Frothy market, anyone positioning for a drop?

[surprising]

Market indices and NWs are at ATHs along with many other metrics. Buffet has over 50% of his portfolio in T-Bills (over $200B!). News articles are overwhelmingly upbeat. I am starting to feel that this market is unsustainable, especially in an election year. I am not worried about my short term bucket as it is mostly made up of dividends and bond CEFs. However my long term bucket (aka 401K which I can't touch for 9 years) is mostly in S&P fund. I might follow Buffet and move to 50% S&P, 50% short term bond fund. Might also buy some cheap(ish) puts on the S&P for further protection.

Is anyone positioning their portfolio for a sustained selloff?

 

[bloom2708]

You should always be prepared for a market drop. But market timing seldom has the desired effect.

 

[jazz4cash]

^Exactly.
My idea of preparing is carefully choosing an AA that I am comfortable with and rebalancing as necessary.

 

[Qs Laptop]

Is anyone positioning their portfolio for a sustained selloff?

No. With two more Fed rate cuts looking like a lock, I don't see the market dropping. Unless there is some political turmoil...

And by political turmoil don't mean the US election, I mean something like an all out war in the middle east that would disrupt oil shipments.

 

[GrayHare]

"Don't Fight the Fed." OTOH, selling into a rally in general, not because of the fear of a drop, is the only timing one can do reliably since you're not predicting anything plus already know how much profit you can lock in.

 

[Jerry1]

On the contrary, I'm feeling like I should put more into the market right now. Every article I read seems to support further upside. Of course, my logical side says that's just how the average Joe feels right before a market burst. Either way, I spent time on my asset allocation earlier this year and I'm trying really hard to stick with it. I don't want to be my own worst enemy just because of FOMO.

 

[Joseph]

Sitting on around 7% cash in portfolio, getting around 4% plus still in MM acct at Schwab. Nibbled early august of sell off. Will wait for another sell off to invest more.

 

[MichaelB]

Warren Buffet is a successful market timer, so his large cash pile and recent sale of BoA and Apple do merit some thought. He hasn’t sold much else, though, so it’s not clear he is expecting a market decline. There may be other good reasons for his recent sales.

One reason to beware of asset price pessimism is the recent announcement of stimulus in the Chinese economy. If there is an economic turnaround there it could lead to a sharp increase in global economic growth.

 

[street]

I have no idea what the markets will do. I hear and read that things should be on the up and up but who knows.

I'm staying Pat doing nothing like I have always done through the good and the bad.

I will sustain whatever the markets throw at me.

 

[Golden Mean]

Market indices and NWs are at ATHs along with many other metrics.

As has been the case on and off for the history of the market.

Buffet has over 50% of his portfolio in T-Bills (over $200B!).

Buffet has a lot of cash because a) He can't buy anything small since it won't move the needle for Berkshire b) He doesn't see any deals in the gigantic companies he can buy. He's had a ton of cash for years, so this tells you nothing about his thoughts on future of the current market.

I might follow Buffet and move to 50% S&P, 50% short term bond fund.

I don't believe Berkshire is 50% cash.

Is anyone positioning their portfolio for a sustained selloff?

Not me. I'm way up from the time the first calls for recession/crash started 2 years ago.

Not even sure how one would do this. Sell when? Now? And wait how long? And buy back in when? What happens if the market runs another 15%+ on the next year? Or 3 years? Buy in then?

Warren Buffet is a successful market timer, so his large cash pile and recent sale of BoA and Apple do merit some thought. He hasn’t sold much else, though, so it’s not clear he is expecting a market decline. There may be other good reasons for his recent sales.

He has stated many times, he doesn't do macro (ie time the market). The Apple sale was most likely due to a) Apple up 10x from his initial buy price b) He has mentioned that tax law may change next year in a negative fashion for Berkshire. Also, Apple is still Berkshire's biggest holding.

 

[Koolau]

Sticking to the plan.

 

[MichaelB]

He has stated many times, he doesn't do macro (ie time the market). The Apple sale was most likely due to a) Apple up 10x from his initial buy price b) He has mentioned that tax law may change next year in a negative fashion for Berkshire. Also, Apple is still Berkshire's biggest holding.

I don’t presume to know his motives for selling those equities. Just because he says he doesn’t do something (like macro) doesn’t mean he isn’t doing it.

There are a number of possibilities and none of us know the real reason. He may have a valid reason that is not meaningful for small individual investors like us.

Or, it may be something simple like rebalancing.

 

[audreyh1]

We’re heading into the last few months of the year. Historically this has been a string period. I suspect that frothiness will continue through year end unless we get strong data indicating that the economy is weakening.

 

[Golden Mean]

I don’t presume to know his motives for selling those equities. Just because he says he doesn’t do something (like macro) doesn’t mean he isn’t doing it.

There are a number of possibilities and none of us know the real reason. He may have a valid reason that is not meaningful for small individual investors like us.

Or, it may be something simple like rebalancing.

I agree, but I think the statement "Warren Buffet is a successful market timer" is demonstrably false. He has largely bought great companies and good prices and held them for a long time.

 

[calmloki]

We are very roughly 4/3/3/3/1 ratio with T-bills, stocks, rental property, real estate secured loans and cash. Our current strategy is the same as ever and is a couple compromise between security and making money work. This is not a written strategy with enumerated and adjusted ratios; neither do we have a budget. We just do as we are wired to do, which works for us.
Currently have 60 day buy orders in for VTI for increasing amounts at three points if it drops 5, 10, or 25%. That worked out for us exactly once a year or so ago.

 

[Diogenes]

I'm nervous for a different reason: market leadership is now, and has been for some years, narrow. It's mostly US large-caps, and within that, US large-cap growth. Value stocks, midcaps and small-caps (either growth or value) have been lackluster, to say the least. The Russell 2000 remains below its March 2021 high. That's three and a half years of being (historically) underwater.

Then there's the issue with the rest of the world. US stocks have been inordinately dominant ever since the then-peak before the Great Financial Crisis. For 17 years now, US stocks have trounced the ex-US global average. When will this change?

 

[pb4uski]

... Is anyone positioning their portfolio for a sustained selloff?

Yes, but unfortunately a few years years ago.

I was also early on bonds getting slammed by higher interest rates by a couple years.

 

[disneysteve]

I'm not "positioning for a drop" because I don't believe in market timing. However, I have been gradually shifting our AA to reduce our equity exposure. This is a permanent change, not a response to any particular current conditions or predictions of near-term performance. It is a response to the fact that we've seen a substantial run up in the value of our portfolio and I feel it's no longer necessary for us to take on as much risk going forward. If you've won the game, it's okay to stop playing. I haven't made any dramatic moves but I've sold off about 200K or so of equity holdings this year and our stock allocation is down to 59.4% at the moment. I'd like to keep chipping away until it's around 55%. I probably won't do much more until after the first of the year so that the next batch of capital gains realized comes in the new tax year.

 

[RetiredHappy]

My IRA is 100% Fixed Income, i.e. term deferred fixed income annuities, while my brokerage is close to 100% equities. I consider the portfolio to be fully diversified.

My husband's portfolio is now 80-20 equities to fixed income and he just made that change in July of this year and before then he was 95-5. He bought MYGAs for his fixed income component.

We don't see the need to make further adjustments.

 

[VanWinkle]

Nobody knows nothing about the future. There is no smart money, just lucky money. Ask the
ARK fund manager Kathy Woods. Pick an AA you can stick to through thick and thin, you will
be rewarded by the market. Patience is the key to success in long term investing. I wish you
good luck in your investing future.

 

[jollystomper]

Markets always drop, that is why they have peaks . Just set your AA to a value that lets you sleep well at night, and enjoy the ride.

 

[Ronstar]

I’m not, but I’m going to convince MiL’s FA that she should be 100% in an income producing fund or something similar with less risk. At 95 yo, she will not be able to outlast the coming market debacle.

 

[Andre1969]

I'll let you guys know if I decide to make a move. I've discovered that, pretty reliably, if I sell an asset, it then suddenly goes up in value about 50% of the time. And if I buy an asset, it immediately goes down in value about 50% of the time.

 

[aja8888]

I'll let you guys know if I decide to make a move. I've discovered that, pretty reliably, if I sell an asset, it then suddenly goes up in value about 50% of the time. And if I buy an asset, it immediately goes down in value about 50% of the time.

That's the camp that I am usually in too!

 

[Koolau]

I'll let you guys know if I decide to make a move. I've discovered that, pretty reliably, if I sell an asset, it then suddenly goes up in value about 50% of the time. And if I buy an asset, it immediately goes down in value about 50% of the time.

I remember those days! Now I just rebalance occasionally - usually through my RMDs.