Will the "Other Shoe" EVER Drop?

[audreyh1]

Well the last shoe drop was the fastest I’ve ever seen.it was a real crash down >30% in a very short period of time, but the Feds came out throwing everything at it, and there was a massive reversal. I didn’t even have time to finish my tax loss harvesting.

Who knows what it will be like next time.

Whatever. I like to stick to my simple plan.

[audreyh1]

Quote:

Originally Posted by Fermion Stocks have reached a permanently high plateau so I wouldn't worry over any big drops.

Just like 1929.

[Gumby]

Quote:

Originally Posted by Fermion Stocks have reached a permanently high plateau so I wouldn't worry over any big drops.

Why, Mr. Fisher. So nice of you to drop by.

[MarieIG]

The other shoe will drop - it always does. But - I can't tell you when.

[Time2]

Quote:

Originally Posted by kjpliny Some people fail to realize that preservation of capital can also be a strategy. If you have won the game, why take the elevated risk?

That was one of Bob Brinkers lines,

"Once you have critical mass, don't put it at risk"
Now, why don't I follow that advice?
Someday!

[SecondCor521]

Post #47 is very good.

I would add, if you don't have a pre-thought-out plan based on fundamentals, then you're going to have to continuously make decisions.

I have a plan that I've stuck with for 34 years. I only change my plan when I change my goals (hasn't happened yet), my situation changes (divorce or inheritance), or if I understand something fundamentally better (NPV of future SS can be treated as a bond equivalent). I do not change my plan based on the Fed, interest rates, the price of GME, the DJIA level, who the President is, or what any talking head or stock picker says is about to happen.

Many would call me too rigid. I prefer the term consistent. Some will prefer to have a general plan that they tweak around the edges and/or periodically. Yet others like the OP have what might be called a continual planning process. The latter would be too stressful for me because I'd never get a break from the planning process.

[Out of Steam]

Quote:

Originally Posted by Fermion Stocks have reached a permanently high plateau so I wouldn't worry over any big drops.

[Out of Steam]

Quote:

Originally Posted by Montecfo Out of Steam- That all makes sense. Thanks for the perspective.

I'm not at all a sophisticated investor, but have been influenced by the "rising equity glidepath" from Michael Kitces that has been discussed here, as well as the idea that taking a market loss right at retirement has a larger impact than it would later.

[Closet_Gamer]

Quote:

Originally Posted by SecondCor521 Post #47 is very good. I would add, if you don't have a pre-thought-out plan based on fundamentals, then you're going to have to continuously make decisions.

Thanks.

To your point, I once got to see Warren Buffett speak live. It was really cool.

He said that "there are no called strikes in investing" by which he meant that the risk of making a bad decision generally outweighed the risk of making no decision.

His opinion was that the average investor only needed to make a handful (10 or so) good decisions in their entire life.

People who tried to make lots of decision -- chasing pitches -- would likely underperform.

[FREE866]

I think this whole fear of "another shoe dropping" is pretty much always baked into investors psyche. I recall back in March of 2020 with the market down 30%+ comments like "we haven't seen the worst". The proverbial wall of worry is always there.

[Montecfo]

Quote:

Originally Posted by Out of Steam I'm not at all a sophisticated investor, but have been influenced by the "rising equity glidepath" from Michael Kitces that has been discussed here, as well as the idea that taking a market loss right at retirement has a larger impact than it would later.

It seems to me that you took a loss though, by selling last May. Your AA should reflect your risk tolerance and temperament.

Many people wished to sell sometime in the past year. I considered it. But instead I held my nose and added to positions in March because I knew that was right to do with the market down.

If you could get a decent return from bonds I would lighten. Instead I am staying the course, for now. I'm at about 70 pct equities.

[jollystomper]

Quote:

Originally Posted by SoReadyToRetire Does anyone here still think something "catastrophic" is bound to happen later this year? It just feels like everything is SO high, it's a dumb time to even consider getting back in. Thanks.

Of course something catastrophic will happen. That is the nature of the market. Of course, one person's catastrophe is another person's opportunity . It is much more l likely to be a "It's just a flesh wound" catastrophe than an "apocalyptic burned out wasteland with hoards of flesh eating zombies roaming the landscape looking for brains to devour for years to come" catastrophe .

A simple test of your tolerance: visualize the market down 50%. or 60%. Calculate the impact on your investments. Determine if that would change your desired lifestyle, or cause stress or loss of sleep. If yes, then don't invest it. If no, go for it.

[stephenson]

Some get lucky based on timing, but few seem to be able to do it purposefully.

I have always kept some cash available for investing on dips - never been able to call the big drops, but did over-invest at the bottom a couple of times, like Dec 18, and COVID 20, but it was excruciating to do it. I bought stocks and ETFs.

I screwed up later in 2020 and went cash on about 25% of non taxable accounts, and since then have been easing back in, mainly on specialty ETFs like ARKK ... BUT, to be clear, I should never have sold that 25% to cash.

BTW, I resisted selling when the markets got really hammered a decade earlier ... perhaps because I had no time to overthink it - too busy with life and kids ��?

[sengsational]

If your time frame is long enough, returning to the AA you had before panicking-out, all at once, is probably the best approach. By doing it now, you won't have to make any more moves beyond the occasional rebalance. To improve upon this, all of your dollar cost averaging would have to sum up to below today's price. If it zig zags horizontally, you'd be the same as all-in. But historically it zig zags with an upward trend, so would sum to a price above today's price. Of course it's all about what it does during the (unspecified) DCA period. But I think that we're in for another "roaring twenties". Not without bears, but overall, I'm thinking positive.

[donheff]

Quote:

Originally Posted by SoReadyToRetire Donheff, when you say "stay put", do you mean stay in cash like I am now?

No, I was talking about staying put at your AA. That would not be all cash for many. But once you are there, hang tight.

I don't have a good solution for when and how to get back in. Psychologically, it will be difficult to take if you go all in and a crash happens shortly thereafter. If I was in your situation I would probably pick an equity allocation somewhat below where I eventually want to be and just buy all in at one time. Staying fairly conservative initially would result in a smaller sticker shock if the market tanks. Any near time growth will feel good even with less than optimal equities. After a while I would then buy more equities to get to my chosen AA.

[Out of Steam]

Quote:

Originally Posted by Montecfo It seems to me that you took a loss though, by selling last May. Your AA should reflect your risk tolerance and temperament.

We definitely found out last March that our risk tolerance was less than we thought it was, but were able to wait long enough to recover much of the initial decline.

I'm not inclined to second-guess that decision, or to push too much money back in in the hope of making up for it. Long-term goal will be an allocation of roughly 40%, mainly by reinvesting proceeds from an ESOP in stocks in the next five years.

[FREE866]

Figured this was a decent analysis to post here. It's really become glaringly apparent to me over the years that trying to time the market with big swings to cash is just not the way to go.


https://awealthofcommonsense.com/202...ket-is-up-big/

[frayne]

After listening to Fed. chairman J. Powell on 60 Minutes this evening, doesn't sound like any shoes will be dropping for some time. Stated we are probably looking at 6%+ GDP growth this year as well as unemployment around 2%. Hope he's right !

[FREE866]

Quote:

Originally Posted by frayne After listening to Fed. chairman J. Powell on 60 Minutes this evening, doesn't sound like any shoes will be dropping for some time. Stated we are probably looking at 6%+ GDP growth this year as well as unemployment around 2%. Hope he's right !

He didn't say 2%!!!


4-5 %

[NW-Bound]

Will the "Other Shoe" EVER Drop?

The following quote is not applicable here, but talking about shoe dropping reminds me of the following interview with Warren Buffett at the early stage of the subprime crisis in Dec 2007.

Quote:

Becky: We keep hearing all these big companies, like UBS yesterday, coming up with these write-downs, and the market’s starting to look around and say, OK, is this finally it? Is it the last shoe to drop? Is there any way to know when it’s the last shoe to drop? Buffett: No. No. When people start dropping shoes you really don’t know whether they’re a one-legged guy or a centipede. (Laughs.)