Is the next downturn coming soon...?

[NW-Bound]

Digging out the data for the period of 1/2015-1/2019, I saw that I did not get anywhere near that 31% market return for the 4 years. So what did I do wrong? Were my stock picks that bad?

But, but, but one look on Quicken told me the story: in those 4 years, I withdrew a total of 14%. Yikes! And I was never 100% in stocks, so cannot compare myself to that 31% market rise.

Ah, I feel much better, knowing I did not mess up that badly.

And now with a WR of less than 1% due both to lower expenses and portfolio growth, I am certainly not afraid of any market crash. I still want to grow my stash, to see how well I can manage my own money.

PS. I did trail Wellington MF for the above 4-year period, due to my holdings of international equities.

[RobbieB]

I've been blowing 5 to 7 percent for 7 years. Got more dough than I started with. Just bought a boat with an 80 gallon gas tank and 2 miles per gallon. And a slip to park it in at the marina. Where gas is six dollars a gallon.

What me worry -

I'm sticking with the 80/20 allocation.

[UnrealizedPotential]

I smiled when I read the title of this post. Of course no one has a clue when the next downturn will come. But I do not worry much. What difference does it make worrying over something I do not have any control over? If the AA is right for yourself that goes a long ways towards addressing questions like this.

[JoshTrent]

Quote:

Originally Posted by UnrealizedPotential I smiled when I read the title of this post. Of course no one has a clue when the next downturn will come. But I do not worry much. What difference does it make worrying over something I do not have any control over? If the AA is right for yourself that goes a long ways towards addressing questions like this.

If you are accusing me of picking a provocative title.. well, I did so on purpose. I have been a lurker on this forum for a long while (see join date vs # of posts), and I have always appreciated the discussions amongst its members. I am by no means a Chicken Little, and I am certainly not running a fire sale.

Not only do I find the differing opinions stimulating to read, but I also enjoy the different personalities of those on this board. Add to that the YEARS of experience you all have.. and I really find myself reading more and more.

[target2019]

Quote:

Originally Posted by JoshTrent If you are accusing me of picking a provocative title.. well, I did so on purpose. I have been a lurker on this forum for a long while (see join date vs # of posts), and I have always appreciated the discussions amongst its members. I am by no means a Chicken Little, and I am certainly not running a fire sale. Not only do I find the differing opinions stimulating to read, but I also enjoy the different personalities of those on this board. Add to that the YEARS of experience you all have.. and I really find myself reading more and more.

My early morning thought for you is that a provocative title works for a time. Then it's necessary to provide a thought or two to sustain us in glorious retirement.

MarketWatch is clicks-driven, and that tends to drive away the personalities here. It is free though, and more interesting than watching tickers rise and fall.

I suppose the backstory to your question is about economies and the hope which investors have about the future. Has your opinion changed at all? Are you going to reduce equities and accumulate more cash to use in the next decline?

My reaction to these downturns included increasing my 401(k) contributions throughout the crash.

[Markola]

Quote:

Originally Posted by target2019 ……Are you going to reduce equities and accumulate more cash to use in the next decline?.

That’s the rub for those who try this approach. That cash can’t earn enough to keep up with inflation during the years (and even decades) between stock plunges. Then, one has to time the bottom and time the peaks correctly, cycle after cycle. As all kinds of research shows, a market timing approach cannot be repeated consistently and is suboptimal to buy-and-hold.

Or, the objective for the cash is to spend down for living expenses during stock plunges, then build back up as stocks improve. That approach is simply slow-motion-rebalancing, and doesn’t make enough difference to a portfolio’s returns vs. daily, annual, random or rebalance bands rebalancing approaches, or no rebalancing at all, to bother with over the course of a couple of decades or more.

Over spans that long, the higher return approach is to avoid significant cash and stay fully invested in a stock/bond allocation that is conservative enough to let one sleep at night as stock volatility cycles.

[Lsbcal]

Come on now folks, how bad could it really get? I ask myself this recently and recalled 1987. That was a great year until October. Here is the SP500 chart for 1 year starting July 1 1987:



How would markets react if we had another -20% day? Off 33% from August high to late November low

So I'm at 70% equities and looking at the tea leaves. I told myself after a surge I would reduce by 5% increments, i.e. to 65% around about now. As of Friday if felt like a surge.

I would just add to my short term investment grade bonds which I expect will preform barely up to inflation but most of that money will be sticking around at least. Bonds were paying high real rates in 1987 but they are ugly now.

[audreyh1]

Darn, I was hoping you were talking about COVID!

[JoshTrent]

Quote:

Originally Posted by target2019 My early morning thought for you is that a provocative title works for a time. Then it's necessary to provide a thought or two to sustain us in glorious retirement. MarketWatch is clicks-driven, and that tends to drive away the personalities here. It is free though, and more interesting than watching tickers rise and fall. I suppose the backstory to your question is about economies and the hope which investors have about the future. Has your opinion changed at all? Are you going to reduce equities and accumulate more cash to use in the next decline? My reaction to these downturns included increasing my 401(k) contributions throughout the crash.

I am currently residing in a GMT +2 location, so I'm sure that my posts come through at strange times.

I was more interested in opinions based on the Economics of Buffet's "indicator". In hindsight, I realize I didn't place enough emphasis on that in the OP. FWIW - the link in the OP was from MSN (owned by Microsoft), originally based on an article from Business Insider (owned by Insider). It was not a MarketWatch (owned by Dow Jones) Article. I appreciate what a click-bait article is, I was reading more into what Buffet was quoted as saying.

Input noted on how titles of threads can be a turn-off. Thank you for that.

I am paring small long term gains on a bi-weekly basis. While it's a fact that I am missing out on some gain presently, I am "hopeful" to be buying in the near term (< 1 year) at a larger discount will work to my favor. To me, the opportunity cost is worth it.

[JoshTrent]

Quote:

Originally Posted by Lsbcal Come on now folks, how bad could it really get? I ask myself this recently and recalled 1987. That was a great year until October. Here is the SP500 chart for 1 year starting July 1 1987: How would markets react if we had another -20% day? Off 33% from August high to late November low So I'm at 70% equities and looking at the tea leaves. I told myself after a surge I would reduce by 5% increments, i.e. to 65% around about now. As of Friday if felt like a surge. I would just add to my short term investment grade bonds which I expect will preform barely up to inflation but most of that money will be sticking around at least. Bonds were paying high real rates in 1987 but they are ugly now.

Thank you for that.. I entered the market in the late 90's, so 1987 was a bit before I was paying attention. While focused on the future, I think it's important to be mindful of the past.

[JoshTrent]

Quote:

Originally Posted by audreyh1 Darn, I was hoping you were talking about COVID!

I wish I was!

[2177V]

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

[FIREarly]

DCA

[ejman]

Quote:

Originally Posted by NW-Bound Digging out the data for the period of 1/2015-1/2019, I saw that I did not get anywhere near that 31% market return for the 4 years. So what did I do wrong? Were my stock picks that bad? But, but, but one look on Quicken told me the story: in those 4 years, I withdrew a total of 14%. Yikes! And I was never 100% in stocks, so cannot compare myself to that 31% market rise. Ah, I feel much better, knowing I did not mess up that badly. And now with a WR of less than 1% due both to lower expenses and portfolio growth, I am certainly not afraid of any market crash. I still want to grow my stash, to see how well I can manage my own money. PS. I did trail Wellington MF for the above 4-year period, due to my holdings of international equities.

Yeah, those pesky international equities. Most everything I've read says to own international equities in some measure. But they have only brought grief for the last what 15-20 years? Maybe it's time they start earning their keep.

[ejman]

Quote:

Originally Posted by vchan2177 I am not concerned about a crash because the market always recovers.

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

[kbst]

Quote:

Originally Posted by Montecfo Comparing public equities to GDP makes little sense IMHO, for variety of reasons. Instead, equity valuations are best understood relative to interest rates, the single most important driver of equity values. Am I ready for a "crash"? Always. I stand ready to buy more equities as I did last year. But I do not "worry" about a crash. Worry is completely unproductive and shortens your life. Instead I prepare myself. And the most of important part is to be mentally ready to buy stocks when they are falling and worry is rampant. In my view the money is made in down markets, when everyone wants to sell. That's when I buy.

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.

[target2019]

Quote:

Originally Posted by target2019 My early morning thought for you is that a provocative title works for a time. Then it's necessary to provide a thought or two to sustain us in glorious retirement. MarketWatch is clicks-driven, and that tends to drive away the personalities here. It is free though, and more interesting than watching tickers rise and fall. I suppose the backstory to your question is about economies and the hope which investors have about the future. Has your opinion changed at all? Are you going to reduce equities and accumulate more cash to use in the next decline? My reaction to these downturns included increasing my 401(k) contributions throughout the crash.

Quote:

Originally Posted by JoshTrent I am currently residing in a GMT +2 location, so I'm sure that my posts come through at strange times. I was more interested in opinions based on the Economics of Buffet's "indicator". In hindsight, I realize I didn't place enough emphasis on that in the OP. FWIW - the link in the OP was from MSN (owned by Microsoft), originally based on an article from Business Insider (owned by Insider). It was not a MarketWatch (owned by Dow Jones) Article. I appreciate what a click-bait article is, I was reading more into what Buffet was quoted as saying. Input noted on how titles of threads can be a turn-off. Thank you for that. I am paring small long term gains on a bi-weekly basis. While it's a fact that I am missing out on some gain presently, I am "hopeful" to be buying in the near term (< 1 year) at a larger discount will work to my favor. To me, the opportunity cost is worth it.

I don't follow these type of quotes much anymore. Sure there are interesting people like Buffet, Shiller, etc., but I'm a pretty boring investor with total market funds in 85% of the portfolio. The asset allocation does not get out of balance by much.

I did decide just now to make 2-3 trades to pay taxes. One of those will be a trim of a position in tech industry. Another will be an exit, so one less individual company to look at.

In a way I guess I am adjusting to high stock prices by removing some of the reward. But it's a very limited amount.

[cyber888]

Fed tapering may slow the market down a bit, but not by that much. Here's the thing - unless the Fed hikes up the Prime Rate from 3.25% to 3.50%, which will still happen anytime in 2023, I'm not changing my asset allocation of 75% - 25% (the 25% includes my cash holdings/emergency fund). My 401K is 80% - 20%. Then again, the Fed promised to hike prime rate 3 years after the 2009 recession - but that did not happen. It took much more - 7 years? Only Bullard of the Fed wants to taper, by the way, and he tries to make a lot of noise about tapering. I still think he will get voted out by the majority of the Fed board.

[Montecfo]

^^^^^
Just to be clear, the FED sets the Fed funds rate. Banks set the prime rate.

[Timeisprecious]

Quote:

Originally Posted by 38Chevy454 There are always talking heads/articles that predict doom. One of these days one of them will be right. Until then their track record is pretty inaccurate. Answer to your question is no, not doing anything different today than I was yesterday, or one month ago, or 6 months ago. Or plan to do any anything different for foreseeable future.

+1. It seems everyone wants to be a prophet or son of a prophet these days. Most are inaccurate time after time.