I bet the house. [Rebalanced portfolio to a 10/90 asset allocation]

[TomCat96]

[Below is a quote from: Re: Coronavirus and the market --admin LadyGeek]

Basically it is far worse than what the media is saying, prepare adequately. Do what you can. Panic helps no one.

in the meantime, I'm 99.69% stocks right now, and about .31% cash and cash equivalents.

Tomcat....I am curious....

If your first statement above is true, then it would follow that the market, as well as the media, would be significantly downplaying the risk.
So I am curious,,,,if you believe your first statement above to be true, why do you remain 99.69% in stocks? That strikes me as logically contradictory and extremely risky- you are not "preparing adequately" (your words). Yes, panic helps nobody, but having all your eggs in the stock market given your rather strong belief that things are a lot worse than suggested or acknowledged strikes me as the opposite- foolhardy at best.
Please explain.

Did you notice I started the thread on preparing for the Coronavirus consumer issues?

Clearly you win the "I said it first" award for the Bogleheads site.
Hopefully, you profited mightily from your clear advanced knowledge and insight.

Did you bet the house?

It's time I come clean.
I bet the house.

I never considered myself a true boglehead. But I knew the math, know the throngs of research papers saying the market can't be beat, and it's right there on my IPS.

Last Tuesday I gave all that up. Sold everything and bought into government treasuries. I am 10/90 at the moment with 10% in a single stock, and 90% in bonds.

I might eat crow. I might get egg on my face.
But based on all my research on this matter, I think I made the right call.

Still though it is only fair to my critics and detractors to give them a fair shot at me.

As per my so called research on this matter, I post here quite frequently. The entire evolution of my thoughts on this matter laid itself out in a very public way. I certainly didn't start out by throwing away my IPS.

I believe this is a once in a lifetime occurrence. I believe efforts to analogize this to anything else: SARS, Ebola, Aids, will result in a blocked insight.
Not every event that goes forward in the future can be neatly categorized by a bucket of your past experiences.

This is one such event.

[arcticpineapplecorp.]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

p.s., you may have bet the house, but at least you didn't buy the farm.

[canadianbacon]

Cool story, bro.

[Bungo]

If the world doesn't end and the market bounces back, how will you determine when to buy stocks again? Seems like it's all too easy in this scenario to sell low and buy high.

[averagedude]

Are your insights to the coronavirus based on research, statistics, or well thought out intelligent thought, or is it based on the emotions of witnessing a corrective decline in the stock market? Would you still maintain your same opinion of the coronavirus if the markets ignored it and their was no decline?

[TomCat96]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

The one stock is Gilead Sciences, maker of Remdesivir.

[TomCat96]

Are your insights to the coronavirus based on research, statistics, or well thought out intelligent thought, or is it based on the emotions of witnessing a corrective decline in the stock market? Would you still maintain your same opinion of the coronavirus if the markets ignored it and their was no decline?

My insights are all posted in my posting history.

I'll write up about it later.

[Triple digit golfer]

Congratulations. Do you post about basketball on car forums? That's about the equivalent of what you're doing here. I'm curious why, other than potential bragging, anybody who is timing the market with significantly his entire net worth would discuss it on a forum whose core principles stand for the entire opposite.

[smitcat]

Basically it is far worse than what the media is saying, prepare adequately. Do what you can. Panic helps no one.

in the meantime, I'm 99.69% stocks right now, and about .31% cash and cash equivalents.

Tomcat....I am curious....

If your first statement above is true, then it would follow that the market, as well as the media, would be significantly downplaying the risk.
So I am curious,,,,if you believe your first statement above to be true, why do you remain 99.69% in stocks? That strikes me as logically contradictory and extremely risky- you are not "preparing adequately" (your words). Yes, panic helps nobody, but having all your eggs in the stock market given your rather strong belief that things are a lot worse than suggested or acknowledged strikes me as the opposite- foolhardy at best.
Please explain.

Did you notice I started the thread on preparing for the Coronavirus consumer issues?

Clearly you win the "I said it first" award for the Bogleheads site.
Hopefully, you profited mightily from your clear advanced knowledge and insight.

Did you bet the house?

It's time I come clean.
I bet the house.

I never considered myself a true boglehead. But I knew the math, know the throngs of research papers saying the market can't be beat, and it's right there on my IPS.

Last Tuesday I gave all that up. Sold everything and bought into government treasuries. I am 10/90 at the moment with 10% in a single stock, and 90% in bonds.

I might eat crow. I might get egg on my face.
But based on all my research on this matter, I think I made the right call.

Still though it is only fair to my critics and detractors to give them a fair shot at me.

As per my so called research on this matter, I post here quite frequently. The entire evolution of my thoughts on this matter laid itself out in a very public way. I certainly didn't start out by throwing away my IPS.

I believe this is a once in a lifetime occurrence. I believe efforts to analogize this to anything else: SARS, Ebola, Aids, will result in a blocked insight.
Not every event that goes forward in the future can be neatly categorized by a bucket of your past experiences.

This is one such event.

"Last Tuesday I gave all that up. Sold everything and bought into government treasuries. I am 10/90 at the moment with 10% in a single stock, and 90% in bonds."
Will you go back to some other AA in the future?
If yes then what AA and when will you go back in?
If not will you add more to treasuries over time?

[arcticpineapplecorp.]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

[TomCat96]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

Let's just say I'm not as rich as some of you. The taxes I owe will be modest. My 401k was really the lions share of my net worth.
Did I buy it because of their trial coronavirus vaccine?

I bought it because Remdesivir is a current treatment to the virus yes. That is to say it has shown promise.

[averagedude]

The market participants have extremely smart people, but I have followed the markets for several decades and have learned that they are often wrong. My take on this is that the market does not like uncertainty, especially at a time when the markets were a little ahead of itself.

[Kenkat]

Well you’ve put your stake on the ground and I give you credit for posting the decision. Now we will all get to see what happens. The odds are not in your favor but we shall see.

[Dottie57]

Basically it is far worse than what the media is saying, prepare adequately. Do what you can. Panic helps no one.

in the meantime, I'm 99.69% stocks right now, and about .31% cash and cash equivalents.

Why do you think/know it is worse than the media says? It may be worse but I have no extra knowledge.

My mom’s cupboard is bare so am getting groceries today.

[nisiprius]

TomCat96, in order to make any intelligent appraisal of your strategy, we need to know two things.

1) What should we compare it to?

Basically, you seem to be talking about a change in strategy, so what would you have done otherwise? Since you mention being >99% in stocks, it seems to me that you are talking about a step change in asset allocation from 100/0 to 10/90. It would be better to have more details about the actual composition before and after, but basically that's it. We should compare a 10/90 portfolio, going forward, to a 100% stocks portfolio.

2) When and how should we measure the results? I'm guessing "number of dollars" for "how."

But, can you give us a target date in the future when we will know whether your change had been successful or not? Since you are talking about the coronavirus, and since the 1918 flu pandemic was severe for about two years, I am guessing that you would agree that we will know in about three years.

I would like you to take the following statement and replace what is in the brackets with what you think is an accurate expression of your opinion. Or edit anything in it as needed.

Is this what you think?

An investor with
$10,000 in stock [XYZ]
and $90,000 in bond fund [TUVWX]
on 2/29/2020,
will find on [3/1/2023]
that they have at least [90%] as much money
as they would have had if they had put $100,000 into
[an S&P 500 index fund].

[anonsdca]

"...I never considered myself a true boglehead..."


There are many of you here.

[theorist]

Bold decision! Courageous to post it here.

Not a decision I would have made, or will make. But it is your money and we still live in a free country.

Good luck!

[KlangFool]

OP,

1) What is your portfolio size in terms of your current annual expense?

2) I never worried about the forecast for the low average annual return of the stock market. Some people will capitulate at a stock market drop because they feel that this time is different. Then, the next batch of people will capitulate when their employer start furloughing or laying off people. This is only the beginning.

KlangFool

[mrspock]

"...I never considered myself a true boglehead..."


There are many of you here.

Lol, think of how boring would the forums be without them? We’d all be like “I rebalanced to my AA today”, “I saved .0001% in management fees today”, “should I buy munis or bnd?” Etc

Instead we get threads like this .

[Wanderingwheelz]

Wow!

That is all.

[Normchad]

For me, the primary benefit of this website is an educational tool. There is a lot of self reinforcing group think on here, which is good and to be expected.

But I really do appreciate when others do things differently, state their case and lay out the results so that we can all watch and learn as things unfold. Think markettimer and hedgefundie. I add you to the list.

I wish you well. I hope it works out well for you. But mostly I thank you for sharing the experience and your thinking with us.

[watchnerd]

It's time I come clean.
I bet the house.

How big is the house in terms of years of living expenses?

And how far are you from retirement?

If you're 25 and your portfolio is smallish, it won't make a difference in life outcomes, probably, no matter what.

[KlangFool]

OP,

I am not agreeing or disagreeing with you whether this time is different. It won't matter to me. My AA is 60/40 and my portfolio is 20 times my current annual expense. I have 8 years of expenses in my bonds. I plan to rebalance if my 5/25 band trigger and keep 5 years of expense in the bond.

My plan is designed for a recession lasting 5 years. Why 5 years? Because I am pessimistic enough to believe that after 5 years of recession, money is no longer the problem.

I am prepared.

KlangFool

[Nicolas Perrault]

Congratulations. Do you post about basketball on car forums? That's about the equivalent of what you're doing here. I'm curious why, other than potential bragging, anybody who is timing the market with significantly his entire net worth would discuss it on a forum whose core principles stand for the entire opposite.

I sympathise with this sentiment. Nevertheless, I credit the OP with posting his thoughts so that he may be held accountable. This may just become a thread that is referenced to in future years to warn people who feel like market timing.

I think it's remarkable that in the list of diseases he mentions (ebola, etc.), the OP does not mention the Spanish flu where ~3% of world population was killed, but where stocks apparently did not notice.

OP: Do you think this will be as bad as the black death?

[LoveTheBogle]

My favorite is that he said he sold 90% before the sell off. I wonder why he didn’t post that when he did it?

If you want to be totally transparent post your trades and fill prices when you do it not several days later when it makes you sound smart. It’s all luck anyway, even if true.

[mbasherp]

I have a book that predicts the future too. It disagrees with you.

Which should we believe?

[BoggledHead2]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

Let's just say I'm not as rich as some of you. The taxes I owe will be modest. My 401k was really the lions share of my net worth.
Did I buy it because of their trial coronavirus vaccine?

I bought it because Remdesivir is a current treatment to the virus yes. That is to say it has shown promise.

You did all of this because of a virus that 80+% of its “victims” have symptoms that are so mild they don’t even know they have it.

Wow.

[FI4LIFE]

I don't consider this "betting the house." It's simple fear selling. Betting the house would be buying 3x weighted bear etfs.

[Call_Me_Op]

The real reason not to sell (in the midst of a panic) is it usually is better to hang on. The main reason is it is very hard to get back in - for similar behavioral reasons that made you get out in the first place. It is not that Bogleheads believe in going down with the ship out of some form of dogmatic loyalty to principles.

The key to allowing one to comfortably ride the market down, however, is to have the right amount of safe assets (usually fixed income). This is what many get wrong.

[Pikel]

I don't consider this "betting the house." It's simple fear selling. Betting the house would be buying 3x weighted bear etfs.

I agree. OP is afraid to be in the market, not making a leveraged bet on a 'once in a lifetime occurance.'

[watchnerd]

I don't consider this "betting the house." It's simple fear selling. Betting the house would be buying 3x weighted bear etfs.

I tend to agree.

90% bonds is not betting the house.

Going leveraged bear, as you said, shorting the market, or investing a lot in puts.....that's the gutsy 'bet the house' move.

[watchnerd]

I don't consider this "betting the house." It's simple fear selling. Betting the house would be buying 3x weighted bear etfs.

Okay, now you have me shopping for leveraged inverted ETFs.

Do you have a favorite?

Instead of using my rebalancing funds to just buy the usual indexes, going leveraged bear might be more needle-moving.

[Ocean77]

It would be ironic if as a response to the virus, the Fed started to print massive amounts of money to support the market, resulting in a spike of inflation and interest rates, sending bonds to the dumpster. I'd rather stay with a balanced AA.

[watchnerd]

It would be ironic if as a response to the virus, the Fed started to print massive amounts of money to support the market, resulting in a spike of inflation and interest rates, sending bonds to the dumpster. I'd rather stay with a balanced AA.

My Long Treasuries would hate that.

My short TIPS would love that.

[Fallible]

...
But based on all my research on this matter, I think I made the right call. ...

Reading this, the common investor affliction known as overconfidence comes to mind. Now, I might not think that if you had stated it this way:

"I realize research can be wrong and that it may not have been as thorough as needed, and that I may not have all the qualifications to conduct such research (e.g., judging its quality), and that because I feel so strongly (emotional) about my bet that I am especially vulnerable to confirmation bias (and overconfidence), but I hope it is good enough and that I made the right call."

[smitcat]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

Let's just say I'm not as rich as some of you. The taxes I owe will be modest. My 401k was really the lions share of my net worth.
Did I buy it because of their trial coronavirus vaccine?

I bought it because Remdesivir is a current treatment to the virus yes. That is to say it has shown promise.

Will you go back to some other AA in the future?
If yes then what AA and when will you go back in?
If not will you add more to treasuries over time?

[mortfree]

Marge-g Retreat to Cash - Part 2

Here’s hoping for a similar outcome for those who stay the course.

[Wanderingwheelz]

I don't consider this "betting the house." It's simple fear selling. Betting the house would be buying 3x weighted bear etfs.

I tend to agree.

90% bonds is not betting the house.

Going leveraged bear, as you said, shorting the market, or investing a lot in puts.....that's the gutsy 'bet the house' move.

If this gets real ugly I may just bet my house by getting a HELOC at .75%, or whatever ridiculous level loans are being written at, and pile every last dollar into stocks.

I’m not joking.

[ballons]

It would be ironic if as a response to the virus, the Fed started to print massive amounts of money to support the market, resulting in a spike of inflation and interest rates, sending bonds to the dumpster. I'd rather stay with a balanced AA.

Spike of interest rates would trigger corporate debt bubble to pop.

[watchnerd]

If this gets real ugly I may just bet my house by getting a HELOC at .75%, or whatever ridiculous level loans are being written at, and pile every last dollar into stocks.

I’m not joking.

Why take out a HELOC instead of just buying a leveraged inverse ETF?

Or did you mean both?

[TomCat96]

Tomkat96, in order to make any intelligent appraisal of your strategy, we need to know two things.

1) What should we compare it to?

Basically, you seem to be talking about a change in strategy, so what would you have done otherwise? Since you mention being >99% in stocks, it seems to me that you are talking about a step change in asset allocation from 100/0 to 10/90. It would be better to have more details about the actual composition before and after, but basically that's it. We should compare a 10/90 portfolio, going forward, to a 100% stocks portfolio.

2) When and how should we measure the results? I'm guessing "number of dollars" for "how."

But, can you give us a target date in the future when we will know whether your change had been successful or not? Since you are talking about the coronavirus, and since the 1918 flu pandemic was severe for about two years, I am guessing that you would agree that we will know in about three years.

I would like you to take the following statement and replace what is in the brackets with what you think is an accurate expression of your opinion. Or edit anything in it as needed.

Is this what you think?

An investor with
$10,000 in stock [XYZ]
and $90,000 in bond fund [TUVWX]
on 2/29/2020,
will find on [3/1/2023]
that they have at least [90%] as much money
as they would have had if they had put $100,000 into
[an S&P 500 index fund].

I don't think I have to answer that. It's not an accurate characterization. There is a reason I am here after all (on this website)

As a general rule I don't think one can beat the market. But there is a difference between beating the market all the time and never being able to beat the market once on a single timing event. Active management(hedge funds) loses to the market. The research shows that. I do not disagree.

I intend to re-enter the market at 100% stocks.
I have the shared the conditions of when I will re-enter the market with a few on this site. I prefer not to share it here.

It is highly unlikely I will time the market at the absolute lowest point. I am perfectly ok with that. I have always been ~100% stocks. Riding out crashes does not bother me. Losing 10% 20% does not bother me. It was not the fear which drove me to do what I am doing. It was an attempt to profit abnormally.

When I re-enter the market, I will own more shares of the same position than I did previously. I do not have to perfectly time the bottom to come out ahead.

So the way you characterize it is inapposite. It assumes that my market timing will be so specific, based on dates. It assumes time frames.
It is not. It is based on events.

[Wanderingwheelz]

If this gets real ugly I may just bet my house by getting a HELOC at .75%, or whatever ridiculous level loans are being written at, and pile every last dollar into stocks.

I’m not joking.

Why take out a HELOC instead of just buying a leveraged inverse ETF?

Or did you mean both?

There’s more than one way to skin a cat. Depends how you wanted to take the risk.

[TomCat96]

will your sale of all stock (except the 10%) result in capital gains taxes owed?

why didn't you sell the remaining 10% in the one stock? mind sharing what that one stock is?

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

Let's just say I'm not as rich as some of you. The taxes I owe will be modest. My 401k was really the lions share of my net worth.
Did I buy it because of their trial coronavirus vaccine?

I bought it because Remdesivir is a current treatment to the virus yes. That is to say it has shown promise.

Will you go back to some other AA in the future?
If yes then what AA and when will you go back in?
If not will you add more to treasuries over time?

Yes, I will return to 100% stocks. That is my default position, the one I tend to ride out for the long haul.
100/0 is my default AA.

If the market continues to drop another 20-30% after I buy back in, I am ok with that. I am ok with riding it out for the very long run.

This was an attempt to come out ahead by owning more shares of total market.

[DrPayItBack]

I have the shared the conditions of when I will re-enter the market with a few on this site. I prefer not to share it here.

So what on earth is the point of this post? It’s clearly not for useful discussion.

[Wanderingwheelz]

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

Let's just say I'm not as rich as some of you. The taxes I owe will be modest. My 401k was really the lions share of my net worth.
Did I buy it because of their trial coronavirus vaccine?

I bought it because Remdesivir is a current treatment to the virus yes. That is to say it has shown promise.

Will you go back to some other AA in the future?
If yes then what AA and when will you go back in?
If not will you add more to treasuries over time?

Yes, I will return to 100% stocks. That is my default position, the one I tend to ride out for the long haul.
100/0 is my default AA.

This was an attempt to come out ahead by owning more shares of total market.

What is your criteria that’ll let you signal the “all clear” and go back to 100/0?

[smitcat]

The one stock is Gilead Sciences, maker of Remdesivir.

1. did you buy it because they make a trial coronavirus vaccine?
2. did you incur capital gains for which you will owe tax as a result of your stock sales?

Let's just say I'm not as rich as some of you. The taxes I owe will be modest. My 401k was really the lions share of my net worth.
Did I buy it because of their trial coronavirus vaccine?

I bought it because Remdesivir is a current treatment to the virus yes. That is to say it has shown promise.

Will you go back to some other AA in the future?
If yes then what AA and when will you go back in?
If not will you add more to treasuries over time?

Yes, I will return to 100% stocks. That is my default position, the one I tend to ride out for the long haul.
100/0 is my default AA.

This was an attempt to come out ahead by owning more shares of total market.

When are you going back to 100% stocks? What is the trigger?

[whodidntante]

OP, I applaud you for reaching a level of conviction about what is going to happen that I feel is out of reach for me. If I could reach your level of conviction, I would have the guts to act. I have happily bet mortgage payments on poker hands because I had conviction it was the right thing to do. But as it is, the best I can do for myself is to stay in the market, avoid single stocks, and to buy with positive cash flow, or to sell with negative cash flow. I do not know what is going to happen.

But as is, I hope you lose, sir. Because if you win, it is bad for me.

[VaR]

What question are we trying to answer? I'm not sure this is actionable.

[DesertDiva]

Bet the house on a single pharmaceutical stock - now that’s being risk adverse!

[TomCat96]

Let's be clear on how to splice this..

Bogleheads you are used to seeing it this way:

1. The market has gone down. I am so scared that I want to sell. I can't handle the drops.

The above is the type of market timing you perceive. I am sorry but that is not what is happening here.

This is how I perceive it.

2. The market is going to go down. Im 100% stocks for the long haul anyway.
Why don't I get out now, wait for it to drop more, and then buy back in at 100% stocks. I'll come out ahead.


I am market timing, just not the standard assumption you all are so used to jumping to.