Should I have seen this coming?

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masonstone
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Should I have seen this coming?

Post by masonstone » Sat Mar 21, 2020 8:19 am

When China closed Wuhan shouldn’t I have converted my VTSAX to money-market since I should have known an epidemic never stays local?

Worst case scenario, if I had pulled the funds out, I would’ve been out of the market for 2-3 months and could put money back in VTSAX if nothing happened? Im in my 30s and have a long investment horizon left so I want get some lessons for the future.

PS: after the market tanked I did not sell any stocks and and plan not to, now that the market has already tanked. I’m in it for the long haul. I’m just saying that there were definite signs that something bad was on the horizon and like a good boglehead I did not do anything about it. I’m regretting that now.

Silk McCue
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Re: Should I have seen this coming?

Post by Silk McCue » Sat Mar 21, 2020 8:26 am

Market timing post number 222,132 (SWAG).

Hindsight is 20/20 and useless. You couldn't have really known it would get this bad. You are just rationalizing that now.

Cheers

JimBeam
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Re: Should I have seen this coming?

Post by JimBeam » Sat Mar 21, 2020 8:32 am

I get you, when you look back it seems so obvious, that the virus will spread beyond China. SP500 started the decline on February 21th, exact the same day new cases of coranavirus showed up outside China.

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Re: Should I have seen this coming?

Post by nisiprius » Sat Mar 21, 2020 8:43 am

masonstone wrote:
Sat Mar 21, 2020 8:19 am
When China closed Wuhan shouldn’t I have converted my VTSAX to money-market since I should have known an epidemic never stays local?
No, you shouldn't have.

First of all, "an epidemic never stays local" is vacuous. An epidemic never stays local, because until it does spread, it's not an "epidemic."

Second, it's a short enough period of time that you should be able to think back and remember the great divergence of opinion at the time on how serious a threat it was. When they closed Wuhan, a realistic humility would have said "I think it's bad but I might be wrong."

What tends to happen is that one experience mood swings. Some days you think "it's going to be a pandemic." Other days you think "No, it's going to be OK." Unless you literally write them down in a notebook with a timestamp on which one, you're almost unconscious of it. Then afterwards you edit your memories and only remember the times you were right.

Tangentially, it's always interesting, after taking a trip to a new place--one that you haven't seen in hundreds of pictures beforehand--to ask yourself the question "how did I actually expect it to look?" Personally, before the trip I have a mental image of what I expect. When I get there, the reality quickly erases that and a week later I literally just cannot recall what I expected.

A big part of the Boglehead message is that we believe that picking a course you can stay with, and then blindly, staunchly, pigheadedly staying the course, actually works better than trying to anticipate the things that look obvious in hindsight.

The coronavirus took me by surprise. The timing of the stock market drop took me by surprise. 2008-2009 took me by surprise. In late 1996, when Alan Greenspan said "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" I thought that, coming from Greenspan, that was a screaming air raid siren of a warning. I didn't go to cash, but I did pull back on stock allocation. And nothing happened for three years.

Expect to be taken by surprise.
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Re: Should I have seen this coming?

Post by masonstone » Sat Mar 21, 2020 8:51 am

nisiprius wrote:
Sat Mar 21, 2020 8:43 am
masonstone wrote:
Sat Mar 21, 2020 8:19 am
When China closed Wuhan shouldn’t I have converted my VTSAX to money-market since I should have known an epidemic never stays local?
No, you shouldn't have.

First of all, "an epidemic never stays local" is vacuous. An epidemic never stays local, because until it does spread, it's not an "epidemic."

Second, it's a short enough period of time that you should be able to think back and remember the great divergence of opinion at the time on how serious a threat it was. When they closed Wuhan, a realistic humility would have said "I think it's bad but I might be wrong."

What tends to happen is that one experience mood swings. Some days you think "it's going to be a pandemic." Other days you think "No, it's going to be OK." Unless you literally write them down in a notebook with a timestamp on which one, you're almost unconscious of it. Then afterwards you edit your memories and only remember the times you were right.

Tangentially, it's always interesting, after taking a trip to a new place--one that you haven't seen in hundreds of pictures beforehand--to ask yourself the question "how did I actually expect it to look?" Personally, before the trip I have a mental image of what I expect. When I get there, the reality quickly erases that and a week later I literally just cannot recall what I expected.

A big part of the Boglehead message is that we believe that picking a course you can stay with, and then blindly, staunchly, pigheadedly staying the course, actually works better than trying to anticipate the things that look obvious in hindsight.

The coronavirus took me by surprise. The timing of the stock market drop took me by surprise. 2008-2009 took me by surprise. In late 1996, when Alan Greenspan said "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" I thought that, coming from Greenspan, that was a screaming air raid siren of a warning. I didn't go to cash, but I did pull back on stock allocation. And nothing happened for three years.

Expect to be taken by surprise.
I understand but what’s the downside on pulling money out for 3 months?

RetiredAt40
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Re: Should I have seen this coming?

Post by RetiredAt40 » Sat Mar 21, 2020 8:52 am

I haven't read all of the hundreds of recent posts, but I have seen enough to know that there are many of us who regret not selling. I mean, it was so obvious, right? But if it *was* so obvious and we're so good at recognizing the future, then why aren't I seeing a bunch of posts about buying on margin right now (or when xyz happens). I mean, we all believe the stock market is going to go back up, right? And assuming it does, won't we then say we should have done something to take advantage of it? But I don't think too many of us feel all that certain about anything right now, except perhaps that things will get worse before they get better.

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Re: Should I have seen this coming?

Post by masonstone » Sat Mar 21, 2020 8:58 am

RetiredAt40 wrote:
Sat Mar 21, 2020 8:52 am
I haven't read all of the hundreds of recent posts, but I have seen enough to know that there are many of us who regret not selling. I mean, it was so obvious, right? But if it *was* so obvious and we're so good at recognizing the future, then why aren't I seeing a bunch of posts about buying on margin right now (or when xyz happens). I mean, we all believe the stock market is going to go back up, right? And assuming it does, won't we then say we should have done something to take advantage of it? But I don't think too many of us feel all that certain about anything right now, except perhaps that things will get worse before they get better.
See the downside of buying on margin now is a lot worst than staying out of the market for a couple of months. In February 2020, the downside of not pulling out can be a recession and loss of half of the value of your stock, and the downside of not staying in would’ve been a couple of percentage increases.

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Re: Should I have seen this coming?

Post by Kenkat » Sat Mar 21, 2020 9:04 am

masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
Because if we pulled money out for three months every time there was a threat of trouble in the world, we’d be pulling money out a lot. Which events are the real deal and which ones are false alarms? Very clear in hindsight, 0% clear ahead of time.

For example, I thought we were heading into another middle eastern war in January of this year but it didn't happen.

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Re: Should I have seen this coming?

Post by Dottie57 » Sat Mar 21, 2020 9:05 am

I had a queasy feeling. But thought —- “You are being Chicken Little again”. Part of me wants to kick myself in the butt. The other part says.. forget it. I have no choice but to move on.

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masonstone
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Re: Should I have seen this coming?

Post by masonstone » Sat Mar 21, 2020 9:07 am

Kenkat wrote:
Sat Mar 21, 2020 9:04 am
masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
Because if we pulled money out for three months every time there was a threat of trouble in the world, we’d be pulling money out a lot. Which events are the real deal and which ones are false alarms? Very clear in hindsight, 0% clear ahead of time.

For example, I thought we were heading into another middle eastern war in January of this year but it didn't happen.
Sure but when China quarantines 11million people for a virus it’s not a minor threat. I’m sure taking this approach you’d be wrong multiple times, but even if you’re right some of the times , you’d come out ahead.

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Re: Should I have seen this coming?

Post by A-Commoner » Sat Mar 21, 2020 9:22 am

There were other events in the news headlines in January 2020 that caused distractions which prevented many from focusing on this pandemic as a potential market killer. There was the US strike on the Iranian general which threatened to escalate into full blown war between the US and Iran. When that didn’t happen, people heaved a sigh of relief and the market surged on. There was the seeming progress in the US-China tariff wars which also fueled more bullishness. There was the impeachment process and the primaries which dominated the headlines and distracted everyone.

Given all the competing economic and political events grabbing your attention in early 2020, would you really have thought the coronavirus epidemic would quickly take over in just a month as the dagger that would kill the bull market?

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nps
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Re: Should I have seen this coming?

Post by nps » Sat Mar 21, 2020 9:25 am

There have been a lot of people coming out of the woodwork to tell us how obvious this all was. I remember the world getting quite excited about SARS, H1N1, Ebola, and MERS. Now of course we know that the global response to this latest virus is without parallel to those outbreaks. But at what point was this "obvious," and more importantly, was it always obvious that those previous epidemic scares would not scale to what we're seeing with COVID-19?

Some say it was when Wuhan locked down. During SARS, Beijing closed all schools and entertainment venues, imposed additional limitations on gatherings, canceled the May Day holiday, and scrambled to rapidly build capacity for thousands of additional hospital beds. The WHO was saying the world still had a "chance" to contain it, same as they said for SARS-CoV-2 well into the start of this month.

Granted, China locking down Wuhan was a greater step than SARS. However, for those non-epidemiologists out there (i.e. most of us), it would not be inconceivable to think at the beginning of this current pandemic that since China and other Asian nations contained SARS through extreme measures that they could contain this one too.

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Re: Should I have seen this coming?

Post by Kenkat » Sat Mar 21, 2020 9:26 am

masonstone wrote:
Sat Mar 21, 2020 9:07 am
Kenkat wrote:
Sat Mar 21, 2020 9:04 am
masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
Because if we pulled money out for three months every time there was a threat of trouble in the world, we’d be pulling money out a lot. Which events are the real deal and which ones are false alarms? Very clear in hindsight, 0% clear ahead of time.

For example, I thought we were heading into another middle eastern war in January of this year but it didn't happen.
Sure but when China quarantines 11million people for a virus it’s not a minor threat. I’m sure taking this approach you’d be wrong multiple times, but even if you’re right some of the times , you’d come out ahead.
Unless you are right more than half the time, you won’t come out of head. Seriously, take 5 or 10% of your portfolio and try it for awhile and see how you do.

What do you suppose happens to the market if:

1) we unexpectedly make a breakthrough on a vaccine
2) we discover a drug regimen that greatly reduces severe cases
3) we discover that this virus is very susceptible to UV light and spring is coming and new infection rates begin to drop

I have heard rumblings of all the above. Will they happen?

What if overnight news breaks that a US warship was sunk in the Persian Gulf and the US is launching air strikes on Iranian missile infrastructure? We should have seen that coming, right?

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nps
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Re: Should I have seen this coming?

Post by nps » Sat Mar 21, 2020 9:30 am

masonstone wrote:
Sat Mar 21, 2020 9:07 am
Kenkat wrote:
Sat Mar 21, 2020 9:04 am
masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
Because if we pulled money out for three months every time there was a threat of trouble in the world, we’d be pulling money out a lot. Which events are the real deal and which ones are false alarms? Very clear in hindsight, 0% clear ahead of time.

For example, I thought we were heading into another middle eastern war in January of this year but it didn't happen.
Sure but when China quarantines 11million people for a virus it’s not a minor threat. I’m sure taking this approach you’d be wrong multiple times, but even if you’re right some of the times , you’d come out ahead.
So what would your system be then? Anytime China quarantines 11 million people for a virus, get out of stocks for three months? That's a pretty limited rule set, and world investors might just react a little faster the next time it's seen.

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nisiprius
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Re: Should I have seen this coming?

Post by nisiprius » Sat Mar 21, 2020 9:33 am

masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
To state what might be obvious, let's say you had $10,000 in cash and $10,000 in Total Stock on 9/21/2018. The stock market falls just about 20%, so on 12/24/2018 you decide to pull your money out for 3 months. You only get $7,986.

Image

You now have $17,986 in cash.

You keep the money out for three months.

Three months later, it costs you $9,588 to buy the exact same amount of the mutual fund that you had before. Since you only got $7,986 when you sold it, you have to make up the extra $1,602. You end up with the same amount of stock as before, but $1,602 less in cash. You've lost $1,602. That's an actual money loss, not a so-called "paper loss."

In short, the downside on pulling money out for 3 months is "I might be wrong, and I'll lose money if I'm wrong."

Another example. On December 5th, 1996, Alan Greenspan gave his "irrational exuberance" speech. Now in reality I actually did pull $10,000 out of stocks; I don't remember the exact numbers, but I was trimming back my stock allocation. I didn't sell it all. And my intention, which I kept, was to keep it down. However... if I had said "what's the downside on pulling money out for 3 months,"

Image

I would have pulled out $10,000 for three months and it would have then cost me $10,644.95 to get back in. A loss, a realized actual money dollar loss of $644.

There's always "a downside." The only way there can't be a downside is if you have a working crystal ball.
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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Re: Should I have seen this coming?

Post by Sic Vis Pacem » Sat Mar 21, 2020 9:45 am

I have numerous facebook posts, emails, and chat logs from late January and early February warning anyone that would listen that this was going to get much worse. The equivalent of the notepad and timestamps discussed above. I even stocked up on food and medicine for my son and some critical supplies about two weeks before the panic-buying really started. I was supposed to be on an international trip starting March 17 with my toddler and elderly in-laws, so I was following these events closely and discussed the potential of cancelling the trip starting in late February/early March.

And yet I never really considered any dramatic change to my investments. I'm having a hard time squaring that cognitive dissonance now. After significant reflection, I can only think that my mind was focused more on our safety/plans for our trip than our investments.

In deep enough now with an 80/20 allocation (and even rebalancing on the way down) to ride this out.

So, you're not alone in your thoughts on this. But what you do with those thoughts is up to you. Since I missed this one, it makes me even less certain I'm going to "get" the next one (whether that's the trigger for the rebound or the next crash). But once this is in the rear view, I think I've learned that my asset allocation is a little higher than my risk tolerance, and I'll be bringing that down a bit.
Last edited by Sic Vis Pacem on Sat Mar 21, 2020 9:59 am, edited 3 times in total.

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Will do good
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Re: Should I have seen this coming?

Post by Will do good » Sat Mar 21, 2020 9:45 am

If you should have seen this coming, shouldn't most of Wall Street or pro money managers?
Then why did the overall market drop if enough people should have seen this coming?

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masonstone
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Re: Should I have seen this coming?

Post by masonstone » Sat Mar 21, 2020 9:53 am

nisiprius wrote:
Sat Mar 21, 2020 9:33 am
masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
To state what might be obvious, let's say you had $10,000 in cash and $10,000 in Total Stock on 9/21/2018. The stock market falls just about 20%, so on 12/24/2018 you decide to pull your money out for 3 months. You only get $7,986.

Image

You now have $17,986 in cash.

You keep the money out for three months.

Three months later, it costs you $9,588 to buy the exact same amount of the mutual fund that you had before. Since you only got $7,986 when you sold it, you have to make up the extra $1,602. You end up with the same amount of stock as before, but $1,602 less in cash. You've lost $1,602. That's an actual money loss, not a so-called "paper loss."

In short, the downside on pulling money out for 3 months is "I might be wrong, and I'll lose money if I'm wrong."

Another example. On December 5th, 1996, Alan Greenspan gave his "irrational exuberance" speech. Now in reality I actually did pull $10,000 out of stocks; I don't remember the exact numbers, but I was trimming back my stock allocation. I didn't sell it all. And my intention, which I kept, was to keep it down. However... if I had said "what's the downside on pulling money out for 3 months,"

Image

I would have pulled out $10,000 for three months and it would have then cost me $10,644.95 to get back in. A loss, a realized actual money dollar loss of $644.

There's always "a downside." The only way there can't be a downside is if you have a working crystal ball.
True thanks for input

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nps
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Re: Should I have seen this coming?

Post by nps » Sat Mar 21, 2020 9:58 am

Sic Vis Pacem wrote:
Sat Mar 21, 2020 9:45 am
I even stocked up on food and medicine for my son and some critical supplies about two weeks before the panic-buying really started. I was supposed to be on an international trip starting March 17, so I was following these events closely and discussed the potential of cancelling the trip starting in late February/early March.

And yet I never really considered any dramatic change to my investments. I'm having a hard time squaring that cognitive dissonance now.
I don't see the cognitive dissonance personally. Stocking up just moves future purchases into the present, you don't stand to lose anything.

Canceling travel is a little different, you may stand to lose something (non-refundable purchases, experiences, etc) but still your downside is probably definable.

Deciding that you can predict how markets will behave and be able to profit from those predictions is a lot more open ended IMO.

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Re: Should I have seen this coming?

Post by dh » Sat Mar 21, 2020 10:03 am

No one could have seen COVID-19 coming. Yet, the advantage of being a Boglehead is the recognition that we invest fully cognizant that the market is risky and can go into a bear market (losing 50%) at any point in time (it would be illogical to think we get a risk premium without taking risk). So the onus falls on each of us to design an IPS and asset allocation appropriate for our risk tolerance. At times like this I am reminded of Jack Bogle commenting on being 50% stocks and 50% bonds - he said something to the effect that half the time he felt like he had too much in stocks, and half the time he felt like he had too little in stocks. It is a classic Jack Bogle response (apologizes for not having his exact quote). Thank you Jack and all the Boglehead's that have helped me stay the course through challenging times.

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Re: Should I have seen this coming?

Post by TheTimeLord » Sat Mar 21, 2020 10:07 am

I think people whose focus is risk management should have been aware that a disruption was coming, not the velocity of depth of the dip or the magnitude of the disruption. I sold 30% of my equities at roughly between 3%-10% down because of factors I was noticing here and in the market place. That said I have already reinvested 75%-80% of that money systematically, so you can say I got it partially right to date and have been spare a portion of potential loses because of it. If you were someone focused on maximizing returns then I would think you would have been less likely to see it because there was a lot of confirmation bias floating around.
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Re: Should I have seen this coming?

Post by Sic Vis Pacem » Sat Mar 21, 2020 10:43 am

nps wrote:
Sat Mar 21, 2020 9:58 am

I don't see the cognitive dissonance personally. Stocking up just moves future purchases into the present, you don't stand to lose anything.

Canceling travel is a little different, you may stand to lose something (non-refundable purchases, experiences, etc) but still your downside is probably definable.

Deciding that you can predict how markets will behave and be able to profit from those predictions is a lot more open ended IMO.
Thank you for the perspective.

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Re: Should I have seen this coming?

Post by 1789 » Sat Mar 21, 2020 11:03 am

You are seeing the outcome bias. Please don’t let your emotions to trick you. Whoever saw this coming is not smarter than you. If the drawdowns impacting you, it may worth another look to your AA. If your time horizon is 10+ years, it maybe the right time to add more stocks.
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Re: Should I have seen this coming?

Post by Randolph Mortimer » Sat Mar 21, 2020 11:24 am

The whole "we should have seen it coming" theme that is so prevalent here lately is frustrating because the conclusion of the entire premise leads to a never ending feedback loop.

If everyone was a smarty pants brilliant market timer and saw it coming, and sold their stocks to get out of the market, then what? What is the logical outcome of that thought process?

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Re: Should I have seen this coming?

Post by TheTimeLord » Sat Mar 21, 2020 11:38 am

Randolph Mortimer wrote:
Sat Mar 21, 2020 11:24 am
The whole "we should have seen it coming" theme that is so prevalent here lately is frustrating because the conclusion of the entire premise leads to a never ending feedback loop.

If everyone was a smarty pants brilliant market timer and saw it coming, and sold their stocks to get out of the market, then what? What is the logical outcome of that thought process?
Correct, if everyone saw it coming then the market would have priced it in. So to time the market you need not only an insight, but an insight that is contrary to the majority opinion. The flaw I saw in the majority opinion early on was the belief it would be a short duration event and would fade from the headlines soon enough.
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Re: Should I have seen this coming?

Post by 7eight9 » Sat Mar 21, 2020 11:48 am

Randolph Mortimer wrote:
Sat Mar 21, 2020 11:24 am
The whole "we should have seen it coming" theme that is so prevalent here lately is frustrating because the conclusion of the entire premise leads to a never ending feedback loop.

If everyone was a smarty pants brilliant market timer and saw it coming, and sold their stocks to get out of the market, then what? What is the logical outcome of that thought process?
The first one out wins the most. In times of panic it is smartest to panic first. Those who wait get a worse price.
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Re: Should I have seen this coming?

Post by pennsylvania211 » Sat Mar 21, 2020 11:59 am

Randolph Mortimer wrote:
Sat Mar 21, 2020 11:24 am
The whole "we should have seen it coming" theme that is so prevalent here lately is frustrating because the conclusion of the entire premise leads to a never ending feedback loop.

If everyone was a smarty pants brilliant market timer and saw it coming, and sold their stocks to get out of the market, then what? What is the logical outcome of that thought process?
Yeah. Just like no one can predict when is the right time to "get back in the market."

Admit it and learn to work around it, rather than keep holding out for the pragmatically impossible. It's a human shortcoming, we are designed to think that everything is knowable with just a little more effort. Somethings are knowable, others are not. History keeps piling evidence that predicting market is not knowable but we keep ignoring the mountain of evidence due to our arrogance in ourselves.
"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses." - Jack Bogle

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Re: Should I have seen this coming?

Post by Randolph Mortimer » Sat Mar 21, 2020 12:14 pm

7eight9 wrote:
Sat Mar 21, 2020 11:48 am
In times of panic it is smartest to panic first.
How often do you panic?

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Re: Should I have seen this coming?

Post by HomerJ » Sat Mar 21, 2020 1:44 pm

masonstone wrote:
Sat Mar 21, 2020 8:51 am
nisiprius wrote:
Sat Mar 21, 2020 8:43 am
masonstone wrote:
Sat Mar 21, 2020 8:19 am
When China closed Wuhan shouldn’t I have converted my VTSAX to money-market since I should have known an epidemic never stays local?
No, you shouldn't have.

First of all, "an epidemic never stays local" is vacuous. An epidemic never stays local, because until it does spread, it's not an "epidemic."

Second, it's a short enough period of time that you should be able to think back and remember the great divergence of opinion at the time on how serious a threat it was. When they closed Wuhan, a realistic humility would have said "I think it's bad but I might be wrong."

What tends to happen is that one experience mood swings. Some days you think "it's going to be a pandemic." Other days you think "No, it's going to be OK." Unless you literally write them down in a notebook with a timestamp on which one, you're almost unconscious of it. Then afterwards you edit your memories and only remember the times you were right.

Tangentially, it's always interesting, after taking a trip to a new place--one that you haven't seen in hundreds of pictures beforehand--to ask yourself the question "how did I actually expect it to look?" Personally, before the trip I have a mental image of what I expect. When I get there, the reality quickly erases that and a week later I literally just cannot recall what I expected.

A big part of the Boglehead message is that we believe that picking a course you can stay with, and then blindly, staunchly, pigheadedly staying the course, actually works better than trying to anticipate the things that look obvious in hindsight.

The coronavirus took me by surprise. The timing of the stock market drop took me by surprise. 2008-2009 took me by surprise. In late 1996, when Alan Greenspan said "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?" I thought that, coming from Greenspan, that was a screaming air raid siren of a warning. I didn't go to cash, but I did pull back on stock allocation. And nothing happened for three years.

Expect to be taken by surprise.
I understand but what’s the downside on pulling money out for 3 months?
If you pulled your money out for 3 months every time there was an "obvious" crisis on the horizon, you'd be out of the market most of time, and lot poorer.

We've had like 3-4 virus scares in the past 10 years and none of them caused this much damage. Should you have pulled out each time for those?

We had a Greek debt crisis that threatened to take down the entire EU, and an Italian economic problem, and Brexit, all of which increased risk at different times for the global economy. Should you have pulled out your money for 3 months each times those happened? (Although Brexit took place over 3 years, so which 3 months should you have been out?)

We've had long government shutdowns here in the U.S., and trade wars, even with our allies. Those absolutely raised risk for the economy. Should you have pulled out for 3 months for each of those events?

Pick an Asset Allocation that you can hold at all times. Don't jump in and out based on your guesses on risk. Pick an Asset Allocation that you can hold even if the market crashes 50% tomorrow. Because it might. The risk is NEVER zero. There's always a chance.

How many times do we have to post that before people listen?

The obvious risks don't always come true, and there's always a chance you'll be surprised when a non-obvious risk shows up.
The J stands for Jay

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HomerJ
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Re: Should I have seen this coming?

Post by HomerJ » Sat Mar 21, 2020 1:50 pm

masonstone wrote:
Sat Mar 21, 2020 9:07 am
Kenkat wrote:
Sat Mar 21, 2020 9:04 am
masonstone wrote:
Sat Mar 21, 2020 8:51 am
I understand but what’s the downside on pulling money out for 3 months?
Because if we pulled money out for three months every time there was a threat of trouble in the world, we’d be pulling money out a lot. Which events are the real deal and which ones are false alarms? Very clear in hindsight, 0% clear ahead of time.

For example, I thought we were heading into another middle eastern war in January of this year but it didn't happen.
Sure but when China quarantines 11million people for a virus it’s not a minor threat. I’m sure taking this approach you’d be wrong multiple times, but even if you’re right some of the times , you’d come out ahead.
11 million people for China is less than 1% of their population.

It would be like the U.S. quarantining one town of 250,000 (say Irving, Texas).

It could have played out differently. It could have been contained. Like other viruses were contained in the recent past.

People who bet on it having a huge impact were right. But it was still a bet. Nothing is ever 100%.
The J stands for Jay

7eight9
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Re: Should I have seen this coming?

Post by 7eight9 » Sat Mar 21, 2020 1:52 pm

Randolph Mortimer wrote:
Sat Mar 21, 2020 12:14 pm
7eight9 wrote:
Sat Mar 21, 2020 11:48 am
In times of panic it is smartest to panic first.
How often do you panic?
If there is a run on the bank do you want to be first or last in line (think pre-FDIC days).

Do you want to buy toilet paper first or find the shelf empty?

Would you prefer to have sold your equities in February or now?

Those who act first win.
I guess it all could be much worse. | They could be warming up my hearse.

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HomerJ
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Re: Should I have seen this coming?

Post by HomerJ » Sat Mar 21, 2020 1:55 pm

7eight9 wrote:
Sat Mar 21, 2020 1:52 pm
Randolph Mortimer wrote:
Sat Mar 21, 2020 12:14 pm
7eight9 wrote:
Sat Mar 21, 2020 11:48 am
In times of panic it is smartest to panic first.
How often do you panic?
If there is a run on the bank do you want to be first or last in line (think pre-FDIC days).

Do you want to buy toilet paper first or find the shelf empty?

Would you prefer to have sold your equities in February or now?

Those who act first win.
I want to be the lady who only takes $20 to get through the week, and gets hugged by Jimmy Stewart in it's a Wonderful life.

You want to be the guy who withdraws all his money and nearly causes the bank to fail :)
The J stands for Jay

chevca
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Re: Should I have seen this coming?

Post by chevca » Sat Mar 21, 2020 2:09 pm

Will do good wrote:
Sat Mar 21, 2020 9:45 am
If you should have seen this coming, shouldn't most of Wall Street or pro money managers?
Then why did the overall market drop if enough people should have seen this coming?
Exactly!!

I'm really getting a kick out of, and also sick of, all the amateurs claiming they saw this coming or knew it was coming. If it was that known about, the sell off would have happened in early February or so, right? It didn't.

There have been MANY things over the last 10 years or so that folks saw coming that would tank the market. Some brought up earlier in this one... but also, BREXIT, the 2016 election, shoot 2018, and so on. Only the market didn't tank on those, so no one "saw it coming". But, now they did... :oops:

I think people are thinking they are much better investors than they really are about now. No matter how many BH books they've read, however many times they've seen 'nobody knows nothin', however many times they've read 'sometimes you will lose money in the stock market', and so on..... this time they knew and should have done something....

Randolph Mortimer
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Re: Should I have seen this coming?

Post by Randolph Mortimer » Sat Mar 21, 2020 2:45 pm

7eight9 wrote:
Sat Mar 21, 2020 1:52 pm
Randolph Mortimer wrote:
Sat Mar 21, 2020 12:14 pm
7eight9 wrote:
Sat Mar 21, 2020 11:48 am
In times of panic it is smartest to panic first.
How often do you panic?
If there is a run on the bank do you want to be first or last in line (think pre-FDIC days).

Do you want to buy toilet paper first or find the shelf empty?

Would you prefer to have sold your equities in February or now?

Those who act first win.
This presupposes that in order to win, someone else has to lose. Is that what you think investing in the stock market is all about?

If that is what you believe to be true, this is a strange place to be spending your time.

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Phineas J. Whoopee
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Re: Should I have seen this coming?

Post by Phineas J. Whoopee » Sat Mar 21, 2020 2:49 pm

chevca wrote:
Sat Mar 21, 2020 2:09 pm
Will do good wrote:
Sat Mar 21, 2020 9:45 am
If you should have seen this coming, shouldn't most of Wall Street or pro money managers?
Then why did the overall market drop if enough people should have seen this coming?
I'm really getting a kick out of, and also sick of, all the amateurs claiming they saw this coming or knew it was coming. If it was that known about, the sell off would have happened in early February or so, right? It didn't.
...
At least the posters are putting the blame on themselves, for not acting on what is obvious only in hindsight, rather than on external nefarious forces out to get them. That would be worse.

PJW

Call_Me_Op
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Re: Should I have seen this coming?

Post by Call_Me_Op » Sat Mar 21, 2020 2:52 pm

nisiprius wrote:
Sat Mar 21, 2020 8:43 am
A big part of the Boglehead message is that we believe that picking a course you can stay with, and then blindly, staunchly, pigheadedly staying the course, actually works better than trying to anticipate the things that look obvious in hindsight.
Many seem to be forgetting this. From what I am reading, I would say that only a minority here invest in the "Boglehead way."
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Should I have seen this coming?

Post by Call_Me_Op » Sat Mar 21, 2020 2:55 pm

Sic Vis Pacem wrote:
Sat Mar 21, 2020 9:45 am
I have numerous facebook posts, emails, and chat logs from late January and early February warning anyone that would listen that this was going to get much worse. The equivalent of the notepad and timestamps discussed above. I even stocked up on food and medicine for my son and some critical supplies about two weeks before the panic-buying really started. I was supposed to be on an international trip starting March 17 with my toddler and elderly in-laws, so I was following these events closely and discussed the potential of cancelling the trip starting in late February/early March.

And yet I never really considered any dramatic change to my investments. I'm having a hard time squaring that cognitive dissonance now. After significant reflection, I can only think that my mind was focused more on our safety/plans for our trip than our investments.

In deep enough now with an 80/20 allocation (and even rebalancing on the way down) to ride this out.

So, you're not alone in your thoughts on this. But what you do with those thoughts is up to you. Since I missed this one, it makes me even less certain I'm going to "get" the next one (whether that's the trigger for the rebound or the next crash). But once this is in the rear view, I think I've learned that my asset allocation is a little higher than my risk tolerance, and I'll be bringing that down a bit.
Lots of people seem to be second-guessing themselves. Did you have a written plan before this happened? i did (and still do) - and it said (says) nothing about bailing out of stocks before or during a perceived crisis. We have had many crises and the stock market has always recovered and then proceeded to make new highs.

I am going to go out on a limb and say that will happen this time too.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Randolph Mortimer
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Re: Should I have seen this coming?

Post by Randolph Mortimer » Sat Mar 21, 2020 2:59 pm

Call_Me_Op wrote:
Sat Mar 21, 2020 2:52 pm
nisiprius wrote:
Sat Mar 21, 2020 8:43 am
A big part of the Boglehead message is that we believe that picking a course you can stay with, and then blindly, staunchly, pigheadedly staying the course, actually works better than trying to anticipate the things that look obvious in hindsight.
Many seem to be forgetting this. From what I am reading, I would say that only a minority here invest in the "Boglehead way."
There are lots of members that regard Boglehead-style, buy and hold investing with varying levels of contempt. Some are subtle about it and others are openly hostile. This is the biggest investing discussion sandbox on the internet so they have nowhere else to go.

chevca
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Re: Should I have seen this coming?

Post by chevca » Sat Mar 21, 2020 3:01 pm

Phineas J. Whoopee wrote:
Sat Mar 21, 2020 2:49 pm
chevca wrote:
Sat Mar 21, 2020 2:09 pm
Will do good wrote:
Sat Mar 21, 2020 9:45 am
If you should have seen this coming, shouldn't most of Wall Street or pro money managers?
Then why did the overall market drop if enough people should have seen this coming?
I'm really getting a kick out of, and also sick of, all the amateurs claiming they saw this coming or knew it was coming. If it was that known about, the sell off would have happened in early February or so, right? It didn't.
...
At least the posters are putting the blame on themselves, for not acting on what is obvious only in hindsight, rather than on external nefarious forces out to get them. That would be worse.

PJW
I don't know. I feel like most are blaming BHs for 'making' them stay the course.

Of course, none are mentioning the numerous times staying the course when the experts predicted doom and gloom worked well...

Call_Me_Op
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Re: Should I have seen this coming?

Post by Call_Me_Op » Sat Mar 21, 2020 3:01 pm

dh wrote:
Sat Mar 21, 2020 10:03 am
No one could have seen COVID-19 coming. Yet, the advantage of being a Boglehead is the recognition that we invest fully cognizant that the market is risky and can go into a bear market (losing 50%) at any point in time (it would be illogical to think we get a risk premium without taking risk). So the onus falls on each of us to design an IPS and asset allocation appropriate for our risk tolerance. At times like this I am reminded of Jack Bogle commenting on being 50% stocks and 50% bonds - he said something to the effect that half the time he felt like he had too much in stocks, and half the time he felt like he had too little in stocks. It is a classic Jack Bogle response (apologizes for not having his exact quote). Thank you Jack and all the Boglehead's that have helped me stay the course through challenging times.
Very well stated.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Should I have seen this coming?

Post by Call_Me_Op » Sat Mar 21, 2020 3:04 pm

Randolph Mortimer wrote:
Sat Mar 21, 2020 2:59 pm
Call_Me_Op wrote:
Sat Mar 21, 2020 2:52 pm
nisiprius wrote:
Sat Mar 21, 2020 8:43 am
A big part of the Boglehead message is that we believe that picking a course you can stay with, and then blindly, staunchly, pigheadedly staying the course, actually works better than trying to anticipate the things that look obvious in hindsight.
Many seem to be forgetting this. From what I am reading, I would say that only a minority here invest in the "Boglehead way."
There are lots of members that regard Boglehead-style, buy and hold investing with varying levels of contempt. Some are subtle about it and others are openly hostile. This is the biggest investing discussion sandbox on the internet so they have nowhere else to go.
I found Bogleheads because I was tired of being ripped-off and was searching for the truth. I believed (and still believe) that the principles taught here represent the best way to invest for the long term. There is always worry out there and the possibility of a sudden sharp market downturn is omnipresent.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Randolph Mortimer
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Re: Should I have seen this coming?

Post by Randolph Mortimer » Sat Mar 21, 2020 3:14 pm

Call_Me_Op wrote:
Sat Mar 21, 2020 3:04 pm
I found Bogleheads because I was tired of being ripped-off and was searching for the truth. I believed (and still believe) that the principles taught here represent the best way to invest for the long term. There is always worry out there and the possibility of a sudden sharp market downturn is omnipresent.
Oh, I agree. There is an element of humility to the principles that when I see people come out of the woodwork claiming they know better I just sit and wonder where the hubris comes from. Great, you think you're smarter than everyone here, how does that help the entire population of investors?

bigfry
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Re: Should I have seen this coming?

Post by bigfry » Sat Mar 21, 2020 3:17 pm

masonstone wrote:
Sat Mar 21, 2020 8:19 am
When China closed Wuhan shouldn’t I have converted my VTSAX to money-market since I should have known an epidemic never stays local?

Worst case scenario, if I had pulled the funds out, I would’ve been out of the market for 2-3 months and could put money back in VTSAX if nothing happened? Im in my 30s and have a long investment horizon left so I want get some lessons for the future.

PS: after the market tanked I did not sell any stocks and and plan not to, now that the market has already tanked. I’m in it for the long haul. I’m just saying that there were definite signs that something bad was on the horizon and like a good boglehead I did not do anything about it. I’m regretting that now.
Nobody can predict the future. Hindsight is 20/20 and while some people accurately predicted this crash it's possible things could've happened differently. I nearly timed the market back in Feb. but decided to stay the course. The only thing you can do now is try to mitigate the damage done (TLH, rebalancing to maintain your preferred AA). The only people who get hurt riding a roller coaster are the ones that jump off in the middle!
Keep it simple, stupid.

7eight9
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Re: Should I have seen this coming?

Post by 7eight9 » Sat Mar 21, 2020 3:24 pm

Randolph Mortimer wrote:
Sat Mar 21, 2020 2:45 pm
7eight9 wrote:
Sat Mar 21, 2020 1:52 pm
Randolph Mortimer wrote:
Sat Mar 21, 2020 12:14 pm
7eight9 wrote:
Sat Mar 21, 2020 11:48 am
In times of panic it is smartest to panic first.
How often do you panic?
If there is a run on the bank do you want to be first or last in line (think pre-FDIC days).

Do you want to buy toilet paper first or find the shelf empty?

Would you prefer to have sold your equities in February or now?

Those who act first win.
This presupposes that in order to win, someone else has to lose. Is that what you think investing in the stock market is all about?

If that is what you believe to be true, this is a strange place to be spending your time.
It presupposes that if others are going to panic the best time to panic is first.
I guess it all could be much worse. | They could be warming up my hearse.

KlangFool
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Re: Should I have seen this coming?

Post by KlangFool » Sat Mar 21, 2020 3:31 pm

OP,

My AA is 60/40. Because the stock was going up, I have been buying the bond. This week, the bond allocation is up so much that it triggered my 5/25 band based rebalancing. I sold the bond to buy the stock.

I do not need to see and/or predict anything. I am just "buy, hold, and rebalancing" with an AA between 70/30 to 30/70.

It is very simple and not complicated. And, it works. It is better and smarter than any system that required an ability to predict the future.

KlangFool

Jack56
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Re: Should I have seen this coming?

Post by Jack56 » Sat Mar 21, 2020 4:00 pm

No -- what insight did you have or do you have that everyone else doesn't have?

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Phineas J. Whoopee
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Re: Should I have seen this coming?

Post by Phineas J. Whoopee » Sat Mar 21, 2020 7:39 pm

Jack56 wrote:
Sat Mar 21, 2020 4:00 pm
No -- what insight did you have or do you have that everyone else doesn't have?
The Shoe Event Horizon?

PJW

james22
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Re: Should I have seen this coming?

Post by james22 » Sun Mar 22, 2020 2:37 am

... the market's starting to look around and say, OK, is this finally it? Is it the last shoe to drop? Is there any way to know when it's the last shoe to drop?

Buffett: No. No. When people start dropping shoes you really don't know whether they're a one-legged guy or a centipede. (Laughs.)


https://www.cnbc.com/id/22202683

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Stef
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Re: Should I have seen this coming?

Post by Stef » Sun Mar 22, 2020 2:52 am

At this point I wonder what the better strategy is. Follow the news or just ignore everything what's happening out there and invest blindly?

jjface
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Re: Should I have seen this coming?

Post by jjface » Sun Mar 22, 2020 4:03 am

There are always signs. Thing is half the time it still doesn't go the way you "know' it will go. Life it is full of unpredictable outcomes. But if it does happen it doesn't mean we knew, it means we guessed right. That guess may be educated but it is still a guess as no one knows the future with certainty.

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