U.S. stocks in free fall

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Starchild
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Re: U.S. stocks in free fall

Post by Starchild » Fri Dec 21, 2018 6:30 pm

TomatoTomahto wrote:
Fri Dec 21, 2018 5:08 pm
michaeljmroger wrote:
Fri Dec 21, 2018 4:54 pm
quantAndHold wrote:
Fri Dec 21, 2018 4:48 pm
michaeljmroger wrote:
Fri Dec 21, 2018 4:25 pm
munemaker wrote:
Fri Dec 21, 2018 4:09 pm

I suggest it is not a loss until you realize it by selling.
That's a theoretical and unrealistically distant view of money I worked extremely hard to gain. I very much see that as a dreadful loss.
The S&P500 is down about 10% in 15 days. Which is a lot, but in order to lose $85k, you either invested $850k, or you are not very well diversified.
You have to take the long view. If you’re doing it right, this is not the last time your portfolio balance will drop by $85k.
I invested $1.2M and yes, I am well diversified. Even though I fully realize that the markets fluctuate, it's hard to deny that this kind of losses is unusual (in fact, this is literally the worst week since the financial crisis of 2008).
In a separate thread I confessed to, at an age approaching 70, discovering that I’m a market timer. I have an amount not dissimilar to your investment sitting in MM right now. I had debated lump summing it (my previous modus operandi) into equities or DCAing it in, and truth be told, my shame at being uncovered as a market timer is overpowered by my relief at not losing 15% of the proceeds of our house sale in a couple of weeks.

I feel you. There’s a lot of loose macho talk of obliviousness around here. Very young people can rightfully see it as equities on sale. Older hands, with serious assets at risk, should know that whistling past the graveyard doesn’t fool anyone.
I hear ya little feat. I too have cash from a house sale sitting in MM. I don’t care what advice people will tell ya here. Lump summing is bad advice in a volatile climate coming out of a 9 year bull run. That’s not timing it’s common sense. I learned the mistake forgoing common sense in February doing a lump sum during a major jack up. I since learned patience.

Zigma
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Re: U.S. stocks in free fall

Post by Zigma » Fri Dec 21, 2018 7:29 pm

amitb00 wrote:
Fri Dec 21, 2018 5:42 pm
All of us who are long are seeing our wealth eroded. As long as you don’t have to sell in this market, it will come back. It may take 6 months or 2-3 years remian calm. History tells us, it will come back.
Cheers,
Amit
This will be my first bear market since I started investing. I am still all in and will stay the course. I will probably buy in the next few days (I have to for my Roth and SEP IRA contribution) but it does feel like there's more going on. I will thread with caution though regarding expectations that it will come back. It would (if the US remains the mega-economy that it is) , but I think I read somewhere that it took 25 years for the DOW to recover from the great depression.
Last edited by Zigma on Fri Dec 21, 2018 7:39 pm, edited 1 time in total.
Keep moving on higher ground.

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Hector
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Re: U.S. stocks in free fall

Post by Hector » Fri Dec 21, 2018 7:37 pm

Starchild wrote:
Fri Dec 21, 2018 6:30 pm
TomatoTomahto wrote:
Fri Dec 21, 2018 5:08 pm
michaeljmroger wrote:
Fri Dec 21, 2018 4:54 pm
quantAndHold wrote:
Fri Dec 21, 2018 4:48 pm
michaeljmroger wrote:
Fri Dec 21, 2018 4:25 pm

That's a theoretical and unrealistically distant view of money I worked extremely hard to gain. I very much see that as a dreadful loss.
The S&P500 is down about 10% in 15 days. Which is a lot, but in order to lose $85k, you either invested $850k, or you are not very well diversified.
You have to take the long view. If you’re doing it right, this is not the last time your portfolio balance will drop by $85k.
I invested $1.2M and yes, I am well diversified. Even though I fully realize that the markets fluctuate, it's hard to deny that this kind of losses is unusual (in fact, this is literally the worst week since the financial crisis of 2008).
In a separate thread I confessed to, at an age approaching 70, discovering that I’m a market timer. I have an amount not dissimilar to your investment sitting in MM right now. I had debated lump summing it (my previous modus operandi) into equities or DCAing it in, and truth be told, my shame at being uncovered as a market timer is overpowered by my relief at not losing 15% of the proceeds of our house sale in a couple of weeks.

I feel you. There’s a lot of loose macho talk of obliviousness around here. Very young people can rightfully see it as equities on sale. Older hands, with serious assets at risk, should know that whistling past the graveyard doesn’t fool anyone.
I hear ya little feat. I too have cash from a house sale sitting in MM. I don’t care what advice people will tell ya here. Lump summing is bad advice in a volatile climate coming out of a 9 year bull run. That’s not timing it’s common sense. I learned the mistake forgoing common sense in February doing a lump sum during a major jack up. I since learned patience.
How did you feel about it in September?

VortexStreet
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Re: U.S. stocks in free fall

Post by VortexStreet » Fri Dec 21, 2018 8:05 pm

anoop wrote:
Fri Dec 21, 2018 6:20 pm
Just to put things in perspective, the current draw down is not even close to being the worst we have seen since March 2009.
https://www.advisorperspectives.com/ima ... 3d6cfa.png

The big difference this time (since March 2009) is that the fed is tightening, not just interest rates, but also allowing their balance sheet to run off.
Note that the chart is from last Friday, 12/14/18. The S&P 500 closed on 9/20/18 at 2930.75, and it closed today at 2416.62, a decline of 17.54%. Assuming the rest of the chart is correct, this is now the second worst decline since March 2009, and is less than 2% away from being the worst.

2Birds1Stone
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Re: U.S. stocks in free fall

Post by 2Birds1Stone » Fri Dec 21, 2018 8:17 pm

At this rate y'all will have to suck it up and jump on the MMM bandwagon ;)

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Starchild
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Re: U.S. stocks in free fall

Post by Starchild » Fri Dec 21, 2018 8:51 pm

Hector wrote:
Fri Dec 21, 2018 7:37 pm
Starchild wrote:
Fri Dec 21, 2018 6:30 pm
TomatoTomahto wrote:
Fri Dec 21, 2018 5:08 pm
michaeljmroger wrote:
Fri Dec 21, 2018 4:54 pm
quantAndHold wrote:
Fri Dec 21, 2018 4:48 pm

The S&P500 is down about 10% in 15 days. Which is a lot, but in order to lose $85k, you either invested $850k, or you are not very well diversified.
You have to take the long view. If you’re doing it right, this is not the last time your portfolio balance will drop by $85k.
I invested $1.2M and yes, I am well diversified. Even though I fully realize that the markets fluctuate, it's hard to deny that this kind of losses is unusual (in fact, this is literally the worst week since the financial crisis of 2008).
In a separate thread I confessed to, at an age approaching 70, discovering that I’m a market timer. I have an amount not dissimilar to your investment sitting in MM right now. I had debated lump summing it (my previous modus operandi) into equities or DCAing it in, and truth be told, my shame at being uncovered as a market timer is overpowered by my relief at not losing 15% of the proceeds of our house sale in a couple of weeks.

I feel you. There’s a lot of loose macho talk of obliviousness around here. Very young people can rightfully see it as equities on sale. Older hands, with serious assets at risk, should know that whistling past the graveyard doesn’t fool anyone.
I hear ya little feat. I too have cash from a house sale sitting in MM. I don’t care what advice people will tell ya here. Lump summing is bad advice in a volatile climate coming out of a 9 year bull run. That’s not timing it’s common sense. I learned the mistake forgoing common sense in February doing a lump sum during a major jack up. I since learned patience.
How did you feel about it in September?
Bad.

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CULater
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Re: U.S. stocks in free fall

Post by CULater » Fri Dec 21, 2018 8:56 pm

VortexStreet wrote:
Fri Dec 21, 2018 8:05 pm
anoop wrote:
Fri Dec 21, 2018 6:20 pm
Just to put things in perspective, the current draw down is not even close to being the worst we have seen since March 2009.
https://www.advisorperspectives.com/ima ... 3d6cfa.png

The big difference this time (since March 2009) is that the fed is tightening, not just interest rates, but also allowing their balance sheet to run off.
Note that the chart is from last Friday, 12/14/18. The S&P 500 closed on 9/20/18 at 2930.75, and it closed today at 2416.62, a decline of 17.54%. Assuming the rest of the chart is correct, this is now the second worst decline since March 2009, and is less than 2% away from being the worst.
And just think -- you'll only need to gain 21.27% from here to get back to even. That could take a while.
On the internet, nobody knows you're a dog.

BogleMelon
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Re: U.S. stocks in free fall

Post by BogleMelon » Fri Dec 21, 2018 9:04 pm

CULater wrote:
Fri Dec 21, 2018 8:56 pm
VortexStreet wrote:
Fri Dec 21, 2018 8:05 pm
anoop wrote:
Fri Dec 21, 2018 6:20 pm
Just to put things in perspective, the current draw down is not even close to being the worst we have seen since March 2009.
https://www.advisorperspectives.com/ima ... 3d6cfa.png

The big difference this time (since March 2009) is that the fed is tightening, not just interest rates, but also allowing their balance sheet to run off.
Note that the chart is from last Friday, 12/14/18. The S&P 500 closed on 9/20/18 at 2930.75, and it closed today at 2416.62, a decline of 17.54%. Assuming the rest of the chart is correct, this is now the second worst decline since March 2009, and is less than 2% away from being the worst.
And just think -- you'll only need to gain 21.27% from here to get back to even. That could take a while.
Not if you are buying/rebalancing to equities while they are down.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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ofcmetz
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Re: U.S. stocks in free fall

Post by ofcmetz » Fri Dec 21, 2018 9:12 pm

letsgobobby wrote:
Fri Dec 21, 2018 6:12 pm
ofcmetz wrote:
Fri Dec 21, 2018 5:53 pm
animule wrote:
Fri Dec 21, 2018 5:50 pm
This is beginning to feel way too much like 2008.

I remember the feeling - withering losses like this for weeks on end.

Stock up on Maalox.
Feels different to me because people aren’t losing their jobs and houses. There is no fear that this might be the end to the financial system either. I would guess we may be getting close to the bottom, but that’s just a guess.
People weren't losing their jobs in the fall of 2007 when that great bear market began.
Good point. Yeah in the beginning it felt like a correction or much smaller adjustment because housing prices had gotten too hot.
Never underestimate the power of the force of low cost index funds.

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CULater
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Re: U.S. stocks in free fall

Post by CULater » Fri Dec 21, 2018 9:32 pm

Like I've always said: I can tolerate risk -- it's just the losing money part that bothers me.
On the internet, nobody knows you're a dog.

OnTrack
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Re: U.S. stocks in free fall

Post by OnTrack » Fri Dec 21, 2018 9:56 pm

anoop wrote:
Fri Dec 21, 2018 6:20 pm
Just to put things in perspective, the current draw down is not even close to being the worst we have seen since March 2009.
https://www.advisorperspectives.com/ima ... 3d6cfa.png

The big difference this time (since March 2009) is that the fed is tightening, not just interest rates, but also allowing their balance sheet to run off.
Looks like they have about 3 trillion to run off before they are back to 2008 balance sheet levels.
https://www.federalreserve.gov/monetary ... trends.htm

MDCrab
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Re: U.S. stocks in free fall

Post by MDCrab » Fri Dec 21, 2018 9:59 pm

Doom&Gloom wrote:
Fri Dec 21, 2018 5:11 pm
MDCrab wrote:
Fri Dec 21, 2018 4:12 pm
Expro wrote:
Fri Dec 21, 2018 3:49 pm
Cue the cliches...

The bull reluctantly climbs the stairs. The bear jumps out the window.
This might be my first bear market as an investor. Is it weird that I’m a little bit excited?
Probably because of all the posting bravado you read here recently where posters were hoping for a fall so they could shop at the SALE! SALE! SALE!

Let us know how you feel about it if it gets quite a bit worse or drags out for several months.
A few months wouldn’t bother me. A few years might.

justsomeguy2018
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Re: U.S. stocks in free fall

Post by justsomeguy2018 » Fri Dec 21, 2018 10:26 pm

Here's how cautious I'm being in this market; every time it drops 1%, I buy *1* share of ITOT Total Stock Market. I have enough sitting in SPAXX to do this 18 more times. :beer

That approach actually worked out well for me these past few weeks....if market rallies and I missed out on the "bottom", so be it. I predict there is more pain to come.

I'm reminded now of Ben Bernanke's infamous remarks in early 2007.

Responding to a question from a member of the House Budget Committee, Bernanke said that the central bank was closely monitoring the stock market after the Dow slumped 416 points Tuesday amid a selloff in stocks worldwide.
Bernanke said the selloff did not change the Fed's view on U.S. economic growth. "There is really no material change in our expectations for the U.S. economy since I last reported to Congress a couple weeks ago," he said. Lawmakers did not ask the Fed chief about comments made earlier this week by his predecessor Alan Greenspan who warned that the U.S. economy might fall into recession by the end of the year.
Senior White House economic adviser Edward Lazear echoed Bernanke's comments Wednesday, calling the big decline in U.S. markets Tuesday an anomaly. "It looks like whatever happened yesterday was anomalous," Lazear said. "We don't think of it reflecting any of the fundamentals in the economy, which I think are quite strong."
:|

tmcc
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Re: U.S. stocks in free fall

Post by tmcc » Fri Dec 21, 2018 10:27 pm

LiterallyIronic wrote:
Fri Dec 21, 2018 4:31 pm
brokenrecord wrote:
Fri Dec 21, 2018 4:19 pm
tmcc wrote:
Fri Dec 21, 2018 4:16 pm
The market is down? lol i dont look at that.
I bet that’s not true
It happens every time someone posts "the market is up big time!" or "the market is tanking!". A number of people feel the need to post "Oh, really, I didn't notice" as if they're trying to impress someone with their alleged aloofness.
i was being facetious for the same reasons you noted.

JiggyWillis
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Re: U.S. stocks in free fall

Post by JiggyWillis » Fri Dec 21, 2018 10:50 pm

I'm down about $60k of money invested this year, having just achieved full investment at my AA mid-year. I am comforted by the story of Bob, the world's worst market timer, or whatever his name is. I am also thankful for the recommendation to keep short-term money out of equities. So the $200k sitting in MM to pay for remodeling of the $1M commercial building I purchased today to house my business means that my AA is about 20% lighter in equities than it otherwise would have been. When the remodel is done in March, I wll DCA the remaining cash into equties. So far I am SWAN.

Getting on a plane in six hours to go to a tropical island resort. 15 years ago I was broke, in debt, alone, drunk and miserable. Today I am sober, "rich," happy, useful and grateful. I am thinking about the 50% of americans who have no retirement savings or emergency fund and are living life the best they can, pumping all their wealth into the coffers of the corporations we buy, and don't give a rat's a$$ about what the markets are doing. I hope they will be alright. We have it easy.

Bogleheads Rock! See you next year.

anoop
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Re: U.S. stocks in free fall

Post by anoop » Fri Dec 21, 2018 10:56 pm

JiggyWillis wrote:
Fri Dec 21, 2018 10:50 pm
15 years ago I was broke, in debt, alone, drunk and miserable. Today I am sober, "rich," happy, useful and grateful.
Off topic for this thread, but I would be interested in your story if you have it written up somewhere.

Mister E
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Re: U.S. stocks in free fall

Post by Mister E » Fri Dec 21, 2018 10:57 pm

Had my 3 fund low cost portfolio set at 50/50 from around the peak of the year, down about $40,000 from there. Rebalanced back to 50/50 today, Kept the Vanguard Acct name the same and had the Wife change my password with instructions not to give it to me until MLK holiday (I may want to add funds then?). Am I being weak or stupid here? 10+ years til retirement but I'm a low income earner, can't afford any major blunders. Figure I'll try and get too aggressive, too soon, if I have access, won't stay the course.

MisterMister
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Re: U.S. stocks in free fall

Post by MisterMister » Fri Dec 21, 2018 11:01 pm

Mister E wrote:
Fri Dec 21, 2018 10:57 pm
Had my 3 fund low cost portfolio set at 50/50 from around the peak of the year, down about $40,000 from there. Rebalanced back to 50/50 today, Kept the Vanguard Acct name the same and had the Wife change my password with instructions not to give it to me until MLK holiday (I may want to add funds then?). Am I being weak or stupid here? 10+ years til retirement but I'm a low income earner, can't afford any major blunders. Figure I'll try and get too aggressive, too soon, if I have access, won't stay the course.
A few months back I sold a lot of stock I shouldn't have. I wish I hadn't had access to my brokerage account at that time. If you're committed to this path do what you have to to make it work.

EDIT: Just don't blame your wife if she does what you ask, even if you change your mind. Obviously it would be better if you didn't have to put her in the middle, so to speak, because it does pose some risk to your relationship.

aqan
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Re: U.S. stocks in free fall

Post by aqan » Fri Dec 21, 2018 11:07 pm

Zigma wrote:
Fri Dec 21, 2018 7:29 pm
I read somewhere that it took 25 years for the DOW to recover from the great depression.
Nikkei peaked at ~39K in 1989 and 29 years later it's only about 50% of that (~20K). so yeah.. its entirely possible.

MisterMister
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Re: U.S. stocks in free fall

Post by MisterMister » Fri Dec 21, 2018 11:18 pm

aqan wrote:
Fri Dec 21, 2018 11:07 pm
Zigma wrote:
Fri Dec 21, 2018 7:29 pm
I read somewhere that it took 25 years for the DOW to recover from the great depression.
Nikkei peaked at ~39K in 1989 and 29 years later it's only about 50% of that (~20K). so yeah.. its entirely possible.
Folks, this is not shaping up to be another 1929, or even 2008 for that matter. There is nothing on the horizon that looks anything near that scary. Market sentiment is awful, for sure. The US and world economy may be slowing, we may have trade issues with China. Even if there were a recession next year (which most doubt), we wouldn't be looking at anything near that serious.

Could something really bad happen? Yes, anything can happen. But the odds are minutely small from what I hear, see, and read. And optimists get better investment returns than pessimists. Stick to the plan. There will be some rough seas ahead, for sure, but I don't think the ship will sink.

pennylane
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Re: U.S. stocks in free fall

Post by pennylane » Fri Dec 21, 2018 11:27 pm

Human nature never fails to amaze me. When the market is going up, everyone is gung-ho. When it’s going down, everyone is in a panic like the world is ending. Seriously, you all preach “stay the course”? Yet freak out? Who the hell cares... if you’re down big you shouldn’t be in equities. Go buy bonds.

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willthrill81
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Re: U.S. stocks in free fall

Post by willthrill81 » Fri Dec 21, 2018 11:28 pm

Grogs wrote:
Fri Dec 21, 2018 5:20 pm
willthrill81 wrote:
Fri Dec 21, 2018 5:03 pm
alfaspider wrote:
Fri Dec 21, 2018 4:28 pm
willthrill81 wrote:
Fri Dec 21, 2018 4:19 pm
tmcc wrote:
Fri Dec 21, 2018 4:16 pm
The market is down? lol i dont look at that.
If you only looked at your portfolio once per year at the end of the year, you'd probably yawn when you compared Dec. 31st, 2017, to Dec. 31st, 2018.
Really? I wouldn’t yawn at what is looking like a 10% decline YOY.
VTSAX had a 5.6% return from one year ago through yesterday.
Not correct. VTI closed at 137.57 on 12/21/17 and 123.49 today. That's a 10.2% LOSS. Dividends add back 1.4% or so, but that's still about an 8.8% loss YOY.
Vanguard reports the 1 year return of VTI as 5.52%. You're barking up the wrong tree.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

MotoTrojan
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Re: U.S. stocks in free fall

Post by MotoTrojan » Fri Dec 21, 2018 11:41 pm

willthrill81 wrote:
Fri Dec 21, 2018 11:28 pm
Grogs wrote:
Fri Dec 21, 2018 5:20 pm
willthrill81 wrote:
Fri Dec 21, 2018 5:03 pm
alfaspider wrote:
Fri Dec 21, 2018 4:28 pm
willthrill81 wrote:
Fri Dec 21, 2018 4:19 pm


If you only looked at your portfolio once per year at the end of the year, you'd probably yawn when you compared Dec. 31st, 2017, to Dec. 31st, 2018.
Really? I wouldn’t yawn at what is looking like a 10% decline YOY.
VTSAX had a 5.6% return from one year ago through yesterday.
Not correct. VTI closed at 137.57 on 12/21/17 and 123.49 today. That's a 10.2% LOSS. Dividends add back 1.4% or so, but that's still about an 8.8% loss YOY.
Vanguard reports the 1 year return of VTI as 5.52%. You're barking up the wrong tree.
That is as of 11/30/18. Perhaps you are the flawed barker.

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willthrill81
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Re: U.S. stocks in free fall

Post by willthrill81 » Fri Dec 21, 2018 11:48 pm

MotoTrojan wrote:
Fri Dec 21, 2018 11:41 pm
willthrill81 wrote:
Fri Dec 21, 2018 11:28 pm
Grogs wrote:
Fri Dec 21, 2018 5:20 pm
willthrill81 wrote:
Fri Dec 21, 2018 5:03 pm
alfaspider wrote:
Fri Dec 21, 2018 4:28 pm


Really? I wouldn’t yawn at what is looking like a 10% decline YOY.
VTSAX had a 5.6% return from one year ago through yesterday.
Not correct. VTI closed at 137.57 on 12/21/17 and 123.49 today. That's a 10.2% LOSS. Dividends add back 1.4% or so, but that's still about an 8.8% loss YOY.
Vanguard reports the 1 year return of VTI as 5.52%. You're barking up the wrong tree.
That is as of 11/30/18. Perhaps you are the flawed barker.
I stand corrected. :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

anoop
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Re: U.S. stocks in free fall

Post by anoop » Sat Dec 22, 2018 12:03 am

pennylane wrote:
Fri Dec 21, 2018 11:27 pm
Human nature never fails to amaze me. When the market is going up, everyone is gung-ho. When it’s going down, everyone is in a panic like the world is ending. Seriously, you all preach “stay the course”? Yet freak out? Who the hell cares... if you’re down big you shouldn’t be in equities. Go buy bonds.
Bonds are going down too!

anoop
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Re: U.S. stocks in free fall

Post by anoop » Sat Dec 22, 2018 1:09 am

MisterMister wrote:
Fri Dec 21, 2018 11:18 pm
Folks, this is not shaping up to be another 1929, or even 2008 for that matter. There is nothing on the horizon that looks anything near that scary. Market sentiment is awful, for sure. The US and world economy may be slowing, we may have trade issues with China. Even if there were a recession next year (which most doubt), we wouldn't be looking at anything near that serious.

Could something really bad happen? Yes, anything can happen. But the odds are minutely small from what I hear, see, and read. And optimists get better investment returns than pessimists. Stick to the plan. There will be some rough seas ahead, for sure, but I don't think the ship will sink.
I agree with this.

Back in 2015, when the S&P was around 2000, Yellen warned that stocks were overvalued.
https://www.thestreet.com/story/1314159 ... treet.html

Even though they may not admit it, the fed is targeting asset prices. If asset prices truly enter free fall, they will do whatever it takes to prop it back up. Right now, it's actually a pretty well controlled deflation in asset prices. They just need to have it kick in for some bubble housing markets (like SF) as well (which it is).

2015
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Re: U.S. stocks in free fall

Post by 2015 » Sat Dec 22, 2018 1:51 am

pennylane wrote:
Fri Dec 21, 2018 11:27 pm
Human nature never fails to amaze me. When the market is going up, everyone is gung-ho. When it’s going down, everyone is in a panic like the world is ending. Seriously, you all preach “stay the course”? Yet freak out? Who the hell cares... if you’re down big you shouldn’t be in equities. Go buy bonds.
Indeed. Investors have lost far more money throughout history as a result of behavioral errors than by anything the market has done. If you've done your homework, you're neither "gung-ho" or "freaked out" regardless of what the market is doing. There's a reason it's been said that investing should be like watching grass grow, or paint dry.

But the over/underconfident will always be among us. They are shackled by fear of missing out, always reading the "wealth of information", as good "students of investing", thinking their personal capabilities are somehow different than the dismal historical long-term record of active investors of any sort. Then, when the next market tsunami comes--and it will come--they will be the ones mooning everyone as they bend over grabbing because the tide went out taking their shorts down with it.

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gilgamesh
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Re: U.S. stocks in free fall

Post by gilgamesh » Sat Dec 22, 2018 3:13 am

I am starting to realize I may be tempted not to ‘stay the course’ if the markets continue to slide significantly...so far it’s been easy, as it’s not significant, but say if S&P 500 is down 30% from its all-time high I may be tempted to change my AA.

I’m about 9 years from retirement and at around 30% in bonds...if USA stocks decline by 30% I’m thinking of going 25% bonds, and 20% bond at a 35% market decline and go down to 15% bonds if it declines by 40%. There on , I’ll stay there...

I don’t think I could resist the stock market sale, if it declines by 30%...heck! Even 20% will be mighty tempting...

Besides my 30% bond allocation was assuming a 50% stock decline...if stocks are already down 30%, it’s unlikely (not impossible) to go another 50%, So why stay at 30%? I should have thought about this before, but it makes a lot of sense now...

bmritz
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Re: U.S. stocks in free fall

Post by bmritz » Sat Dec 22, 2018 6:00 am

gilgamesh wrote:
Sat Dec 22, 2018 3:13 am
I am starting to realize I may be tempted not to ‘stay the course’ if the markets continue to slide significantly...so far it’s been easy, as it’s not significant, but say if S&P 500 is down 30% from its all-time high I may be tempted to change my AA.

I’m about 9 years from retirement and at around 30% in bonds...if USA stocks decline by 30% I’m thinking of going 25% bonds, and 20% bond at a 35% market decline and go down to 15% bonds if it declines by 40%. There on , I’ll stay there...

I don’t think I could resist the stock market sale, if it declines by 30%...heck! Even 20% will be mighty tempting...

Besides my 30% bond allocation was assuming a 50% stock decline...if stocks are already down 30%, it’s unlikely (not impossible) to go another 50%, So why stay at 30%? I should have thought about this before, but it makes a lot of sense now...
I don't get this one.

Take the rule of thumb for a 50% stock decline. If you rebalance to keep your 70/30 allocation at those -30%, -35% & -40% decline points you'll end up with a 37% max drawdown (assuming bonds return 0%). Your "new IPS" takes that 37% up to 40%.

Why did you choose 70/30 over 80/20 in the first place? Is it because -37% max draw down was a better fit for you than -40%?

Those numbers aren't so far apart from each other, but what is the gain? Assuming you take the same AA adjustments on the way back up (if stocks do eventually reach their previous peak), you end up with less money than if you just adjusted to 70/30 at each rebalance point.

Stay. The. Course.

Grogs
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Re: U.S. stocks in free fall

Post by Grogs » Sat Dec 22, 2018 7:40 am

bmritz wrote:
Sat Dec 22, 2018 6:00 am
gilgamesh wrote:
Sat Dec 22, 2018 3:13 am
I am starting to realize I may be tempted not to ‘stay the course’ if the markets continue to slide significantly...so far it’s been easy, as it’s not significant, but say if S&P 500 is down 30% from its all-time high I may be tempted to change my AA.

I’m about 9 years from retirement and at around 30% in bonds...if USA stocks decline by 30% I’m thinking of going 25% bonds, and 20% bond at a 35% market decline and go down to 15% bonds if it declines by 40%. There on , I’ll stay there...

I don’t think I could resist the stock market sale, if it declines by 30%...heck! Even 20% will be mighty tempting...

Besides my 30% bond allocation was assuming a 50% stock decline...if stocks are already down 30%, it’s unlikely (not impossible) to go another 50%, So why stay at 30%? I should have thought about this before, but it makes a lot of sense now...
I don't get this one.

Take the rule of thumb for a 50% stock decline. If you rebalance to keep your 70/30 allocation at those -30%, -35% & -40% decline points you'll end up with a 37% max drawdown (assuming bonds return 0%). Your "new IPS" takes that 37% up to 40%.

Why did you choose 70/30 over 80/20 in the first place? Is it because -37% max draw down was a better fit for you than -40%?

Those numbers aren't so far apart from each other, but what is the gain? Assuming you take the same AA adjustments on the way back up (if stocks do eventually reach their previous peak), you end up with less money than if you just adjusted to 70/30 at each rebalance point.

Stay. The. Course.
Yeah, I think the tactical AA always sounds good in theory, but the execution is difficult. If you have a $1MM portfolio at 70/30, you've got 300k in bonds. If stocks drop 50% and bonds are ~ unchanged, you've now got $650k. To rebalance you need to sell $105k of your safe bonds to buy an asset that has just dropped 50%. Lots of people blinked in 2008-9 and couldn't stomach this. To overbalance to an 80/20 AA, you have to sell $170k of your bonds - over half. That really takes nerves of steel because after a drop that big every piece of financial news will be doom and gloom, telling you how much lower the markets will fall before you ever see the bottom.

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gilgamesh
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Re: U.S. stocks in free fall

Post by gilgamesh » Sat Dec 22, 2018 8:04 am

bmritz wrote:
Sat Dec 22, 2018 6:00 am
gilgamesh wrote:
Sat Dec 22, 2018 3:13 am
I am starting to realize I may be tempted not to ‘stay the course’ if the markets continue to slide significantly...so far it’s been easy, as it’s not significant, but say if S&P 500 is down 30% from its all-time high I may be tempted to change my AA.

I’m about 9 years from retirement and at around 30% in bonds...if USA stocks decline by 30% I’m thinking of going 25% bonds, and 20% bond at a 35% market decline and go down to 15% bonds if it declines by 40%. There on , I’ll stay there...

I don’t think I could resist the stock market sale, if it declines by 30%...heck! Even 20% will be mighty tempting...

Besides my 30% bond allocation was assuming a 50% stock decline...if stocks are already down 30%, it’s unlikely (not impossible) to go another 50%, So why stay at 30%? I should have thought about this before, but it makes a lot of sense now...
I don't get this one.

Take the rule of thumb for a 50% stock decline. If you rebalance to keep your 70/30 allocation at those -30%, -35% & -40% decline points you'll end up with a 37% max drawdown (assuming bonds return 0%). Your "new IPS" takes that 37% up to 40%.

Why did you choose 70/30 over 80/20 in the first place? Is it because -37% max draw down was a better fit for you than -40%?

Those numbers aren't so far apart from each other, but what is the gain? Assuming you take the same AA adjustments on the way back up (if stocks do eventually reach their previous peak), you end up with less money than if you just adjusted to 70/30 at each rebalance point.

Stay. The. Course.
Thank you...I do not know how to calculate max drawdown or it’s significance...so I’ll have to take your word for it.

But, now that you’ve mentioned it. Intuitively it makes sense that just rebalancing will be almost the same.

What if, I go to 15% bonds if markets decline 30%, 0% bonds if markets decline to 40%....back to 15% when markets reach back to 20% of previous high, and 30% bonds if it ever reaches the previous max?
(I’m not saying I’ll do it, just want to know the math...thanks!)

bgf
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Re: U.S. stocks in free fall

Post by bgf » Sat Dec 22, 2018 8:09 am

aqan wrote:
Fri Dec 21, 2018 11:07 pm
Zigma wrote:
Fri Dec 21, 2018 7:29 pm
I read somewhere that it took 25 years for the DOW to recover from the great depression.
Nikkei peaked at ~39K in 1989 and 29 years later it's only about 50% of that (~20K). so yeah.. its entirely possible.
there are many structural reasons for why the japan market reached those bubble heights that do not exist in todays US market. i wish whenever people cited japan they cited the reasons for the bubble.

think about the immense wealth accumulated by those who knew what was going on.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

BogleMelon
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Re: U.S. stocks in free fall

Post by BogleMelon » Sat Dec 22, 2018 8:53 am

gilgamesh wrote:
Sat Dec 22, 2018 3:13 am
I am starting to realize I may be tempted not to ‘stay the course’ if the markets continue to slide significantly...so far it’s been easy, as it’s not significant, but say if S&P 500 is down 30% from its all-time high I may be tempted to change my AA.

I’m about 9 years from retirement and at around 30% in bonds...if USA stocks decline by 30% I’m thinking of going 25% bonds, and 20% bond at a 35% market decline and go down to 15% bonds if it declines by 40%. There on , I’ll stay there...

I don’t think I could resist the stock market sale, if it declines by 30%...heck! Even 20% will be mighty tempting...

Besides my 30% bond allocation was assuming a 50% stock decline...if stocks are already down 30%, it’s unlikely (not impossible) to go another 50%, So why stay at 30%? I should have thought about this before, but it makes a lot of sense now...
If new information becomes available to you now and it wasn't available to you before for whatever reason, then (now) is the correct time to adjust your AA instead of waiting and sell low. You didn't know before your real risk tolerance, and this is absolutely so fine because we are humans after all with emotions that don't usually follow the theory. But since you start to get a clearer idea now how really your tolerance is, then no reason to wait for a crash to happen to start to make the changes.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Admiral
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Re: U.S. stocks in free fall

Post by Admiral » Sat Dec 22, 2018 9:18 am

pennylane wrote:
Fri Dec 21, 2018 11:27 pm
Human nature never fails to amaze me. When the market is going up, everyone is gung-ho. When it’s going down, everyone is in a panic like the world is ending. Seriously, you all preach “stay the course”? Yet freak out? Who the hell cares... if you’re down big you shouldn’t be in equities. Go buy bonds.
I'm not so sure about that. Define "big." I am 70/30 and down 85k since the peak on Oct 1. It depends on the size of your portfolio. I am not selling, and in fact am buying. But these are still big drops, if only on paper. I am essentially flat since Jan, even with 50k in contribs.

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J G Bankerton
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Re: U.S. stocks in free fall

Post by J G Bankerton » Sat Dec 22, 2018 9:24 am

pennylane wrote:
Fri Dec 21, 2018 11:27 pm
Human nature never fails to amaze me. When the market is going up, everyone is gung-ho. When it’s going down, everyone is in a panic like the world is ending. Seriously, you all preach “stay the course”? Yet freak out? Who the hell cares... if you’re down big you shouldn’t be in equities. Go buy bonds.
Out of 76,000 members very few post much less freak out over everyday ups and downs. Most don't even look.
They sleep well at night.
If you are changing asset allocation because of market conditions you are doing it wrong.

Scooter57
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Re: U.S. stocks in free fall

Post by Scooter57 » Sat Dec 22, 2018 9:47 am

Some more thoughts about the Japanese market references. The Japanese market was insanely overvalued before it collapsed and stayed down for all the years that followed. The usual argument that this doesn't apply to US markets is that we aren't looking at that kind of overvaluation.

To some extent this is true. But still, there are valuation issues. The majority of the "growth" in the large cap indexes over this past year was due to dramatic rises in the prices of a very few monster stocks--especially the so called FAANG stocks (Facebook, Amazon, Apple etc.) At one time this year Amazon's P/E was in the 100s. It has fallen to "only" 77 right now. The P/Es of some of these other stocks were also very rich. Netflix P/E has dropped to 88. It was 149 last summer. The biotech sector, which had been hot and now is dropping at rates much higher than the rest of the market, was full of companies with billion dollar market caps that had no earnings or if they did, very modest earnings giving them P/Es of 60 or higher.

So while we aren't at Japanese valuation levels for the entire market, there are quite a few companies in the top 50% of the large cap indexes that do have valuations that are extremely inflated. This has been true for several years. "Irrational exuberance" can persist for quite a while, as we all learned in the 1990s. Many investors fled to stocks because interest rates close to 0% lasted far longer than any of us dreamed they could.

One other factor to consider is that valuation is based on the relationship of price to various metrics, though many people only look at earnings per share. Because of this, corporate execs, whose salaries are tied much too closely to stock performance, have come up with a lot of tricks since the 1980s when Japan's market collapsed, to inflate the earnings per share, even when the rest of the company's annual report read carefully, paints a less rosy picture.

[OT comments removed by admin LadyGeek]

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Flymore
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Re: U.S. stocks in free fall

Post by Flymore » Sat Dec 22, 2018 10:07 am

Aren't we do for a bounce? :)

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JoMoney
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Re: U.S. stocks in free fall

Post by JoMoney » Sat Dec 22, 2018 10:12 am

Flymore wrote:
Sat Dec 22, 2018 10:07 am
Aren't we do for a bounce? :)
It will bounce once it hits the floor, unfortunately it's hard to see the floor from where we stand.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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J G Bankerton
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Re: U.S. stocks in free fall

Post by J G Bankerton » Sat Dec 22, 2018 10:24 am

Flymore wrote:
Sat Dec 22, 2018 10:07 am
Aren't we do for a bounce? :)
Dead cat bounce? I love those; no actual cats are harmed in a "dead cat bounce".

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Flymore
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Re: U.S. stocks in free fall

Post by Flymore » Sat Dec 22, 2018 10:25 am

JoMoney wrote:
Sat Dec 22, 2018 10:12 am
Flymore wrote:
Sat Dec 22, 2018 10:07 am
Aren't we do for a bounce? :)
It will bounce once it hits the floor, unfortunately it's hard to see the floor from where we stand.
Just statically speaking. :)
Reversion to the mean and all that. :)

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J G Bankerton
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Re: U.S. stocks in free fall

Post by J G Bankerton » Sat Dec 22, 2018 10:31 am

Flymore wrote:
Sat Dec 22, 2018 10:25 am
Just statically speaking. :)
Reversion to the mean and all that. :)
. How much time does one have to wait for the mean to not be so mean? :confused

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JoMoney
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Re: U.S. stocks in free fall

Post by JoMoney » Sat Dec 22, 2018 10:37 am

Flymore wrote:
Sat Dec 22, 2018 10:25 am
JoMoney wrote:
Sat Dec 22, 2018 10:12 am
Flymore wrote:
Sat Dec 22, 2018 10:07 am
Aren't we do for a bounce? :)
It will bounce once it hits the floor, unfortunately it's hard to see the floor from where we stand.
Just statically speaking. :)
Reversion to the mean and all that. :)
"statically" speaking would be at rest with no movement at all
currently there's a lot of downward momentum, with the holiday slowdown, various "uncertainties" in the news cycle, end of year tax transactions and fund changes, it's hard to see what will break that momentum before next year... maybe we'll begin the climb backup early next year... maybe not...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

harmoniousmonk
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Re: U.S. stocks in free fall

Post by harmoniousmonk » Sat Dec 22, 2018 10:39 am

Has anyone been kicked out of Flagship or Flagship select yet?

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Flymore
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Re: U.S. stocks in free fall

Post by Flymore » Sat Dec 22, 2018 10:40 am

J G Bankerton wrote:
Sat Dec 22, 2018 10:31 am
Flymore wrote:
Sat Dec 22, 2018 10:25 am
Just statically speaking. :)
Reversion to the mean and all that. :)
. How much time does one have to wait for the mean to not be so mean? :confused
Probable a year. Maybe more, Maybe less. :)

RollTide31457
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Re: U.S. stocks in free fall

Post by RollTide31457 » Sat Dec 22, 2018 10:47 am

Cash is king. We’ve been working on accumulating 10+ years of living expenses in cash reserves since 2009.

rerod
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Re: U.S. stocks in free fall

Post by rerod » Sat Dec 22, 2018 10:50 am

Scooter57 wrote:
Sat Dec 22, 2018 9:47 am
Some more thoughts about the Japanese market references. The Japanese market was insanely overvalued before it collapsed and stayed down for all the years that followed. The usual argument that this doesn't apply to US markets is that we aren't looking at that kind of overvaluation.

To some extent this is true. But still, there are valuation issues. The majority of the "growth" in the large cap indexes over this past year was due to dramatic rises in the prices of a very few monster stocks--especially the so called FAANG stocks (Facebook, Amazon, Apple etc.) At one time this year Amazon's P/E was in the 100s. It has fallen to "only" 77 right now. The P/Es of some of these other stocks were also very rich. Netflix P/E has dropped to 88. It was 149 last summer. The biotech sector, which had been hot and now is dropping at rates much higher than the rest of the market, was full of companies with billion dollar market caps that had no earnings or if they did, very modest earnings giving them P/Es of 60 or higher.

So while we aren't at Japanese valuation levels for the entire market, there are quite a few companies in the top 50% of the large cap indexes that do have valuations that are extremely inflated. This has been true for several years. "Irrational exuberance" can persist for quite a while, as we all learned in the 1990s. Many investors fled to stocks because interest rates close to 0% lasted far longer than any of us dreamed they could.

One other factor to consider is that valuation is based on the relationship of price to various metrics, though many people only look at earnings per share. Because of this, corporate execs, whose salaries are tied much too closely to stock performance, have come up with a lot of tricks since the 1980s when Japan's market collapsed, to inflate the earnings per share, even when the rest of the company's annual report read carefully, paints a less rosy picture.

[OT comments removed by admin LadyGeek]
Thanks for that.. I look forward to reading more from you before they get edited.

Grogs
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Re: U.S. stocks in free fall

Post by Grogs » Sat Dec 22, 2018 10:54 am

harmoniousmonk wrote:
Sat Dec 22, 2018 10:39 am
Has anyone been kicked out of Flagship or Flagship select yet?
Aren't you grandfathered in unless you drop out because you actually sell funds? I can't imagine that if someone put in $500k or whatever the cutoff is, and the value dropped to $499.9k the next day that they would be encouraged to keep their money at Vanguard if they were promptly dropped down a level.

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J G Bankerton
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Re: U.S. stocks in free fall

Post by J G Bankerton » Sat Dec 22, 2018 11:04 am

RollTide31457 wrote:
Sat Dec 22, 2018 10:47 am
Cash is king. We’ve been working on accumulating 10+ years of living expenses in cash reserves since 2009.
Cash is still a "real" loser. It was a super real loser for many years.

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gilgamesh
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Re: U.S. stocks in free fall

Post by gilgamesh » Sat Dec 22, 2018 11:06 am

BogleMelon wrote:
Sat Dec 22, 2018 8:53 am
gilgamesh wrote:
Sat Dec 22, 2018 3:13 am
I am starting to realize I may be tempted not to ‘stay the course’ if the markets continue to slide significantly...so far it’s been easy, as it’s not significant, but say if S&P 500 is down 30% from its all-time high I may be tempted to change my AA.

I’m about 9 years from retirement and at around 30% in bonds...if USA stocks decline by 30% I’m thinking of going 25% bonds, and 20% bond at a 35% market decline and go down to 15% bonds if it declines by 40%. There on , I’ll stay there...

I don’t think I could resist the stock market sale, if it declines by 30%...heck! Even 20% will be mighty tempting...

Besides my 30% bond allocation was assuming a 50% stock decline...if stocks are already down 30%, it’s unlikely (not impossible) to go another 50%, So why stay at 30%? I should have thought about this before, but it makes a lot of sense now...
If new information becomes available to you now and it wasn't available to you before for whatever reason, then (now) is the correct time to adjust your AA instead of waiting and sell low. You didn't know before your real risk tolerance, and this is absolutely so fine because we are humans after all with emotions that don't usually follow the theory. But since you start to get a clearer idea now how really your tolerance is, then no reason to wait for a crash to happen to start to make the changes.
I don’t agree with you...Now will not be the time.

The whole point was to buy stocks in the cheap. The new information I have now, precisely says not to act now....

Say, the assumption now is that the stock market can decline 50% from its all time high. At that data point, I’m willing to risk 70% of my portfolio to stock risk. After a 30% decline, it’s unlikely to drop another 50% and secondly stocks are on sale - that’s when I want to have more than 70% in stocks as I can take more risk as I’m not fearing another 50% loss and I’m potemtially buying stocks for cheap. It makes absolutely no sense to change my AA now
Last edited by gilgamesh on Sat Dec 22, 2018 11:10 am, edited 1 time in total.

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J G Bankerton
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Re: U.S. stocks in free fall

Post by J G Bankerton » Sat Dec 22, 2018 11:08 am

harmoniousmonk wrote:
Sat Dec 22, 2018 10:39 am
Has anyone been kicked out of Flagship or Flagship select yet?
Do they rip off your buttons and break your sword when they kick you out?
I had a fund fall below admiral requirement for over a year and I was not demoted to a common "investor".

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