When to buyback?

[rayinpenn]

Ok before you jump to some bad conclusions we too took it on the chin in our taxable accounts. Earlier in the year I looked at my non taxable retirement accounts after a years retirement and they had actually grown. I was afraid I’d get burnt being greedy. So I sold all equities in my non taxable accounts (410ks) and then the wife’s last. I had a buy back number in mind 40% loss in the Dow from it’s high. I understand if you don’t like the sound of that but let’s keep feeling out of it for this.

High 2/12/2020. 29,552.
Yesterday 19,152.
Drop. 10,400. 35%

So we are not there.. will we ever get there? I sure don’t know but if I were to guess I’d say sure based on the news from Spain and Italy.
Thoughts? Please be kind.

hunkered down and nervous.

 

[Markola]

The Shiller Cape for the S&P 500 is certainly trending your way.


https://www.multpl.com/shiller-pe

 

[Masquernom]

Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets."

He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that's not the whole story. The original quote is believed to be "Buy when there's blood in the streets, even if the blood is your own."

We're still binge watching Netflix. Not time for blood in the streets yet.

 

[NoiseBoy]

Thanks for the quick link to the CAPE, I was planning to check it today. I am trying to decide if/when to move from the Target 2025 fund (55/45) to the Target 2060 fund (90/10) in my megacorp 401k. I am also sitting on a fair amount of cash, but 2020 is my target retirement year, so I am probably too chicken to put any of that into equities. However, my retirement plans don't require me to use any of the Target fund monies for daily living expenses, so I feel like I can take on some additional risk with them. Any advice from the forum about moving that part of my portfolio to a much higher equity ratio fund?

 

[brewer12345]

AS a veteran of getting in too early numerous times in the past, I am waiting. Ideally I want to see either prices so low I can't pass us the bargain (not there yet) or convincing evidence that we are past the bottom, have stabilized, and are in the early stages of a rebound (not there yet). At the moment the credit/funding markets are still a mess and there remains enormous uncertainty, so any purchases I make will be pretty clean investment grade bonds at what I consider to be attractive spreads. Junk is still very overpriced considering the coming wave of defaults, and I suspect we will see a bunch of BBBs downgraded to junk.

 

[COcheesehead]

AS a veteran of getting in too early numerous times in the past, I am waiting. Ideally I want to see either prices so low I can't pass us the bargain (not there yet) or convincing evidence that we are past the bottom, have stabilized, and are in the early stages of a rebound (not there yet). At the moment the credit/funding markets are still a mess and there remains enormous uncertainty, so any purchases I make will be pretty clean investment grade bonds at what I consider to be attractive spreads. Junk is still very overpriced considering the coming wave of defaults, and I suspect we will see a bunch of BBBs downgraded to junk.

I agree with this sentiment.

 

[cyber888]

Took equities off at the start of the month when Dow was around 25,600. My equities was at 24%. Yesterday, at 19,100, I started nibbling a little. Talk is Dow will hit 15K-17K and S&P at 2,000 by Goldman at bottom, and this is a black swan event and we don't know if Dow could go down even further to 12K-14K - so just assess your risk-aversion. I will keep on nibbling for the next 8 weeks. They say China and Taiwan and South Korea are getting better with less covid cases, so there are some signs. It depends also on how the current govt. admin manages these crisis in the next 2-3 weeks to stabilize the situation. Congress need to put $$$ directly into people's hands - because this is a 'demand side' problem. People need money and have them spend it. The oil market is collapsing, which is not good for the market - again, no demand. Once the consumer demand side goes up, we'll be better.

 

[target2019]

If you buy back at - 40% what will you do when the market drops another 10%...

 

[COcheesehead]

At yesterday’s close the market was at 100% of expected GDP. It’s not cheap yet.

 

[brewer12345]

If you buy back at - 40% what will you do when the market drops another 10%...

Probably ignore the fluctuation at that point. I am a long term investor who cares about value. Overvalued = poor returns. Cheap may get cheaper in the short term, but usually means strong returns in the next several years. It just has to be cheap enough to accept the risk.

 

[pb4uski]

Once/if the smoke clears, I'll probably look at some length of moving average to signal the bottom and then value average in over a period of time.... still need to think about it, but it will be a gradual and methodical getting back in and not all at once.

 

[perez99]

I switched my future 401k contributions from an intermediate bonds fund to a large cap stock one. Seems a better alternative to me and its not a huge bet..
Lets see what happens

 

[audreyh1]

The Shiller Cape for the S&P 500 is certainly trending your way.


https://www.multpl.com/shiller-pe

In general yes, a huge drop in CAPE10.

Unfortunately their earnings data is at least 4 months behind so it’s not very precise real time, but it will be when looking back 6 months.

 

[audreyh1]

Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets."

He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that's not the whole story. The original quote is believed to be "Buy when there's blood in the streets, even if the blood is your own."

We're still binge watching Netflix. Not time for blood in the streets yet.

The initial news in England was that the British had lost the battle, so there was a selling panic. Then the next day? came the news of victory. Methinks Rothschilds had better information that he took advantage of.

 

[Masquernom]

The initial news in England was that the British had lost the battle, so there was a selling panic. Then the next day? came the news of victory. Methinks Rothschilds had better information that he took advantage of.

He must have got the government briefing before it was released to the public.

 

[Masquernom]

I don't know how to imbed pictures, so you'll have to see the graph in the linked article. I'd think the US rate needs to get closer to the top of this graph before stocks bottom out. But then again, it's said the stock market is looking into the future, so perhaps it will bottom before then. I'm pretty sure nobody knows when it will bottom.

https://www.vox.com/future-perfect/2020/3/20/21179040/coronavirus-us-italy-not-overreacting

 

[OldShooter]

... will we ever get there? I sure don’t know but if I were to guess ...

You might as well guess. No one knows.

But, hey, you might guess right.

 

[UnrealizedPotential]

The Shiller Cape for the S&P 500 is certainly trending your way.


https://www.multpl.com/shiller-pe

Ok, so the Schiller PE for the SP 500 says 21.76. I saw another estimate that says the PE for the SP 500 is currently 17.34. Which one is right? I don't have any idea. Maybe neither one. If we had a good idea which one was closer to reality, it would help us to understand where we are in this bear market. I don't think anyone really knows.

 

[audreyh1]

He must have got the government briefing before it was released to the public.

I think he had his own employees or business contacts in Europe that got him the real news directly faster. Didn’t have to rely on the government. And he didn’t share it?

 

[audreyh1]

Ok, so the Schiller PE for the SP 500 says 21.76. I saw another estimate that says the PE for the SP 500 is currently 17.34. Which one is right? I don't have any idea. Maybe neither one. If we had a good idea which one was closer to reality, it would help us to understand where we are in this bear market. I don't think anyone really knows.

They are completely different metrics and not interchangeable.

One uses a 1 year view of past earnings, and the other a 10 year inflation-adjusted view of past earnings.

You can educate yourself by reading more on that multipl.com site.

 

[UnrealizedPotential]

They are completely different metrics and not interchangeable.

One uses a 1 year view of past earnings, and the other a 10 year inflation-adjusted view of past earnings.

Thank you for that Audrey. I learned something today.

 

[audreyh1]

Thank you for that Audrey. I learned something today.

I encourage you to explore the https://www.multpl.com/shiller-pe site and click on the FAQ for various metrics. They explain a lot.

 

[NoiseBoy]

I encourage you to explore the https://www.multpl.com/shiller-pe site and click on the FAQ for various metrics. They explain a lot.

I was curious to see if the mean had shifted upward at all from the long bull market, but it looks to still be in the 15 - 16 range that I recall from his original study. It only briefly touched that level during the housing crisis, but could this time be different? For today, I think I will stay on the fence and keep an eye on this chart. I'm not trying to time the very bottom, so I may move my 401k to a more aggressive fund if the CAPE gets below ~20.

 

[OldShooter]

... where we are in this bear market. I don't think anyone really knows.

Correct. And playing with charts and numbers will not result in any change to this situation.

If there were actually some reliable way to predict, do you think that the possessor of that information would be announcing it to the world?

 

[audreyh1]

I was curious to see if the mean had shifted upward at all from the long bull market, but it looks to still be in the 15 - 16 range that I recall from his original study. It only briefly touched that level during the housing crisis, but could this time be different? For today, I think I will stay on the fence and keep an eye on this chart. I'm not trying to time the very bottom, so I may move my 401k to a more aggressive fund if the CAPE gets below ~20.

I think there are two different “means” - one prior to the late 90s and one after. I pay no attention to the overall mean.

From Nov of 2008 through May 2009, CAPE10 stayed below 16, but not by much, so it more or less bottomed near the long term mean. It didn’t get up to 21 until March of 2010.

Earnings data tends to run several months behind so very recent CAPE10 calcs may be off as they are projections based on stale earnings data. It’s not a particularly real-time metric. But historical numbers are good.