A warning on RBDs [Really Bad Days]
A warning on RBDs [Really Bad Days]
We are having fun with the RBD that occurred on Friday for many ETFs (and asset classes). I have always said that such occurrences are good days to check if one needs to tax-loss harvest and/or rebalance one's portfolio.
The warning: Just because there was an RBD does not mean that the stock market will stop going down in value or will now go up in value. The stock market could keep going down for quite a while. Also, it does not mean that there will not be any more RBDs in the near future.
I think I am safe in predicting that in the future there will be more opportunities for tax-loss harvesting and portfolio rebalancing.
The warning: Just because there was an RBD does not mean that the stock market will stop going down in value or will now go up in value. The stock market could keep going down for quite a while. Also, it does not mean that there will not be any more RBDs in the near future.
I think I am safe in predicting that in the future there will be more opportunities for tax-loss harvesting and portfolio rebalancing.
Re: A warning on RBDs
I'd like to point out that Really Big Dogs can be just as friendly as normal size dogs and that people should not fear them.
While I don't subscribe to the RBD investment philosophy, I do find it helpful to be reminded that things can keep going down for awhile before they turn around. We don't know what will happen Monday or the Monday after it.
While I don't subscribe to the RBD investment philosophy, I do find it helpful to be reminded that things can keep going down for awhile before they turn around. We don't know what will happen Monday or the Monday after it.
Never underestimate the power of the force of low cost index funds.
Re: A warning on RBDs
I don't have the data to prove this statement, but have read it many times in my life. The market seldom hits the bottom on a Friday, so expect a drop again on the Monday following a Friday major drop. Will that happen again this Monday?
Anyway, for me personally, I don't give a darn one way or the other as I have 3+ years of future planned retirement withdrawals protected from the stock market. I'll leave the panic for you younguns. My advice, though, is don't panic..
Anyway, for me personally, I don't give a darn one way or the other as I have 3+ years of future planned retirement withdrawals protected from the stock market. I'll leave the panic for you younguns. My advice, though, is don't panic..
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
- bertilak
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Re: A warning on RBDs
With stars in my eyes I ran to my Vanguard taxable account to see what I could TLH. I was devastated to see it was still in the black.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
- nisiprius
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Re: A warning on RBDs
To underline what livesoft is saying: market movements are not smooth, on any time scale.
It seems to be almost impossible to "feel" this intuitively, the actual complexity of the past movements is far too complicated for anyone--or at least most people--to remember. We smooth, we simplify, we make a storyline. The actual pattern of the stock market involves hundreds of separate movements occurring every minute of every day of every year. Simplifying the pattern enough to make it comprehensible loses so much accuracy that it becomes deceptive.
In memory, the stock market was "up" in 2007, then it went "down" in 2008, then it started to go "up" in 2009 and has been going up ever since, until now.
Not.
All upward movements are interrupted by smaller downward movements, those in turn are interrupted by smaller upward movements, which in turn are interrupted by smaller downward movements, and so on and so on. Just like a coastline or a fractal. "Big fleas have little fleas upon their back to bite 'em/And little fleas have lesser fleas, and so ad infinitum."
The recent drop looks just like a bunch of drops that were just pauses in a general climb from 2009-present, and it also looks just like a bunch of drops that were part of the sickening plunge to 2009. And the plunge to 2009 was interrupted by several upward movements that, while they were in progress, looked just like the big drop was over.
It seems to be almost impossible to "feel" this intuitively, the actual complexity of the past movements is far too complicated for anyone--or at least most people--to remember. We smooth, we simplify, we make a storyline. The actual pattern of the stock market involves hundreds of separate movements occurring every minute of every day of every year. Simplifying the pattern enough to make it comprehensible loses so much accuracy that it becomes deceptive.
In memory, the stock market was "up" in 2007, then it went "down" in 2008, then it started to go "up" in 2009 and has been going up ever since, until now.
Not.
All upward movements are interrupted by smaller downward movements, those in turn are interrupted by smaller upward movements, which in turn are interrupted by smaller downward movements, and so on and so on. Just like a coastline or a fractal. "Big fleas have little fleas upon their back to bite 'em/And little fleas have lesser fleas, and so ad infinitum."
The recent drop looks just like a bunch of drops that were just pauses in a general climb from 2009-present, and it also looks just like a bunch of drops that were part of the sickening plunge to 2009. And the plunge to 2009 was interrupted by several upward movements that, while they were in progress, looked just like the big drop was over.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: A warning on RBDs [Really Bad Days]
This thread is now in the Investing - Theory, News & General forum (general investing). I also retitled the thread to help with the acronym, which is in the wiki: Acronyms
Re: A warning on RBDs
Which is precisely why the constant chatter on this board about "RBDs" and how they necessitate some kind of action is absurd, contradictory, and likely confusing to newer members.nisiprius wrote:To underline what livesoft is saying: market movements are not smooth, on any time scale.
It seems to be almost impossible to "feel" this intuitively, the actual complexity of the past movements is far too complicated for anyone--or at least most people--to remember. We smooth, we simplify, we make a storyline. The actual pattern of the stock market involves hundreds of separate movements occurring every minute of every day of every year. Simplifying the pattern enough to make it comprehensible loses so much accuracy that it becomes deceptive.
In memory, the stock market was "up" in 2007, then it went "down" in 2008, then it started to go "up" in 2009 and has been going up ever since, until now.
Not.
All upward movements are interrupted by smaller downward movements, those in turn are interrupted by smaller upward movements, which in turn are interrupted by smaller downward movements, and so on and so on. Just like a coastline or a fractal. "Big fleas have little fleas upon their back to bite 'em/And little fleas have lesser fleas, and so ad infinitum."
The recent drop looks just like a bunch of drops that were just pauses in a general climb from 2009-present, and it also looks just like a bunch of drops that were part of the sickening plunge to 2009. And the plunge to 2009 was interrupted by several upward movements that, while they were in progress, looked just like the big drop was over.
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Re: A warning on RBDs [Really Bad Days]
One of my favorite William Bernstein quotes is something to the effect "when the market goes up enjoy the ride, and when the market goes down look forward to increased future expected returns". Those words add strength to my will to stay the course.
Dave
Dave
Re: A warning on RBDs [Really Bad Days]
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
Re: A warning on RBDs [Really Bad Days]
...and the schiller PE is still 24. Very high historically.
But of course those who question it will say "this time is different"
of course it is
But of course those who question it will say "this time is different"
of course it is
- stevewolfe
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Re: A warning on RBDs [Really Bad Days]
Or they will say it was high for years, many times, and, while eventually correct, it isn't actionable on a day to day basis.
“I’ve been very wary about advising people to pull out of the market even though my CAPE ratio is at one of the highest levels ever in history,” Shiller told Bloomberg in April. “Something funny is going on. History is always coming up with new puzzles.”
- zaboomafoozarg
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Re: A warning on RBDs
True, but there's a lot more to clean up with the big ones. Which is why I always liked my 3-pound Pomeranianofcmetz wrote:I'd like to point out that Really Big Dogs can be just as friendly as normal size dogs and that people should not fear them.
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Re: A warning on RBDs [Really Bad Days]
I do not subscribe to the RBD approach. I think that it can be a source of behavioral mistakes for some investors.
I much prefer a good old couch potato approach:
"Shut off the TV and go play outside", my mom used to tell me. May be you should develop a new hobby if you spend your days looking at the market.
You just want to rebalance to avoid letting the market decide of your asset allocation. Bringing back your portfolio to its target asset allocation once a year is sufficient.
I much prefer a good old couch potato approach:
- Invest new contributions into assets below their target allocation. (Before retirement).
- Take withdrawals from assets above their target allocation. (After retirement).
- Rebalance once a year on a predetermined date like your birthday.
"Shut off the TV and go play outside", my mom used to tell me. May be you should develop a new hobby if you spend your days looking at the market.
You just want to rebalance to avoid letting the market decide of your asset allocation. Bringing back your portfolio to its target asset allocation once a year is sufficient.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Re: A warning on RBDs
+1John3754 wrote:Which is precisely why the constant chatter on this board about "RBDs" and how they necessitate some kind of action is absurd, contradictory, and likely confusing to newer members.nisiprius wrote:To underline what livesoft is saying: market movements are not smooth, on any time scale.
It seems to be almost impossible to "feel" this intuitively, the actual complexity of the past movements is far too complicated for anyone--or at least most people--to remember. We smooth, we simplify, we make a storyline. The actual pattern of the stock market involves hundreds of separate movements occurring every minute of every day of every year. Simplifying the pattern enough to make it comprehensible loses so much accuracy that it becomes deceptive.
In memory, the stock market was "up" in 2007, then it went "down" in 2008, then it started to go "up" in 2009 and has been going up ever since, until now.
Not.
All upward movements are interrupted by smaller downward movements, those in turn are interrupted by smaller upward movements, which in turn are interrupted by smaller downward movements, and so on and so on. Just like a coastline or a fractal. "Big fleas have little fleas upon their back to bite 'em/And little fleas have lesser fleas, and so ad infinitum."
The recent drop looks just like a bunch of drops that were just pauses in a general climb from 2009-present, and it also looks just like a bunch of drops that were part of the sickening plunge to 2009. And the plunge to 2009 was interrupted by several upward movements that, while they were in progress, looked just like the big drop was over.
Precisely
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: A warning on RBDs [Really Bad Days]
The Boglehead forum, it's good at performance chasing.
When large caps are rocketing up, there is chatter about investing in the Total Stock Market and/or the S & P 500.
When gold is on a tear, it's all about Harry Browne's "Permanent Portfolio."
When Small Cap Value is up, then "tilting small cap, away from the market" and the "Larry Portfolio" become the things to do.
And when the market plunges, topics turn to weighting asset allocations more to bonds, and Tax Loss Harvesting.
When large caps are rocketing up, there is chatter about investing in the Total Stock Market and/or the S & P 500.
When gold is on a tear, it's all about Harry Browne's "Permanent Portfolio."
When Small Cap Value is up, then "tilting small cap, away from the market" and the "Larry Portfolio" become the things to do.
And when the market plunges, topics turn to weighting asset allocations more to bonds, and Tax Loss Harvesting.
Re: A warning on RBDs [Really Bad Days]
How do you explain my purchase of small-cap emerging markets yesterday?steve roy wrote:And when the market plunges, topics turn to weighting asset allocations more to bonds, and Tax Loss Harvesting.
Re: A warning on RBDs [Really Bad Days]
Easy. You're the Warren Buffett of Boglehead investors.livesoft wrote:How do you explain my purchase of small-cap emerging markets yesterday?steve roy wrote:And when the market plunges, topics turn to weighting asset allocations more to bonds, and Tax Loss Harvesting.
Re: A warning on RBDs [Really Bad Days]
Clearly you are correct.livesoft wrote:I think I am safe in predicting that in the future there will be more opportunities for tax-loss harvesting and portfolio rebalancing.
As they say, the future is a long time...
Re: A warning on RBDs [Really Bad Days]
Anybody thinking of buying VDE....Vanguard Energy....I believe 52 week high was 142 now at 89.....you would think it would be a very good long term investment at this price.
Last edited by hoops777 on Sat Aug 22, 2015 4:20 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.
Re: A warning on RBDs [Really Bad Days]
I agree with those that say a RBD is not in and of itself a reason to make any changes. On the other hand there is nothing wrong with rebalancing if the drop in stocks results in your stock to bond ratio being out of alignment.
Best Wishes, SpringMan
Re: A warning on RBDs [Really Bad Days]
I think the figures I saw was this measure was down from 27 in February of this year and has traded at an average of 23.8 for the last 30 years. Not predicting a bottom, just for a little perspective.archii wrote:...and the schiller PE is still 24. Very high historically.
But of course those who question it will say "this time is different"
of course it is
“There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest of them have to pee on the electric fence for themselves.” Will Rogers
Re: A warning on RBDs [Really Bad Days]
livesoft wrote:The warning: Just because there was an RBD does not mean that the stock market will stop going down in value or will now go up in value. The stock market could keep going down for quite a while. Also, it does not mean that there will not be any more RBDs in the near future.
I think I am safe in predicting that in the future there will be more opportunities for tax-loss harvesting and portfolio rebalancing.
Huh. The way I read livesoft is:nisiprius wrote:To underline what livesoft is saying: market movements are not smooth, on any time scale.
Nobody knows nothin' (including livesoft).
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: A warning on RBDs [Really Bad Days]
Are you feeling okay? I'm a little worried about you.livesoft wrote:We are having fun with the RBD that occurred on Friday for many ETFs (and asset classes). I have always said that such occurrences are good days to check if one needs to tax-loss harvest and/or rebalance one's portfolio.
The warning: Just because there was an RBD does not mean that the stock market will stop going down in value or will now go up in value. The stock market could keep going down for quite a while. Also, it does not mean that there will not be any more RBDs in the near future.
I think I am safe in predicting that in the future there will be more opportunities for tax-loss harvesting and portfolio rebalancing.
Re: A warning on RBDs [Really Bad Days]
Actually, I am sick and resting in bed. I caught something from my recent air travel. Thanks for your concern.
Re: A warning on RBDs [Really Bad Days]
Nor do I.iceport wrote:Nobody knows nothin' (including livesoft).
I am pretty sure that no one has said that they do.
Anyway, on RBDs, I think they're fun. Something to put a little interest into things we're supposed to be doing anyway. If it's optimum or will gain you a significantly greater sum, well, I don't think that claim has been made either. Better? Sure, maybe, a bit... maybe not.
Also also wik, for those who have demanded (in other threads through time) the definitive definition of a Really Bad Day:
Given 5 years and 9 days ago..livesoft wrote:Best/worst days defined as follows: A gain or loss in a single day that is among the top 3 best/worst in the last 3 to 6 months for the fund/ETF under consideration.
Not really too dificult if you ask me.
But, alas, there are many other (individual) considerations prior to any action. I'm still working on my own considerations...
:beerCheers,
packet
First round’s on me.
Re: A warning on RBDs [Really Bad Days]
Exactly. Better be pragmatic than dogmatic...SpringMan wrote:I agree with those that say a RBD is not in and of itself a reason to make any changes. On the other hand there is nothing wrong with rebalancing if the drop in stocks results in your stock to bond ratio being out of alignment.
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Re: A warning on RBDs [Really Bad Days]
I'm not a fan of RBDs either. It's clever which is part of the reason why I always enjoy livesofts posts -- but only when they don't involve RBDs . There's always a few newbs that ask "What is RBD?" and they probably put more time / effort into learning about it before learning more important things on the wiki.
If the forum still had polls, this is where a simple "Do you subscribe to the RBD investment philosophy?" could be a good poll to reference in the future.
EDIT: Just saw this old post which is and interesting analysis about RBDs - viewtopic.php?t=129502
If the forum still had polls, this is where a simple "Do you subscribe to the RBD investment philosophy?" could be a good poll to reference in the future.
EDIT: Just saw this old post which is and interesting analysis about RBDs - viewtopic.php?t=129502
Re: A warning on RBDs [Really Bad Days]
If you just call them ReBalancing Days, all's well. Except for the part where you actively wait for one, off-balance -- if I'm off from my target a "Healthy RBD" (tm) is "as soon as possible".
Re: A warning on RBDs [Really Bad Days]
Well, one interpretation is that it's been implied, over these many years, that an RBD strategy is superior to others.packet wrote:Nor do I.iceport wrote:Nobody knows nothin' (including livesoft).
I am pretty sure that no one has said that they do.
But that wasn't where I was headed with the comment.
I really only wanted to reiterate the fact that nobody knows nothin'. livesoft should be commended for making that point.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Re: A warning on RBDs [Really Bad Days]
A better strategy is to decide on rebalancing criteria when the market is boring, and then grit your teeth and stick to them when the market is more interesting.
-jalbert
-jalbert
Re: A warning on RBDs [Really Bad Days]
My reaction to a RBD is a martini.
My reaction to a really, really bad day is 2 martinis.
My reaction to a really, really, really bad day is...............................................
My reaction to a really, really bad day is 2 martinis.
My reaction to a really, really, really bad day is...............................................
Re: A warning on RBDs [Really Bad Days]
And when in doubt, do nothingjalbert wrote:A better strategy is to decide on rebalancing criteria when the market is boring, and then grit your teeth and stick to them when the market is more interesting.
-jalbert
Re: A warning on RBDs [Really Bad Days]
Ugg, that is never fun. Here is to waking up tomorrow feeling much better than now. (by tomorrow I mean today. I work till 0300, so tomorrow for me is at 1100 hrs when I wake up.)livesoft wrote:Actually, I am sick and resting in bed. I caught something from my recent air travel. Thanks for your concern.
Never underestimate the power of the force of low cost index funds.
Re: A warning on RBDs [Really Bad Days]
Tracking/acting on rbd is a waste of time
Re: A warning on RBDs [Really Bad Days]
My crystal ball prediction is for a decline of 150-200 for the DOW tomorrow. Mom and Pop will have checked their portfolios over the weekend and will panic sell tomorrow.
Re: A warning on RBDs
hear hear!bertilak wrote:With stars in my eyes I ran to my Vanguard taxable account to see what I could TLH. I was devastated to see it was still in the black.
Re: A warning on RBDs
The other nice thing about a chart like this is that we can data mine it to present any particular view we would like.nisiprius wrote:
For example, let's say the slide continues and the Dow drops to 14,000 by the end of the year. Bears can say "look, the stock market has shown no price growth in the past 8 years" (late 2007-late 2015).
Using this same chart a couple of months ago, Bulls could have claimed that "the Dow has tripled in price over the past 6 years" (early 2009-early 2015).
From "no gain" to "tripled" just by shifting the dates around a year or two. This is why all the speculation is pretty pointless. There is absolutely no idea what the stock market will do tomorrow and even long term trends on dependent on things completely out of our control. Relaxing, isn't it?
Re: A warning on RBDs [Really Bad Days]
Only off by 400-500 points!Cherokee8215 wrote:My crystal ball prediction is for a decline of 150-200 for the DOW tomorrow. Mom and Pop will have checked their portfolios over the weekend and will panic sell tomorrow.
Re: A warning on RBDs [Really Bad Days]
Just in case anyone did not notice: Monday, August 24, 2015 was a bona fide Livesoft RBD™. And don't many folks agree that today was a good day to do some Tax-Loss Harvesting and some Rebalancing? Was today the lowest price of the year so far for many of your investments?
Bwaaa-ha-ha-ha!
Bwaaa-ha-ha-ha!
Re: A warning on RBDs [Really Bad Days]
Muhahahaha!livesoft wrote: Bwaaa-ha-ha-ha!
Never underestimate the power of the force of low cost index funds.
Re: A warning on RBDs [Really Bad Days]
Yes, put in my rebalancing order just before the close today.
Not sure if I will feel like a genius or an idiot near term, but I do feel that
rebalancing should be a function of a AA deviations, not something to do on my birthday.
Not sure of the optimal band, but I would think 5-15% correction (US vs Int) from recent highs would put
some people in their bands. Bought to move closer to my US / Int / Bond targets, that's all !
If the market bounces back, I'll have the "problem" of having no losses to harvest (pay taxes) !
If it declines, I'll have the problem of creating those losses.
Life is full of problems, isn't it !
Not sure if I will feel like a genius or an idiot near term, but I do feel that
rebalancing should be a function of a AA deviations, not something to do on my birthday.
Not sure of the optimal band, but I would think 5-15% correction (US vs Int) from recent highs would put
some people in their bands. Bought to move closer to my US / Int / Bond targets, that's all !
If the market bounces back, I'll have the "problem" of having no losses to harvest (pay taxes) !
If it declines, I'll have the problem of creating those losses.
Life is full of problems, isn't it !
Re: A warning on RBDs [Really Bad Days]
No to either tlh, no taxable purchases recently, or rebalancing, drop not enough to impact allocation meaningfully, yet.livesoft wrote:Just in case anyone did not notice: Monday, August 24, 2015 was a bona fide Livesoft RBD™. And don't many folks agree that today was a good day to do some Tax-Loss Harvesting and some Rebalancing? Was today the lowest price of the year so far for many of your investments?
Bwaaa-ha-ha-ha!
Generally speaking my observation is that your outlook is warped by a long period of low volatility.
Re: A warning on RBDs
Yes, without a doubt, it makes no sense. Wait for stocks to go from 16,000 to 18,000 without buying because it went up very smoothly, then when it suddenly drops to 17,000 you buy because it happened to fall suddenly in a RBD? Just invest the money as early as possible. All of these RBDs basically get you to where we were a year or two ago. So what? Just invest the money then. And in another year or three, same situation about the recent highs in May.John3754 wrote:
Which is precisely why the constant chatter on this board about "RBDs" and how they necessitate some kind of action is absurd, contradictory, and likely confusing to newer members.
70% Global Stocks / 30% Bonds
Re: A warning on RBDs [Really Bad Days]
What do you mean "wait"? Please don't spread the falsehood about waiting to buy on an RBD.
- zaboomafoozarg
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Re: A warning on RBDs [Really Bad Days]
Eh, I was too busy at work today to do any rebalancing. Plus I have to wait a few more days to avoid a wash sale.
If I'm lucky (unlucky?), the prices will be similar next week. If not, oh well.
If I'm lucky (unlucky?), the prices will be similar next week. If not, oh well.
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Re: A warning on RBDs [Really Bad Days]
Took a look at my AA status after Friday's close, and was surprised to find it hadn't changed from the previous week! No rebalancing indicated!blevine wrote:Yes, put in my rebalancing order just before the close today.
Not sure if I will feel like a genius or an idiot near term, but I do feel that
rebalancing should be a function of a AA deviations, not something to do on my birthday.
Seems like things are going down proportionately, which seems to me to be a possible indication that my AA is at least semi-appropriate. The less tinkering I am inspired to do the better, say I.
IMO, any theory, like RBD, that is interpreted as a call to action is probably a bad thing.
Re: A warning on RBDs [Really Bad Days]
Yep, same here. Except that I was too busy fishing!zaboomafoozarg wrote:Eh, I was too busy at work today to do any rebalancing. Plus I have to wait a few more days to avoid a wash sale.
If I'm lucky (unlucky?), the prices will be similar next week. If not, oh well.
----------
Update Tuesday: markets stayed low, a 10% drop does qualify as a correction, and I decided to rebalance what I could (bonds=>TSM on a tIRA), while sitting tight on a TLH move that needs to wait a few more days to avoid a wash sale...
Re: A warning on RBDs
That's too bad for me. My 401K contributions hit more often on Friday than any other day. If a paycheck would arrive on Saturday or Sunday, or sometimes even the following Monday, my employer helpfully moves it back to Friday. Which is nice for the paycheck-to-paycheck people, of course. Just one more thing I can't control.Sheepdog wrote:I don't have the data to prove this statement, but have read it many times in my life. The market seldom hits the bottom on a Friday, so expect a drop again on the Monday following a Friday major drop. Will that happen again this Monday?
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Re: A warning on RBDs [Really Bad Days]
On the road all day. Heard market moves on the radio but was unable to capitalize on them. Everyone has different opinions on whether the market will keep dropping or start heading back up. All I know is that the market hasn't reached bottom until nearly everyone thinks it can't go back up. It used to be said there needs to be blood in the streets. Well, there is blood in the streets, but not yet rivers of blood (my addition). Speaking metaphorically, of course. I am not looking forward to it, but it does seem that the market needs to experience unbridled fear and panic, to shake out all the casual investors, before it finally stops dropping. I remember fondly Lou Rukeyser hopefully ringing a bell to signal the market bottom; it didn't work.