Never fails in a down market: people fled in droves

[NW-Bound]

Article in Bloomberg:

"Retirement savers violated a cardinal rule of investing this past week: they sold into a plunging market.

After racing into equities in January, they did an about-face as markets fell on Friday Feb. 2...

On Monday, when the Dow Jones Industrial Average plummeted 1,175 points, they repeated the pattern, this time trading at 12 times the typical pace...."

See: https://www.bloomberg.com/news/arti...s-fled-equities-as-markets-sunk-and-recovered

Now, some brokerage Web sites were swamped and people could not get in. The selling would be worse if they all could.

 

[Perryinva]

Amazing. Let’s just lock in those losses.

 

[Breedlove]

OUCH ! Life is not so good .

 

[NW-Bound]

Not necessarily losses. If they have been in the market for a while, they would have some gains. They would think of it as "harvesting some gains".

Except for people who just got in recently, the rest may be simply "rebalancing" en masse.

 

[Lawrence of Suburbia]

I learned my lesson in '08. Thankfully, only took about 25% of my portfolio to cash, and got back in in '10 or so. Wasn't ruinous.

 

[ejman]

FOMO - works both ways I guess...

 

[NW-Bound]

I learned my lesson in '08. Thankfully, only took about 25% of my portfolio to cash, and got back in in '10 or so. Wasn't ruinous.

I did take a lot of cash out in 08, but I got back in in early 09. I did quite all right.

Being an active investor, I was getting out of economic sensitive stocks. Though they were not financial stocks, I could not help seeing them dropping more than the S&P. No point to hang on. But I did not want to buy in some other sectors right away.

Lucky, I guess.

 

[jazz4cash]

I'm afraid that anyone that couldn't get in to sell would eventually get and stay out. I wonder if they even realized they were selling at an unknown price.
Back when MegaCorp rolled out their 401k, you could only sell on the 15th or last day of the month. That was probably not a terrible policy. Eventually you could sell anytime but a few funds had short term trading penalties, mostly international funds held <90 days.

 

[Lawrence of Suburbia]

Learning from your mistakes is good;
Learning from someone else's, even better.

-- Warren Buffett

 

[NW-Bound]

Unarguably true.

However, you remember the lesson better and appreciate it more if the price for it is higher.

 

[Lawrence of Suburbia]

I paid ...

ONE HUNDRED THOUSAND DOLLARS!

(Said in Dr. Evil voice.)

 

[Running_Man]

I am not ready for implementing action for major guessing of market action to reduce my stock holdings below my 25% lower limit I am at, but looking at the market and what occurred over the last week I do not think people that sold this week are the sellers that will get hurt, those sellers are most likely 12-18 months away from selling. I am going to be shocked if the DOW is not below 22,000 in the next 2 weeks (2400 or so on the S&P 500). Moves this violent and this quick after a historically long quiet period --- brought about because of the volatility index products -- I think will not stay here long. These moves usually end up having very strong follow through.

If this is just a spike down and full recovery I will be very happy to have that occur, but the level of complacency is just too high in my book. Despite the post quoted above ---
Fidelity said their retail customers were buying not selling. I have contacted 18 people that I know are invested in the market and 6 purchased more, 4 are waiting to fall a little further to buy more and none sold.

https://www.cnbc.com/2018/02/05/fidelity-says-it-saw-no-panic-among-its-customers-and-more-buying-than-selling-during-the-plunge.html

 

[MRG]

You folks are ALL talking about the market. Did something actually happen?

 

[RobbieB]

I dunno. I'll find out next month.

 

[DanP]

I dunno. I'll find out next month.

Excellent viewpoint!

 

[NW-Bound]

You folks are ALL talking about the market. Did something actually happen?

Just that a lot of people decided to rebalance on the same day.

Like a flash mob, they jammed the brokerages and flooded the market with sell orders. How did they coordinate that? I mean the stock sellers, er, rebalancers, not the dancers.

 

[Free bird]

9 years of bull market without a real correction. Churning accounts is how the brokerages make the money. You never go broke taking a profit. Its in the brokerages to churn baby churn. Or as Sarah would say drill baby drill.

 

[JDARNELL]

I think its good that some people ran for the exits. We need people out there saying how bad the market is to keep the irrational exuberance from returning.

 

[haha]

Churning accounts is how the brokerages make the money.

Not so sure of this. I have had a discount brokerage account for over 40 years, and I have never had a rep call me and suggest a trade. So they sure aren't trying very hard to churn me.

Ha

 

[jazz4cash]

Not so sure of this. I have had a discount brokerage account for over 40 years, and I have never had a rep call me and suggest a trade. So they sure aren't trying very hard to churn me.

Ha

They've probably figured out it would be a waste of their time.

 

[RobbieB]

I've got a full service broker and the guy never calls.

What is this "churning" you talk about?

 

[NW-Bound]

I think its good that some people ran for the exits. We need people out there saying how bad the market is to keep the irrational exuberance from returning.

I kind of like irrational exuberance, so that I can sell some more shares. When it crashes, I can buy them back.

If the market just rises steadily at 5-6%/yr at the long-term growth that Bogle says it should have, I would not get to sell or buy anything. Just hold. It's OK. Just no excitement and no fun.

 

[hgm735]

I learned my lesson in '08. Thankfully, only took about 25% of my portfolio to cash, and got back in in '10 or so. Wasn't ruinous.

2008 was ruinous for me - took almost all of my savings out.

Now holding tight and not panicking. ...

 

[dixonge]

9 years of bull market without a real correction. Churning accounts is how the brokerages make the money. You never go broke taking a profit. Its in the brokerages to churn baby churn. Or as Sarah would say drill baby drill.

Brokerages make a good bit of money on churn, this is true. But it's not anything they have to work that hard at. It's built into the system. Investor psychology. They just keep up a steady flow of 'news' articles aimed at their clients. That's all it takes. Otherwise, how did they make any money over the last 9 years?

 

[DrRoy]

2008 was ruinous for me - took almost all of my savings out.

Now holding tight and not panicking. ...

Good for you. NO MARKET TIMING!