Oh the Pain

[joesxm3]

Well today might be the breaking point for me.

Last week I really cut back on layering in as it fell to increase my equity allocation. Today I am actually thinking to sell some of those purchases at a loss, assuming farther downside.

The thread with the charts shows that we could be just at the start of a much greater downswing. The all-in podcast was saying that growth tech is being deprived to the new normal and their rule of thumb for 50% growth is 8x PE.

I hate to panic and I do have 20% or 30% left to use to buy up to my target, so maybe I will just sit and weight. However I am torn between selling some with the plan to buy back lower versus buying more lower with the plan of layering out as it goes back up. But buying more would make me even more concentrated than I already am so I see it as a risk.

I usually do the opposite of what I should, so maybe I am a harbinger of a bottom.

 

[W2R]

I have found out that for me, when I am in doubt, the best move is to do nothing.

In fact, for me it's always best to do nothing! But anyway unless you are completely certain, I'd suggest maybe getting away from the computer and doing something relaxing and unrelated to investments for a while?

 

[Car-Guy]

^^^^ ^^^^

 

[aja8888]

Joe, the bottom is not in yet and won't be until the high flying stocks with no revenue or earnings are fully cooked. Plus, interest rates are going up more, much more, and that will cause a recession and house prices to fall.

Why not wait until the end of the year to do anything major?

When times are like this, as W2R says above, just stand there and do nothing.

 

[skyking1]

Yes I quit looking because that's just painful. I have no intentions of changing things, short of maybe buying this year's I bonds. That was a toss-up because I might need the cash for the upcoming construction. I'll figure it out by end of year and probably fund Roth and I bond for DW and I before the end of the year deadline. I know it's backwards but I want to keep some dry powder in case we go crazy and buy the building permit.

 

[Dash man]

No one will know the bottom until it’s behind us.

 

[aja8888]

No one will know the bottom until it’s behind us.

And that's typically been when Jim Cramer is screaming SELL, SELL, SELL!

 

[W2R]

And that's typically been when Jim Cramer is screaming SELL, SELL, SELL!

I'll bet Cramer will never forget that melt-down that he had way back when (2008?)! It was CLASSIC.

 

[theo2]

Never invest more then you can afford to lose

 

[bloom2708]

Don't just do something. Stand there.

My stock/bond ratio is only off 1% or so because both stocks and bonds are dropping.

Stick to your plan. Check less often when stocks are dropping.

 

[daylatedollarshort]

We reduced our equity exposure back in 2008 early on, missed the bigger losses to come and really had no regrets. Our stock allocation was clearly too high for our risk tolerance at the time.

 

[NW-Bound]

While we do not know where the bottom is, if the market keeps on going down the stocks with high P/E like Tesla, Nvidia, and Amazon will get hammered harder.

When tech stocks with good P/E ratio like Apple and Microsoft are not spared a spanking, stocks with no revenues let alone earnings will see no mercy.

So, one has to look at the stock fundamentals to see what's to keep and what's to sell.

 

[skyking1]

It's like ripping the band-aid off to see if you still have an owie!

 

[aja8888]

This is not bad, so far.

I keep reminding myself I have only had one stock go to zero, well, really $0.05.

It's quite embarrassing to have to call your broker and have him remove those shares since no one will buy them and you have to stare at that $0.05 stock whenever you look at your holdings.

One good thing about mutual funds and ETF's is that it REALLY has to get BAD before they go to zero.

 

[COcheesehead]

Bucket system: some funds for now, some funds to replenish funds for now and then some funds for later, much later. Relax and enjoy.

 

[mathjak107]

Actually buckets don’t change a thing ….

Just rebalancing a portfolio with no cash bucket at all yields the same or better results then a cash bucket .

Mentally our brains like to compartmentalize things but cash buckets are a mirage Financially

https://www.kitces.com/blog/are-cash-reserve-retirement-strategies-really-necessary/

https://www.kitces.com/blog/are-retirement-bucket-strategies-an-asset-allocation-mirage/

 

[COcheesehead]

Buckets are for the mental side of investing. No one ever said they will improve performance, but they do improve sleep.

 

[NW-Bound]

Another thing about holding on to high P/E stocks: people think that when the market returns to the growth phase, these will go back up to their past glory.

Not so fast! Quite a few will go bankrupt. The ones with real revenues will survive, but look at Cisco, the premier tech stock in 2000, the year everyone realized how the Internet would change our life.

In another thread, I talked about the comparison between Cisco and Hormel, the guy who has been making Spam forever. If you bought $10K worth of Cisco and Hormel in Jan 2000, as of 4/30/2022, you would have $12,639 worth of Cisco, and $156,332 with Hormel. And if you bought SPY (S&P 500 ETF), you would have $42,278.

Cisco: $10K -> $12,639
SPY: $10K -> $42,278
HRL: $10K -> $156,332

All above numbers are with dividend reinvested.

They say that after the market recovers from a burst, the leaders in the new bull market will come from a new sector. The old top honchos having lost their luster will not reinflate their bubble.

After the tech and dot-com bubble burst in 2000, when the market started a new bull run, it was the subprime bankers, the home builders, and the building construction material stocks that were the new highflyers. Until they themselves crashed, that is.

 

[aja8888]

Another thing about holding on to high P/E stocks: people think that when the market returns to the growth phase, these will go back up to their past glory.

Not so fast! Quite a few will go bankrupt. The ones with real revenues will survive, but look at Cisco, the premier tech stock in 2000, the year everyone realized how the Internet would change our life.

In another thread, I talked about the comparison between Cisco and Hormel, the guy who has been making Spam forever. If you bought $10K worth of Cisco and Hormel in Jan 2000, as of 4/30/2022, you would have $12,639 worth of Cisco, and $156,332 with Hormel. And if you bought SPY (S&P 500 ETF), you would have $42,278.

Cisco: $10K -> $12,639
SPY: $10K -> $42,278
HRL: $10K -> $156,332

All above numbers are with dividend reinvested.

They say that after the market recovers from a burst, the leaders in the new bull market will come from a new sector. The old top honchos having lost their luster will not reinflate their bubble.

After the tech and dot-com bubble burst in 2000, when the market started a new bull run, it was the subprime bankers, the home builders, and the building construction material stocks that were the new highflyers. Until they themselves crashed, that is.

Cisco has a real product(s) and income. Compare Hormel to Pets.com.

 

[MarieIG]

Buckets are for the mental side of investing. No one ever said they will improve performance, but they do improve sleep.

+1

The mental side of investing is HUGE. If having buckets here and there allow one to stay calm and carry on, that's a tremendous benefit.

After all, the end game for all of this is to improve one's overall wellbeing.

 

[NW-Bound]

Cisco has a real product(s) and income. Compare Hormel to Pets.com.

Right.

My point is that while many dotcoms went bankrupt, even the Internet-age leader like Cisco still has not recovered to its high 22 years ago when you consider inflation.

It's amazing how much people bid up Cisco in those days.

Yes, I had some Cisco stocks too. One of these days, I will look up my records to see what I paid for it, and when I got out. It should be all there, in my MS Money file which I still keep (have to reinstall the MS Money program though).

 

[copyright1997reloaded]

We need a thread called "March to a Million (DOWN)" to see who among us is first to lose a million $.

 

[Car-Guy]

Right.

My point is that while many dotcoms went bankrupt, even the Internet-age leader like Cisco still has not recovered to its high 22 years ago when you consider inflation.

It's amazing how much people bid up Cisco in those days.

Yes, I had some Cisco stocks too. One of these days, I will look up my records to see what I paid for it, and when I got out. It should be all there, in my MS Money file which I still keep (have to reinstall the MS Money program though).

If your Cisco stock was bought back in the early to late 90's don't forget to consider all their stock splits too. (Yes I know a split doesn't increase the value by itself.... but) Seems every time I looked they were splitting. I once saw someone do a quick study that if you bought 100 shares of CSCO in the early 90's, how many shares you'd have before the dotcom bust. (It was like 28,000+)


EDIT Found it.

https://www.fool.com/investing/2018/03/12/cisco-stock-split-history-why-the-networking-giant.aspx

Also, an interesting tidbit of info, since Cisco gave most/all of their employees restricted stock as part of their compensation package, there were many many secretaries working there that were millionaires by the late 90's. (That's when a million was a lot of money)

 

[Rianne]

I just watched "Diamond Hands: The Legend of WallStreetBets" I realized we were lucky to ride a wave up with stock funds. And are able to hang in there with these downturns. I sympathize with the 20-30 somethings trying to figure out what to do. We can hold and be fine for 30+ years.

 

[Walt34]

I have found out that for me, when I am in doubt, the best move is to do nothing.

That's pretty much what I do - yawn, roll over, and go back to sleep.

It's much easier than getting all worked up about it, and the dust will settle on it all anyway. The demand for refrigerators and cars and tractors and all the other stuff isn't going to change much so it'll all even out in the end.

Or if one must, one can engage in the age-old practice of "When uncertain, when in doubt, run in circles, scream and shout". I'll take a pass.