How long can this go on?

[menthol]

The S&P 500 is now only a few percentage off its all time highs. Meanwhile, all sorts of economic indicators are blinking red: a housing market crisis with an increasing number of foreclosures; a falling dollar; rising energy prices; GDP and employment slowdown; possible war with Iran; and on and on. And did anyone see this in the NY Times?

http://www.nytimes.com/2007/09/15/business/15chart.htm

I have to admit, I am really struggling to fight the urge to market time here. I won't because it's against my investing religion, but I really do think the odds are strong that the market is due for a strong decline. I'll stay the course, but honestly, all I see are storm clouds ahead.

I sure hope I'm wrong about all this. My only solace is that I've been wrong in the past.

[greg24]

The market can stay irrational longer than you can stay solvent. - John Maynard Keynes

[zhiwiller]

"The market climbs a wall of worry"

[Mel Lindauer]

The S&P 500 is now only a few percentage off its all time highs. Meanwhile, all sorts of economic indicators are blinking red: a housing market crisis with an increasing number of foreclosures; a falling dollar; rising energy prices; GDP and employment slowdown; possible war with Iran; and on and on. And did anyone see this in the NY Times?

http://www.nytimes.com/2007/09/15/business/15chart.htm

I have to admit, I am really struggling to fight the urge to market time here. I won't because it's against my investing religion, but I really do think the odds are strong that the market is due for a strong decline. I'll stay the course, but honestly, all I see are storm clouds ahead.

I sure hope I'm wrong about all this. My only solace is that I've been wrong in the past.

Hi menthol:

Jack Bogle has said that a small degree of "tactical asset allocation" (perhaps 15% or less) may be OK.

Regards,

Mel

[TheEternalVortex]

I don't see why you assume that poor economic growth/recession implies a decline in stocks.

[InvestingMom]

Sounds to me like you guys need to reassess your asset allocation plan. This is exactly what is meant by making sure your asset allocation plan is in line with what you can and cannot accept with a market decline.

Also, ask yourself, if the market declines and then turns around will you be back in on time?

[mephistophles]

A little bit of history:

The stock market goes up and it goes down when it wants to. It always has gone up and gone down. It always will go up and go down. That is the nature of the stock market.

Each of us is either a buy-and-holder or a market-timer. You have to decide which one you are. If you are a buy-and-holder of the Diehard type then you will buy and hold regardless of what the market does.

Annual reallocation to stay in keeping with your asset allocation guidelines is all that you need to do. Anything else is a form of market timing. If you are a market timer then you will find little, if anything, on this forum that will help you accomplish your goals.

Regards,

ole meph

[unclemick]

Sounds to me like you guys need to reassess your asset allocation plan. This is exactly what is meant by making sure your asset allocation plan is in line with what you can and cannot accept with a market decline.

Also, ask yourself, if the market declines and then turns around will you be back in on time?

My theory is that it's a guy thing - hormonal, incurable, etc , etc.
15% on the side in individual stocks - maybe build a little cash for 'the dip' and then let greed and emotion run free. For me to blame Jack or call it something high class - like tactical asset allocation is cheating, not managing my 'disease'.

2002's little dip sure tested my pucker as Vanguard's computers 'non-emotionally' rebalanced away, Ok ok so I had also some further side money in REIT Index and Sm Cap value index.

Maybe someday I can say - don't know, don't care with a straight face.

heh heh heh - if it climbs a wall of worry - I'll conviently forget I mentioned it. Yours - theoretically impurely :roll: :lol:

[menthol]

Annual reallocation to stay in keeping with your asset allocation guidelines is all that you need to do. Anything else is a form of market timing.

Regards,

ole meph

Gosh, meph, that quote seems so out of character for you. If anyone would be in favor of market timing, I would think it'd be Satan Himself. What could be more sacrilegious in this forum?

[bilperk]

Sounds to me like you guys need to reassess your asset allocation plan. This is exactly what is meant by making sure your asset allocation plan is in line with what you can and cannot accept with a market decline

This always sounds so nice and if we weren't human, maybe it would even be reasonable.

A 50% market decline will stress almost everyone, retirees and pre-retirees especially.

This concept of "right asset allocation for any market condition" is a bunch of hooy in my view. If my situation warrants that I have to have 40% equities in order to meet my portfolio growth needs, am I supposed to be happy about losing 20% of my life savings? On a $500,000 portfolio, that's $100,000.

Who can lose $100,000 and feel good about it?

So what I'm saying is don't market time, pick the best AA you can for your situation, but don't feel bad about worrying a little. It's normal.

best,

[G12]

These are interesting times, that is for sure. I will admit after looking at my age and figuring where I want to be in about 10-12 years I am glad to have reduced equity exposure from 90% to less than 60% earlier in the year, but will also say I will be most surprised and unhappy if the reallocated portfolio was to take a 40-50% hit.

[Michael Weiss]

The S&P 500 is now only a few percentage off its all time highs. Meanwhile, all sorts of economic indicators are blinking red: a housing market crisis with an increasing number of foreclosures; a falling dollar; rising energy prices; GDP and employment slowdown; possible war with Iran; and on and on. And did anyone see this in the NY Times?


I have to admit, I am really struggling to fight the urge to market time here. I won't because it's against my investing religion, but I really do think the odds are strong that the market is due for a strong decline. I'll stay the course, but honestly, all I see are storm clouds ahead.

I sure hope I'm wrong about all this. My only solace is that I've been wrong in the past.

The market, as defined by the S&P 500 Index, is neither significantly over priced nor under priced. Markets are more likely to correct after periods of excessive valuation such as in the beginning of 2000. There will always be factors that investors perceive as negative for the stock market. The housing crises may not be as negative for the market as some people think, as money that was previously going into the real state market may now be going into the stock market.

I think the market is in reasonably good shape, especially the large cap part of the market. Large-cap stocks are well over due for a period of out performance versus small-cap stocks.


Michael Weiss
The Editor
The Mutual Fund Investor

[leary]

About 10 years ago I kept a record of what I thought the stock market was going to do in the next 6 months. In a 2 year period I was right about 35% of the time, wrong about 40% of the time. The other 25% of the time 6 months later the market was within 2% of the place it started 6 months earlier.

So I stopped trying to predict what the stock or bond markets would do. I don't have an inferority complex though. I read that the market stratigests of the major brokerage houses don't have any better record. What I can't figure out is why they keep paying these guys. No one pays me for my predictions and I am as good as they are.

Charles

[livesoft]

This can go on forever. Suppose the US Government declared the value of one dollar to be equal to 1/160th of a barrel of oil or about half what it is today. The S&P500 index would immediately adjust by doubling its price in dollars.

My point is that what something is "worth" is not always what the dollar price is.

[InvestingMom]

Sounds to me like you guys need to reassess your asset allocation plan. This is exactly what is meant by making sure your asset allocation plan is in line with what you can and cannot accept with a market decline

This always sounds so nice and if we weren't human, maybe it would even be reasonable.

A 50% market decline will stress almost everyone, retirees and pre-retirees especially.

This concept of "right asset allocation for any market condition" is a bunch of hooy in my view. If my situation warrants that I have to have 40% equities in order to meet my portfolio growth needs, am I supposed to be happy about losing 20% of my life savings? On a $500,000 portfolio, that's $100,000.

Who can lose $100,000 and feel good about it?

So what I'm saying is don't market time, pick the best AA you can for your situation, but don't feel bad about worrying a little. It's normal.

best,

I agree. It is totally normal to worry. Although, of course if you find yourself worrying too much then perhaps an adjustment to your AA is called for.
My comment was geared more towards Mels. Sorry I did not quote it. I was actually a bit surprised with him for pointing out Bogle's quote. I wonder about the context of the comment and whether it was really meant for market timing.

[johndcraig]

Ain't necessarily so

Each of us is either a buy-and-holder or a market-timer. You have to decide which one you are. If you are a buy-and-holder of the Diehard type then you will buy and hold regardless of what the market does.

IMO the unfortunate thing is that it seems most diehards believe this statement; you must be 100% buy-and-hold or 100% market timer. Fact of the matter is that the likes of Swedroe, Bernstein, and Bogle are not 100% of either.

John

[YDNAL]

Ladies and Gentlemen,

We like labels, don't we?

I'm a prudent investor with the psychological tendencies of the average Joe. Yesterday I went from 60/40 to 50/50, 5 months ahead of schedule, and by-passing 55/45 altogether. Market timer you say, I say.... who gives a hoot?

Brilliant!, like the beer commercial.

Regards,
Landy

[Dino]

Go for it, Landy! Nobody is 100% right.

Dino

[adave]

What about the record number of baby boomers who will soon start pulling their money out of the market during retirement?

They were putting in 10K a yr during the last 3 decades but will now be pulling out 50K or more per yr.

This must have an effect on the market over the next 20 yrs.

[fundtalker123]

I just flipped "heads" ten times in a row. I can't help but think the next flip I will get "tails".

[unclemick]

Ahem - I just checked back in the old file cabinet:

circa 2002ish one quarter counting everything I was down a 1/4 mil or more than I retired with in 1993.

I am proud to say faith in Bogleheadedness(aka RTM) allowed me to 'hurry up and just stand there'.

But to say I did it with aplomb and total non- chalance would be stretching the truth.

Big dog was Lifestrategy moderate in those days.

heh heh heh - have faith sooner or later there WILL be a test - be ready.