Market correction anxiety

[IMATERP]

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Originally Posted by audreyh1 December rate hike is almost guaranteed. Today’s strong jobs report and wage increases make it almost certain. Interest rates are making a large move up today.

Maybe a half a point. The Fed is capable of bringing "the Don" down.

I

[NW-Bound]

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Originally Posted by marko I tape the 50 year Dow trend on one wall of my living room. Then I walk across to the opposite wall. My eyesight isn't great but what I see is a steady upward trend with what I think are ups and downs along the way.

Yes. But not many of us still have 50 years left to live.

In fact, having to "sell low" to get money to cover our living expenses kind of sucks.

[Free bird]

When the fed raises in Dec I will have bumps & maturing to invest at a higher rate. At some point savers will be back in vogue

[marko]

Quote:

Originally Posted by NW-Bound In fact, having to "sell low" to get money to cover our living expenses kind of sucks.

That's one of the reasons we like to keep 2+ years expenses in MM

[marko]

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Originally Posted by haha I would sure like to meet the god or goddess who could be comfortable with a 90% stock hit. Ha

It depends on how long that 90% drop stays down there. As noted I was down 40% at the end of 2008 but by June was feeling a lot better.
I would personally view a 90% drop as a once in a lifetime buying opportunity.
Having said that, I think such a scenario is unlikely.

[Free bird]

I'm sure they considered a 90% drop unlikely in the 1920s

[marko]

Quote:

Originally Posted by Free bird I'm sure they considered a 90% drop unlikely in the 1920s

Likely not, but my grandfather didn't sell at that time and made out much better than his peers.

In fact the house I'm living in now, he bought for pennies on the dollar as a foreclosure in 1932.

But is this what this discussion is about? I thought we were talking about a 'market correction' not a 1929 style Depression.

[Free bird]

How old was grandpa when he bought your house? Probably a young man.

[marko]

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Originally Posted by Free bird How old was grandpa when he bought your house? Probably a young man.

Early 40s but not sure how that means anything.

[Free bird]

Age matters. I know it does for me.

[Free bird]

But your right destruction does bring opportunity to some.

[marko]

Quote:

Originally Posted by Free bird Age matters. I know it does for me.

Then we're talking about something more than a market correction, right?

[Free bird]

Maybe. You brought up the fact that your grandpa bought a house someone lost.

[marko]

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Originally Posted by Free bird Maybe. You brought up the fact that your grandpa bought a house someone lost.

Well, he bought a half dozen or so but it was almost 90 years ago and we're way, way off topic now.

[RenoJay]

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Originally Posted by ERD50 You can be as bearish as you want, it's just an opinion, it doesn't make me 'sick'. I like to hear different viewpoints. But when I go back and look at charts, I just really don't feel confident that I can pick an exit, and then a re-entry point below that exit. It's easy to see in hindsight, but what if a few years later, the market is 10% below your exit - do you jump in, or wait for 12%, or 15%? What if 12% never comes? The market could just go mostly sideways for a long time, until valuations catch up. I've decided to buy and hold, because I follow this stuff! -ERD50

It's possible that we get a longterm sideways market, but highly unlikely. People often refer to the 18 year sideways market that ended around 1982 where the Dow touched 1,000 at the beginning and the end. (I may not have the dates exactly right...I'm quoting that from memory.) But it wasn't really sideways....there was a severe dip in the middle. Same with the "lost decade" from 2000 to 2010.

If the market only ever dips 10% and then goes sideways for a long time, my metric will be valuations. When things like CAPE, MarketCap to GDP, etc. come within a stone's throw of historical averages I'll get back in. In the interim, I'll be making money with fixed income. If, as I expect, there's a serious drop in the market, I'll start dipping my toes in around -30% from peak to trough, and then will start adding a lot more if/when the dip goes deeper. My metrics have to do with total market cap vs. observable, fairly static metrics like GDP, and currently, I see a lot more opportunity for downside surprises than upside surprises. I believe the broad market is roughly 100% over valued currently. (i.e. a drop of 50% in the S&P 500 over a few years would not shock me.)

Again, time will tell, but as you may have noticed I changed my signature today. When I stopped and thought about it, I've made virtually ALL my money by foreseeing the dotcom bubble then the housing bubble and finally the opportunity during the Great Recession. (In the former, I owned minimal stocks but started a dotcom and made good money from other people's exuberance. In the next, I sold my house and rented for years, but created a website that sold leads to Realtors and made a lot of money. In the current bull market, I pretty much went "all in" to index funds very close to the bottom and am now getting mostly out. I may miss the last run up, but I'm happy with the return from the past 10 years.)

I'm reasonably confident that now we're in the "everything bubble" which was inflated based on unsustainable zero interest rate policy that was held too low for too long and led a lot of people to buying risk assets they otherwise wouldn't have purchased since they couldn't get any yield on savings. Time will tell, but the fact that most people are not nervous in the least is one of my contra-indicators for why I'm bailing. To quote Warren Buffet: "When others are greedy, be fearful." (I'm not trying to imply buy and hold is "greedy"....just that it's certainly not fearful.)

Again and as always, I wish nothing but the best to all those who disagree with me. Time, not our opinions, will tell.

[oscar1]

I sense a higher degree of pessimism in the room than normal. I realize those with less rope left need to be concerned about the swings but most of you don’t if you manage it right.

https://www.macrotrends.net/2324/sp-...cal-chart-data

[copyright1997reloaded]

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Originally Posted by RenoJay People in this forum are probably sick of my bearishness, but I fully expect we are rolling mostly down for a long time. The reason is that by many measure, the US stock market is severely over valued. Valuations don't matter....until they do. Then they matter with a vengeance. Elections, international relations, etc. all matter for short term return. But for long term, valuations matter. A LOT! We very well may have another short term run up, but in reading 10 year forecasts, I find very few credible observers who predict anything better than extremely mediocre returns over the next 10-12 years, including Vanguard. Personally, I've sold out most of my equities (and am enduring enormous capital gains taxes to do so) on the expectation that sometime in the next five years, there will be a significantly better entry point back into equities. I think for people who prefer not to follow this stuff, a buy and hold forever mentality is ok, but I think they'll be very underwhelmed looking at their account statements a decade from now.

So, why not go short to offset your long positions in similar but not equivalent holdings. Even better, if you are so sure we are headed significantly lower, short w/leverage.

[RenoJay]

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Originally Posted by copyright1997reloaded So, why not go short to offset your long positions in similar but not equivalent holdings. Even better, if you are so sure we are headed significantly lower, short w/leverage.

It’s an interesting idea but I’ve never shorted or done puts or calls or anything like that so I don’t know what I don’t know. (And I don’t use leverage with anything. I feel more comfortable when the most I can lose is what I pay for something.)

[revhappy]

Quote:

Originally Posted by copyright1997reloaded So, why not go short to offset your long positions in similar but not equivalent holdings. Even better, if you are so sure we are headed significantly lower, short w/leverage.

I don't think it is a good idea to go short to offset longs. You hold up a lot of capital and it doesn't produce any return. Might as well sell the longs and put it into some money market or very short term bonds funds and earn some interest.

[marko]

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Originally Posted by oscar1 I sense a higher degree of pessimism in the room than normal. I realize those with less rope left need to be concerned about the swings but most of you don’t if you manage it right.

Agreed.
This year has been completely flat and October has been horrible, but taken over a longer view it's 'just a bad year' IMO.

More worrisome times ahead? Possibly, but I just don't see Armageddon on the horizon (but what do I know!)

Corrections, slowdowns and recessions come and go as a part of market life. 2015 was a similarly flat year, at least for me, but '16 and '17 made up for it and then some.

I supervised salesmen most of my career who might make $700K one year and $70K the next. They learned quickly how to balance out the lumpiness and tended to talk in 3 year chunks rather than what they made Jan to Dec.