Will the Stock Market Rally Stick, or Vanish?

[Gearhead Jim]

When everyone is this negative it almost for sure that a rally will ensue. I watched Larry Kudlow's show on CNBC I believe on last Tuesday. He said he was having trouble finding a bull to be on his show. That was the clue for me to pump in some more money into the market the next morning which I did. Market has been up from there. It was clear at that point that just about everyone who was planning to sell had already sold. I'm not predicting this rally will last but I am starting to be able to read these moves much better now based on the amount of negativity that exists.

Recently I've noticed some moderately optomistic economic news stories; not predictions of a big advance but simply "the world is not ending now" stuff.
Since there is lots of money sitting on the sidelines and the beginnings of optimism in the press (which does the public's thinking for them), I suspect that the S&P 500 will end this year above the lows we've seen. Not that we won't see further bumps during the year...

 

[haha]

I wonder how many of us are going to change our asset allocations when the market recovers.

I don't think I will change my asset allocation, but I will be keeping my eyes open for something else to do with my money other than investing all of it. Well, aside from spending it (that doesn't count).

If markets recover moderately, but some of my non-dividend payers go up strongly, I will probably take the gains of the non-payers if I can offset against tax losses and go for more income, stock or fixed, depending on prices.

If markets should get quite extended again, measured by P/E10, I'll look at my stocks and decide what to do.

My equity allocation floats. I try to increase it when the stocks I want are relatively cheap, decrease it when they are relatively expensive.

Ha

 

[W2R]

I have to admit that my dividends in 2008 were a bright star shining through the gloomy night of a cratering economy (how's that for mixed metaphors). Since I am still working, the dividends got overshadowed by the beating my portfolio took. Still, if I were retired, my dividend income would be more than enough.

I will most likely keep all of my nestegg in my usual, previously planned 45:55 (equities:fixed) asset allocation. I haven't really thought of any alternatives that seem reasonable. I would be a lousy landlord, so a rental unit for income is out. I used to think that an immediate lifetime annuity would be great, but I see no reason to trust an insurance company with my money now that I don't have to.

It is in man's nature (and woman's nature too!) to question and check over investment decisions time and again, making sure we are not making a mistake.

 

[Bikerdude]

I have to admit that my dividends in 2008 were a bright star shining through the gloomy night of a cratering economy (how's that for mixed metaphors). Since I am still working, the dividends got overshadowed by the beating my portfolio took. Still, if I were retired, my dividend income would be more than enough.

I will most likely keep all of my nestegg in my usual, previously planned 45:55 (equities:fixed) asset allocation. I haven't really thought of any alternatives that seem reasonable. I would be a lousy landlord, so a rental unit for income is out. I used to think that an immediate lifetime annuity would be great, but I see no reason to trust an insurance company with my money now that I don't have to.

It is in man's nature (and woman's nature too!) to question and check over investment decisions time and again, making sure we are not making a mistake.

I agree. I was very pleased with my 2008 dividends. I'm now closely watching the March payout to see how it compares to last year.

 

[Dawg52]

For the sake of your forehead, at some point you may want to use the rally to take a little out of the market. Maybe not much yet since it's still way underwater, but at some point if it continues for a while it might not be a bad idea to take 10-20% of your stock portion and move it into something safer. Sounds like your forehead could use the TLC...

Don't worry, I will. But a long way to go.

 

[Bikerdude]

I wonder how many of us are going to change our asset allocations when the market recovers.

Probably so many that the market will take a long time to fully recover.

 

[Notmuchlonger]

I wonder how many of us are going to change our asset allocations when the market recovers.

I don't think I will change my asset allocation, but I will be keeping my eyes open for something else to do with my money other than investing all of it. Well, aside from spending it (that doesn't count).

75/25 Ive been fine with whats going on. I see no reason to change it.

 

[ejman]

Probably so many that the market will take a long time to fully recover.

Maybe I'm the eternal optimist but my feeling is that most of the people that spook easily have been long gone from this market. I suspect that the few that are left in will probably ride it for a long time. For myself, I have really wide AA "bands" and I'm still away from the extremes where I would take drastic action. (Target is 50 % to 60 % equities - start looking into selling equities once it exceeds 60 %, which I did in early 2007. Currently equities at 53%)

 

[clifp]

I moved from 70/30 to 80/20 in Jan 2008. I guess I am close to 70/30 now. When the market recovers I am going to take $100K and stick in CDs. I think Ha Ha is joining me. LOL.

 

[Grep]

I wonder how many of us are going to change our asset allocations when the market recovers.

In a time like this, everyone who hasn't sold at the bottom is saying the same thing: "When it gets back to X, I'll sell." Sounds good about now. Heck, I wish it would hurry up and get to X, and I'll sell a bunch too. I promise!

Except that, when it gets there, people start thinking "But what if it keeps going up? Then I'll feel like an idiot for having sold. And if it goes to Y, I'll really clean up! Things are looking much better now, so I'll hang on a while longer." And then by Z, everyone who sold at the bottom starts piling in.

 

[haha]

Maybe I'm the eternal optimist but my feeling is that most of the people that spook easily have been long gone from this market. I suspect that the few that are left in will probably ride it for a long time.

How could this be true? Since someone has to own all shares of stock, and since ther have been more equity issuances than retirements by corporate action, how could there only be a few owners of stock left?

I guess it coud be that all the small fry sold, and Waren Buffett, Carl Icahn, and you and I and the other ER board members are the only stockholders left. But I doubt that is true.

ha

 

[W2R]

How could this be true? Since someone has to own all shares of stock, and since ther have been more equity issuances than retirements by corporate action, how could there only be a few owners of stock left?

I guess it coud be that all the small fry sold, and Waren Buffett, Carl Icahn, and you and I and the other ER board members are the only stockholders left. But I doubt that is true.

ha

Some stockholders have bought more while prices were low. Even I fit into that category due to rebalancing, and I am definitely a small fry and no Carl Icahn. Then again, maybe I don't understand your question.

 

[ejman]

How could this be true? Since someone has to own all shares of stock, and since ther have been more equity issuances than retirements by corporate action, how could there only be a few owners of stock left?

I guess it coud be that all the small fry sold, and Waren Buffett, Carl Icahn, and you and I and the other ER board members are the only stockholders left. But I doubt that is true.

ha

Actually, that's it, between you, Want2Retire and me, we own it all. Now we are sticking thru thick and thin right?

 

[Bikerdude]

I guess it coud be that all the small fry sold, and Waren Buffett, Carl Icahn, and you and I and the other ER board members are the only stockholders left. But I doubt that is true.

ha

Isn't that the definition of a market bottom? Everyone who wants to sell has sold leaving only buyers or holders.

 

[TromboneAl]

In a time like this, everyone who hasn't sold at the bottom is saying the same thing: "When it gets back to X, I'll sell." Sounds good about now. Heck, I wish it would hurry up and get to X, and I'll sell a bunch too. I promise!

Except that, when it gets there, people start thinking "But what if it keeps going up? Then I'll feel like an idiot for having sold. And if it goes to Y, I'll really clean up! Things are looking much better now, so I'll hang on a while longer." And then by Z, everyone who sold at the bottom starts piling in.

Exactly.

Also, many investors don't realize that a 50% decline followed by a 50% increase still leaves you down 25%. So when they hear that the market is up 50%, they start singing "Happy Times are Here Again."