U.S. stocks in freefall

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dbCooperAir
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Re: U.S. stocks in freefall

Post by dbCooperAir » Thu Feb 11, 2016 10:33 am

broadstone wrote:S&P on its way to 1600. I'm still 100% cash.


About another 13% loss! At this rate it could be within the next 2 weeks :twisted:
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mickroark
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Re: U.S. stocks in freefall

Post by mickroark » Thu Feb 11, 2016 10:48 am

I learned a long time ago in about the year 2000 that a portfolio needs massive diversification to survive bear attacks. Just when your emotions can't take it anymore, thats when you sell out your portfolio, and that most likely is at the bottom.

So I laugh when all the bulls on this site ask, is 100% stocks ok for a person in their late 20's or 30's?

I use Cash, Bonds, Gold, Alternative investments, and a Long Short strategy. This is because I have learned from the past. My portfolio is down only 1.6% YTD, and this I can look at every day and not panic and sell at the wrong time.
Last edited by mickroark on Thu Feb 11, 2016 10:54 am, edited 2 times in total.

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Re: U.S. stocks in freefall

Post by livesoft » Thu Feb 11, 2016 10:53 am

"So here I go
I'm still scratching around in the same old hole."
https://www.youtube.com/watch?v=Tiqxn3iOmxY
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tj
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Re: U.S. stocks in freefall

Post by tj » Thu Feb 11, 2016 11:00 am

I don't really get the panic selling. i just bought more VT today! Are people literally concerned about their fund NAV's going all the way to $0.00 ? All selling now accomplishes is to realize a loss. Of course, it frustrates me that I didn't get in at the biggest drop of the day, but the hope is that this will be irrelevant 20-30 years from now when i need the $$.

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Re: U.S. stocks in freefall

Post by flyingaway » Thu Feb 11, 2016 11:23 am

I have about 15% in CD and no bonds. So I consider my portfolio technically 100% cash. I am not selling anything, and will not. I just want to see what the blood on the street looks like. At previous times (2000 and 2008), I did not pay any attention to it since I was busy with my work and did not have much invested.

tj
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Re: U.S. stocks in freefall

Post by tj » Thu Feb 11, 2016 11:26 am

I have to maintain a $100k average with Merrill Edge to hit Platinum Honors, so I just keep pumping $$$ into it out of my salary every couple weeks...it takes a lot of the emotion out of it I guess. :D

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Re: U.S. stocks in freefall

Post by billyo44 » Thu Feb 11, 2016 11:29 am

Great opportunity to make a long-term contribution to the Grandkids 529 College Savings Plan.
H=N/C

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Re: U.S. stocks in freefall

Post by VictoriaF » Thu Feb 11, 2016 12:01 pm

This freefall starts looking as an expensive fall.

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Jozxyqk
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Re: U.S. stocks in freefall

Post by Jozxyqk » Thu Feb 11, 2016 12:17 pm

broadstone wrote:S&P on its way to 1600. I'm still 100% cash.


Its funny that you always pop up to not-so-subtly brag about your prognosticatorial (definitely a word) skills after the market dips.

What makes it particularly funny--and what has to be mentioned every time you do this--is the fact that you were also apparently in cash during the massive bull market that preceded this correction.

broadstone on Jun 02, 2015 wrote:I too started investing again in 2015 and think about being late to the bull party.


So yes. It is definitely true that if you stay in cash virtually all the time, you will not suffer much in bear markets.

The only disappointing thing is that you will disappear forever if the market rebounds before it gets to 1600.

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JonnyDVM
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Re: U.S. stocks in freefall

Post by JonnyDVM » Thu Feb 11, 2016 12:21 pm

WTH??? You guys all said to stay 100% equities cuz the market was going to go up forever. Bad advice everyone.
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dbCooperAir
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Re: U.S. stocks in freefall

Post by dbCooperAir » Thu Feb 11, 2016 12:24 pm

I see we hit/set the 52 week low today, so we got that going for us.

I have been putting off checking my rebalancing bands, I may have to take a look, what can I say, I'm just lazy.
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. | -Dwight D. Eisenhower-

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Re: U.S. stocks in freefall

Post by TheRightKost87 » Thu Feb 11, 2016 12:24 pm

Jozxyqk wrote:The only disappointing thing is that you will disappear forever if the market rebounds before it gets to 1600.


I don't think that's all that disappointing at all :wink:

It's been pretty clear this whole time it's just a bunch of blowing smoke.
"The problem with diversification is that it works, whether or not we want it to"

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Re: U.S. stocks in freefall

Post by visualguy » Thu Feb 11, 2016 1:23 pm

tj wrote:the hope is that this will be irrelevant 20-30 years from now when i need the $$.


Who knows what it will be like 20-30 years from now when you need the money. If you need to sell after a market crash at that time, things can be ugly. If US index behavior starts resembling ex-US index behavior more, things will be even uglier.

The other thing with 20-30 years is how can you tell you won't need the money? It's hard to tell unless you have a lot of safe financial resources. Also, if you can only invest money that you know you won't need for 20-30 years, there's not a whole lot of investment you can do - life is too short, and people don't typically have a significant amount of investable money until middle age when the time horizon isn't tremendously long.

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Re: U.S. stocks in freefall

Post by EyeYield » Thu Feb 11, 2016 1:34 pm

Cash is a position too, IMHO, and I have a position in cash, which is getting killed by my bond position. Where's the, "why not 100% bonds" thread? :)
Cash, outside of an emergency fund, always seems to lose to some other asset class.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

tj
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Re: U.S. stocks in freefall

Post by tj » Thu Feb 11, 2016 1:56 pm

visualguy wrote:
tj wrote:the hope is that this will be irrelevant 20-30 years from now when i need the $$.


Who knows what it will be like 20-30 years from now when you need the money. If you need to sell after a market crash at that time, things can be ugly. If US index behavior starts resembling ex-US index behavior more, things will be even uglier.

The other thing with 20-30 years is how can you tell you won't need the money? It's hard to tell unless you have a lot of safe financial resources. Also, if you can only invest money that you know you won't need for 20-30 years, there's not a whole lot of investment you can do - life is too short, and people don't typically have a significant amount of investable money until middle age when the time horizon isn't tremendously long.



I have roughly 10x annual expenses including over a year's worth of expenses in 5% APY cash. I feel like that is plenty sufficient with presumably a few decades of work ahead of me. Is it possible that will I need the money sooner? Sure. Anything is possible. I think the probability of the $$ growing is higher than the probability of me needing immediate access to it though.

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Re: U.S. stocks in freefall

Post by lack_ey » Thu Feb 11, 2016 1:59 pm

EyeYield wrote:Cash is a position too, IMHO, and I have a position in cash, which is getting killed by my bond position. Where's the, "why not 100% bonds" thread? :)
Cash, outside of an emergency fund, always seems to lose to some other asset class.


Image
http://quote.morningstar.com/fund/chart ... %2C0%22%7D

8-)

dates obviously cherry picked

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Re: U.S. stocks in freefall

Post by Beliavsky » Thu Feb 11, 2016 2:32 pm

tj wrote:I have roughly 10x annual expenses including over a year's worth of expenses in 5% APY cash.

How do you earn 5% on cash at present?

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Re: U.S. stocks in freefall

Post by EyeYield » Thu Feb 11, 2016 2:55 pm

lack_ey wrote:
EyeYield wrote:Cash is a position too, IMHO, and I have a position in cash, which is getting killed by my bond position. Where's the, "why not 100% bonds" thread? :)
Cash, outside of an emergency fund, always seems to lose to some other asset class.


Image
http://quote.morningstar.com/fund/chart ... %2C0%22%7D

8-)

dates obviously cherry picked

Ok, now it doesn't seem to lose. :happy Cash is king. :P
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: U.S. stocks in freefall

Post by Christine_NM » Thu Feb 11, 2016 3:03 pm

OPEC blinks first. Cancel your sell orders.
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

tj
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Re: U.S. stocks in freefall

Post by tj » Thu Feb 11, 2016 3:22 pm

Beliavsky wrote:
tj wrote:I have roughly 10x annual expenses including over a year's worth of expenses in 5% APY cash.

How do you earn 5% on cash at present?


Savings accounts that are attached to Prepaid Cards - Mango, NetSpend, Brinks, Ace Elite, and HEB are probably the most popular. Also have a Rewards Checking account that is 3%.

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Re: U.S. stocks in freefall

Post by wesgreen » Thu Feb 11, 2016 3:36 pm

These are the times when we earn it (our "fair share of what the market earns"). Staying the course. At least, there's no heavy lifting required. And, not having bonds or much cash, I don't even have to worry about rebalancing - phew!

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Re: U.S. stocks in freefall

Post by quantAndHold » Thu Feb 11, 2016 5:01 pm

I think Jeremy Siegel freaking out might be our blood in the streets moment. I'm starting to think about buying.

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Re: U.S. stocks in freefall

Post by technovelist » Thu Feb 11, 2016 6:08 pm

broadstone wrote:S&P on its way to 1600. I'm still 100% cash.


Only 100%? :beer
In theory, theory and practice are identical. In practice, they often differ.

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Re: U.S. stocks in freefall

Post by flyingaway » Thu Feb 11, 2016 6:57 pm

EyeYield wrote:Cash is a position too, IMHO, and I have a position in cash, which is getting killed by my bond position. Where's the, "why not 100% bonds" thread? :)
Cash, outside of an emergency fund, always seems to lose to some other asset class.


If you average bonds and stocks, you get cash.

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Re: U.S. stocks in freefall

Post by CantPassAgain » Thu Feb 11, 2016 7:38 pm

I wasn't a member of this forum back in 2011, the last time a decline like this occurred (the 2011 decline was actually much worse than this one...so far). Where there a bunch of Broadstones and Visualguys around then too?

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Re: U.S. stocks in freefall

Post by visualguy » Thu Feb 11, 2016 7:54 pm

CantPassAgain wrote:I wasn't a member of this forum back in 2011, the last time a decline like this occurred (the 2011 decline was actually much worse than this one...so far). Where there a bunch of Broadstones and Visualguys around then too?


I go back 2 years here, not all the way to 2011...

How was 2011 much worse? We're getting there for US (in terms of drop over the last few months), and we've actually had a worse drop in ex-US over the last few months than in 2011.
Last edited by visualguy on Thu Feb 11, 2016 8:07 pm, edited 1 time in total.

tj
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Re: U.S. stocks in freefall

Post by tj » Thu Feb 11, 2016 8:06 pm

CantPassAgain wrote:I wasn't a member of this forum back in 2011, the last time a decline like this occurred (the 2011 decline was actually much worse than this one...so far). Where there a bunch of Broadstones and Visualguys around then too?


I don't even remember the 2011 drop....which is how I hope to feel about this one in 5 years. :D


This article from Yahoo! Finance is surprisingly enjoyable:

http://finance.yahoo.com/news/why-the-h ... 35805.html

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Re: U.S. stocks in freefall

Post by jayhawkerbeef » Thu Feb 11, 2016 8:59 pm

Want to talk about freefall, Nikkei is down +4% right now. Since feb 1st the nikkei has fallen 16% that is right 16% in just 11 days i do not know if i have ever seen anything quite like this. At least they know how to throw a party.

tim1999
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Re: U.S. stocks in freefall

Post by tim1999 » Thu Feb 11, 2016 9:19 pm

The computers that control the market these days must be angry.

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Re: U.S. stocks in freefall

Post by dunscap » Fri Feb 12, 2016 12:38 am

mickroark wrote:I learned a long time ago in about the year 2000 that a portfolio needs massive diversification to survive bear attacks. Just when your emotions can't take it anymore, thats when you sell out your portfolio, and that most likely is at the bottom.

So I laugh when all the bulls on this site ask, is 100% stocks ok for a person in their late 20's or 30's?

I use Cash, Bonds, Gold, Alternative investments, and a Long Short strategy. This is because I have learned from the past. My portfolio is down only 1.6% YTD, and this I can look at every day and not panic and sell at the wrong time.

Gold has no cash flow, is crazy volatile, and can stay in the dumps or drop with the rest of the market. It may be less correlated to stocks and bonds, but it contributes underperformance to a portfolio as a whole, and unless the portfolio is super-ridiculoubut there's no reasly aggressive, is likely to increase overall volatility.

Liquid alts are completely unproven. What are you going to do if that part of your portfolio experiences a LTCM-style meltdown and its model breaks badly in the middle of a bear market when it is most needed? This is not entirely a hypothetical risk. Models tend to fail when markets are under stress.

I don't agree that you can craft a portfolio to "survive bear attacks." You can have a more risky portfolio with higher expected returns or a safer portfolio which gives up return potential.

BTW 100% stocks is fine for this 30-something. I'll continue buying into the bottom and back up too. The market has certainly been screaming for attention the last couple months but there's nothing to panic about.

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Re: U.S. stocks in freefall

Post by visualguy » Fri Feb 12, 2016 12:50 am

dunscap wrote:The market has certainly been screaming for attention the last couple months but there's nothing to panic about.


I agree. However, I find it very disturbing that world markets react so radically even when there's nothing to panic about. It makes me wonder what will happen next time there is actually something to panic about, and whether I would want to be in the market when that happens...

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Re: U.S. stocks in freefall

Post by dunscap » Fri Feb 12, 2016 1:03 am

visualguy wrote:
dunscap wrote:The market has certainly been screaming for attention the last couple months but there's nothing to panic about.

I agree. However, I find it very disturbing that world markets react so radically even when there's nothing to panic about. It makes me wonder what will happen next time there is actually something to panic about, and whether I would want to be in the market when that happens...

I also agree that it's an overreaction, but historically it's bad but nothing epic.

Eyeing the charts Total International is down almost 28% since summer 2014, but with dividends it's more like 23%. Bad, but panic? Now, consider that most of that is accounted for by the dollar.

Total US has also taken a beating but not as bad.

It's way too early to start making dire pronouncements. Yes, this puts a big damper on expectations for short-term returns. But there's no reason not to think that today's prices will be looking very good down the road.

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Re: U.S. stocks in freefall

Post by visualguy » Fri Feb 12, 2016 1:28 am

Yeah, but ex-US dropping by a quarter, and US dropping by one sixth without any serious crisis causing it is frightening. This is only so far - it may get worse.

Now, what happens when there is a real crisis of some sort? Inevitably there will be one at some point. It feels like markets could easily shed 50% or even more under such circumstances. It's an unpleasant reminder of just how stomach churning this game is.

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Re: U.S. stocks in freefall

Post by saltycaper » Fri Feb 12, 2016 2:17 am

visualguy wrote:Now, what happens when there is a real crisis of some sort? Inevitably there will be one at some point. It feels like markets could easily shed 50% or even more under such circumstances. It's an unpleasant reminder of just how stomach churning this game is.


This should be expected to happen at some point--even multiple points--during one's investing lifetime. If the current situation turns out only to be a reminder of the possibility, but not a realization of it, let that be a positive takeaway from the experience.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

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Re: U.S. stocks in freefall

Post by technovelist » Fri Feb 12, 2016 7:43 am

visualguy wrote:Yeah, but ex-US dropping by a quarter, and US dropping by one sixth without any serious crisis causing it is frightening. This is only so far - it may get worse.

Now, what happens when there is a real crisis of some sort? Inevitably there will be one at some point. It feels like markets could easily shed 50% or even more under such circumstances. It's an unpleasant reminder of just how stomach churning this game is.


Yep. I'm beginning to wonder whether this is a monetary crisis, in which case things are going to get a lot weirder before they get back to "normal".
In theory, theory and practice are identical. In practice, they often differ.

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Feb 12, 2016 2:45 pm

CantPassAgain wrote:I wasn't a member of this forum back in 2011, the last time a decline like this occurred (the 2011 decline was actually much worse than this one...so far). Where there a bunch of Broadstones and Visualguys around then too?


Umm... read this thread you are posting in.

It was started by a Broadstone type in 2011.

There are multiple Broadstones who posted in this thread over the past 5 years, all of whom have been wrong so far. Sooner or later, one of them will be right, maybe even the current Broadstone...

Doesn't mean it's possible to predict crashes. But crashes do come. This may be one, or maybe not. Since we don't know, best to just stay the course. This thread serves a great purpose, showing how people confidently predicted a crash was coming because of XXX, and then it didn't happen.

Nobody knows enough to predict anything with any accuracy.
Last edited by HomerJ on Fri Feb 12, 2016 2:49 pm, edited 2 times in total.

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Feb 12, 2016 2:46 pm

visualguy wrote:I find it very disturbing that world markets react so radically even when there's nothing to panic about.


This is normal human behavior. This is not new.

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Feb 12, 2016 2:52 pm

visualguy wrote:Now, what happens when there is a real crisis of some sort? Inevitably there will be one at some point. It feels like markets could easily shed 50% or even more under such circumstances. It's an unpleasant reminder of just how stomach churning this game is.


You should absolutely expect a 50% crash could happen at anytime.

You also should absolutely expect a 50% crash WILL happen; it's not a maybe.

Plan around that. If knowing a 50% crash will happen (maybe even tomorrow!) is stomach churning, then you have too much in stocks.

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Re: U.S. stocks in freefall

Post by TheRightKost87 » Fri Feb 12, 2016 2:56 pm

HomerJ wrote:There are multiple Broadstones who posted in this thread over the past 5 years, all of whom have been wrong so far. Sooner or later, one of them will be right, maybe even the current Broadstone...


For all we know, all these Broadstones could be the same person that has changed usernames in order to shake themselves of the embarrassment of prior wrong predictions. That's the "beauty" of an online forum. As you alluded to, eventually - one of the doomsayers will be right.
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Re: U.S. stocks in freefall

Post by TomatoTomahto » Fri Feb 12, 2016 2:58 pm

visualguy wrote: I find it very disturbing that world markets react so radically even when there's nothing to panic about.

I'm not recommending panic, but surely you can't be saying that the world is hunky dory, are you?

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Re: U.S. stocks in freefall

Post by cusetownusa » Fri Feb 12, 2016 3:17 pm

TomatoTomahto wrote:
visualguy wrote: I find it very disturbing that world markets react so radically even when there's nothing to panic about.

I'm not recommending panic, but surely you can't be saying that the world is hunky dory, are you?


Has the world ever been hunky dory?

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Re: U.S. stocks in freefall

Post by quantAndHold » Fri Feb 12, 2016 3:42 pm

visualguy wrote:Yeah, but ex-US dropping by a quarter, and US dropping by one sixth without any serious crisis causing it is frightening. This is only so far - it may get worse.

Now, what happens when there is a real crisis of some sort? Inevitably there will be one at some point. It feels like markets could easily shed 50% or even more under such circumstances. It's an unpleasant reminder of just how stomach churning this game is.


“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” -- Benjamin Graham

Right now the voting machine is speaking loudly. In the long run, like when I'm trying to spend down the money I've spent 30 or more years investing, the returns I get will be based on long term economic activity. Early 2016 market gyrations are not only meaningful to my long term plan in that I had to rebalance, and I'm sure I'll need to rebalance again at some point.

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Re: U.S. stocks in freefall

Post by visualguy » Fri Feb 12, 2016 5:10 pm

quantAndHold wrote:“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” -- Benjamin Graham

Right now the voting machine is speaking loudly. In the long run, like when I'm trying to spend down the money I've spent 30 or more years investing, the returns I get will be based on long term economic activity. Early 2016 market gyrations are not only meaningful to my long term plan in that I had to rebalance, and I'm sure I'll need to rebalance again at some point.


There are two problems with this. One is that you are still affected by the voting machine even in the long run. For example, if the market drops 50% during your withdrawal stage. The other problem is that most of your money doesn't spend anywhere near 30 years in the market unless you happened to make an unusually large amount of money while you were young.

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Re: U.S. stocks in freefall

Post by bayview » Fri Feb 12, 2016 5:47 pm

visualguy wrote:
quantAndHold wrote:“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” -- Benjamin Graham

Right now the voting machine is speaking loudly. In the long run, like when I'm trying to spend down the money I've spent 30 or more years investing, the returns I get will be based on long term economic activity. Early 2016 market gyrations are not only meaningful to my long term plan in that I had to rebalance, and I'm sure I'll need to rebalance again at some point.


There are two problems with this. One is that you are still affected by the voting machine even in the long run. For example, if the market drops 50% during your withdrawal stage. The other problem is that most of your money doesn't spend anywhere near 30 years in the market unless you happened to make an unusually large amount of money while you were young.

Really? I'm 61. I expect to work and save five more years before I retire. We will live off our liability matching portfolio (along with SS and small pension) for about 20 years. Then we'll start withdrawing from our risk portfolio. So that's 25 years before that one even gets touched, and it is meant to cover 15 years or so, so forty years from now.

Others who have way more savings than we'll ever have will pull from their investments over 30 or 40 or more years of retirement.

You don't just retire and kill off your investment savings all at once.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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Re: U.S. stocks in freefall

Post by VictoriaF » Fri Feb 12, 2016 5:56 pm

cusetownusa wrote:
TomatoTomahto wrote:
visualguy wrote: I find it very disturbing that world markets react so radically even when there's nothing to panic about.

I'm not recommending panic, but surely you can't be saying that the world is hunky dory, are you?


Has the world ever been hunky dory?


Sometimes it's been hunky, but never dory.

Victoria
Last edited by VictoriaF on Fri Feb 12, 2016 6:05 pm, edited 1 time in total.
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Re: U.S. stocks in freefall

Post by VictoriaF » Fri Feb 12, 2016 6:05 pm

visualguy wrote:
quantAndHold wrote:“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” -- Benjamin Graham

Right now the voting machine is speaking loudly. In the long run, like when I'm trying to spend down the money I've spent 30 or more years investing, the returns I get will be based on long term economic activity. Early 2016 market gyrations are not only meaningful to my long term plan in that I had to rebalance, and I'm sure I'll need to rebalance again at some point.


There are two problems with this. One is that you are still affected by the voting machine even in the long run. For example, if the market drops 50% during your withdrawal stage.


I am retired. I have a very low allocation to stocks and a very high allocation to cash. I will be spending cash until I start collecting the Social Security at the age of 70.

I am an independent observer of the voting.

visualguy wrote:The other problem is that most of your money doesn't spend anywhere near 30 years in the market unless you happened to make an unusually large amount of money while you were young.


"Market money" usually last longer than other money. People try not to sell their earliest stocks with the largest gains and leave them for their heirs.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)

GoldenFinch
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Re: U.S. stocks in freefall

Post by GoldenFinch » Fri Feb 12, 2016 6:32 pm

VictoriaF wrote:
cusetownusa wrote:
TomatoTomahto wrote:
visualguy wrote: I find it very disturbing that world markets react so radically even when there's nothing to panic about.

I'm not recommending panic, but surely you can't be saying that the world is hunky dory, are you?


Has the world ever been hunky dory?


Sometimes it's been hunky, but never dory.

Victoria


Oy vey!

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Ricola
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Re: U.S. stocks in freefall

Post by Ricola » Fri Feb 12, 2016 7:00 pm

broadstone wrote:S&P on its way to 1600. I'm still 100% cash.


I'm %100 equities for NEW money. :D

"There are many roads to Dublin" - Taylor Larimore

CantPassAgain
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Re: U.S. stocks in freefall

Post by CantPassAgain » Fri Feb 12, 2016 7:17 pm

visualguy wrote:
CantPassAgain wrote:I wasn't a member of this forum back in 2011, the last time a decline like this occurred (the 2011 decline was actually much worse than this one...so far). Where there a bunch of Broadstones and Visualguys around then too?


I go back 2 years here, not all the way to 2011...

How was 2011 much worse? We're getting there for US (in terms of drop over the last few months), and we've actually had a worse drop in ex-US over the last few months than in 2011.


S&P 500:
04/29/2011 1363.61
08/19/2011 1123.53
Decline: 240.08
Decline %: 17.61%


07/17/2015 2126.64
02/11/2016 1828.57
Decline: 298.07
Decline %: 14.02%

The point is, you are acting like NOW is the end of the world....when drops like this happen all the time. It could be the end of the world, I don't know. But what is so special about right now?

quantAndHold
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Re: U.S. stocks in freefall

Post by quantAndHold » Sat Feb 13, 2016 12:19 am

visualguy wrote:
quantAndHold wrote:“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” -- Benjamin Graham

Right now the voting machine is speaking loudly. In the long run, like when I'm trying to spend down the money I've spent 30 or more years investing, the returns I get will be based on long term economic activity. Early 2016 market gyrations are not only meaningful to my long term plan in that I had to rebalance, and I'm sure I'll need to rebalance again at some point.


There are two problems with this. One is that you are still affected by the voting machine even in the long run. For example, if the market drops 50% during your withdrawal stage. The other problem is that most of your money doesn't spend anywhere near 30 years in the market unless you happened to make an unusually large amount of money while you were young.


I don't know about that. I started investing in my early 20's. Due to the magic of compounding, the relatively small amount of money I invested in my 20's and 30's has grown to an outsize portion of my portfolio now that I'm in my 50's. I'm healthy, and expect to live another 40 years. Even if I don't get to live that long, I need to invest like that's what I'm expecting. That's a 70 year investing timeline.

The other thing is that as we get older and our investment timeline gets shorter and the inflows turn into outflows, we pick an asset allocation that is appropriately suited to our new timeline. That 50% market drop in retirement is not likely to cause 50% damage to my portfolio because I won't be holding 100% stocks (I don't hold 100% now), and because I will have chosen a sensible allocation and have some leeway about when to sell the stocks, the damage it does to my portfolio is not likely to be permanent.

I'm certainly not losing any sleep.

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