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Old 09-04-2021, 11:54 AM   #61
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Originally Posted by Montecfo View Post
^^^^^
Just to be clear, the FED sets the Fed funds rate. Banks set the prime rate.
Sure - the prime rate always mirrors the Fed fund rate, so no difference to me. Always been the case. The Fed sets the fund rate, and in turn, the bank sets the prime rate as the banks mirror the Fed's rate's.
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Old 09-04-2021, 04:20 PM   #62
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Sure - the prime rate always mirrors the Fed fund rate, so no difference to me. Always been the case. The Fed sets the fund rate, and in turn, the bank sets the prime rate as the banks mirror the Fed's rate's.
Wall Street doesn't care much about the prime rate. They care about discounted future cash flows from companies. And that is calculated from the 10 year rate. And they are not in lock step.

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Old 09-05-2021, 04:36 PM   #63
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I am not concerned about a crash because the market always recovers. I am more concerned about inflation more than a crash because the last double digit inflation was 1974 and most investors do not know how to prepared for inflation. I did some research and I reallocated my AA to:

25% value equities
25% treasury bonds
25% income producing real estate
25% commodities which include VCMDX.

"Value" equities investment is supported by the following link:

https://www.investopedia.com/article...ck-returns.asp

VCMDX is a hedge against inflation and involves derivatives which means high risk but high reward. Bonds provides a hedge against a crash or a bear market but does NOT provide a hedge during inflation. Prices of Commodities rises with double digit inflation.

Income producing real estate generally keep up with inflation.

Treasuries are my safe haven in case the SHTF. If the stock market decline due to inflation fears, I tend to buy equities at low prices using my treasuries.

in 2019, I had reallocated to 100% treasuries and then the 2020 crash occurred so I reallocated to buy equities as low prices so I did very well. I am now anticipating double digit inflation so I am well positioned in the event double digit inflation do occur in 2022 or 2023. The federal government has a high debt and is printing money. The government will benefit during double digit inflation because as wages goes up, the tax revenues goes up. This is a stealth tax increase without the political backlash of a normal tax increase. I suggest people track current inflation rates and compare it to historical inflation rates at:

https://inflationdata.com/Inflation/...Inflation.aspx
Unfortunately, 1974 wasn't the last year of double-digit inflation.

Pity the poor 1965 retiree who faced increasing inflation for the entire first half of a 30 year retirement!

https://www.macrotrends.net/countrie...ation-rate-cpi
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Old 09-06-2021, 11:11 AM   #64
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Sure - the prime rate always mirrors the Fed fund rate, so no difference to me. Always been the case. The Fed sets the fund rate, and in turn, the bank sets the prime rate as the banks mirror the Fed's rate's.
Mirrors?
Fed Funds rate is 0.25 pct.

Prime is 3.25 percent.
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Old 09-06-2021, 12:41 PM   #65
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Originally Posted by Montecfo View Post
Mirrors?
Fed Funds rate is 0.25 pct.

Prime is 3.25 percent.
In my experience, it mirrors the rate changes. So, usually, if the Fed Funds rate goes from 0.25% to 0.50%, the Prime rate will go from 3.25% up to 3.50%
See the graph here Chart: The U.S. Prime Rate vs. The Fed Funds Target Rate vs. 1-Month LIBOR vs. 3-Month LIBOR
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Old 09-06-2021, 02:36 PM   #66
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In my experience, it mirrors the rate changes. So, usually, if the Fed Funds rate goes from 0.25% to 0.50%, the Prime rate will go from 3.25% up to 3.50%
See the graph here Chart: The U.S. Prime Rate vs. The Fed Funds Target Rate vs. 1-Month LIBOR vs. 3-Month LIBOR
I think we are torturing things quite a bit here.

There is in fact not even a single "prime rate", each bank sets their own. The Wall Street Journal publishes a single prime rate based on the rate charged by the top 70 percent of the top 10 banks by assets. Changes to a bank's prime rate may be the same as or similar to changes in the FED funds rate, though with some time lag, but that is up to each bank.

It is just more efficient and accurate to simply refer to the Fed Funds rate when that is what is meant.

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Old 09-06-2021, 03:06 PM   #67
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Old 09-06-2021, 03:39 PM   #68
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Originally Posted by Montecfo View Post
I think we are torturing things quite a bit here.

There is in fact not even a single "prime rate", each bank sets their own. The Wall Street Journal publishes a single prime rate based on the rate charged by the top 70 percent of the top 10 banks by assets. Changes to a bank's prime rate may be the same as or similar to changes in the FED funds rate, though with some time lag, but that is up to each bank.

It is just more efficient and accurate to simply refer to the Fed Funds rate when that is what is meant.

I'm not the one who was snarkily picking nits about the meaning of the word "mirror". You and I both understood what cyber888 meant.
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Old 09-06-2021, 04:29 PM   #69
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It does until it doesn't. Here is chart of the Nikkei since its peak in 1989. Here we are more than 30 years latter https://www.macrotrends.net/2593/nik...cal-chart-data
The fear of a Nikkei crash and slow recovery has always been with us. However, if you look at the debt/GNP ratio of Japan, that ratio is one of the highest. This means Japan cannot stimulate their economy by borrowing more. US is getting there...but it may takes some time for the US to get a similar debt/GNP ratio as Japan's.

As I stated previously, I fear inflation more. COVID is suppressing demand which is NOT inflationary. However, if COVID goes away in 2022, then demand and business activity will pick up which may explain why the stock market is doing so well. However, it is also potentially inflationary. If inflation do rises, the FED has no choice but to raise interest rates. However, this will then suppress business activity and the stock market.

I do not think there will be a crash since the FED will probably raise interest very slowly to avoid shock therapy. Latest FED computer model predicts this situation of rising interest rates will be in late 2022 or early 2023 which is when they have to raise interest rates. However, I believe it may come sooner in early or mid 2022 which explains why I already reallocated my AA. Market timing is impossible to the exact day but market timing one year ahead is what I like do. For example, VCMDX is an inflation hedge fund and is doing very well in 2021 even though inflation is only creeping up. My real estate holdings are also doing well so my current inflation friendly AA is where I want to be.
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Old 09-06-2021, 05:04 PM   #70
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I'm not the one who was snarkily picking nits about the meaning of the work "mirror". You and I both understood what cyber888 meant.
No offense intended (and none taken ). I did not know what was meant since it never has occurred to me to link the prime rate to the Fed. But that's just me.

Hopefully we can return talking about the coming meltdown.
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Old 09-13-2021, 08:29 AM   #71
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Hopefully we can return talking about the coming meltdown.
My pre-retirement estimate for monthly spending in retirement was too high.

Most of my portfolio is in pre-tax accounts. After 18 months retired I find I have 38% cash/Stable Value in pretax accounts and only need 1%/year withdrawal for essential expenses until DW begins SS in 4 years, then 0%.

I'd like to add to stocks to achieve 10% cash/stable value. This seems like the worst time ever to make that move.

I have 15% bond funds/Preferred Stocks. I don't feel like this is a good time to ratchet up Bond funds.

I'm in "deer in the headlights" mode, too!
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Old 09-13-2021, 11:29 AM   #72
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I’ve been buying and selling Carnival in my ROTH and SEP since the downturn and made $725k. I did the same with Suntrust in 2008. That’s how I early retired 11 years ago at 50.
That is fantastic..

Was it involving options or just buy low, sell high, repeat , repeat ...

How much $$$ did you initially involve in this grand adventure
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Old 09-13-2021, 11:52 AM   #73
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Fidelity Magellan Fund manager Peter Lynch:

"Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves."
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Old 09-15-2021, 02:33 PM   #74
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This article lays out an interesting indicator that WB supposedly uses..

https://www.msn.com/en-us/money/mark...NCp?li=BBnb7Kz

A basic valuation of the entire market calculated:
Wilshire 5000 Total Market / GDP

Currently this stands at roughly 205% ($46.69T / $22.72T) - as of 2Q21 GDP

The article notes that for both the dot com bubble (late 1990s) and the 2007/2008 crisis, this indicator remained under 150%.

The article does acknowledge there are Companies whose valuation is based domestically, but don't contribute 100% of their income to the GDP.

I respect those who hold their AA through these downturns. However, I pose the following questions to those who take a more active approach..

- Are you preparing for a "crash" in the near future?
- If so, how?

I have found myself of late, trimming some earnings off Index Funds (in my tIRA & Roth) in very small increments to cash on a bi-weekly basis. I think it's the "the NASDAQ hits a new record" that gets me thinking..
@JoshTrent The next downturn is closer today than it ever has been. No one knows the exact day it will arrive. What is your estimate of when the big day will be here?

I am preparing for a crash by being fully invested in the market.
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Old 09-15-2021, 02:52 PM   #75
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Originally Posted by JoshTrent View Post
This article lays out an interesting indicator that WB supposedly uses..

https://www.msn.com/en-us/money/mark...NCp?li=BBnb7Kz

A basic valuation of the entire market calculated:
Wilshire 5000 Total Market / GDP

Currently this stands at roughly 205% ($46.69T / $22.72T) - as of 2Q21 GDP

The article notes that for both the dot com bubble (late 1990s) and the 2007/2008 crisis, this indicator remained under 150%.

The article does acknowledge there are Companies whose valuation is based domestically, but don't contribute 100% of their income to the GDP.

I respect those who hold their AA through these downturns. However, I pose the following questions to those who take a more active approach..

- Are you preparing for a "crash" in the near future?
- If so, how?

I have found myself of late, trimming some earnings off Index Funds (in my tIRA & Roth) in very small increments to cash on a bi-weekly basis. I think it's the "the NASDAQ hits a new record" that gets me thinking..

How do you know the valuations do not make sense? If a dollar is worth 50 cents then that ratio is now 102.5%. I don't know what future holds but the current market valuations have a far more complex story and it keeps on changing every hour. No one knows what will be the story tomorrow. Time in the market matters the most rather than timing the market. I realized a while back that risk (as defined by the Wall street and academia) is nothing but price fluctuations. The real risk for a retail investor is their reaction to the market prices. To avoid the real risk, simply don't react and stay invested for the eternity.
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Old 09-15-2021, 10:57 PM   #76
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Yes, a downturn is coming soon. Fed will get its hands off the stuck interest rates and will let them (maybe nudge them) to rise.
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Old 09-20-2021, 05:12 PM   #77
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Something to crow about: I reduced AA from 70% stocks to 60% stocks at the start of the month.

Something to cry about: That 60% allocation is going down with the market.

Tea leaves: Probably not the bottom but does not look like an oncoming recession to me. I might even rebalance back up to 60% if this goes down further.
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Old 09-20-2021, 07:34 PM   #78
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When most of the people on this forum believe that stocks will go up in the long run, why do they have bonds in the portfolio. Wouldn’t it make sense to have cash for emergency purposes and invest everything else in stocks for the long ride?
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Old 09-20-2021, 11:59 PM   #79
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Fed has a meeting tomorrow (Tuesday). So today stocks dropped 614 points!

Maybe the downturn is here.
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Old 09-21-2021, 03:38 AM   #80
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