Did anyone's financial advisor see this coming?

[2177V]

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Originally Posted by Ablatus And how did you rebalance to 40/60? Or will you?

I am 30% equity and 70% treasuries and I like this AA during the bear market. Treasuries do very well during a bear market because of the flight to quality. I may buy some more equities before the corona virus subside since I expect a market rally. However, it looks pretty grim health wise so I will stay put.

[Old Microbiologist]

Personally, we expected this with the incoming Trump administration and went to cautious transactions after he was elected. We didn't make massive amounts in the 3 years which I regret but I really thought and still do, that this administration cannot possibly cope with the economic problems in the US.

In January, specifically January 10th, we went to 100% cash and only did swing trading during the days that looked solid. Being a microbiologist I recognized the virus as a threat but we also knew that the market was way overblown. I knew and still maintain, the DOW should and must be at 18,000 or less. It was only a matter of time. When the massive amounts of cash started being infused into the markets to support it I knew then, not because of the virus, but because the Federal Reserve caused this situation, that a collapse was imminent. It is not over and now with the effects of the coronavirus being felt worldwide a depression is now the only possible outcome. I will say that my brilliant wife just playing single stocks and only when it looks good has made $40K since Feb 15th. Of all the trades she made only one was negative. Yes, it is nickel and dime stuff but she is averaging $1200 a day when she bothers. We (she) manage our own portfolio and we see an annual return of 15% a year every year. All of our IRA accounts (roughly 60% of our assets) have been sitting idle as cash since 2016. Only our brokerage account is in play. We still have $350k in our checking account basically earning nothing. That is the level of fear we had and I had been forecasting a collapse and was looking pretty stupid up until it happened. My brother ignored my advice and has lost at least $350k since January. He trusts a financial advisor to manage his accounts. He still hasn't sold which blows my mind.

I know most people refuse to accept the economic theories of Marx but he clearly describes that periodic corrections are necessary for a Capitalistic system. We artificially avoided the depression in 2008 by bailing out the reckless American banks. They are doing it again, but this time there are a lot of things not in control of the US government and a lot of chickens are coming home to roost. I fear major war as the desperate efforts of a weak administration to try and force the world to support the US economy. In the meantime we have imminent collapse of social structures in the US where the discrepancies between rich and poor are going to become obvious in health care opportunities.

I do not think we have hit bottom and I don't expect to see the bottom now until 2021.

[Dtail]

Quote:

Originally Posted by Old Microbiologist Personally, we expected this with the incoming Trump administration and went to cautious transactions after he was elected. We didn't make massive amounts in the 3 years which I regret but I really thought and still do, that this administration cannot possibly cope with the economic problems in the US. In January, specifically January 10th, we went to 100% cash and only did swing trading during the days that looked solid. Being a microbiologist I recognized the virus as a threat but we also knew that the market was way overblown. I knew and still maintain, the DOW should and must be at 18,000 or less. It was only a matter of time. When the massive amounts of cash started being infused into the markets to support it I knew then, not because of the virus, but because the Federal Reserve caused this situation, that a collapse was imminent. It is not over and now with the effects of the coronavirus being felt worldwide a depression is now the only possible outcome. I will say that my brilliant wife just playing single stocks and only when it looks good has made $40K since Feb 15th. Of all the trades she made only one was negative. Yes, it is nickel and dime stuff but she is averaging $1200 a day when she bothers. We (she) manage our own portfolio and we see an annual return of 15% a year every year. All of our IRA accounts (roughly 60% of our assets) have been sitting idle as cash since 2016. Only our brokerage account is in play. We still have $350k in our checking account basically earning nothing. That is the level of fear we had and I had been forecasting a collapse and was looking pretty stupid up until it happened. My brother ignored my advice and has lost at least $350k since January. He trusts a financial advisor to manage his accounts. He still hasn't sold which blows my mind. I know most people refuse to accept the economic theories of Marx but he clearly describes that periodic corrections are necessary for a Capitalistic system. We artificially avoided the depression in 2008 by bailing out the reckless American banks. They are doing it again, but this time there are a lot of things not in control of the US government and a lot of chickens are coming home to roost. I fear major war as the desperate efforts of a weak administration to try and force the world to support the US economy. In the meantime we have imminent collapse of social structures in the US where the discrepancies between rich and poor are going to become obvious in health care opportunities. I do not think we have hit bottom and I don't expect to see the bottom now until 2021.

Nice post.
On a minor level, why play with the Taxable a/c with tax implications vs the TIRA a/c? Increases in future RMD's?

[Vincenzo Corleone]

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Originally Posted by Dtail I have an "unpaid" FA at Fidelity. No warning there. Was kicking myself a bit too, as when this started I felt "this time" there is a clear reason for the decline, so why not get out until cleared up, but my buy and hold theory overcame that. Still nervous, as my LTD portfolio is now down 8.5%.

Regarding the part that's boldfaced: I felt the same thing by Feb. 24th. DW and I had just gotten back from a vacation in the Caribbean a couple days prior and I hadn't been following the news all that much. DW and I had been woken up that morning by the alarm clock (DW still w*rks). As I was listening to the news, I'd learned that the coronavirus spread from China to South Korea, Italy and Iran. I don't think that, alone, gave me pause. The moment I got the "this time" feeling was when I learned from the same newscast that a person can have the coronavirus and be contagious while being asymptomatic (i.e., not knowing he has it). I don't think I knew that prior to that point. That morning the pre-markets were taking a bit of a hit. I panicked and, against my better judgement, I moved from a 70/30 stock/fixed income AA to 30/70.

I'd never done that before. In all the prior market panics (e.g., 2008), I didn't budge. The fact that I retired two years ago and not drawing a regular salary didn't help matters this time around (even though DW still w*rks). I felt this primal survival instinct that I hadn't felt in prior market panics, despite my models telling me that DW and I would've been just fine had I just done nothing.

The last time I checked, we're down 13% YTD (16% from our all-time high). I estimate that we would've been down a little over 21% YTD (24% from our all-time high) had I not taken any action.

Do I think I'm brilliant? Not even close. Do I think the OP should kick him/herself for not seeing this coming? No way. I know I got lucky. And I know that I'll need to be lucky again when I guess the moment it'll be safe to readjust to our original AA of 70/30 (maybe 60/40 now that I see how I reacted).

[Ready]

There are people who will make bold predictions about a market collapse. And there are people who will make bold predictions about a market recovery. The problem is we don’t know who is going to be right or wrong. And neither do they.

[denstl]

I manage my own investments and did not make any changes. Figured there might be an impact but never dreamed it would be like this. But would not have made changes anyway. Luckily we can ride this out for now as not taking withdrawals yet.

The good news for all the FAs out there, they still get to take a % of the funds they managed whether they did something or not. Good or bad they get their cut though it may be smaller when things go down. That is one of the reasons I left our FA and my investments have done as good or better without them.

[Retired Expat]

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Originally Posted by RetiredAt55.5 I manage my own finances, and am not a market timer. However, I keep kicking myself for not seeing/anticipating how this virus would impact the markets once it hit the U.S., and doing some defensive measures. Did anyone's financial advisor give early warning before the market went crazy? I know it's little comfort, but if they didn't see it coming either, my backside won't be as sore!

My FA, like most I believe, said be calm, stay the course. Market dropped 10%. Told him to sell some of my Clorox which was up 33%. Then sold a few hundredK of things that had fallen back to initial values. Didn’t feel much in the mood to pay capital gains taxes on things that were giving up their gains. To much like adding insult to injury.

I retrospect should have dumped more! I know people are starting to buy back in... I have a sense still that this will get worse before it gets better. Going to wait to see if NY medical facilities are hit by that surge of seriously ill patients...

[OldShooter]

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Originally Posted by winyaz ... I've done my own research and simple moving average timing strategies and rotation strategies generally outperform the market on a risk adjusted basis.

With respect, did that research involve actual money and an experiment of adequate length, like ten years?

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Originally Posted by winyaz ... Here's a paper demonstrating it better than I could. It's a great read as well: https://mebfaber.com/2009/02/19/a-qu...ation-updated/

Actually, papers like that are a dime a dozen. Anyone with an IQ above room temperature can find an investment scheme that backtests very well. All one has to do is to follow the advice that renowned financial advisor Will Rogers gave us 90 years ago: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Thanks to @sengsational, here are some 4-year actual results from another scheme that apparently backtested well: https://www.early-retirement.org/for...ker-82446.html But that is just an anecdote. Here is data:

We have over 60 years of history showing that stock-picker funds produce results that are nearly indistinguishable from random. Worse than random, actually. This includes almost 20 years of biannual S&P SPIVA reports showing that over five and ten year periods only single-digit percentages of stock-picker funds beat their benchmarks. Certainly among all of those funds, there are tens of thousands of analysts cooking up schemes that backtest well. If the schemes were useful, there would be winners whose past performance did in fact predict future results. There are not.

Another to think about is why this Faber guy would be giving this scheme away for free and hustling clients for his advisory service. If he actually had a scheme that worked, don't you think he'd be quietly enjoying life on a tropical island or a private yacht with a helipad and at least one swimming pool? The mere fact that he is on the internet and pitching is evidence that he does not believe in his own schemes.

[bigfan188]

Fascinating to read all the post this morning. There are so many different opinions and that's why I really like this site. I was looking to retire at year end but lost a decent amount in the markets. Even my individual bonds have no bids right now. Of course I panicked and moved money out of 401k/Iras after the 3000 Dow down day. I am like a lot of others here that feel the worst is yet to come. We may never be back to normal until a vaccine is available. Who's going to want to sit next to someone at a restaurant? or fly on a plane or be in crowded places even if it is treatable.


But that's just one mans opinion. Best of luck to everyone


FYI- hoping to retire sometime in 21 but will see how long company keeps salespeople that can't meet with prospective customers.

[mickeyd]

My [mod edit] Financial Advisor mentioned it in late November, but I failed to sell at that time. Now I must wait it out like the rest of you guys.

[schellem]

I started taking some profits about a year and a half ago knowing I'd be happy with the gains in hand even if the market kept going up for a bit longer. I had recently been questioning myself but feel better now.

[winyaz]

Quote:

Originally Posted by OldShooter With respect, did that research involve actual money and an experiment of adequate length, like ten years? Actually, papers like that are a dime a dozen. Anyone with an IQ above room temperature can find an investment scheme that backtests very well. All one has to do is to follow the advice that renowned financial advisor Will Rogers gave us 90 years ago: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." Thanks to @sengsational, here are some 4-year actual results from another scheme that apparently backtested well: https://www.early-retirement.org/for...ker-82446.html But that is just an anecdote. Here is data: We have over 60 years of history showing that stock-picker funds produce results that are nearly indistinguishable from random. Worse than random, actually. This includes almost 20 years of biannual S&P SPIVA reports showing that over five and ten year periods only single-digit percentages of stock-picker funds beat their benchmarks. Certainly among all of those funds, there are tens of thousands of analysts cooking up schemes that backtest well. If the schemes were useful, there would be winners whose past performance did in fact predict future results. There are not. Another to think about is why this Faber guy would be giving this scheme away for free and hustling clients for his advisory service. If he actually had a scheme that worked, don't you think he'd be quietly enjoying life on a tropical island or a private yacht with a helipad and at least one swimming pool? The mere fact that he is on the internet and pitching is evidence that he does not believe in his own schemes.

I actually read the link that you suggested. If you want to have a discussion, rather than a lecture, then you should at least read the paper at the link that I posted. From the many factual errors in your response it's clear that you did not.

[Dogman]

Yes, check out Hedgeye.com

[ERD50]

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Originally Posted by winyaz I actually read the link that you suggested. If you want to have a discussion, rather than a lecture, then you should at least read the paper at the link that I posted. From the many factual errors in your response it's clear that you did not.

Then please point out the factual errors. I'm sure Old Shooter will be happy to discuss them with you.

But even w/o reading it (I didn't), it's true that anyone can create a scenario that back-tests well. But did they make the calls at the time? And if so, how do we determine if this is due to skill, or just one of the few who did well, as the losers seldom document their failures in public.

-ERD50

[tsoispf]

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Originally Posted by schellem I started taking some profits about a year and a half ago knowing I'd be happy with the gains in hand even if the market kept going up for a bit longer. I had recently been questioning myself but feel better now.

Ditto that.

I retired last December. Perfect timing, eh. But over the last year plus, considering high valuations, I drifted from 60/40 to 50/50. Now at 40/60. That puts me perfectly square with my implementation of a Liability Matching Portfolio. All in all, weathering the storm.

[OldShooter]

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Originally Posted by winyaz I actually read the link that you suggested. If you want to have a discussion, rather than a lecture, then you should at least read the paper at the link that I posted.

(Well, you are ignoring my direct question, I will assume that your enthusiasm for this scheme has not been tested with actual money or time.)

Actually I did read it, though not with great care. There is too much fluff. I did also find a (seriously flawed) study here: https://extradash.com/en/strategies/...et-allocation/ that provided some actual data. If you look at their Figure 3 and visualize how it would look if began at the end of Faber's backtesting period, I think you will see that with real-world data the scheme basically flatlined and was outrun by the S&P 500. IOW the scheme had not been tuned for that real-world period, so it failed. If you're interested in this general topic, I recommend Nate Silver's "the signal and the noise," specifically the comments on overfitting.

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Originally Posted by winyaz From the many factual errors in your response it's clear that you did not.

Don't keep me in suspense! Both @ERD50 and I are waiting.

[winyaz]

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Originally Posted by OldShooter (Well, you are ignoring my direct question, I will assume that your enthusiasm for this scheme has not been tested with actual money or time.)

I have never traded the strategy in Faber's paper, but based on the research I did pre-2008 I have included a relative strength strategy in my portfolio ever since and am quite happy with the results.

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Originally Posted by OldShooter Actually I did read it, though not with great care. There is too much fluff. I did also find a (seriously flawed) study here: https://extradash.com/en/strategies/...et-allocation/ that provided some actual data. If you look at their Figure 3 and visualize how it would look if began at the end of Faber's backtesting period, I think you will see that with real-world data the scheme basically flatlined and was outrun by the S&P 500. IOW the scheme had not been tuned for that real-world period, so it failed. If you're interested in this general topic, I recommend Nate Silver's "the signal and the noise," specifically the comments on overfitting.

Yes, the strategy underperformed the S&P 500 on an absolute basis since 2006. The S&P 500 was one of the best assets you could own over the last decade - do you expect similar results in the next decade? That would be truly anomalous. What about treasuries? Over the past 10 years, IEF (7-10 year treasuries) has returned over 5% annually. Now with 10 year yields below 1% that is the rough estimate of future returns. Currently less than inflation. I wonder how well 'tuned' buy and hold is for the next decade?
Despite the strong performance of treasuries and the S&P 500 over the past decade, as of now, since the paper was written the strategy has outperformed the S&P 500, a 50/50 portfolio and a globally diversified portfolio on a risk adjusted basis. Your point of overfitting is well taken. There are countless strategies that worked until they didn't, but then you could say that about buy and hold. Japan has been in a drawdown for over 30 years - that's a long time to wait to get your money back. How many retirees never did get back to even? And large drawdowns wreak havoc for retirees who are in the withdrawal stage.

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Originally Posted by OldShooter Don't keep me in suspense! Both @ERD50 and I are waiting.

Before I saw ERD50's response I edited my post to remove the reference to "factual errors". It wasn't the most appropriate description. While I don't mind discussing specific points I did not intend to participate in a general debate of buy and hold vs. active management. What's the point? I'm not going to change your mind and you are not going to change mine.

The OP basically asked if anyone saw this coming and I have now posted 3 strategies that mitigated all or much of this drawdown, 2 of them free, and one fully disclosed. They have track records of outperforming the market on a risk adjusted basis for 8, 30, and 14 years. Was it luck? Maybe. Are they lying? Many in this industry do, but I have followed these three long enough to think that they are not. The strategies are not get rich quick schemes and they have all underperformed the market at times. They are far from perfect, but then so is buy and hold.

[OldShooter]

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Originally Posted by winyaz I have never traded the strategy in Faber's paper, but based on the research I did pre-2008 I have included a relative strength strategy in my portfolio ever since and am quite happy with the results.

How did your actual portfolio total return compare to a simple Bogleheads equity portfolio?

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Originally Posted by winyaz Yes, the strategy underperformed the S&P 500 on an absolute basis since 2006.

IOW, it only performed during the backtest period that it was tuned for.

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Originally Posted by winyaz The OP basically asked if anyone saw this coming and I have now posted 3 strategies that mitigated all or much of this drawdown, 2 of them free, and one fully disclosed. They have track records of outperforming the market on a risk adjusted basis for 8, 30, and 14 years. ...

I submit that a backtest is not a "track record." It takes money and time to create a track record. If any of these strategies actually have a track record I would be interested to know the post #s where you identified them.

For the record, when I have a strategy I want to test I take exactly $100K and commit it on the first day of a calendar quarter, then ignore it for two years. I already have a measuring stick portfolio that started at 65/35 total US market/total international market on 1/1/2005. Divs reinvested and no rebalancing. I compare the results of the candidate with the measuring stick beginning at about two years. The measuring stick is also useful for monitoring a couple of nonprofits' equity portfolios that I am involved with.

Backtesting is great fun and I like to use PortfolioVisualizer when I am, for example, comparing two mutual fund portfolios. But I have long since learned that the best investment strategy in the world is the one you have just fallen in love with but have not yet committed any money to. As a German general observed 150 years ago: "No plan survives first contact with the enemy." I would paraphrase that, of course, to say that no plan survives first contact with randomness. That is the fundamental problem here.

[winyaz]

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Originally Posted by OldShooter How did your actual portfolio total return compare to a simple Bogleheads equity portfolio?

As I said earlier, I outperformed my benchmark (a globally diversified portfolio) on a risk adjusted basis. That is well over a decade.

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Originally Posted by OldShooter IOW, it only performed during the backtest period that it was tuned for.

As I said earlier, these strategies outperformed in real time on a risk adjusted basis. That is what matters most to me.

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Originally Posted by OldShooter I submit that a backtest is not a "track record."

The two strategies that I posted have 8 and 30 year track records - those are real time, not backtests. The paper has an out of sample 14 year track record - also not a backtest.

You have criticized the strategies that I have linked and active management in general and yet answered none of my criticisms of buy and hold. I suspect you could find fault with actively managed strategies for quite some time. So don't invest in them. I think we have hijacked this thread quite enough. Moving on.

[RetiredAtThirty-eight]

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Originally Posted by Redbugdave Well, really for me there is no big rush. I make money as long as I get back in somewhere below 27K on the DOW.

Not necessarily. The best performers will be making new highs long before the DOW is back to 27K. That's how it works in disruptions such as this. The good ones go up sooner (and more).