember going to see prefab bomb shelters with my dad, and seeing some front lawns torn up where they installed the shelters. Still remember the ventilation pipes sticking up from the front yard I passed on the way to school. Years later the pipes disappeared, never knew if the shelter was ever removed. These were really scary times. One of the things that helped kill the personal bomb shelter movement surprisingly enough was a Twilight Zone episode called "The Shelter." Everyone saw and was talking about it. Really brought home the insanity of the times. In the youtube video they interview Rod Serling about it.

 

[Moemg]

My parents had a bomb shelter in our cellar . Our cellar was creepy so the thought of months down there eating canned food was pretty awful.

 

[Live And Learn]

If you've been retired for several years this drop is nothing to be concerned about and you simply stay the course. However, we all know about the studies of sequence of return risk. For those who retired in December, I think it's the hardest.

Definitely not fun but a good reminder of why I did TMY to get me down to a planned initial WR of 3%. Hope for the best, plan for the worst.

 

[CaliforniaMan]

My parents had a bomb shelter in our cellar . Our cellar was creepy so the thought of months down there eating canned food was pretty awful.

We didn't have a cellar, but I remember keeping canned goods and supplies in a central hallway, that could be somewhat closed off from radiation. My father, a U.S. Marine at the time, didn't say much about it, but I think he thought it was pretty much a waste of time. If there were a nuclear war our little bit of food would not amount for much.
He actually took part in some of the atomic bomb tests at Yucca Flats (he said he was wearing dark goggles, but could still see the bone in his arm, which he held across his face). Then they marched close to ground zero. I remember as a young kid, collecting the sand from the cuffs in his pants when he came home, thought it would be cool to have some "radioactive" sand.

 

[Ed_The_Gypsy]

We keep supplies and have an earthquake plan. Much more likely; perhaps no different survivability-wise.

Sent from my SM-G900V using Early Retirement Forum mobile app

 

[papadad111]

But... two tons from older individuals?

I didn't say all older individuals. Just some .... Hence 1 ton.

 

[papadad111]

If you've been retired for several years this drop is nothing to be concerned about and you simply stay the course. However, we all know about the studies of sequence of return risk. For those who retired in December, I think it's the hardest.

Indeed. That's where having a withdraw rate closer to the average dividend yield of the market is helpful - while it does not negate ravages of longer term inflation, that strategy typically avoids liquidating down positions early on / short term and gives the market a chance to recover. Having a higher AA makes sense given the benefit of equities over bonds in higher inflation environments.

Based on all the sequence of returns risk assessment work I've seen, it's the very reason the 4% rule should never apply to early retirees, those in their 40s and early 50s... And why even 3% makes some earlier retirees very nervous due to SOR risk.

Now 2.5% or less is most survivable / sustainable for the first decade of retirement (again for those retiring in their 40s up to mid 50s) to mitigate SOR risks for those One to two decades out from the "guarantee" of SS.

 

[HadEnuff]

My parents had a bomb shelter in our cellar . Our cellar was creepy so the thought of months down there eating canned food was pretty awful.

My mom was a WWII refugee, in Italy. By 1960 she was raising me and my siblings in Cincinnati. We had a bomb shelter and a basement full of Spam. When the Cuban Missile Crisis resolved, we still had a bomb shelter, and a basement full of Spam, which we had to eat. Ugh! We could have written the Monty Python skit on "Spam, Spam and Spam" except we wouldn't have found any humor in it.

Meanwhile, back on topic: Stay the course.

 

[marko]

Every once in a while, I revive this old post I submitted:

"So, I’ve been thinking about this lately. Over the course of my life there were supposed to be all sort of calamities and dire warnings of doom and apocalypse. What I’ve learned in my 60 plus years is that nothing seems to ever be as bad as the ‘experts’ claim.

The fifties had us looking under our beds in search of Communists and spies.

The sixties had us digging bomb shelters in our backyards, stocking up on food and readying for nuclear attack. Hide under your school desk; you’ll be fine.
If that didn’t happen, we were going to be all starving from massive overpopulation (The Population Bomb) within 20 years.

The seventies brought us warnings about running out of oil. By 2010, all the oil was supposed to be gone and we were going to be living by candlelight and riding bicycles.
The ‘albedo effect’ was going to bring about global cooling not seen since the ice age, which, coupled to the demise of oil, one would assume we’d all freeze to death.
The Saudis were buying up everything and were going to own the entire United States.

In the eighties the AIDS virus was “a mere mutation or two” away from being able to be contracted as easily as the common cold or flu.
Acid rain was turning all our buildings into sand.
The Japanese were buying up everything and were going to own the entire United States.

The nineties saw us worrying about global warming, which then became climate change.

More recently, we had the BP Gulf oil spill which many billed as “the greatest environmental disaster in the history of mankind”.

I'm not saying that many of these issues did not impact certain people, but the severity and “end of life as we know it” never seems to materialize."

IMHO, the Great Recession was a blessing in a way.

For the first time in 80 years, (almost) the worst happened. And yet, here we are; after 5 years, most of us (those who didn't panic) made our money back and likely made a ton more.

Throughout the trough of 2008-2010 my dividends (sorry mathjak) kept me whole financially and my lifestyle during that period didn't change one iota.

Now if you thought "this time is different" and sold on the 3rd week of February of 2009 (like my smarter-than-you neighbor), well..........

 

[DrRoy]

The problem with getting out of the market is timing the back in part. Many investors can get out in time, very few can get back in. There is always a case for going lower. Many retail investors are still out from 2008.

Maybe get out, wait for a 5-10% drop, and get back in. Maybe we are already at the bottom, and you get back in over where you got out.

I am going to rely on 130+ years of market history and stay the course. I will continue to invest my ~$10K a month until I retire this year. Then only $5K a month for a few years.

Dividends are still steady, and reinvested. If this economy makes for a bad market, imagine when things really go bad...

This is probabaly closest to where I am at on this. The weak market does not make me feel good, but I know that I cannot figure the right time to get out and then also the right time to get back in. I do have a general plan to slowly reduce my equity AA over time, which I did on Jan 4 from 75 to 72 regardless of the market that day.

Lastly, RBS says sell everything and other Doomer's are jumping on the bandwagon.

If it's really true that sentiment is at the maximum low, then no one is left to sell and the only way remaining is up. I don't try to guess that either on catching the falling knife.

 

[papadad111]

Have not seen the stock market or oil calamity appear on Time or Newsweek cover. When that happens, I'll know the correction or bear is about over

Just as I know we were a bit over valued when a barber was telling me what hot stocks he liked.... Literally 3 weeks ago.

Just as I knew to steer clear of big oil when a united flight attendant told me during a long haul flight last spring that she was "all in" on big oil and stock trading was her hobby ...

Just follow the street sentiment... And run Forrest .....run ....

 

[eytonxav]

If your 30% equity exposure is making you think of running for the hills based on a correction (or even a possible future recession), perhaps you should revisit your allocation and lighten up.

 

[ziggy29]

If it's really true that sentiment is at the maximum low, then no one is left to sell and the only way remaining is up. I don't try to guess that either on catching the falling knife.

I haven't quite seen a "Death of Equities" moment in this downcycle yet. When I see that I'll be convinced we're close to hitting bottom....

 

[Corporateburnout]

If your 30% equity exposure is making you think of running for the hills based on a correction (or even a possible future recession), perhaps you should revisit your allocation and lighten up.

+1.

Or invest mainly in TIPS like other risk averse people on this board.

 

[bclover]

I see it as an opportunity to once again practice doing what I do best - nothing.

Anyone can put together a laundry list of "why we're doomed" topics, but I won't be convinced that's true until I look up in the sky and see the asteroid first hand.

Attempts to try to "avoid the coming financial disaster" often end up having investors zig when they should have zagged. My experience is the wisest move is staying still.

So I have two more months until I am officially retired. 3/31/16 My company has ask that I drop down to part time for 6 months which I agreed to.

Anyhoo,
My AA has been sort of modeled after the "bucket" method. I have an immediate need bucket, which is a years living expenses in a money market fund.

Since I am only 55 I do have a long term bucket with 65% equities. I'm not making any changes since this bucket will hopefully not come into play for another 20 years.

LOL this maybe one of the times when being a new comer is a good thing. I don't know enough to "time" the market.

 

[audreyh1]

Anyhoo,
My AA has been sort of modeled after the "bucket" method. I have an immediate need bucket, which is a years living expenses in a money market fund.

Money market fund? Just wondering why use an uninsured, minimal interest rate vehicle to hold a years worth of funds when there are FDIC insured options around that will pay you around 1%?

 

[Spanky]

I know he has to be an intelligent guy, BUT... Yes, my head spins watching the entertainment show... It treats each days advise, like he never said anything the day before... Or emphasizes what he says he said last week, but was opposite of the day before.. His selective memory is better than mine!


Sent from my iPad using Tapatalk

No one should take Jim Cramer seriously!