move to cash for upcoming bear market?

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nisiprius
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Re: move to cash for upcoming bear market?

Post by nisiprius »

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And not only is it easy to move to cash too soon, it's easy to buy back in too late. After the bottom in 3/6/2009, it would be interesting just how high the market had to rise before people stopped saying "dead cat bounce" and "classic value trap."
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Yesterdaysnews
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Re: move to cash for upcoming bear market?

Post by Yesterdaysnews »

Momentum is still good for US equities. Have a plan and stick to it come hell or high water, that's more important than anything in investing. Stick to a plan your like and have patience.
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Re: move to cash for upcoming bear market?

Post by Grt2bOutdoors »

Bear market? What bear market? The market is up 270 points today thus far, apparently it didn't get the Yellen memo.
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JohnSwanson
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Re: move to cash for upcoming bear market?

Post by JohnSwanson »

I'm also considering selling at the top of today's stock market bubble! Although you thought that the recovery from the 2008 market crash was slow, compare it to how long it took the market to recover from the year 2000 crash! The speed with which the 2008 bubble inflated and, then deflated, is, in my opinion, the result of stock market manipulation! It's my belief that when today's bubble bursts, there will be a VERY prolonged market recovery! I have no hard data to support my opinion, but the reason I hold this belief is that the herd has been wise-enough to stay out of the market during the current bubble. Now that those who manipulate this wild stock market realize that we're onto them, what motive do they have to inflate another bubble?

Although other investors have replied asking how you will know when to buy back-into stocks, don't you think that if you wait for the S&P500 to drop 30-40%, that this is a good time to invest? Certainly the market will be more fairly priced than it is today! You probably won't buy-in exactly at the market bottom but, since you've got 14 more years until you retire, you stand an excellent chance of making money! Note that there are market bears who believe that the market will crash over 50%! If they're right, you'll face some downside unless buy-in near the bottom!

My situation is different then yours because I'm 57 and I retired 2 years ago. I'm living on my pension plus 4% of my 401K balance, withdrawn annually. My portfolio is 60% bonds/40% stocks. The reason that I'm thinking of selling now is that, in two years, I'm going to rollover my 401K into my Vanguard IRA and I suspect that this bubble will pop before I'm going to perform my rollover. Even with my conservative asset allocation, a large stock market correction will erase more of my portfolio than I'm willing to lose! If I'm correct that the market recovery will be slow, it will force me to delay my rollover until my portfolio recovers! Although this may not sound like a problem to you, I need to take control of my money as soon as I can because my former employer's 401K plan is terrible!

I saw the 2008 stock market crash coming and we're overdue for another one!
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Re: move to cash for upcoming bear market?

Post by retiredjg »

JohnSwanson wrote:My situation is different then yours because I'm 57 and I retired 2 years ago. I'm living on my pension plus 4% of my 401K balance, withdrawn annually. My portfolio is 60% bonds/40% stocks. The reason that I'm thinking of selling now is that, in two years, I'm going to rollover my 401K into my Vanguard IRA and I suspect that this bubble will pop before I'm going to perform my rollover.
Even with my conservative asset allocation, a large stock market correction will erase more of my portfolio than I'm willing to lose! If I'm correct that the market recovery will be slow, it will force me to delay my rollover until my portfolio recovers! Although this may not sound like a problem to you, I need to take control of my money as soon as I can because my former employer's 401K plan is terrible!
It sounds like you have stayed with a terrible 401k because you can withdraw from your 401k without penalty, but not from an IRA until age 59.5.

Did you/have you considered Substantially Equal Periodic Payments from an IRA? If you have, why did you not choose that instead of staying with a terrible 401k?


Even if you do wait till you are 59.5 and even if there is a crash, you do not have to delay your rollover. It would simply be a sideways move in the market from a bad 401k to a good IRA. Nothing would be lost by making that move.
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Re: move to cash for upcoming bear market?

Post by JohnSwanson »

retiredjg, yes the reason that I haven't rolled-over my 401K yet is because I thought that the only way that I can withdraw money from my nest egg, before age 59.5, was to leave the money in my 401K! Although I found and bookmarked the IRS faq page on Substantially Equal Periodic Payments, I don't see a quick summary about what this allows me to do! Can you explain how this can help me?

Thanks!
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Re: move to cash for upcoming bear market?

Post by HomerJ »

JohnSwanson wrote:My portfolio is 60% bonds/40% stocks.... Even with my conservative asset allocation, a large stock market correction will erase more of my portfolio than I'm willing to lose!
Then you shouldn't be 60/40 bonds/stocks...

Pick an AA assuming that a 50% bear will start tomorrow. Sell to your sleeping point, so you don't have to worry about what happens tomorrow.
If I'm correct that the market recovery will be slow, it will force me to delay my rollover until my portfolio recovers!
Why?

If you're invested in a stock fund in your 401k and it tanks, then you rollover to Vanguard, and then it grows back just as fast as the market recovers as it would have in the 401k.... probably faster since the fees from Vanguard are probably smaller than the fees in your 401k.

I don't understand the problem... Unless you're worried the market will go up 5% in the 2-3 days it takes to rollover to Vanguard... I suppose that's possible.
I saw the 2008 stock market crash coming and we're overdue for another one!
Stock market crashes can't be overdue... They happen when they happen... If you think it should have happened a year ago, then you've just discovered that you can't predict the future, not that the stock market is behind schedule.
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Hawaiishrimp
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Re: move to cash for upcoming bear market?

Post by Hawaiishrimp »

FelixTheCat wrote:
bopper20 wrote:I'm 14 years to retirement, and don't have a huge nest egg - so can't afford to be too reckless.
You have the wrong asset allocation if you are fearful. Try dialing back your AA until you are comfortable.
This is exactly what I'm about to suggest also. :)

Going 100% cash is not a strategy I can recommend.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.
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Re: move to cash for upcoming bear market?

Post by TradingPlaces »

Here are several reasons why equities might not be at the top yet:

1. You don't have a crystal ball,
2. I don't either,
3. And no one does either,

Now, some prognostication:

4. Equity yields are in the 5-6% range, while the 10-yr US Treasury is 2%. Thus, equities are yielding far more,
5. We are not at full employment yet. Wait until we are in full employment. In fact, employment to population ratio is BELOW the previous recession lows,
6. Residential construction investment is one of the big drivers of stock market, and it is just picking up,
7. We have not seen real wage growth yet. I would wait until there is a few years of wage growth,


Of course, you might have 10 reasons why equities are overvalued. If you find yourself doing so, go back to point #1 in this post.
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Re: move to cash for upcoming bear market?

Post by z3r0c00l »

TP gives some good reasons to hope for another 50% in stocks before anything serious happens. There are many tail winds including low oil and low interest rates, not to mention improving employment conditions. In the long run, as long as there are no major political problems, there is reason to hope. Of course it is simply unknowable, except to say that it does not feel anything like the environment of 1999 in tech/telecom or 2007 in housing. The amount of innovation and growth in small internet companies, like Uber, as well as the rebound of housing, are all good signs. Yet these are profitable companies and markets that are still growing at well below bubble rates. Anyway, although a crash is always possible, it seems like odds are good (1 in 3? 1 in 2?) that the stock market run can continue for a few more years. The cost of missing out on that is much greater, imho, than the value of staying safe in cash. Does anyone really think stocks will be lower in 2030 than they are today?
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retiredjg
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Re: move to cash for upcoming bear market?

Post by retiredjg »

JohnSwanson wrote:retiredjg, yes the reason that I haven't rolled-over my 401K yet is because I thought that the only way that I can withdraw money from my nest egg, before age 59.5, was to leave the money in my 401K! Although I found and bookmarked the IRS faq page on Substantially Equal Periodic Payments, I don't see a quick summary about what this allows me to do! Can you explain how this can help me?

Thanks!
Here's some information from the Wiki: https://www.bogleheads.org/wiki/Substan ... c_payments

Note that you will be locked into this for 5 years.

Another approach would be to roll as much of your money out of the 401k as you can - leaving only enough there to get you to age 59.5. This would reduce the impact of the terrible 401k for the years you remain there. Your 401k plan may or may not allow a partial rollover though.
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Re: move to cash for upcoming bear market?

Post by ddurrett896 »

JohnSwanson wrote:I suspect that this bubble will pop before I'm going to perform my rollover.
What is we are in a "pre-bubble" and something huge is coming?
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Re: move to cash for upcoming bear market?

Post by riptide »

Yesterdaysnews wrote:Momentum is still good for US equities. Have a plan and stick to it come hell or high water, that's more important than anything in investing. Stick to a plan your like and have patience.
Trying to stick to my plan and have no cash moved, just trying to stay in the right asset allocation...
I couldn't pass up this post - I am listening to the live DVD in concert of Deep Purple (of one my all time favorite bands) come hell or high water, so I had to write. (Sweet Child in Time) 8-)
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Re: move to cash for upcoming bear market?

Post by JohnSwanson »

I'd like to thank retiredjg and the others who replied to my reply to OP! Although I've been reading the posts to bogleheads.org for several years, this is the first time that I've sought advice on this forum!

I don't think that the SEPP program will work for me, due to the 5-year constraint! However, I will find-out if my 401K plan will allow a partial rollover. If it does, then this will address my concerns!

If I was still employed, I'd be quite comfortable with my asset allocation! The reason that I'm not is because of the market volatility and the pending rollover to my Vanguard IRA, which has me looking only 2 years into the future. If stocks and bonds lose money before my rollover, I will go to cash to maintain the balance in my 401K! I realize that my investing strategy isn't pure boglehead, but I'm more of a boglemutt! :D
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Re: move to cash for upcoming bear market?

Post by HardKnocker »

"Don't just do something, stand there!" -- John Bogle
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Re: move to cash for upcoming bear market?

Post by Yesterdaysnews »

The market will continue to climb this wall of worry - that's my prediction, which is just as good as anyones !
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Re: move to cash for upcoming bear market?

Post by Yesterdaysnews »

I think people are worried about the US economy and stock market because it's difficult to believe that we have been able to rebound from being on the brink of economic collapse so quickly and with relatively little pain.

Right now market is at all time high, people are getting richer (those engaged in the market especially) and that just a few years ago all hell had broken loose.

However - the way I see it, we had a one-time "get out of jail fee" card in the dollar's status as world reserve currency. This allowed the Fed to print tons of money and export the inflation to developing countries. It worked beautifully for us, however, I think it's a one time thing you can do. If we try to pull use the card again I think the world will figure it out and US will lose reserve currency status.

I feel we dodged a big bullet and are now good for a while. The Fed basically printed TRILLIONS of new dollars and made the problem go away. That much money can solve a lot of problems. I see no compelling reason to worry so much.
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Re: move to cash for upcoming bear market?

Post by chessmannextmove »

bopper20 wrote: I imagine will be around 2019...
Are you trolling?
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Re: move to cash for upcoming bear market?

Post by PeanutButterIsJelly »

The bottom line in my view is that if a person's AA is set correctly, they don't have a reason to worry about equity price declines. Market timing is a losing game. The evidence to support that position is overwhelming.

Back in the early 90s people were busy calling the top, they were right...it just look seven years to materialize. Back in 2011, people wouldn't stop yacking about a "double dip recession".

I have no idea what the market is going to do, nor does anyone else. I'm just going to continue to buy, hold, and re-balance in accordance with my AA. This approach allows me to sleep well at night. :beer
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