Looks like the Party is over

[Balance]

So, the Saudi's has orchestrated a drop in Oil to a 10 year low, China's false economy is finally coming home to roost and Japan and the Eurozone have stagnant growth. The FED is finally raising rates and I would be surprised if they don't raise another 50 to 75 bps in 2016, despite the bad global economy. They might spread it out more but I don't think they will stop or reverse. These conditions will put tremendous pressure on the US economy and might drive into a recession. As such, the US stock market has made a correction of over 10% from it's 52 week high and with it being overvalued even at Friday's close coupled with the aforementioned headwinds history points to a further adjustment that could see this market drop another 10 to 20%. Lastly, RBS says sell everything and other Doomer's are jumping on the bandwagon.

So, looking back at 2007 thru 2009, the market corrected over 50% and it took over 5 years for it to get back those losses. I know everyone says you can't time the market but if you are in the early stages of retirement you have to think about capital preservation so you can catch the future upswing.

Right now, I am only 30% exposed in the market so I was outside when the cops arrived to the party. However, based on past experience with Parties that go very badly, I should slip away into the bushes while the paddy wagon rounds up party leaders. My wife and I have income from consulting deals for 2016. But, if we go into a recession some of that might go away in 2017. So, I am thinking of lightening up some more during the short rally's in 2016 and then probably going back in slowly in 2017. Of course, that may have to adjusted depending on the outcome of the elections.

How are some of the experienced longer term (retired 10 years or more) retirees viewing this situation?

 

[Whisper66]

I buy in down markets with any extra cash I can find. Also use any excess bond money to buy. During the down turn , living expenses will come from dividends and 3 yrs of expenses saved in bond funds. If needed, will cut back expenses to outlast a down turn. Just spent time last night looking for any extra cash or bonds laying around. 2016 may be a great buying opportunity. In my view, we just have a new party starting for those with the ability to buy in.


Sent from my iPhone using Early Retirement Forum

 

[REWahoo]

How are some of the experienced longer term (retired 10 years or more) retirees viewing this situation?

I see it as an opportunity to once again practice doing what I do best - nothing.

Anyone can put together a laundry list of "why we're doomed" topics, but I won't be convinced that's true until I look up in the sky and see the asteroid first hand.

Attempts to try to "avoid the coming financial disaster" often end up having investors zig when they should have zagged. My experience is the wisest move is staying still.

 

[Senator]

The problem with getting out of the market is timing the back in part. Many investors can get out in time, very few can get back in. There is always a case for going lower. Many retail investors are still out from 2008.

Maybe get out, wait for a 5-10% drop, and get back in. Maybe we are already at the bottom, and you get back in over where you got out.

I am going to rely on 130+ years of market history and stay the course. I will continue to invest my ~$10K a month until I retire this year. Then only $5K a month for a few years.

Dividends are still steady, and reinvested. If this economy makes for a bad market, imagine when things really go bad...

 

[eta2020]

Yea...such moods happened and will happen again.

Still S&P graph looks pretty good over that last 120 years even with all the drops. Collect dividends and do nothing.

Party is over for people without long term view.

 

[jim584672]

The problem with relying on 130 years of history is that our current situation has never happened before in history. Years of ZIRP, a massive Fed balance sheet, worldwide QE with negative rates in other countries. This is actually a live experiment, and we don't know how it all ends.

 

[W2R]

I see it as an opportunity to once again practice doing what I do best - nothing.

Anyone can put together a laundry list of "why we're doomed" topics, but I won't be convinced that's true until I look up in the sky and see the asteroid first hand.

Attempts to try to "avoid the coming financial disaster" often end up having investors zig when they should have zagged. My experience is the wisest move is staying still.

+1000

Fear (in this case, fear of possible impending disasters that may or may not occur) is a very strong emotion, and emotional investing is not generally a great idea IMO.

 

[REWahoo]

This is actually a live experiment, and we don't know how it all ends.

So this time is different?

Every day of life, financial or otherwise, is a "live experiment" and we never know how it ends until it does. Wouldn't have it any other way!

 

[eta2020]

The problem with relying on 130 years of history is that our current situation has never happened before in history. Years of ZIRP, a massive Fed balance sheet, worldwide QE with negative rates in other countries. This is actually a live experiment, and we don't know how it all ends.

Historically we had worst things to deal with over a last 130 years.

You need to be an optimist in order to invest. BTW this is so far nothing. If markets decline another 10-20 % it will still be insignificant decline.

 

[Corporateburnout]

Almost 2 years into retirement and relying exclusively on our portfolio for expenses. Established a 50% equity allocation a couple of years before retirement with no plans to deviate other than to rebalance with a 10% variance.

I would have timed the market if I only knew when to get back in but since I don't have a crystal ball I stay the course and enjoy retirement....

 

[marko]

Yea...such moods happened and will happen again.

Still S&P graph looks pretty good over that last 120 years even with all the drops. Collect dividends and do nothing.

Party is over for people without long term view.

+1. I just keep monitoring the dividend payments which (with SS) cover most of my expenses and make minor adjustments when I see a really great opportunity to jump on. Otherwise, stay the course.

The problem with relying on 130 years of history is that our current situation has never happened before in history. Years of ZIRP, a massive Fed balance sheet, worldwide QE with negative rates in other countries. This is actually a live experiment, and we don't know how it all ends.

That's the problem with the future. We never know how it ends, but "this time is different" has failed me so many times... so many, many times!

Things just never end up as grim as feared in my experience.

 

[ERD50]

.... As such, the US stock market has made a correction of over 10% from it's 52 week high and with it being overvalued even at Friday's close ...

Overvalued? That's a subjective judgement on your part, not a statement of fact. If it was 'overvalued' it would not be at that level (and then it would not be 'overvalued'!). It is at whatever value the market assigns to it, with buyers and sellers balancing out on each trade.

I know everyone says you can't time the market but if you are in the early stages of retirement you have to think about capital preservation so you can catch the future upswing.

Not 'everyone' says you can't time the market, but history says very few are consistently able to do it profitably. What makes you think any of us can?

... How are some of the experienced longer term (retired 10 years or more) retirees viewing this situation?

I see it as an opportunity to once again practice doing what I do best - nothing.

Anyone can put together a laundry list of "why we're doomed" topics, but I won't be convinced that's true until I look up in the sky and see the asteroid first hand.

Attempts to try to "avoid the coming financial disaster" often end up having investors zig when they should have zagged. My experience is the wisest move is staying still.

The problem with getting out of the market is timing the back in part. Many investors can get out in time, very few can get back in. There is always a case for going lower. Many retail investors are still out from 2008.

Maybe get out, wait for a 5-10% drop, and get back in. Maybe we are already at the bottom, and you get back in over where you got out ...

Agreed.

-ERD50

 

[W2R]

I would have timed the market if I only knew when to get back in but since I don't have a crystal ball I stay the course and enjoy retirement....

Here you go... I bought this one at a dusty old antique store back in 2009.

​

Unfortunately, it might (or might not) be broken.
​

 

[steelyman]

There's always a party somewhere, even if you have to get a few friends together and start it yourself.

 

[HadEnuff]

About 3 years or so after the 2008-2009 bottom, I saw a TV ad for one of the big money management companies. It might have been John Hancock, but I don't really remember for certain.
In it, a couple are sitting across the desk from the person who is now going to help them with their investments and either the man or the woman says "we think it's time to get back into the market"...

Well, OK, but 3 years ago would have been a lot better. To me that ad says it all about trying to time the market. Just as Senator and others have posted, when do you get back in? 3 years after the bottom? You are 3 years closer to the next correction.

I don't know what that cobra-headed jiggy is, W2R, but if it times the market, please keep us informed.

 

[W2R]

About 3 years or so after the 2008-2009 bottom, I saw a TV ad for one of the big money management companies. It might have been John Hancock, but I don't really remember for certain.
In it, a couple are sitting across the desk from the person who is now going to help them with their investments and either the man or the woman says "we think it's time to get back into the market"...

Well, OK, but 3 years ago would have been a lot better. To me that ad says it all about trying to time the market. Just as Senator and others have posted, when do you get back in? 3 years after the bottom? You are 3 years closer to the next correction.

I don't know what that cobra-headed jiggy is, W2R, but if it times the market, please keep us informed.

Will do, but I wouldn't hold my breath if I were you. My crystal ball (in the cobra-headed stand) hasn't worked yet.

That commercial is hilarious - - I think that many of us had completely recovered from 2008-2009 within a year or two.

 

[ejman]

The problem with relying on 130 years of history is that our current situation has never happened before in history. Years of ZIRP, a massive Fed balance sheet, worldwide QE with negative rates in other countries. This is actually a live experiment, and we don't know how it all ends.

Yes, the exact same set of circumstances have never happened before but frankly, it certainly looks a hell of a lot better now than say 1941, 1942 with the whole world fighting an existential war and the other side looking like it may very well win, or for that matter closer to our time, the 1970's with high inflation, another of our multiple stupid wars tearing the fabric of our society apart and the stock markets stuck in the doldrums for near 20 years.

As for now, I'll do what I've doing since ER 13 years ago - nothing- until and unless my wide rebalance band is exceeded from my 50/50 allocation. Being that almost half of my liquid NW is in balanced funds, I almost never have to actually do anything. Which suits me just fine...

 

[sengsational]

I did what I was going to do already. On October 7th (http://www.early-retirement.org/for...e-to-time-the-market-73166-9.html#post1642287), I changed from an age appropriate asset allocation to one that's appropriate for someone 30 years older. So with this recent correction, I'll do what I usually do: rebalance if an asset class percent deviates over 5% from target (the new target as of 10/7, of course). As to getting back in, I'll use the same PE10-based scheme; no emotion, no wondering if some screwball leader in the world did or didn't do something, just a rule. I might be out for a long time. I don't care, I'll still be in the 30/70, 70/30 range the whole time.

Also, I might do a cash-out refi so I can keep income low. That's kind of a prediction that interest rates won't go down. I'm pretty sure of that prediction.

 

[audreyh1]

I don't know what that cobra-headed jiggy is, W2R, but if it times the market, please keep us informed.

That cobra-headed jiggy is holding her crystal ball!!

 

[Bigdawg]

Hey balance, Sell! Sell! Sell!

Don't try to stir up panic on this board. This crew doesn't seem to get excited about a 10-20% drop. Most on here are long. Personally haven't changed my strategy nor even look at my accounts. I'm in the do nothing camp. Staying with my long term strategy.

Good luck to you. Hope your plan works out the way you expect.

 

[Bestwifeever]

I believe that is W2R's pet cobra, named Whee.

 

[mystang52]

I see it as an opportunity to once again practice doing what I do best - nothing.

Anyone can put together a laundry list of "why we're doomed" topics, but I won't be convinced that's true until I look up in the sky and see the asteroid first hand.

Attempts to try to "avoid the coming financial disaster" often end up having investors zig when they should have zagged. My experience is the wisest move is staying still.

Ditto for me

 

[Danmar]

I see it as an opportunity to once again practice doing what I do best - nothing.

Anyone can put together a laundry list of "why we're doomed" topics, but I won't be convinced that's true until I look up in the sky and see the asteroid first hand.

Attempts to try to "avoid the coming financial disaster" often end up having investors zig when they should have zagged. My experience is the wisest move is staying still.

Me too. Didn't do anything in 2008-2009. Won't do anything now except collect divs and my pension.

 

[audreyh1]

I believe that is W2R's pet cobra, named Wh**.

The name that shall not be spoken aloud!!!!!!

 

[Dawg52]

I see it as an opportunity to once again practice doing what I do best - nothing.

.

That's what I tell people when they ask what am I'm going to do today.

As far as when the market tanks, I do squirm a bit. But usually end up buying a little. I call it nibbling, some people call it rebalancing. Not sure which one sounds better. Overall I maintain a conservative AA, more so than most.