Once in lifetime buying opportunity?

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Enzo IX
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Once in lifetime buying opportunity?

Post by Enzo IX »

This is looking like its turning into the mother of all bears, maybe a record setter, since at least 1973. That being said somewhere there's going to be a firm bottom made, when true Benjamin Graham types say the risk return ratio is too great to pass up. History shows that the rebound after these events are humongous.

My question is how many of you are planning to change your current allocation model to take advantage of this increased expected future return of stocks. If I was an accumulator I would be extremely interested, as a retiree not so.

Doug
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Taylor Larimore
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Take advantage ?

Post by Taylor Larimore »

Hi Doug:

How many of you are planning to change your current allocation model to take advantage of this increased expected future return of stocks?


I am not a market-timer. Our family will simply stay-the-course as determined by our asset-allocation plan.

Best wishes.
Taylor
Hemispheres
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Post by Hemispheres »

You might get an even better "once in a lifetime buying opportunity" tomorrow, next week, and next month. I thought the fundamentals of the economy had stabilized after the Sept seizure but it's getting scary now. We might be in a death spiral between stocks and the economy.
Andrew
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went from 85/15 to 99/1

Post by Andrew »

The stock market being down 40% in 12months as of today was just too much to pass up.

Exchange traded from MMF's, putting 33% of our MMF into FTSE All-World Excluding USA, and 66% into Total Stock Market. Our Stock Allocation is 75/25 between these two funds now. Our overall portfolio now has 1% in TE intermediate bonds.

This was Tuesday. Of course market has dropped more, which is OK. Not wanting to use any of this money for another 25 years. We will be reducing equity exposure a percent or two each year over next 25 years as written in IPS. Reducing equity exposure down to 60/40 which we plan on maintaining throughout retirement.


Rgds
Andrew
effillus
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Post by effillus »

I don't know where the bottom is, I don't know how to market time, I'm not planning to buy into the market right now, but I do know this, in fact, I am positive about it: Someone, somewhere is going to come out of this crash making absolutely obscene amounts of money; someone is going to get filthy rich.
wydIdoit
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Post by wydIdoit »

I think I am going to put my 2008 contribution in now and even move some out of money market....

That means, the dow will promptly tank to 5000 tomorrow so just keep that in mind lol......
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jh
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Post by jh »

...
Last edited by jh on Thu Dec 11, 2008 5:23 pm, edited 1 time in total.
learning
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Post by learning »

I'm not an historian. But it's my recollection that in the past stocks have gone down -- and stayed down -- for quite some time before coming back.
Investors expecting a rubber-band like bounce-back may be sorely disappointed.

Taylor, I think your words are very wise.
sprmario2k3
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Post by sprmario2k3 »

i've been staying the course... and i will continue to do so... At this point the S&P is down about 42% so i figure bailing now is just ridiculous, however, I'm feeling fear today for the first time. We are down now 8 days in a row a really large chunk.

My fear really isn't really from my stock losses, because all of my equities are in retirement funds which i son't need for 30 years... my fear is for the economy and the stability of my job. I think the fear is very real that this might go well beyond recession and be a real depression.
Hemispheres
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Post by Hemispheres »

One thing I forgot is that the shortselling ban was lifted today. We might be seeing the fallout from that. There might be a potential for a snap back rally tomorrow.

I'd love for the Fed/Treasury to specifically target their anticipated buying on the stocks that the hedge funds are shorting. Break their *ing backs.
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jh
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Post by jh »

...
Last edited by jh on Thu Dec 11, 2008 5:23 pm, edited 1 time in total.
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Enzo IX
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Post by Enzo IX »

Hemispheres,

I realize that the market can continue to go down, but somewhere this is gonna stabilize, It can't continue to go down 5-6% a day or its will be for the most part Dow 0 in twenty days. The total value of the world economy is worth something I would think, if not you know outcome of that scenario.

Doug
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Post by Gaius Octavianus »

I really didn't pay attention to the market this morning but I thought I heard the Dow was up 150? If so, there is some serious volatility given that the Dow was down as much as 650 late this afternoon.
gvernon
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Post by gvernon »

FWIW,

I exchanged some VMMXX for VFINX today. Just couldn't fight off the gambling urge inside of me any longer. I'm considering it the "play money" portion of my portfolio.
Hemispheres
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Post by Hemispheres »

Enzo IX wrote:I realize that the market can continue to go down, but somewhere this is gonna stabilize, It can't continue to go down 5-6% a day or its will be for the most part Dow 0 in twenty days. The total value of the world economy is worth something I would think, if not you know outcome of that scenario.
I thought the same way up at 1200 on the SP500. This market is the absolute poster child for "catch a falling knife".
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Enzo IX
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Post by Enzo IX »

Hemispheres,

Well then it's a good thing I've been practicing alot on "Call of Duty 4."

Doug
Last edited by Enzo IX on Thu Oct 09, 2008 3:08 pm, edited 1 time in total.
vb
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Post by vb »

I'll let my regular 401(k) contribution take care of this buying opportunity. (Hopefully I'll still be working.)

I don't like to time the market, but I still have an IRA to Roth Conversion that I didn't do this year. My finger was on the trigger, but I didn't pull. I think we can go lower. (This is the only silver lining for me.)
bozo
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Re: Once in lifetime buying opportunity?

Post by bozo »

Enzo IX wrote:This is looking like its turning into the mother of all bears, maybe a record setter, since at least 1973. That being said somewhere there's going to be a firm bottom made, when true Benjamin Graham types say the risk return ratio is too great to pass up. History shows that the rebound after these events are humongous.

My question is how many of you are planning to change your current allocation model to take advantage of this increased expected future return of stocks. If I was an accumulator I would be extremely interested, as a retiree not so.

Doug
Well, my wife and I are 61. I'm retired, she's not. Our AA is 40/60 (2/3 of the "60" being in a ten-year ladder of CDs averaging 5.5%). I convinced my wife this morning that she should stick with her 401K monthly contributions to a 60/40 balanced fund, since our CDs and (in a bit) our Social Security and her modest pension will cover our living expenses. So, you could say we're slightly overweight equities in accumulations.

Bozo
sprmario2k3
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Post by sprmario2k3 »

i've been staying the course... and i will continue to do so... At this point the S&P is down about 42% so i figure bailing now is just ridiculous, however, I'm feeling fear today for the first time. We are down now 8 days in a row a really large chunk.

My fear really isn't really from my stock losses, because all of my equities are in retirement funds which i son't need for 30 years... my fear is for the economy and the stability of my job. I think the fear is very real that this might go well beyond recession and be a real depression.
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tc101
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Post by tc101 »

Dow crashed in the last hour of trading and closed around 8580. Somebody will buy at the bottom and make a good profit over the next few years, but I have no idea where the bottom is and am too nervous to buy.

I thought it was a great buying opportunity when it went below 10,000. That shows what I know.

My plan was to never work again, but somebody called me yesterday to see if I was interested in a job and I am thinking maybe I will go back to work.
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greg24
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Post by greg24 »

I have rebalanced all our accounts. I am considering changing my future 401k allocations from 70/30 to 80/20.
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Post by scb175 »

New investor here. I recently opened a Roth IRA and selected one of those Target Retirement Funds. Don't recall at the moment what year, but close to 2045. I'm a young buck and have about 4 grand sitting in an E-Trade savings account earning 3.3%.

I have income also stashed away for emergency and have been thinking about opening up a Vanguard Money Market Fund with the money I have in my E-Trade. That way, when things flatten out... come next spring, summer, fall or whatever. I'll be ready to pounce in the market when she's sitting good and low. My only question would be, what should I invest in? Should I go straight Emerging Markets, or Total Stock Market, or just stick to International? I know I need to keep my allocations lined up with my Target Fund, but it gets confusing the more I think about it. Maybe I should take this question to the newbie forum. Any Help?
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gravlax
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Re: went from 85/15 to 99/1

Post by gravlax »

Andrew wrote:The stock market being down 40% in 12months as of today was just too much to pass up.

Exchange traded from MMF's, putting 33% of our MMF into FTSE All-World Excluding USA, and 66% into Total Stock Market. Our Stock Allocation is 75/25 between these two funds now. Our overall portfolio now has 1% in TE intermediate bonds.

This was Tuesday. Of course market has dropped more, which is OK. Not wanting to use any of this money for another 25 years. We will be reducing equity exposure a percent or two each year over next 25 years as written in IPS. Reducing equity exposure down to 60/40 which we plan on maintaining throughout retirement.
What is IPS?
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Kenster1
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Re: went from 85/15 to 99/1

Post by Kenster1 »

gravlax wrote:
Andrew wrote:The stock market being down 40% in 12months as of today was just too much to pass up.

Exchange traded from MMF's, putting 33% of our MMF into FTSE All-World Excluding USA, and 66% into Total Stock Market. Our Stock Allocation is 75/25 between these two funds now. Our overall portfolio now has 1% in TE intermediate bonds.

This was Tuesday. Of course market has dropped more, which is OK. Not wanting to use any of this money for another 25 years. We will be reducing equity exposure a percent or two each year over next 25 years as written in IPS. Reducing equity exposure down to 60/40 which we plan on maintaining throughout retirement.
What is IPS?
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jaxbmw
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V SHAPED RECESSION

Post by jaxbmw »

Given the precipitous drop and the lack of trust across markets this is not the time to try to catch a falling knife.

Credit markets have to open up at some point, the FED is pumping enough money into the system. Hopefully this can be the basis for some TRUST.

This would allow for businesses to operate and generate revenue, jobs and earnings. Until this happens we are going to be in a recession.

Let's only hope that at some point housing stabilizes so that individuals have a floor to build off of.

I remember in '74 when no one wanted stocks and they stayed at depressed levels for a LONG time. YES the world is not ending and the market will come back but boy do we have a mess on our hands.

All we need to do is loose Ford and GM, then watch the unemployment numbers.

I don't think the FAT LADY IS SINGING YET!
JohnDoe2004
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Post by JohnDoe2004 »

I rebalenced into VWO this morning. Looks like I should have waited till the end of the trading day lol.

Today was the first day I was actually shocked when I looked at the close. I was expecting either a 1-2% up or down. Not 7.62% down...
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Post by SamB »

I wonder why there is no one beating on their Congressman now to establish a REIT fund within the TSP.

Sam
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Post by stratton »

SamB wrote:I wonder why there is no one beating on their Congressman now to establish a REIT fund within the TSP.
This comment doesn't make any sense.

REITs have held up almost the best of any asset class this year. The performance chasers should be all over it. :wink:

Paul
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renditt
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Re: Once in lifetime buying opportunity?

Post by renditt »

Enzo IX wrote:This is looking like its turning into the mother of all bears, maybe a record setter, since at least 1973. That being said somewhere there's going to be a firm bottom made, when true Benjamin Graham types say the risk return ratio is too great to pass up. History shows that the rebound after these events are humongous.

My question is how many of you are planning to change your current allocation model to take advantage of this increased expected future return of stocks. If I was an accumulator I would be extremely interested, as a retiree not so.

Doug
Enzo, agree with you, this looks like the buying opportunity of a lifetime. I don't really get this 'catching the falling knife' debate. Is the market likely lower next week? Yes, of course. But the real question is: Is the market (much) higher in 10 years? With every major drop, this becomes more and more likely.

My next entry point is S&P at 800. Will then change from 70/30 to around 75/25.
Hemispheres
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Re: Once in lifetime buying opportunity?

Post by Hemispheres »

renditt wrote:Enzo, agree with you, this looks like the buying opportunity of a lifetime. I don't really get this 'catching the falling knife' debate. Is the market likely lower next week? Yes, of course. But the real question is: Is the market (much) higher in 10 years? With every major drop, this becomes more and more likely.

My next entry point is S&P at 800. Will then change from 70/30 to around 75/25.
Your two paragraphs don't make sense together. By saying "my next entry point is S&P at 800" is an attempt to not catch a "falling knife". Why not simply purchase stocks right now?
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Enzo IX
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Post by Enzo IX »

I'm not measuring this in days, weeks or even months, but I'm talking about an eventual stabilization of the system. Somewhere there is gonna be a bottom, and when fear subsides, and the feeling of being left behind by the neighbor(I don't follow that thinking, I hope the best for everyone) turns to greed. There's gonna be a rally of some kind often huge in the following year.

It seems that I read that Warren Buffett when he was young made a huge contrarian play that gave him that starting capital to parlay it into major dollars.

Doug
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Post by VictoriaF »

stratton wrote:
SamB wrote:I wonder why there is no one beating on their Congressman now to establish a REIT fund within the TSP.
This comment doesn't make any sense.

REITs have held up almost the best of any asset class this year. The performance chasers should be all over it. :wink:

Paul
I have not compared the performance of funds, but I trust Paul.

Even if REITs were not the best performer, they are a different asset class and are recommended by David Swensen. Considering that they are not tax efficient a room in a tax-deferred account, such as TSP, would be welcome.

It just happens that fund managers (TSP and else) are busy with something else at the moment.
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Post by nisiprius »

JohnDoe2004 wrote:I rebalenced into VWO this morning. Looks like I should have waited till the end of the trading day lol.

Today was the first day I was actually shocked when I looked at the close. I was expecting either a 1-2% up or down. Not 7.62% down...
Me, too. I used to try to avoid deliberately checking the Dow, ever. It was OK if I happened to hear something on the news, but I didn't allow myself to take any positive action to look at it on the Web.

Lately, I've been trying to discipline myself not to check it more than once a day. I checked around noon and figured it would be a boring day. Thought I was making progress on my addiction. So much for that idea.

That sneaky Dow. Look what it does if I don't keep an eye on it.

I'll probably check it several times this evening just to make sure it hasn't done anything since the close :P
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whitemiata
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Post by whitemiata »

Enzo IX wrote:Hemispheres,

I realize that the market can continue to go down, but somewhere this is gonna stabilize, It can't continue to go down 5-6% a day or its will be for the most part Dow 0 in twenty days. The total value of the world economy is worth something I would think, if not you know outcome of that scenario.

Doug
Doug,

actually the market could drop 5% per day until long after your and I are both dead of natural causes in our early 100s.

I agree with you that a bottom exists and that it's not the near zero but not quite zero that such a scenario would result in, but the math itself does quite easily allow for such a scenario :-)
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renditt
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Re: Once in lifetime buying opportunity?

Post by renditt »

Hemispheres wrote:
renditt wrote:Enzo, agree with you, this looks like the buying opportunity of a lifetime. I don't really get this 'catching the falling knife' debate. Is the market likely lower next week? Yes, of course. But the real question is: Is the market (much) higher in 10 years? With every major drop, this becomes more and more likely.

My next entry point is S&P at 800. Will then change from 70/30 to around 75/25.
Your two paragraphs don't make sense together. By saying "my next entry point is S&P at 800" is an attempt to not catch a "falling knife". Why not simply purchase stocks right now?
I can't put indefinitely more cash into stocks, so I have to pick my entry points. I bought at S&P 1000 and will buy again at 800. The point I was trying to make is that I am not expecting to time the exact bottom and don't really care if the market drops more in the short term after I buy. Doesn't mean I have to lump sum everything into this when the market clearly is in free fall.
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Post by White Coat Investor »

Enzo IX wrote:Hemispheres,

I realize that the market can continue to go down, but somewhere this is gonna stabilize, It can't continue to go down 5-6% a day or its will be for the most part Dow 0 in twenty days. The total value of the world economy is worth something I would think, if not you know outcome of that scenario.

Doug
Not true. It isn't going down 5% of its original value each day, but 5% of yesterday's value. So it could go down 5% each day from now until 2030 and still not be zero. It makes me somehow feel better to know that a 5% drop now in EM is no different than a 2% drop a year ago.
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Enzo IX
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Post by Enzo IX »

You guys know what I mean, it's the same analogy that your portfolio can't go to zero if you only withdraw 4% a year.

Doug
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Post by UKbloke »

tc101 wrote: My plan was to never work again, but somebody called me yesterday to see if I was interested in a job and I am thinking maybe I will go back to work.
I'd seriously consider it. You can keep living on your retirement budget and use your entire salary to pick up a lot of equity really cheap. It makes sense to do so now as opportunity costs are higher. You will come out of this bear market a lot stronger financially, which is nice even if it's not really needed. FI and FI are two.
Apprentice_941
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Post by Apprentice_941 »

I am a (modified) market timer. I only guess once:

I'm almost completely in CD's or Bonds since almost a year ago. However, my investment policy statement stipulates that I pre-pick a time period before hand in which I must return to stocks. Months ago I set October 15, 2008 as the day I must return.

So I will return to stocks next Wednesday.

It's just as well. I have no idea when the market will hit bottom.
DP
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Post by DP »

Hi,
Well I must confess I am not a true Boglehead and I scaled my equity from 70% to 20% in Aug and Sept. Not planning to sell the 20%. As far as getting back in, certainly the dramatic falls tend to be followed by sharp runups ... but I know my timing is not that good.

I used mostly moving averages to scale out and will use a similar strategy to scale back in. So I missed some of the loss and will miss some of the recovery.

FYI, there is a very good paper on this type of strategy. Wish I had posted before the market decline, but it may still be of interest. The strategy is far from perfect, and it may be better suited for retirement accounts, but it generally does reduce volatility - very successfully for those that followed it this year, it's nearly flat for the year and 100% in cash.

http://papers.ssrn.com/sol3/papers.cfm? ... _id=962461

For any that are interested, the author has a blog here: http://worldbeta.blogspot.com/

Don
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AzRunner
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Post by AzRunner »

I rebalanced some money from fixed income to Vanguard Value Index. I don't know where the market will be tomorrow but I figure long term I'm buying at a bargain and my equities are below my AA goal.

Norm
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Post by Rodc »

Given the values being posted for things like P/E10 I don't think we are down as far as we could possibly go. Today's values might be better than the values of a few months ago, but the values a few month in the future could continue to be better.

I have done some rebalancing, half way back, and will continue, but I'm not at all sure we are yet in a "once in a lifetime" situation.
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.
FinanceGeek
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Post by FinanceGeek »

For those of you with any interest in market timing, I suspect waiting a month or two is the best move...

1. the election results will be known, further discounting may occur
2. end of year tax loss selling hasn't really started yet
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Enzo IX
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Post by Enzo IX »

effillus wrote:I don't know where the bottom is, I don't know how to market time, I'm not planning to buy into the market right now, but I do know this, in fact, I am positive about it: Someone, somewhere is going to come out of this crash making absolutely obscene amounts of money; someone is going to get filthy rich.
"Was that an obscene amount of money, or merely offensive." Sorry everybody I just had to try the quote feature I just learned on the test page
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renditt
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Post by renditt »

Rodc wrote:Given the values being posted for things like P/E10 I don't think we are down as far as we could possibly go. Today's values might be better than the values of a few months ago, but the values a few month in the future could continue to be better.

I have done some rebalancing, half way back, and will continue, but I'm not at all sure we are yet in a "once in a lifetime" situation.
Maybe not once in a lifetime, but certainly once in a generation: If I take the 900 for the S&P and calculate back what the corresponding S&P values would have been for the past 50 years using the longterm earnings growth ratio of 6.5%, it seems that the market was only cheaper in the period 1974 - 1985. (Not sure by the way if this approach is very scientific, but it makes sense to me.)

How far does the S&P have to fall to be the cheapest in 50 years according to my method?

640.
norak
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Post by norak »

Everyone has been talking about buying opportunities. When you see a car that has had 50% off, that's a bargain. But maybe the seller took 50% off because the car had a broken engine. That's what I'm worried about. I'm staring to get really worried with this massive decline. Yesterday while on the exercise bike I was listening to a podcast from an Austrian Economist talking about how governments have been propping up the economy with credit for the last 50 years or so and that eventually this debt binge would have to end some day. That has gotten me worried.
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Post by Speedie »

DP wrote:Hi,
FYI, there is a very good paper on this type of strategy. Wish I had posted before the market decline, but it may still be of interest. The strategy is far from perfect, and it may be better suited for retirement accounts, but it generally does reduce volatility - very successfully for those that followed it this year, it's nearly flat for the year and 100% in cash.

http://papers.ssrn.com/sol3/papers.cfm? ... _id=962461

Don
Thank-you for the link to a very interesting paper. I took a quick look at a chart of the S&P 500 with a 12 month moving average (the 10 month MA listed in the paper isn't available in my software). The timing system in the paper would have given a buy signal in April 2003 at around 916 and a sell signal at the end of December 2007 when the index was around 1,450. To date no buy signal given since then and we're a loooooong way below that average.

Its main strength seems to be sitting in cash during the most severe parts of downturns in various assets. Typical momentum strategy, miss the tops and bottoms but grab the chunk in the middle. Definitely food for thought and further research.

One thing that I'm not clear on having read the paper (albeit while my brain is more intent on a website redesign that I'm working on!): if you were using for example three asset classes and started with a $100,000 portfolio ($33K per asset class) is there ever any rebalancing? Or does each slice of the pie sit either in cash or its respective asset class with no mingling of funds between the three?
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Post by nisiprius »

norak wrote:Everyone has been talking about buying opportunities. When you see a car that has had 50% off, that's a bargain. But maybe the seller took 50% off because the car had a broken engine.
Precisely. When Jif peanut butter goes on sale at the supermarket, it is probably the same article as it was when it was not on sale.*

The "stocks-are-on-sale" meme implicitly assumes that late-2008-vintage GE stock is the same thing as late 2007-vintage GE stock, and that the price decline is pure irrational negativism, unrelated to anything important about GE's business or the economy.

(*always being sure to keep a sharp eye on the "sell-by" date)
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DP
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Post by DP »

Hi,
re. the question about the quantitative asset allocation strategy:
is there ever any rebalancing? Or does each slice of the pie sit either in cash or its respective asset class with no mingling of funds between the three?
I can't recall whether the author ever said. I'm guessing no, because rebalancing basically reduces risk and returns, but the timing model also reduces risk. Still, if I were following it, and I plan to follow it more closely in the recovery, I would consider rebalancing in a tax sheltered account if an allocation was off it's target by 20%.

If you can't find the answer in the paper, the author responds to e-mails. You can find his contact info in his blog.

Don

P.S. for those that think this strategy would be easy to follow, check out a chart of PCRIX in the 2005-2006 time frame. This strategy would have been whipsawed multiple times for that fund, taking significant loss although PCRIX was basically flat.
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whitemiata
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Joined: Wed Apr 18, 2007 8:44 pm

Post by whitemiata »

nisiprius wrote:
norak wrote:Everyone has been talking about buying opportunities. When you see a car that has had 50% off, that's a bargain. But maybe the seller took 50% off because the car had a broken engine.
Precisely. When Jif peanut butter goes on sale at the supermarket, it is probably the same article as it was when it was not on sale.*

The "stocks-are-on-sale" meme implicitly assumes that late-2008-vintage GE stock is the same thing as late 2007-vintage GE stock, and that the price decline is pure irrational negativism, unrelated to anything important about GE's business or the economy.

(*always being sure to keep a sharp eye on the "sell-by" date)
I don't know wether late-2008-vintage GE stock is the same thing as late 2007-vintage GE stock.

But I'm somewhat comfortable in saying that in 20 years you will find that a capitalization-balanced vintage-2007 mix of world indexes is no different than an identical vintage-2008 mix of world indexes.

GE could get wiped out. I don't think it's likely but it could happen.

I don't think I can wrap my head around the scenario where VTSMX and VFWIX are wiped out... but I think it involves knives, arrows, a little bit of rare cannibalism and the period would then be followed eventually by the middle ages part deux.

I guess I should see about getting knighted or something.

Alessandro
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