How Far Will Dow Fall During Next Retraction

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Stef
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Re: How Far Will Dow Fall During Next Retraction

Post by Stef » Wed Dec 04, 2019 2:50 am

MathWizard wrote:
Wed Dec 04, 2019 2:29 am
CAPE PE10 is at about 30,

What does that say about valuations?

Does that predict a drop to 20:. a 33% drop?

A drop to 15: a 50% drop?
30 is the new 20.

the way
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Re: How Far Will Dow Fall During Next Retraction

Post by the way » Wed Dec 04, 2019 4:25 am

Here's an interesting chart that purports to show that indexes don't always recover after a major peak and fall. I.e. the mantra to just close your eyes and hold on may not necessarily work next time!
Image

stocknoob4111
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Re: How Far Will Dow Fall During Next Retraction

Post by stocknoob4111 » Wed Dec 04, 2019 6:10 am

I believe Jeff Gundlach made the same point recently.. he claims all the other markers have not regained their peaks and now it's the US's turn.. he says the US will crash and never recover in our lifetime! I find that hard to believe but if it does a diversified portfolio should be ok.. money has to go somewhere!!

RadAudit
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Re: How Far Will Dow Fall During Next Retraction

Post by RadAudit » Wed Dec 04, 2019 6:43 am

rockthisworld wrote:
Tue Dec 03, 2019 10:59 am
Should I actually rebalance and acquire capital gains in order to go from 100% stocks to maybe 60/40 or 50/50 in anticipation? Or am I better off long term sticking 100% stocks and rebalance later in my 50s and 60s to get slightly more conservative? I can whether a bear market knowing I have time to recover.
Rebalamce in anticipation? Probably not. What you might want to do is figure out (SWAG) is a portfolio AA that will allow you to meet your goals. See Swedroe and "need, ability and willingness to accept the risks."
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

WhiteMaxima
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Re: How Far Will Dow Fall During Next Retraction

Post by WhiteMaxima » Wed Dec 04, 2019 11:37 am

csmath wrote:
Tue Dec 03, 2019 8:09 pm
WhiteMaxima wrote:
Tue Dec 03, 2019 6:31 pm
Chuck5781 wrote:
Tue Dec 03, 2019 6:23 pm
WhiteMaxima wrote:
Tue Dec 03, 2019 5:22 pm
20-40% drop depend how severe the economy slow down is. I would not 100% equity now and leave 20-40% in bond or cash (60/40 AA) and keep rebalancing.
Since you know the amount, could you also tell us the dates of the drop, the bottom, and full recovery?
I don't know when. But I do know major correction happens in a normal business cycle and a balanced AA will benefit from a major correction. I am not telling to timing the market. I am telling to diversify AA in all asset class. 20-40% number is from the last two business down turn, I am using it as an example.
In 2016...
WhiteMaxima wrote:
Thu Oct 06, 2016 3:17 pm
I am 20% cash now. But I DCA small amount in Vanguard everyday. If the market is up 10%, I will be up 8% which is not bad. If market crashed 20% tomorrow, I will be all in again. Long term, I dont thinking market timing will work. It's just my short term play.
VTSAX...
+9.07 inflation adjusted CAGR over the following 6 months
+16.04 inflation adjusted CAGR over the following 12 months

In Feb 2017 you started a thread "Moving 20% into Cash"...
WhiteMaxima wrote:
Tue Feb 14, 2017 12:50 pm
The market did very well during the last 1.5 month (up 5%, translate 40% annually). So I decide to move 20% from equity to cash to lock some of the profit. While I still have 80% in the stock market (no bonds). So if the market is doing well during rest of year, I will still enjoy 80% of the growth (I still believe so). So the 20% cash will sitting there to make me more comfortable just in case.
VTSAX...
+8.06 inflation adjusted CAGR over the following 6 months
+22.67 inflation adjusted CAGR over the following 12 months

In March 2017...
WhiteMaxima wrote:
Thu Mar 30, 2017 11:57 am
I truely believe the healthcare industry will out perform the general market despite the political pressure on drug price. This is because this industry is directly benefit our healthy living. The downward pressure during last couple of years only create value for this sector. So we wont over pay this sector. I would over weight this sector.
Vanguard Health Care Index Admiral... 0.10% ER
+9.99 inflation adjusted CAGR over the following 6 months
+10.11 inflation adjusted CAGR over the following 12 months
VTSAX... 0.04 ER
+6.39 inflation adjusted CAGR over the following 6 months
+11.22 inflation adjusted CAGR over the following 12 months

Oct 2017
WhiteMaxima wrote:
Fri Oct 06, 2017 3:15 pm
I moved 50% into cash. Would forgo 10% potential gain instead of 20~ 30 % potential loss. Once the music stops, everyone rush out. You know ETFs, index fund, at panic, all will be dumped. I am now sitting down and worry free. I still have 50% there, so if market continous, I will still get 50% of the return. If market crushes, I might get at certain point. I don't see recession in the near term, But I do see a potential sell off anytime soon.
VTSAX...
+4.54 inflation adjusted CAGR over the following 6 months
+15.00 inflation adjusted CAGR over the following 12 months

Feb 2018
WhiteMaxima wrote:
Thu Feb 08, 2018 5:51 pm
The market is over valued even today. A BH should aware of this and be value oriented. This is not market timing.
https://www.cnbc.com/2018/01/23/markets ... -says.html
VTSAX...
+4.54 inflation adjusted CAGR over the following 6 months
-3.71 inflation adjusted CAGR over the following 12 months
+3.55 inflation adjusted CAGR over the following 14 months

Not trying to pick on you and you've given plenty of good advice in the past... but market timing is not one of them.
I always like to put 20% in cash or more conservative investment no matter of the market condition is. so my AA is between 80/20 to the best or 60/40 to the lowest.

csmath
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Re: How Far Will Dow Fall During Next Retraction

Post by csmath » Wed Dec 04, 2019 12:11 pm

WhiteMaxima wrote:
Wed Dec 04, 2019 11:37 am
I always like to put 20% in cash or more conservative investment no matter of the market condition is. so my AA is between 80/20 to the best or 60/40 to the lowest.
AA is an example of a great reason to be 20% cash.

"Moving" x% into cash due to market speculation would be a bad reason.

WhiteMaxima
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Re: How Far Will Dow Fall During Next Retraction

Post by WhiteMaxima » Wed Dec 04, 2019 12:17 pm

csmath wrote:
Wed Dec 04, 2019 12:11 pm
WhiteMaxima wrote:
Wed Dec 04, 2019 11:37 am
I always like to put 20% in cash or more conservative investment no matter of the market condition is. so my AA is between 80/20 to the best or 60/40 to the lowest.
AA is an example of a great reason to be 20% cash.

"Moving" x% into cash due to market speculation would be a bad reason.
AA has some market timing inside: buying when market is low and sell when market is high.

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nisiprius
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Re: How Far Will Dow Fall During Next Retraction

Post by nisiprius » Wed Dec 04, 2019 12:34 pm

the way wrote:
Wed Dec 04, 2019 4:25 am
Here's an interesting chart that purports to show that indexes don't always recover after a major peak and fall. I.e. the mantra to just close your eyes and hold on may not necessarily work next time!
I call BS on that chart. I can't even tell what it means, can you? Can you give us a link to some explanatory text?

Let me add two dotted lines on it.

Image

The indexes are said to be "normalized as of 12/31/1987," but the four lines show four different values at that date. MSCI Emerging markets seems to be plotted at zero for 12/31/1987, while the S&P 500 appears to be plotted at zero for 12/31/1982... so what is that? Did he "normalize" by subtracting a constant value, which is nutty for anything that grows by compounding?

The box talks about "last price," as if dividends weren't being paid to the investor.

What I know is that if you'd invested $10,000 into the Vanguard 500 Index Fund on 12/31/1982...

Source
Image

...on 6/10/2019 you would have had $472,000.

If you'd "normalized" it to $1,000 on 12/31/1982 you'd have had $47,200.
If you'd "normalized" it to $100 on 12/31/1982, you'd have had $4,720. A lot more than $1952.57.

If we look at the raw numbers for the S&P 500 price index, on 12/31/1982 it closed at 140.64; on 6/10/2019, at 2,886.73. So, jeez, I don't even know why I bother to work this hard to figure it out... if we subtract 140.64 from 2,886.73, we get $2,746.09. On 12/31/1987, it closed at 247.08, and if you subtract that from $2,886.73, you get $2,669.65. I've done all that work on some completely crazy calculations, and I still can't replicate his numbers.
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.

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snackdog
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Re: How Far Will Dow Fall During Next Retraction

Post by snackdog » Wed Dec 04, 2019 1:07 pm

We are sort of overdue for more of a depression than another light recession. If the big fall is "only" as bad as the crash of 1929, the Dow will fall from 28,000 to 4,000 by October 2022. Those who "stay the course" will be rewarded with a return to 28,000 in 30 short years (mid 2049).

gfirero
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Re: How Far Will Dow Fall During Next Retraction

Post by gfirero » Wed Dec 04, 2019 1:15 pm

nisiprius wrote:
Wed Dec 04, 2019 12:34 pm
the way wrote:
Wed Dec 04, 2019 4:25 am
Here's an interesting chart that purports to show that indexes don't always recover after a major peak and fall. I.e. the mantra to just close your eyes and hold on may not necessarily work next time!
I call BS on that chart. I can't even tell what it means, can you? Can you give us a link to some explanatory text?
If you invested $10,000 in MSCI Emerging Markets Index ETF at the peak of Nov 9, 2007, today you would have.... about $10,000. Not great, but not the 30% decline the chart appears to show. As mentioned, the chart posted doesn't include dividends.
For reference: https://www.ishares.com/us/products/239 ... hartDialog

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CyclingDuo
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Re: How Far Will Dow Fall During Next Retraction

Post by CyclingDuo » Wed Dec 04, 2019 1:21 pm

The most important chart you need to know regarding Gundlach is right here:

Image
https://am.jpmorgan.com/blob-gim/138364 ... sts_AM.pdf

Beware The Armageddonists...
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