What would you do if Crystal Ball showed long term market drop of 30% next week

[Midpack]

No such thing as a useful crystal ball, so no answer...

 

[mickeyd]

I would send Crystal Ball back to the factory (if still under warranty) as it is clearly malfunctioning.

 

[FUEGO]

Buy a boatload of cheap, out of the money put options that expire just after next week. Then lease my crystal ball to Bloomberg who would undoubtedly be better at marketing it through their terminal subscriptions.

 

[bobandsherry]

I would go into my portfolio tracking spreadsheet to see if this would trip a rebalancing band if so what purchases I would need to make to rebalance.

You said what would we do if we knew the market was going to go down 30%. You did not indicate how quickly it would recover.

Actually, I did - 2 years+.

 

[DawgMan]

I already made my crystal ball moves in July. Changed asset allocation from 80/20 to 45/55.

Sure I missed some big gains last three months.
But I am very satisfied that I locked in some significant profits.

So here here lies the tension...

Smart part of your brain says “stay with your planned AA”, “don’t panick, you have seen how markets come back... like after 2007”.

Impulsive/greedy/fearfull brain says “it’s coming, cash out and wait to buy back in after a big drop” aka “market timer”.

So this begs the question... are you adjusting your AA as effectively a market timing strategy or is this your new AA due to long term strategic planning?

Despite my own crystal ball saying we are due for a sizable correction since the beginning of the year, I have stayed the course with my previously set long term AA of 60/40. None the less, my market timing itch feels like it needs scratching every day these days. Part of me sees the logic in dropping my AA to more conservative levels, but then the question is always when do you ratchet back up... back to my market timer brain.

 

[Ronstar]

If the crystal ball yielded solid info as to the beginning and end of the drop, I'd go to cash in my IRA and buy puts with my taxable $. But I tried market timing during Y2K and missed out on +100k $ because I mis-timed the end of the drop. So I'd have to be 100% assured that the crystal ball was correct or else I'd just ride it out with my current AA.

 

[Dash man]

If the crystal ball were accurate, forget the market. I’ll find the upcoming lottery winning numbers and spend $5/week for a large return.

 

[flintnational]

In this order:

1) Sell the crystal ball to the highest bidder
2) Invest the proceeds into my current AA
3) Re-balance annually to buy cheaper shares in a declining market
3) Remind myself that reinvested dividends are also buying cheap shares
4) Stay the course and wait for the market to recover


FN

 

[bobandsherry]

If the crystal ball were accurate, forget the market. I’ll find the upcoming lottery winning numbers and spend $5/week for a large return.

The crystal ball was one time use and only for the forward view of the market. No lottery numbers, that would just be cheating, and where's the fun in that?

 

[jetpack]

Sell all my stocks and buy up SPXU (-3x s&p) Double my holdings in a week. Big tax bill though.

 

[bobandsherry]

I already made my crystal ball moves in July. Changed asset allocation from 80/20 to 45/55.

Sure I missed some big gains last three months.
But I am very satisfied that I locked in some significant profits.

It's all about timing, and they say most people won't time things right.

Someone who made the move a year ago missed a lot in the gains. Comparing Vanguard total bond fund (VBMFX) to S&P, over the last year VBMFX is about 2% loss while S&P is 20% gain and DOW and NASDAQ up almost 28%. Effectively, someone who made the move a year ago has already realized the value of a 8-14% market correction in their portfolio. Trying to time when to get in could cause them another 8-14% in their portfolio. So trying to time the market could still effectively cost you a 'market correction' in your portfolio.

 

[jollystomper]

If it were a real crystal ball it would also tell me when the market would recover its losses. So I would do nothing.

A long term 30% drop with my AA is less than a 15% loss, and dividends are still coming in. I can weather that fine.

 

[Rianne]

Buy.

 

[bclover]

I have an asset allocation and I stick with it. Worked in the last crash and I expect it to work in the next one.

+1

I'd market the services of my crystal ball to the masses and make a bundle as a market guru.

me too!

 

[dallas27]

Curious... what would you do with your investment portfolio if you had a crystal ball and could see a long term (2+ years) drop in the market of 30% in the next week? What would be your flight to safety? Gold? Bitcoin? CD's? Cash? Specific stocks that fair well in market downturn? Do you already have a plan in mind or just fly by seat of your pants?

Why would you need safety? If you knew the future direction of any asset, you make the biggest derivative leverage bet you can and collect your reward afterward.

 

[kcowan]

I remember some pundits predicting a decline after last January. Ho hum...

 

[sengsational]

First, let's nail-down the scenario:

• I'm the only one that has such a crystal ball, and I'm the only one that knows what it says (if more than just me had the information, the market would tank before next week).
• I somehow know with certainty that the crystal ball is 100% reliable.

If either of the above were not true, then I'd do nothing in advance of the drop (a drop which may or may not happen).

More provisos:

• The only thing the crystal ball tells me is that next week, the market will drop 30%. After that, the ball quits working.
• Nobody would believe me, so I can't sell the ball or the information it provided.

Given all of that, I would sell all my equity positions, "Buy a boatload of cheap, out of the money put options that expire just after next week".


Immediately after the drop, I'd reinvest to my target asset allocation.

 

[unclemick]

Hmmm. 1966 to current still buy a few good stocks. Mostly full auto retirement letting those computers rebalance.

Soo a crystal ball giving the next Superbowl winner that would get my rapt attention. World Series a tad less.



heh heh heh - Stay the course 1966 - 2017 has been a bit grippy at times but the victory parties are fun.

 

[unclemick]

Pinky: Gee, Brain. What are we going to do tonight?

The Brain: The same thing we do every night, Pinky. Try to take over the world.

I wish they would stop charging $1.99 to see old episodes. Loved that program.

heh heh heh - guess which service. I wonder what household insurance would cost to add a crystal ball to coverage?

 

[Doc0]

Sell 33% and buy the VIX and maybe some gold. Once I hit the 30% downdraft, sell the VIX and rebalance the proceeds. Tax loss harvest what I can.

 

[Jerry1]

What would I do with information from a crystal ball? Of course the only reasonable thing to do is consult with my magic 8 ball to verify my next step.

https://www.amazon.com/Magic-8-Ball...744311ca0ffee749507a6&creativeASIN=B0149MC426

 

[Sunset]

First, let's nail-down the scenario:

• I'm the only one that has such a crystal ball, and I'm the only one that knows what it says (if more than just me had the information, the market would tank before next week).
• I somehow know with certainty that the crystal ball is 100% reliable.

If either of the above were not true, then I'd do nothing in advance of the drop (a drop which may or may not happen).

More provisos:

• The only thing the crystal ball tells me is that next week, the market will drop 30%. After that, the ball quits working.
• Nobody would believe me, so I can't sell the ball or the information it provided.

Given all of that, I would sell all my equity positions, "Buy a boatload of cheap, out of the money put options that expire just after next week".


Immediately after the drop, I'd reinvest to my target asset allocation.

Plus borrow fully on the HELOC, and cash advance CC's and even some PayDay loan folks, then short the market, probably via 3x short ETF's.

After the drop, sell, and buy a HI island, and reinvest to my asset allocation.