If you knew a recession was coming, what would you do?

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jwhitebkny
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If you knew a recession was coming, what would you do?

Post by jwhitebkny » Fri Mar 16, 2018 3:27 pm

Looking for some knowledge and insights into BH investing. If you knew a recession was on its way...what would you do with these investments to protect them from a swing:

My 401K ($350K) and investments ($175K) are all set up the same way:
VTI - 60%
VXUS - 20%
BND - 20%

Do I hold them? Then use cash to buy in when prices are low?
Can I move them to something safer (that won't drop), then use funds to re-invest when prices are lower?

Learning as quickly as possible but still so much to learn. Also, any references or reading on the matter would be very appreciated.

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Sandtrap
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Re: If you knew a recession was coming, what would you do?

Post by Sandtrap » Fri Mar 16, 2018 4:03 pm

Welcome.
The better and more solid your IPS, and carried into your portfolio, the better able to weather a financial storm.

Have you done this>?
Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
IPS Statement Worksheet PDF at Morningstar
http://news.morningstar.com/pdfs/inves ... pr2016.pdf

Based on this?
Risk Tolerance (what is your "sleep factor"?)
https://www.bogleheads.org/wiki/Risk_tolerance
Asset Allocation (what is right for you?)
https://www.bogleheads.org/wiki/Asset_allocation
Bogle 3 Fund Portfolio Basics and Beyond
https://www.bogleheads.org/wiki/Three- ... _portfolio

And, have this as a financial buffer?
Emergency Fund
https://www.bogleheads.org/wiki/Emergency_fund

Do the above and it matters not if and when a recession comes.

Read this excellent thread by "sheepdog".

SHEEPDOG ON WHY YOU NEED AN EMERGENCY FUND
viewtopic.php?t=25126

Then request a comprehensive portfolio review to find out exactly how you are doing.
Given the data you provided, it's not enough.

Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

aloha
j :D

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iceport
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Re: If you knew a recession was coming, what would you do?

Post by iceport » Fri Mar 16, 2018 4:08 pm

jwhitebkny wrote:
Fri Mar 16, 2018 3:27 pm
Looking for some knowledge and insights into BH investing. If you knew a recession was on its way...what would you do with these investments to protect them from a swing:

My 401K ($350K) and investments ($175K) are all set up the same way:
VTI - 60%
VXUS - 20%
BND - 20%

Do I hold them? Then use cash to buy in when prices are low?
Can I move them to something safer (that won't drop), then use funds to re-invest when prices are lower?

Learning as quickly as possible but still so much to learn. Also, any references or reading on the matter would be very appreciated.
A recession is always on its way. Always. We just don't ever know when it will hit, how deep it will be, or how long it will be.

In the face of all the uncertainty, the best course of action is to establish an asset allocation that you will be comfortable maintaining when — not if — the next recession hits. And then? Yes, buy when prices are low by rebalancing back to your target asset allocations, and by buying underweighted positions with new contributions.

DO NOT try to time any moves in and out of safer asset allocations. That is a classic recipe for failure.
"Discipline matters more than allocation.” ─William Bernstein

livesoft
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Re: If you knew a recession was coming, what would you do?

Post by livesoft » Fri Mar 16, 2018 4:10 pm

OK, I know a recession is coming. It is a certainty.

But I don't know when it will happen nor how long it will last.

So ...

First read this:
https://earlyretirementnow.com/2018/02/ ... economics/

Then come back and discuss. Thanks!
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Re: If you knew a recession was coming, what would you do?

Post by Darth Xanadu » Fri Mar 16, 2018 4:11 pm

Well, if I KNEW a recession was coming, I would put all my money in cash and bear market funds and reap the rewards. But since this is basically unknowable I would be comfortable following Sandtrap's post and sticking to my overall plan, which is designed to last a very (I hope) long time.
My friends said stick to your guns, but instead I just got stuck.

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greg24
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Re: If you knew a recession was coming, what would you do?

Post by greg24 » Fri Mar 16, 2018 4:16 pm

A recession does not mean that your investments go down. It means GDP has gone down for two consecutive quarters, possibly putting your job at risk.

I would buildup more cash, and make sure my employer appreciates my efforts.

KlangFool
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Re: If you knew a recession was coming, what would you do?

Post by KlangFool » Fri Mar 16, 2018 4:17 pm

OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool

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Tyler Aspect
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Re: If you knew a recession was coming, what would you do?

Post by Tyler Aspect » Fri Mar 16, 2018 4:25 pm

Recession coming? Increase my emergency cash to one year of expense.
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JBTX
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Re: If you knew a recession was coming, what would you do?

Post by JBTX » Fri Mar 16, 2018 4:43 pm

KlangFool wrote:
Fri Mar 16, 2018 4:17 pm
OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool
I’m not sure I understand what you are saying. You have said you have 20x savings saved. A 50% equity drop would probably get you to around 13x or 14x with Wellington. So how is your answer only 5 years?

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Re: If you knew a recession was coming, what would you do?

Post by JBTX » Fri Mar 16, 2018 4:48 pm

A recession is coming. They are always coming. Historically they average about every 7 years. The post 2008 growth period is unusual.

My guess is the overall recent increase in economic growth will probably cause a recession to get here faster than it would have otherwise.

Not all recessions are equal. How you would handle a 2008/2009 recession would be quite different than how you would handle 1982.

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cfs
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Re: If you knew a recession was coming, what would you do?

Post by cfs » Fri Mar 16, 2018 4:52 pm

Wait a minute now, the last time I checked I was told that the recession was already here! Gracias por leer / cfs
~ Your Money, Your Portfolio, Your Decision ~

KlangFool
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Re: If you knew a recession was coming, what would you do?

Post by KlangFool » Fri Mar 16, 2018 4:55 pm

JBTX wrote:
Fri Mar 16, 2018 4:43 pm
KlangFool wrote:
Fri Mar 16, 2018 4:17 pm
OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool
I’m not sure I understand what you are saying. You have said you have 20x savings saved. A 50% equity drop would probably get you to around 13x or 14x with Wellington. So how is your answer only 5 years?
JBTX,

5 years in my case because I added additional criteria of not selling any stock. I can afford to do that. It does not apply to anyone else.

KlangFool

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Re: If you knew a recession was coming, what would you do?

Post by MJW » Fri Mar 16, 2018 4:59 pm

jwhitebkny wrote:
Fri Mar 16, 2018 3:27 pm
Looking for some knowledge and insights into BH investing. If you knew a recession was on its way...what would you do with these investments to protect them from a swing:

My 401K ($350K) and investments ($175K) are all set up the same way:
VTI - 60%
VXUS - 20%
BND - 20%

Do I hold them? Then use cash to buy in when prices are low?
Can I move them to something safer (that won't drop), then use funds to re-invest when prices are lower?

Learning as quickly as possible but still so much to learn. Also, any references or reading on the matter would be very appreciated.
I'm going to extract from this that you are using "recession" and "market crash" interchangeably. Please correct me if I am wrong.

What magnitude of drop do you think would cause distress to the point that you might do something rash at the wrong time? Where are you now in your investing timeline? Without knowing either of these considerations it is difficult to give concrete feedback.

Generally speaking, you will need to either adjust your allocation to reflect your willingness to take risk, or be satisfied with how much risk you are taking with the knowledge that it could mean a substantial (to you) drop at some point. Since we do NOT know with certainty when another crash will happen, we just have to do the best we can. We don't get to have it both ways.

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Re: If you knew a recession was coming, what would you do?

Post by aristotelian » Fri Mar 16, 2018 5:06 pm

I don't know that a recession is coming. Therefore I invest using an appropriate allocation based on the presumption that stocks go up in the long term, but might crash from time to time, and my own personal need, willingness, and ability to take risk.

JBTX
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Re: If you knew a recession was coming, what would you do?

Post by JBTX » Fri Mar 16, 2018 5:06 pm

KlangFool wrote:
Fri Mar 16, 2018 4:55 pm
JBTX wrote:
Fri Mar 16, 2018 4:43 pm
KlangFool wrote:
Fri Mar 16, 2018 4:17 pm
OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool
I’m not sure I understand what you are saying. You have said you have 20x savings saved. A 50% equity drop would probably get you to around 13x or 14x with Wellington. So how is your answer only 5 years?
JBTX,

5 years in my case because I added additional criteria of not selling any stock. I can afford to do that. It does not apply to anyone else.

KlangFool
So if that worst case scenario happened to you, you’d gravitate towards a 100% equity allocation?

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Phineas J. Whoopee
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Re: If you knew a recession was coming, what would you do?

Post by Phineas J. Whoopee » Fri Mar 16, 2018 5:09 pm

I remember from years ago a very angry response from a facilitator who wanted to know from each of us what we would do if it were our last day on earth.

I said I'd charter a Concorde and tell the pilot to fly west.

PJW

retiredjg
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Re: If you knew a recession was coming, what would you do?

Post by retiredjg » Fri Mar 16, 2018 5:12 pm

Many people think a recession and a market crash/market downturn/extended bear market are the same thing. They are not.

A crash and/or bear market may be accompanied by a recession. Or it may not be accompanied by a recession. I'm not sure about the other way though. Can we have a recession without a serious and long term market downturn? I don't know.

Since the last unpleasantness included both a severe downturn followed by an extended bear market and a recession all at the same time, I've noticed a lot of people say "recession" when they really mean "crash/downturn/bear market".

For that reason, I don't think the replies to this post are going to mean much because people are talking about different things.

If I knew a "bad market" was coming in ___ month of ___ year, I'd sell the month before. But nobody can know that... so I try to maintain a portfolio that I can live with comfortably during the bad times as well as the good times. I'm not going to like it when my portfolio drops 20 or 25%, but at least I know I can tolerate it without much discomfort.
Last edited by retiredjg on Fri Mar 16, 2018 5:18 pm, edited 1 time in total.

KlangFool
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Re: If you knew a recession was coming, what would you do?

Post by KlangFool » Fri Mar 16, 2018 5:15 pm

JBTX wrote:
Fri Mar 16, 2018 5:06 pm
KlangFool wrote:
Fri Mar 16, 2018 4:55 pm
JBTX wrote:
Fri Mar 16, 2018 4:43 pm
KlangFool wrote:
Fri Mar 16, 2018 4:17 pm
OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool
I’m not sure I understand what you are saying. You have said you have 20x savings saved. A 50% equity drop would probably get you to around 13x or 14x with Wellington. So how is your answer only 5 years?
JBTX,

5 years in my case because I added additional criteria of not selling any stock. I can afford to do that. It does not apply to anyone else.

KlangFool
So if that worst case scenario happened to you, you’d gravitate towards a 100% equity allocation?
JBTX,

No. 40% of my portfolio is in Wellington (65/35) fund. So, even if I sell all my bonds, it would be 100% stock. In fact, in my case, I probably will only be selling anything if the recession lasts more than 2 years. Please note that I have 1 year worth of emergency fund that is not counted in the portfolio. My annual dividend and distribution, unemployment benefits, severance pay, and so on will add another 6 months to a year.

I am very conservative.

KlangFool

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Re: If you knew a recession was coming, what would you do?

Post by KlangFool » Fri Mar 16, 2018 5:17 pm

retiredjg wrote:
Fri Mar 16, 2018 5:12 pm
Many people think a recession and a market crash/market downturn/extended bear market are the same thing. They are not.

A crash and/or bear market may be accompanied by a recession. Or it may not be accompanied by a recession. I'm not sure about the other way though. Can we have a recession without a serious and long term market downturn? I don't know.
retiredjg,

You are right. But, for planning purpose, it is best to assume the worst case scenario. If you can handle the worst, it should work fine for anything less than that.

KlangFool

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Re: If you knew a recession was coming, what would you do?

Post by timmy » Fri Mar 16, 2018 5:20 pm

I would hold enough cash (or short term bonds) to get through a period of joblessness.

That would keep you from having to raid your long term portfolio. And maintain your desired asset allocation.

Good luck.

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Re: If you knew a recession was coming, what would you do?

Post by samsoes » Fri Mar 16, 2018 5:25 pm

I would run to the hills.
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Re: If you knew a recession was coming, what would you do?

Post by JoeRetire » Fri Mar 16, 2018 5:31 pm

jwhitebkny wrote:
Fri Mar 16, 2018 3:27 pm
Looking for some knowledge and insights into BH investing. If you knew a recession was on its way...what would you do with these investments to protect them from a swing:
I always know that a recession is on it's way - it's a given.

But for your recession:
- when will it start?
- how long will it last?
- how bad will it be?
- and most importantly, who wins the Super Bowl?

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Re: If you knew a recession was coming, what would you do?

Post by oldcomputerguy » Fri Mar 16, 2018 6:16 pm

A recession *is* coming. We just don’t know when. Nor do I have a crystal ball. So I just make sure my emergency fund is in good shape, my AA is suitable, and my television is off.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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Re: If you knew a recession was coming, what would you do?

Post by RadAudit » Fri Mar 16, 2018 7:49 pm

I'm retired.

I'd make sure the portfolio AA agreed with my IPS and take the RMDs from the bond side of the portfolio. The bond side should cover SWRs for about 20 years.* I'd rebalance when / if stocks recovered to appropriate levels.

* If stocks don't recover in 20 years, hopefully I'll think of something.
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Re: If you knew a recession was coming, what would you do?

Post by mhadden1 » Fri Mar 16, 2018 8:10 pm

JoeRetire wrote:
Fri Mar 16, 2018 5:31 pm
jwhitebkny wrote:
Fri Mar 16, 2018 3:27 pm
Looking for some knowledge and insights into BH investing. If you knew a recession was on its way...what would you do with these investments to protect them from a swing:
I always know that a recession is on it's way - it's a given.

But for your recession:
- when will it start?
- how long will it last?
- how bad will it be?
- and most importantly, who wins the Super Bowl?
So right - you just can't know anything that will really help. And if you think you do, and act, and benefit, it was just luck. No matter how clever you are, you don't know more than the market.

But I do think the Falcons will win the Super Bowl.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

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Re: If you knew a recession was coming, what would you do?

Post by dknightd » Fri Mar 16, 2018 8:22 pm

If you knew a recession was coming, what would you do?

I'd laugh at myself :lol:

And be very cautious, in case I was right

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Re: If you knew a recession was coming, what would you do?

Post by PhilosophyAndrew » Fri Mar 16, 2018 10:43 pm

I know that multiple recessions are coming in my lifetime. Regardless of their exact timing and severity, I’m going to continue to invest with the fixed asset allocation specified in the investment policy statement; although my AA may change as I age, I won’t be trying to time the market

Put slightly differently, I know that recesssions are coming, but can’t know exactly when; I also know that whenever they do come, they will end. Will the future be exactly like the past? Of course not! Do I know in detail what the future will be like? Nope. Is there a persuasive reason to think that, in my lifetime, the economy is likely to change in a way that makes the Boglehead philosophy unwise? None that I’ve seen.

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Re: If you knew a recession was coming, what would you do?

Post by heyyou » Fri Mar 16, 2018 11:48 pm

I know that I don't know, so I would keep the same allocation that I have now, expecting my portfolio balance to fluctuate. Those gains and losses are just part of the long term owning of equities, not some surprising event to be dreaded.

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Re: If you knew a recession was coming, what would you do?

Post by snackdog » Sat Mar 17, 2018 3:53 am

If I suddenly gained 20/20 foresight on the market, I would celebrate with a very fancy dinner. Next I might quit my job. Then I would start planning which stocks to short to make an absolute killing.

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Re: If you knew a recession was coming, what would you do?

Post by whodidntante » Sat Mar 17, 2018 4:16 am

If I had specific information including dates and severity, then I would sell stock index futures.

Valuethinker
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Re: If you knew a recession was coming, what would you do?

Post by Valuethinker » Sat Mar 17, 2018 7:20 am

Sorry I cannot resist.

The famous physicist Dr Werner Heisenberg, was stopped for speeding

policeman: Do you know how fast you were going, Herr Doctor Heisenberg?

Heisenberg:. No, but I know where I am.

8-) :happy :sharebeer

Same feeling about recessions. We know Winter is Coming, just not when.

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Re: If you knew a recession was coming, what would you do?

Post by Valuethinker » Sat Mar 17, 2018 7:23 am

The issue is correlation between your labour income and the economy. Also your home equity.

If I knew a recession was coming I would hold more cash in case I lost my job.

Contra to that, interest rate falls as Central Banks cut rates to fight inflation mean longer term bonds are a better bet.

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Re: If you knew a recession was coming, what would you do?

Post by Valuethinker » Sat Mar 17, 2018 7:30 am

JBTX wrote:
Fri Mar 16, 2018 4:48 pm
A recession is coming. They are always coming. Historically they average about every 7 years. The post 2008 growth period is unusual.

My guess is the overall recent increase in economic growth will probably cause a recession to get here faster than it would have otherwise.

Not all recessions are equal. How you would handle a 2008/2009 recession would be quite different than how you would handle 1982.
Afaik the only postwar recovery this long was in the 1990s. Falling import prices due to economic revolution in China meant Alan Greenspan could lower interest rates and hold them down for longer.

This time, the depth of the Great Financial Crisis means it has taken the economy an unusually long time to set up spare capacity in labour markets and product markets. Inflation has not risen. Thus monetary policy has been accommodative not restricting to growth.

The US economy is more or less at full employment. From here, it gets a lot harder. The FED Open Market Committee is in for some pretty tough meetings.

New Fed chair too, which increases uncertainty.

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Re: If you knew a recession was coming, what would you do?

Post by Olemiss540 » Sat Mar 17, 2018 7:51 am

Same answer as if you asked "if you knew the winning number to this week's Powerball, what would you do"?

We want to know the reason for your question, and if there is insider information involved hopefully a PM on the details. Otherwise, what do you and the other news outlets know that the thousands upon thousands of ivy league educated institutional investors have yet to figure out? With the impending crash all over the news for the last 4 years, how have the most intelligent minds in the US failed to pick up on the evidence so glaringly apparent to yourself and fox/cnn/cnbc?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

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Re: If you knew a recession was coming, what would you do?

Post by motorcyclesarecool » Sat Mar 17, 2018 8:15 am

I am still working. In my retirement accounts, I would convert my bond funds to a cd and Treasury based ladder of similar duration. Then I would use each maturity to rebalance. This would help me keep my head on straight.

In my taxable account I would aggressively harvest my tax losses in order to decrease my tax liability and economically increase my Roth contributions.

TL;dr I would not alter my bond allocation, I’d shift it to a CD / short-ish Treasury ladder. And TLH in taxable.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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Re: If you knew a recession was coming, what would you do?

Post by Hockey10 » Sat Mar 17, 2018 5:54 pm

What would I do? Nothing. I am comfortable with my asset allocation and I see no reason to change it.

I remember a quote from Jamie Dimon from roughly 10-15 years ago. His daughter was asking him about recessions. Dimon's response was that a recession is a normal part of the economic cycle and they typically happen about once every 5 - 10 years.

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Re: If you knew a recession was coming, what would you do?

Post by Darth Xanadu » Tue Mar 20, 2018 9:23 am

retiredjg wrote:
Fri Mar 16, 2018 5:12 pm
Many people think a recession and a market crash/market downturn/extended bear market are the same thing. They are not.

A crash and/or bear market may be accompanied by a recession. Or it may not be accompanied by a recession. I'm not sure about the other way though. Can we have a recession without a serious and long term market downturn? I don't know.

Since the last unpleasantness included both a severe downturn followed by an extended bear market and a recession all at the same time, I've noticed a lot of people say "recession" when they really mean "crash/downturn/bear market".
Your comment got me thinking, I did a (brief) search for articles on this correlation and came up with https://www.forbes.com/sites/mikepatton ... 25e90e52e0 which is dated a bit but shows there is definitely a correlation, but perhaps not a "strong" one.
My friends said stick to your guns, but instead I just got stuck.

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Re: If you knew a recession was coming, what would you do?

Post by retiredjg » Tue Mar 20, 2018 9:37 am

Yes, there can be a correlation in occurrence, but a recession is NOT a market downturn/extended bear market which is what I think the original poster was probably asking about. And what almost all responders are probably talking about too.

It's like talking about apples when they are really meaning to talk about oranges. Both are fruit and the are sometimes in the same dish, but they are NOT the same thing. Oranges are not apples.

The only reason this thread makes any sort of sense is because almost everyone is using the wrong word. :D

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Re: If you knew a recession was coming, what would you do?

Post by Darth Xanadu » Tue Mar 20, 2018 9:40 am

retiredjg wrote:
Tue Mar 20, 2018 9:37 am
Yes, there can be a correlation in occurrence, but a recession is NOT a market downturn/extended bear market which is what I think the original poster was probably asking about. And what almost all responders are probably talking about too.

It's like talking about apples when they are really meaning to talk about oranges. Both are fruit and the are sometimes in the same dish, but they are NOT the same thing. Oranges are not apples.

The only reason this thread makes any sort of sense is because almost everyone is using the wrong word. :D
Very true, and an apt analogy. To take it further, it might have been more clear if the OP had asked, "what would you do if you knew a big plate of apples and oranges was imminently about to arrive at your table, even though you had ordered neither."

Then again, that might make it more confusing :confused
My friends said stick to your guns, but instead I just got stuck.

retiredjg
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Re: If you knew a recession was coming, what would you do?

Post by retiredjg » Tue Mar 20, 2018 9:46 am

That's funny. :D

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munemaker
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Re: If you knew a recession was coming, what would you do?

Post by munemaker » Tue Mar 20, 2018 10:22 am

jwhitebkny wrote:
Fri Mar 16, 2018 3:27 pm
If you knew a recession was on its way...what would you do with these investments to protect them from a swing:

My 401K ($350K) and investments ($175K) are all set up the same way:
VTI - 60%
VXUS - 20%
BND - 20%

Do I hold them? Then use cash to buy in when prices are low?
You can be 100% certain that a recession is coming. Problem is, no one knows when.

Since no one knows when, you should not do anything to protect them from a swing.

The protection comes from maintaining an asset allocation that is appropriate for your risk tolerance.

You just continue to buy and hold as you would do if the economy was on the upturn. Do nothing special.

If you did something special in anticipation of a recession, that would be market timing and should be totally avoided.

Stay the course.

wrongfunds
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Re: If you knew a recession was coming, what would you do?

Post by wrongfunds » Tue Mar 20, 2018 10:29 am

KlangFool wrote:
Fri Mar 16, 2018 4:55 pm
JBTX wrote:
Fri Mar 16, 2018 4:43 pm
KlangFool wrote:
Fri Mar 16, 2018 4:17 pm
OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool
I’m not sure I understand what you are saying. You have said you have 20x savings saved. A 50% equity drop would probably get you to around 13x or 14x with Wellington. So how is your answer only 5 years?
JBTX,

5 years in my case because I added additional criteria of not selling any stock. I can afford to do that. It does not apply to anyone else.

KlangFool
What happens to your retirement options after the end of the 5 years? What do you do then? Since this is all speculation, it is valid to ask how far do you want to speculate. Why stop at 5 years? Tell us how you will handle 20 years protracted downturn and/or 90% stock market drop.

Is it because that has never happened in the past? So now, you want to use the historical data to predict the future?

These type of discussion should really only get the Mike Tyson reply aka "the plan go out the window when you get your teeth knocked out". Frankly, this is nothing but mental m*.

KlangFool
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Re: If you knew a recession was coming, what would you do?

Post by KlangFool » Tue Mar 20, 2018 10:39 am

wrongfunds wrote:
Tue Mar 20, 2018 10:29 am
KlangFool wrote:
Fri Mar 16, 2018 4:55 pm
JBTX wrote:
Fri Mar 16, 2018 4:43 pm
KlangFool wrote:
Fri Mar 16, 2018 4:17 pm
OP,

1) What is your annual expense?

2) How long can you survive if you are unemployed and the stock market drops 50% and the bond stays the same?

If you are uncomfortable with the answer, increase your Emergency Fund and adjust your AA to be less risky.

I can "sleep well at night" (SWAN) because my answer to (2) is 5 years. For most people, a good answer would be 1 to 2 years.

KlangFool
I’m not sure I understand what you are saying. You have said you have 20x savings saved. A 50% equity drop would probably get you to around 13x or 14x with Wellington. So how is your answer only 5 years?
JBTX,

5 years in my case because I added additional criteria of not selling any stock. I can afford to do that. It does not apply to anyone else.

KlangFool
What happens to your retirement options after the end of the 5 years? What do you do then? Since this is all speculation, it is valid to ask how far do you want to speculate. Why stop at 5 years? Tell us how you will handle 20 years protracted downturn and/or 90% stock market drop.

Is it because that has never happened in the past? So now, you want to use the historical data to predict the future?

These type of discussion should really only get the Mike Tyson reply aka "the plan go out the window when you get your teeth knocked out". Frankly, this is nothing but mental m*.
wrongfunds,

<<Why stop at 5 years? >>

Because it will not be safe to stay in this country after 5 years.

<<What happens to your retirement options after the end of the 5 years?>>
<<Tell us how you will handle 20 years protracted downturn and/or 90% stock market drop.>>

Move out of the country and live somewhere else after year 3 or 4. I kept some physical gold for this purpose.

I was in an Asian country during Asian Currency Crisis. So, I had experienced this kind of situation before.

KlangFool

Dominic
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Re: If you knew a recession was coming, what would you do?

Post by Dominic » Tue Mar 20, 2018 11:26 am

Hypothetically, I'd go 100% long-term Treasuries, and might consider taking short positions on commodities and equities,

Realistically, if I know that a recession is coming, it has probably already happened and it's too late to make any portfolio changes.

livesoft
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Re: If you knew a recession was coming, what would you do?

Post by livesoft » Tue Mar 20, 2018 12:07 pm

What happened to the person who started this thread?
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Hockey10
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Location: Philadelphia suburbs

Re: If you knew a recession was coming, what would you do?

Post by Hockey10 » Tue Mar 20, 2018 1:47 pm

Looks like he may be a one and done....

WhiteMaxima
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Re: If you knew a recession was coming, what would you do?

Post by WhiteMaxima » Tue Mar 20, 2018 1:50 pm

Up emergency cash and cash position Everything will be on sale during a recession.

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FlordiaGuy
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Re: If you knew a recession was coming, what would you do?

Post by FlordiaGuy » Tue Mar 20, 2018 4:42 pm

If I knew a recession was coming in some specific near-term, I would be a lot better than most economic predictors. So I would go to the race track and pick a few horses ....

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Ged
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Re: If you knew a recession was coming, what would you do?

Post by Ged » Tue Mar 20, 2018 6:22 pm

I know a recession is coming. One is always coming. What can you do with that information?

The usual Boglehead things. Emergency fund and an allocation in bonds that will let you sleep well enough through the recession.

Now if by some sort of miracle you have more specific information as to the parameters of the recession you can take more specific steps. Sadly the OP didn't specify anything.

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midareff
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Re: If you knew a recession was coming, what would you do?

Post by midareff » Tue Mar 20, 2018 6:39 pm

I'd do a Warren and get ready to get greedy.

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