The market that goes from suck to blow...

[cute fuzzy bunny]

I'm a dirty market timer too! And I like it

But remember...you only lose money if you sell when things are down.

If we're not in year 4 or 5 of a long term bear market and you're forced to sell and take a loss in order to pay the bills, you need a different strategy.

Holders of high income asset classes should be able to pay the biils from their regular dividend checks (right Unclemick?); holders of high equity/low income classes in large amounts should have a cash buffer sufficient to handle at least a 3 year downturn.

Downturns also bring about another nice side benefit, if the downturn is long and hard enough...converting IRA's to Roths. So that when you hit 59.5 you get to be ticked at the govt for one more thing as they've implemented a flat sales tax to replace the income tax

 

[grumpy]

Suggestion:

If you expect (or fear) a long term flat market, then consider buying stock in companies with good dividends and a history of increasing their dividends. If you reinvest the dividends (at flat or falling prices) you will still eke out some gains and when the markets eventually take off again you will be holding alot of shares with a low cost basis.

Grumpy

 

[unclemick]

Ah yes

A nice 5000-6000 point drop in the Dow plus a long interest jump of 4% or so would restore the glint of greed in my eyes.

Then - the current yield wouldn't be bad either. Plus it would provide seasoning/education for people interested in stock/bond investing.

I suspect more of a sideways muddle for a while as rates slowly grind up. Of course, I've been wrong many times before.

 

[Bookm]

I suspect more of a sideways muddle for a while as rates slowly grind up. Of course, I've been wrong many times before.

You're in good company along with John Mauldin having that belief, unclemick.

Bookm

 

[Martha]

My husband reads John Mauldin. Who is this guy?

 

[BigMoneyJim]

Greaney (Intersct), left his employment at age 38 with a ----load of stock options, and continued investing those proceeds into the most dynamic tech mkt. anybody on this board will ever see. (Realizing, of course that it only looks easy in retrospect, however the potential was there).
While I agree that the thought of early retirement is good as a "character" builder, and is helpful in not allowing Madison Ave. to take over your life, there are times to get real.
Anybody on this board under the age of 50 has never experienced anything in the stock and bond markets, except having the wind at their backs. (All accomplished with a relatively low inflation rate.)
It is little wonder that twenty somethings, with a family to take care of can get discouraged when their goal is early retirement. (Especially when they tune in to this board, and are bombarded by all the "success" stories.).
INMHO, going forward, (for the twenty somethings), focus on your careers, family life, and living within your means. My guess is that you will have to adjust your "very early" retirement ideas. (If you are counting on the stock and bond markets alone to accomplish this for you).

Great words. It's been a few months, but my dreams of retiring at 45 fell off a cliff when I forecast my portfolio based on 3%-6% real returns. And I thought I was doing well for my age. I'll be a lucky man if I can retire at 50, and I occasionally wonder if I can do it by 55.

But that's okay.

 

[ak4195]

SOUP,
There are other ways,the mutual fund industry is based on one underlying theme."You are a sheep,to dumb to know,buy n hold,oh and heres my management fee."Equity indexes have VERY seasonal patterns,by being long during these specific times that are statisticly proven,you can easily get a years worth of gains with a minimum of 1/2 the risk(in terms of time).The safest option is to be flat the rest of the year,more risk would be short,but theres really no need imo.
these seasonal patterns are established by the very same people who are telling you to buy and hold,that includes bogle.Buy n hold helps THEM manage money,less so you.Its fine for the retired here who invested in the '80's or earlier and rode the biggest bull market so far in human history,and can sit back on there laurels,and theyve deserved it.but show be one buy n holder who started in 2000 and is at a minimum back to break even with this farce.Soup,google up Sy Harding,iF this tweeks your interest,wait till early sept before getting a trial subscription,youll understand by mid to late october why.You could even just devote a % of portfolio to test the waters,prove it for yourself.
Im sure im stepping on toes here ,but thats not my intent(well ok maybe it is a bit).But there are better ways to manage risk,buy n hold is not risk management.

 

[BigMoneyJim]

Ouch ak4195. Don't hold back, tell us what you really think.

I'm not fond of others calling me dumb or sheep, but I often justify--at least to myself--that I'm better off buying and holding index funds since I'm not sharp enough to outplay nearly everyone else in the market.

As far as seasonally proven cycles, there are definitely at least a few sharp people out there. Does their buying and selling power not counteract the sheep cycles?

by being long during these specific times that are statisticly proven,you can easily get a years worth of gains with a minimum of 1/2 the risk(in terms of time).

"Lies, damn lies and statistics." Pretty much sums up my view on them. But just for grins, do you have a link?

but show be one buy n holder who started in 2000 and is at a minimum back to break even with this farce.

Beter even than having been in cash! Assuming you buy the same stuff I buy. Now whether the money was better spent or invested could be an interesting discussion.

 

[cute fuzzy bunny]

Anyone for a sheep with a pancake or two on its head?

BAAAAAAAAAAAAA!!!!!!!!!!

 

[Jarhead*]

Ah yes

A nice 5000-6000 point drop in the Dow plus a long interest jump of 4% or so would restore the glint of greed in my eyes.

Then - the current yield wouldn't be bad either. Plus it would provide seasoning/education for people interested in stock/bond investing.

I suspect more of a sideways muddle for a while as rates slowly grind up. Of course, I've been wrong many times before.

Unclemick: How would a drop to 5,000 in the Dow be a good thing for you. As I understand it, you are basically a buy and holder. If we dropped to that level, I would imagine you would have a large loss in your portfolio. Where is the new money coming from to follow through with being able to exploit this situation.?
I could understand it if you were on the sidelines with a s---pot full of cash, but in your situation it is puzzling.

 

[unclemick]

After the little 1987 blip, I switched 401k from 50/50 stocks/fixed to 100% stocks and held thru 1992. My big mistake (in hindsight) was Lifestrategy mod a quasi 60/40 - but I expected to do a 72t - which wasn't needed as it turned out.

Now that I'm not working I might slowly edge my 60/40 postion toward 80/20 depending on yield on both sides.

If someone gives me a working crystal ball - I  would sit in Target - Income and move up the series scale as conditions warrant.

On paper I will be 'less rich' but with a better income stream and prospects.

In the end - I will probably do nothing - except maybe lower stock as I age. The RMD thing is getting closer - 9 years.

 

[haha]

I am not sure what will happen in the market, but I am pretty sure what will happen on this board if stocks don't continue up, or muddle, or do TH'd Mini-Bear, but instead they do the big old Papa-Bear that they sometimes do so well.

Ladies and Gents, the shite will be so far into the fan that you won't be able to see the walls around here.

Saying a bear market wouldn't bother you much is like saying you wouldn't be too upset if your wife is having an affair. "It could bring us closer together..." Just wait till you catch that dirty #@-+% in the act!

Same with a big bear. You feel like somebody hit you in the stomach, hard. It's hard to concentrate on work. You aren't near as horny as you used to be.

This is not something to blithely sail into if you have any feeling that at least the worst of it can be avoided.

Right now, I have in cash and short notes about as much as I had total assets roughly 6 years ago. But I will still feel awful if I see a big loss in the equities that I do hold. You want the other guys stocks to go down, so you can buy them cheap. What good does it do you if your stocks go down? Unless you have so few that it is immaterial.

My equities are supposedly in uncorrelated sectors-energy & oil service, gold, foreign and domestic tobacco and consumer products companies- in close to equal amounts except less in gold.

Still, the last few days everything went down. Greenspan says we should worry about inflation, raises rates a paltry 1/4 %, and still gold and energy stocks go in the toilet.

We may all be about to get a lesson in past non-correlations vs. future correlations!

Hey, just my 2 cents!

Mikey

 

[unclemick]

Sigh!

Dividends and interest are real money - Mr Market is just plain old market fluctuation.

Of course your right Mikey - talks cheap - stiff upper lip and steady on (to mask frayed nerves) - might be harder to come by - but the market doesn't ask for my vote - and low cost balanced index has exceeded my string of victories and defeats in personal forays by a wide margin over thirty years.

My hat is off to all of you heh, heh - 'dirty market timers'

"You are a better man than I am Gunga Din."

 

[haha]

Sigh!
Dividends and interest are real money - Mr Market is just plain old market fluctuation.

UncleMick, I agree wtih what you are saying in the quote above. But just sticking to the dividend topic, and my own current situation, I bought UST at an average yield between and 9 and 10%, about 5 years ago.
Dividends have increased roughly 25-30% since then- but the stock price has almost tripled. Would I rather hold, and get my 4% dividend increasing about 5% a year, or would I rather sell and see if Mr Market doesn't again get the tobacco willies? Or some other fainting spell?

I know I would not buy any of my tobacco stocks at their current quotes. Should I perhaps let someone who wants them more have them?

So for me, at least, even the presence of apparantly secure dividends doesn't necessarily make the case for holding.

I respect your point of view, and I realize it comes form experience. Thanks for your comments.

Mikey

 

[Cut-Throat]

Saying a bear market wouldn't bother you much is like saying you wouldn't be too upset if your wife is having an affair. "It could bring us closer together..." Just wait till you catch that dirty #@-+% in the act!

Same with a big bear. You feel like somebody hit you in the stomach, hard. It's hard to concentrate on work. You aren't near as horny as you used to be.

This stuff is easy. I've got so many people around me coming down with cancer lately, that they wish they had this stuff to worry about.

 

[haha]

This stuff is easy. I've got so many people around me coming down with cancer lately, that they wish they had this stuff to worry about.

Well said, C-T. Best wishes to you-

Mikey

 

[yakers]

Mikey,

Funny you should mention UST. I Openned a DRIP about three years ago, missed the big yield but it has been an excellent stock for a DRIP program. I add $100 a month and it just keeps growing. The DRIP approach suits me as it is low fee and is based on a monthly contribution which is how I get paid, I don't have a bundle of money to invest (win or lose) at one time. So I just look for a good company with a good dividend history. If there is a major market downturn I think this will still be my investing approach and, overall, a good approach for a lot of people.

 

[ak4195]

Re: Big Money Jim

I dont think its really the interest of the board,and am not sure it should be,my intention wasnt to slap you or anybody else in the face.But i assume soupx is a young man wondering why all his non correlary assets just took a big dump.Sy Harding runs a pay websight/service,with lots of tables and historic figures to back up his work.He has basically taken yale Hirsches work and modernized it.Yale Hirsch wrote "TRaders Almanac" for decades,i believe his son has stepped in after his death.Sy's service is cheaper but not as invormative as yales,personally i dont like his stock picking,just his seasonal work.Its very effective.I no longer subscribe to it ,prefering to rely on my own chart work,but this simple premis is worth the look imo.Just trying to sooth the pain and expand the horizons of a young investor.SY doesnt catch the exact bottoms/tops,but you definitely get the meat and potatoes of the seasonal run,and miss many of the rough patches by being out of the market.As i said,you could test drive the idea with just a % of funds.Personally rather than buy a whole year,just start in sept,perhaps first of october till spring,since the rest of the year is contrarian in general.Anyways heres the link http://www.streetsmartreport.com/index.html

 

[cute fuzzy bunny]

Re: Big Money Jim

wondering why all his non correlary assets just took a big dump.

I have about the most diverse portfolio around, and everything I own took it in the face this week.

What asset class do you see that put up numbers or held ground this week?

Energy? Down. Value? Down. Growth? Down. Indexes? Down. REITs? Down. Commodities? Down. Bonds of any description? Down. Small caps? Down. Emerging Markets? Down. Healthcare? Down.

 

[Nords]

My husband reads John Mauldin.  Who is this guy?

Maudlin Mauldin runs investments and writes a newsletter. After reading him for a year, my opinion is that he's a long-winded economist who manages to find "guest speakers" to write most of his columns-- or to at least volunteer extensive quotes. Then wraps it up with a couple paragraphs where he whines ad infinitum about how hard it is to write a book, how he never finds time anymore to read & think, and how much fun he's having with his family (instead of writing a book).

But when he's writing his own stuff, he uses the phrase "muddle through" to describe his philosophy of a sideways market for the next 5-10 years.

That last paragraph should save you from having to read any of his columns. I slogged through with this guy until his theme song repeated, and then I decided life was too short to waste any more time on him.

Energy? Down. Value? Down. Growth? Down. Indexes? Down. REITs? Down. Commodities? Down. Bonds of any description? Down. Small caps? Down. Emerging Markets? Down. Healthcare? Down.

Some of my shorts have been waiting for months for a market like this!

I'm much happier reading the writing on this wall of worry than I am hearing about hopping into the next bull market. Are we talking a market decline of 30-40%? Bring it on...

 

[Mr._johngalt]

My shorts "have been waiting for months" also.

JG

 

[brewer12345]

Jeez, what a lot of whining! The market has a bad week and you'd think it was 1929/2002 again. Are you guys really investors? Last I checked, you needed a little stomach for up and down if you were an investor. If you guys are this upset over a few weeks of sliding, what were you like in 2001/2002/2003?

One last observation on the whole thing:

We talk a lot about assembling a diversified portfolio and investing in multiple low correlation asset classes. I think this is prudent and it definately results in better risk-adjusted performance over time. However, its not always a silver bullet. Just by sheer chance, sometimes things will move together een in a low correlation port. Also, when the sh!t really hits the fan and large negative moves come out of the woodwork, correlations tend to increase. These are facts of life, folks. Just remember that over the long term the up days outnumber the down days, and all you have to do is be firm of purpose and stick to your knitting. This isn't something that requires smarts; it just requires testicular fortitude.

 

[Martha]

What I want is for the market to go down in one fell swoop and get it over with. I am tired of hearing DH tell me it's going to happen and it is going to be bad. We have a bunch of cash. It's time. Let's get it over with. Then I might know whether I have to keep working. End of rant.

 

[laurence]

LOL Brewer, reminds me of full metal jacket:

Searge: "WHERE YOU FROM, MAGGOT?!?"

Recruit: "SIR, TEXAS SIR!"

Searge: "TEXAS, HOLY SH** ONLY STEERS AND QUEERS COME FROM TEXAS AND I DON'T SEE ANY HORNS COMING OUT OF YOUR HEAD, SO THAT JUST ABOUT NARROWS IT DOWN!"

I'm not smart enough to time the correction, just DCAing, but I can afford to be "dumb" since I'm so far from my end game....

 

[preben]

He,he - thought that was An Officer And a Gentleman? Maybe in both?
Anyway; a well diversified portfolio would actually still be doing OK, despite the admittedly weird "all together now" weeks we just had.
Commodities (PCRIX) up 8% ytd, VGPMX(metals) up 4% ytd,, VTRIX foreign value up 1% ytd, XLE energy stocks up 16% Etc.
I think I am am up about 2-3% ytd. Cheers!