U.S. stocks in free fall

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ClassII
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Re: U.S. stocks in free fall

Post by ClassII »

Marseille07 wrote: Sat May 21, 2022 4:12 pmYour math is correct, but my argument is that withdrawals should be some percentage of your remaining balance. If you have 1.25M doing 50K/year, and your portfolio becomes 625K after a 50% crash, then you ought to be drawing 25K instead of 50K is what I'm saying. Having some extra cash can certainly help, I'm not saying it doesn't.
Lets see you live on $25k for a prolonged period. Yes in Mr. Moneybag-Boglehead world living on 50% of your salary is inconvenient but reasonable. Mr. Mainstreet who can barely retire with social security and a meager 401k is not going to last long like that.
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Re: U.S. stocks in free fall

Post by LadyGeek »

Please stay on-topic, which is the US market (decreasing).
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smooth_rough
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Re: U.S. stocks in free fall

Post by smooth_rough »

Amazon laying off 100,000? We're already in recession, not going to argue. Any "defensive plays" for your portfolio to share?
Last edited by smooth_rough on Sat May 21, 2022 4:45 pm, edited 1 time in total.
ClassII
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Re: U.S. stocks in free fall

Post by ClassII »

smooth_rough wrote: Sat May 21, 2022 4:40 pm Amazon laying off 100,000? We're already in recession, not going to argue. Any "defensive plays" to share?
Reference? I can't find it anywhere online.
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9-5 Suited
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Re: U.S. stocks in free fall

Post by 9-5 Suited »

Abalyon wrote: Fri May 20, 2022 1:44 pm
9-5 Suited wrote: Fri May 20, 2022 12:50 pm
Abalyon wrote: Fri May 20, 2022 12:24 pm Wow, S&P starting to test 3,800. This is awesome. When I started investing at 4,300, I dreamed of levels this low and they might get even lower!
I wish people would stop with this unabashed excitement about stock declines. I'm 35 and still accumulating as well, so I understand the value that can come from continued investment during market declines. But it's also not that hard to temper or moderate this "excitement" if you have a few small ounces of empathy. Many people - including people I know and care about - are in or near retirement without tremendous amounts of money to spare.

To me it's an indicator of selfishness and lack of experience as an investor to have such outward expressions of enthusiasm on the topic. Maybe in echo chamber bubbles of young high earners in FIRE forums it's a nice rallying cry.

My hope is this attitude can be dialed down a few notches on the forum. And this comment is one of hundreds of similar ones, so I'm responding to this one but not responding only to Abalyon in particular.
I see what you mean and I apologize for being so insensitive. I realize that I’m in a privileged position in being young and not everyone is in as much of a cushion as me, especially in this space. Stock declines and economic falls has real consequences and impacts others in varying degrees. I’ll dial back the excitement in the future.
All good! I realized afterward that this comment was a little on the preachy side. I appreciate that you took it in the (nicer) spirit it was intended. It had been on my mind for a little while and your comment happened to be in the crosshairs :)

I completely understand your excitement for lower prices on stocks and am glad you are continuing to invest into a difficult market with a positive attitude. Wishing you the best with the outcome since it’s a shared outcome after all …
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Cheez-It Guy
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Re: U.S. stocks in free fall

Post by Cheez-It Guy »

ClassII wrote: Sat May 21, 2022 4:15 pm
Marseille07 wrote: Sat May 21, 2022 4:12 pmYour math is correct, but my argument is that withdrawals should be some percentage of your remaining balance. If you have 1.25M doing 50K/year, and your portfolio becomes 625K after a 50% crash, then you ought to be drawing 25K instead of 50K is what I'm saying. Having some extra cash can certainly help, I'm not saying it doesn't.
Lets see you live on $25k for a prolonged period. Yes in Mr. Moneybag-Boglehead world living on 50% of your salary is inconvenient but reasonable. Mr. Mainstreet who can barely retire with social security and a meager 401k is not going to last long like that.
This is completely possible when you don't have debt. I've probably been doing it for 15 years running, except the year I bought a new car with cash.
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Re: U.S. stocks in free fall

Post by Triple digit golfer »

HomerJ wrote: Sat May 21, 2022 12:41 pm
Triple digit golfer wrote: Sat May 21, 2022 9:59 am
m@ver1ck wrote: Sat May 21, 2022 9:57 am
Tim_in_GA wrote: Sat May 21, 2022 9:12 am
HomerJ wrote: Fri May 20, 2022 5:42 pm If you retire with $1 million, 100% in stocks, and the market crashes 50%, so you only have $500,000 now... AND you are pulling $40,000 a year from that $500,000 (4% withdrawals from the original $1 million), after five years you will have pulled $200,000 out, and be down to $300,000.

If the market finally bounces back to it's original heights, you're only going to have $600,000 when it gets back to even. The $200,000 you spend over those 5 years is gone, and never bounces back. You technically blew through $400,000 in 5 years because you were selling stocks at 50% down.

This is why one should have a good chunk in fixed-income at retirement, so you can spend that in a crash and leave your stocks alone and wait for them to recover.

If you were 60/40, the $600,000 in stocks would drop to $300,000, you wouldn't touch it, instead spending $200,000 out of the fixed-income.

After five years the $300,000 would bounce back fully to $600,000, and you'd still have $200,000 in fixed-income, so you'd be at $800,000 after the recovery instead of at $600,000.
Depends in what your fixed income is invested. If it was 40% bonds you wouldn't be doing so hot this year.
If one is really 60/40 - would one not want to remain at 60/40 / even during down turn? Since there is no guarantee that a bounce will happen - and stocks could drop another 50% just as one is done with spending down their bonds…
Yes, and if stocks are down 50%, you'd need yo spend down bonds for a while to get back to 60/40. Or, rebalance and then you're spending at 60/40. Same end result theoretically
We've all learned that Total Bond Fund can drop a lot in short-term. We all knew that before this happened that intermediate bond funds are not really short-term investments. But now we've learned the lesson first-hand. Total Bond will bounce back too (as dividends rise), but it will take a while.

Which is why if one is 60/40 in retirement, at least 10% of that 40% should be short-term investments, like cash, CDs, stable-value funds, and you'd spend those first.
I totally agree with that.

I'd even say the first 10% in cash/bonds should be those things.

So a 90/10 would be 10% cash.
70/30 would be 10% cash, 20% total bond.

Or maybe dollars instead. The first X years of expenses should be cash.

I don't follow this but I should.
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Re: U.S. stocks in free fall

Post by rockstar »

Marseille07 wrote: Sat May 21, 2022 4:12 pm
HomerJ wrote: Sat May 21, 2022 3:49 pm No, it's not about spending 10% or 20% less because stocks are down... If you are 100% stocks and stocks crash 50%, and you are forced to sell stocks to eat, everything is costing you twice as much.

Because every $50,000 you sell from your stock pile when stocks are 50% down is costing you $100,000 from your original retirement portfolio value.

Better to have SOME money in cash\bonds\etc. so you can leave the stocks alone and wait for them to recover.
Your math is correct, but my argument is that withdrawals should be some percentage of your remaining balance. If you have 1.25M doing 50K/year, and your portfolio becomes 625K after a 50% crash, then you ought to be drawing 25K instead of 50K is what I'm saying. Having some extra cash can certainly help, I'm not saying it doesn't.
You have to withdraw your expenses. That doesn't change.
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Re: U.S. stocks in free fall

Post by mtmingus »

AlphaLess wrote: Sat May 21, 2022 3:57 pm
Aaand...it'sgone wrote: Sat May 21, 2022 3:41 pm
lostdog wrote: Sat May 21, 2022 2:05 pm Sam's Club was packed today. All of the retail business around Sams were packed.

Hard to imagine a possible recession after seeing carts full of junk at Sam's club today.
Dang, I had the opposite experience grocery shopping today. I personally skipped items I had planned to buy because the prices were way up. It was at H-Mart, so perhaps they have more supply chain issues than a typical market, but I left convinced that discretionary spending will slow down.

But, I'll keep investing every paycheck anyway.
We have decided not to buy a new set of patio furniture this summer.
I agree:
- discretionary spending is going down,
- as supply chain issues are getting solved, there is too much product.

We are living in a perfect world of whack-a-mole.
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Re: U.S. stocks in free fall

Post by Marseille07 »

strummer6969 wrote: Sat May 21, 2022 6:23 pm Hmm...thought it would be 'priced in' since that much is already known. But it makes sense.
It takes a while to unfold because lots of bond buying happening these days pushing the yields down as the markets lost 8 straight weeks for the first time since 1932.
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Re: U.S. stocks in free fall

Post by Nathan Drake »

QQQ and TQQQ won’t do very well in a 2000 era revaluation

Many tech companies are far more exposed to the business cycle than many believe
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newyorker
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Re: U.S. stocks in free fall

Post by newyorker »

How are people doing these days?

Will it drop more? What do we do? Keep buying?
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HanSolo
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Re: U.S. stocks in free fall

Post by HanSolo »

newyorker wrote: Sat May 21, 2022 7:24 pm How are people doing these days?
Fine, thank you.
Will it drop more? What do we do? Keep buying?
There will be ups and downs. Stay the course.
ClassII wrote: Sat May 21, 2022 11:30 am
Yesterdaysnews wrote: Sat May 21, 2022 10:55 am 2008 really felt like the entire financial system could collapse. This does not feel like that at all. In some sense it feels healthy that some degree of rationality is returning to the market, although the process is painful.
Last night out of my own curiosity I pulled up the S&P chart and looked from the (then) ATH on 10/8/2007 to the bottom of the crash (3/2/2009). Curiously, there was almost a whole year of rather steady declines until the bottom fell out. So it wasn't like we went from all time high to crash instantly, it took almost a year of bad news before people really panicked.
Some people "really panicked" earlier, some later, and some not at all. Who knows, maybe an equal number panicked on each day during that period. In other words, it's hard to measure. BTW, your dates are a bit off.

So, just like back then, there are people who've already panicked, people who will panic later, and then there will be people who feel like they missed the boat because the market never got down to the price where they wanted to buy.
Pelerus wrote: Sat May 21, 2022 3:06 pm
Beensabu wrote: Sat May 21, 2022 2:18 pm
lostdog wrote: Sat May 21, 2022 2:05 pm ...seeing carts full of junk at Sam's club today.
What kind of junk?
Probably Spam and bottled water.
Meanwhile at the coffee shops, there's still no shortage of people paying 5 bucks for a cup of coffee.

There's the old saying: when your neighbor loses his job, that's a recession, and when you lose yours, it's a depression.
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Re: U.S. stocks in free fall

Post by Nathan Drake »

HanSolo wrote: Sat May 21, 2022 7:25 pm There's the old saying: when your neighbor loses his job, that's a recession, and when you lose yours, it's a depression.
And when a Boglehead loses their job, it’s a sabbatical :)
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Re: U.S. stocks in free fall

Post by marcopolo »

Nathan Drake wrote: Sat May 21, 2022 7:33 pm
HanSolo wrote: Sat May 21, 2022 7:25 pm There's the old saying: when your neighbor loses his job, that's a recession, and when you lose yours, it's a depression.
And when a Boglehead loses their job, it’s a sabbatical :)
I thought it was an early retirement :beer
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Re: U.S. stocks in free fall

Post by Kevin M »

strummer6969 wrote: Sat May 21, 2022 6:14 pm
rockstar wrote: Sat May 21, 2022 6:10 pm
mbltna wrote: Sat May 21, 2022 5:47 pm <snip>
smooth_rough wrote: Sat May 21, 2022 4:50 pm <snip>
Once the long bond tops out, QQQ and even TQQQ is going to be very tasty to pick up.
Hasn't it already? Yields seem to have flatlined since mid-April.
Assuming you mean 30-year bond by "long bond", it hasn't really flattened since mid-April.

Image

On April 14 yields was 2.92%. It topped out on May 6 at 3.23%, and ended Friday at 2.99%, down from 3.05% on Thursday. So it's not much higher than mid-April now, but I would not describe it as "flattened since mid-April".

Of course this thread is about stocks in free fall, but apparently some think that this is related to the "long bond", so apparently this is on topic.

Kevin
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Re: U.S. stocks in free fall

Post by newyorker »

I love how everyone become more analytical when the market drops.
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HanSolo
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Re: U.S. stocks in free fall

Post by HanSolo »

newyorker wrote: Sat May 21, 2022 9:03 pm I love how everyone become more analytical when the market drops.
Are you sure? I was pretty analytical all along.
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Re: U.S. stocks in free fall

Post by nigel_ht »

HomerJ wrote: Fri May 20, 2022 5:42 pm
peskypesky wrote: Fri May 20, 2022 3:51 pm
HomerJ wrote: Fri May 20, 2022 3:28 pm
peskypesky wrote: Fri May 20, 2022 3:18 pm It's funny that one person is criticizing me for being too pessimistic about the market's prospects, and someone else is criticizing me for being too optimistic. :sharebeer

They probably should argue with each other, since I'm in the middle. :)
What was funny was you saying "Dark days are coming for years" AND "I wish I could borrow money to buy stocks" in the same post.

That worked in 2008 because you were still getting a paycheck. (and the market recovered quickly, so even if you were retired it could have worked).

If dark days continue for years, when your cash runs out, you will have to sell equities to eat.

You can't just wait 5-10 years for the market to bounce back if you are spending down your portfolio, AND paying interest on some margin loans (assuming they don't get called).
The market took 5 years to recover in 2008. To me that's not so quick. But we can have different opinions on whether that's quick.

I have no margin loans.

And I absolutely CAN wait 5-10 years for the market to bounce back. What other choice would I have? Wouldn't we all be waiting for the market to bounce back?
Look, you may not realize this, but if you are SELLING stocks each year to buy food, you can run out of money if it takes too long to recover.

Because the 3% or 4% that you are pulling from your 100% equities each year never gets a chance to bounce back.

If you retire with $1 million, 100% in stocks, and the market crashes 50%, so you only have $500,000 now... AND you are pulling $40,000 a year from that $500,000 (4% withdrawals from the original $1 million), after five years you will have pulled $200,000 out, and be down to $300,000.

If the market finally bounces back to it's original heights, you're only going to have $600,000 when it gets back to even. The $200,000 you spend over those 5 years is gone, and never bounces back. You technically blew through $400,000 in 5 years because you were selling stocks at 50% down.

This is why one should have a good chunk in fixed-income at retirement, so you can spend that in a crash and leave your stocks alone and wait for them to recover.

If you were 60/40, the $600,000 in stocks would drop to $300,000, you wouldn't touch it, instead spending $200,000 out of the fixed-income.

After five years the $300,000 would bounce back fully to $600,000, and you'd still have $200,000 in fixed-income, so you'd be at $800,000 after the recovery instead of at $600,000.
Generally 4% assumes 50/50 or 60/40…although even with 100/0 it had a 97% success rate over 30 years when ERN computed it.

Image

You probably get better results by taking SS early if you are 100/0 and down 50%+ and it looks like recovery will take a while.

I guess you could use Nikkei as the test but I’m on my phone…but historically for the US 100/0 isn’t that bad over 30 years at 4% and has a higher success rate than 50/50.

You can probably push that to 100% by skipping COLA a couple years when below that 50% market value…
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Re: U.S. stocks in free fall

Post by InvestorHowie »

Aaand...it'sgone wrote: Sat May 21, 2022 3:41 pm
lostdog wrote: Sat May 21, 2022 2:05 pm Sam's Club was packed today. All of the retail business around Sams were packed.

Hard to imagine a possible recession after seeing carts full of junk at Sam's club today.
Dang, I had the opposite experience grocery shopping today. I personally skipped items I had planned to buy because the prices were way up. It was at H-Mart, so perhaps they have more supply chain issues than a typical market, but I left convinced that discretionary spending will slow down.

But, I'll keep investing every paycheck anyway.
Having shopped at both of these stores over the past week I can say that both are as busy as ever here in the Chicago area. While inflation is very much in effect I've always been one to shop the sales in any economy. Noticing that where DW and I might typically make 2-3 casual trips to the local grocery store each week we're definitely hitting up Sam's more frequently and putting more emphasis on buying in bulk (meat and paper products, in particular). Slight behavioral changes yielding a lesser effect on our budget.
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m@ver1ck
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Re: U.S. stocks in free fall

Post by m@ver1ck »

HomerJ wrote: Sat May 21, 2022 3:49 pm
Marseille07 wrote: Sat May 21, 2022 1:13 pm
HomerJ wrote: Sat May 21, 2022 1:04 pm Well, sure... if you are still accumulating, and still getting a paycheck, you can afford to be 100% in stocks (with an emergency fund), because you aren't pulling from your portfolio to eat. You can just let the money sit there and wait for it to recover. In fact, you're still adding to the pile at lower prices.

The danger when you retire and start pulling from your portfolio. You don't want to be forced to sell stocks when they are 50% down.

Trouble is that sometimes people "get retired" (laid off) before they plan to retire, so yeah, it's hard to go 100/0 right up to the date of your retirement, and better to slowly move to 80/20, 70/30, whatever, as you approach retirement age.
But you don't need to downshift AA; you can just slash discretionary spending you budgeted (less travel).

If you can't do that then you aren't ready to retire ("get retired") yet, you'd have to find a new gig unfortunately.
No, it's not about spending 10% or 20% less because stocks are down... If you are 100% stocks and stocks crash 50%, and you are forced to sell stocks to eat, everything is costing you twice as much.

Because every $50,000 you sell from your stock pile when stocks are 50% down is costing you $100,000 from your original retirement portfolio value.

Better to have SOME money in cash\bonds\etc. so you can leave the stocks alone and wait for them to recover.
If one’s AA is say. 60/40, shouldn’t it stay that always - good times and bad? So even in times of crash, one would rebalance back to 60/40 - and then withdraw from them
Both in 60/40 ratio?
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Re: U.S. stocks in free fall

Post by lostdog »

Triple digit golfer wrote: Sat May 21, 2022 5:20 pm
HomerJ wrote: Sat May 21, 2022 12:41 pm
Triple digit golfer wrote: Sat May 21, 2022 9:59 am
m@ver1ck wrote: Sat May 21, 2022 9:57 am
Tim_in_GA wrote: Sat May 21, 2022 9:12 am

Depends in what your fixed income is invested. If it was 40% bonds you wouldn't be doing so hot this year.
If one is really 60/40 - would one not want to remain at 60/40 / even during down turn? Since there is no guarantee that a bounce will happen - and stocks could drop another 50% just as one is done with spending down their bonds…
Yes, and if stocks are down 50%, you'd need yo spend down bonds for a while to get back to 60/40. Or, rebalance and then you're spending at 60/40. Same end result theoretically
We've all learned that Total Bond Fund can drop a lot in short-term. We all knew that before this happened that intermediate bond funds are not really short-term investments. But now we've learned the lesson first-hand. Total Bond will bounce back too (as dividends rise), but it will take a while.

Which is why if one is 60/40 in retirement, at least 10% of that 40% should be short-term investments, like cash, CDs, stable-value funds, and you'd spend those first.
I totally agree with that.

I'd even say the first 10% in cash/bonds should be those things.

So a 90/10 would be 10% cash.
70/30 would be 10% cash, 20% total bond.

Or maybe dollars instead. The first X years of expenses should be cash.

I don't follow this but I should.
Or maybe just all short term bond fund. That method might average out to having just short bonds. Sounds simple.
VT and chill...
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Re: U.S. stocks in free fall

Post by JoMoney »

The problem with having 0 cash is if you're in a withdrawal phase and need cash, a short-term bond fund isn't cash. There can be (and have been) instances where there market has unexpectedly closed (i.e. 9-11-2001) and/or mutual funds frozen for a period of time to protect the longer term investors as others flee for the exits. After 9/11 there were efforts made to get money market funds available again quickly, other mutual funds were delayed a little longer, similarly the Fed has made unusual moves in the past to ensure the liquidity and stability of money market funds. Short-term (or longer) bond investments aren't intended to be transaction accounts for immediate monies.
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Re: U.S. stocks in free fall

Post by anon_investor »

JoMoney wrote: Sun May 22, 2022 9:10 am The problem with having 0 cash is if you're in a withdrawal phase and need cash, a short-term bond fund isn't cash. There can be (and have been) instances where there market has unexpectedly closed (i.e. 9-11-2001) and/or mutual funds frozen for a period of time to protect the longer term investors as others flee for the exits. After 9/11 there were efforts made to get money market funds available again quickly, other mutual funds were delayed a little longer, similarly the Fed has made unusual moves in the past to ensure the liquidity and stability of money market funds. Short-term (or longer) bond investments aren't intended to be transaction accounts for immediate monies.
One reason to have a real bank and not rely on a CMA as a bank?
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Re: U.S. stocks in free fall

Post by Robot Monster »

strummer6969 wrote: Sat May 21, 2022 6:23 pm
rockstar wrote: Sat May 21, 2022 6:18 pm
strummer6969 wrote: Sat May 21, 2022 6:14 pm
rockstar wrote: Sat May 21, 2022 6:10 pm
mbltna wrote: Sat May 21, 2022 5:47 pm

A little levity for the thread.

Had to share that I got a 30 second add for QQQ before that video. Coincidence or AI? (rhetorical) :shock:

Made me chuckle a bit too much… :D
Once the long bond tops out, QQQ and even TQQQ is going to be very tasty to pick up.
Hasn't it already? Yields seem to have flatlined since mid-April.
Fed isn't done tightening. As its balance sheet runs off, it should go higher. We really haven't seen those effects yet. The below chart is updated every Thursday. And there should be some reasonable spread between the short end and long end as the Fed pushes up the Fed Funds rate.

https://www.federalreserve.gov/monetary ... trends.htm
Hmm...thought it would be 'priced in' since that much is already known. But it makes sense.


My understanding...

What's priced in is the expected pace of the Fed's quantitative tightening (QT) program. When the Fed actually runs off its balance sheet, it might act more, or less aggressively than the market expects. As a consequence, as the balance sheet runs off, bond yields might go higher, or lower, depending on this and also other things e.g. if things turn more risk-off, investors might buy Treasuries more aggressively, or Japanese investors could step in to buy Treasuries with greater zest if the yen unexpectedly reverses trend and begins to strengthen against the US dollar.

***

As far as where bond yields may go, I found this interesting...

The 10-year Treasury yield tends to peak near the peak fed funds rate

Image
From "8 Questions on the Bond Market and Rate Hikes"
Schwab link

***

May 26 edit:
“We have rarely been as bullish on government bonds as we are now,” said Mike Riddell, a senior portfolio manager at Allianz Global Investors. “If growth slumps, then inflationary pressure will recede, and yields look more attractive than they have in a long time.”...“Over the past month, we went from inflation woes dominating to recession fears increasingly being the cause for concern,” said George Goncalves, head of US macro strategy at MUFG Securities. “It’s possible that we have hit the cycle high for the [US] 10-year yield and it’s more likely we continue to slide lower in long-term rates into the summer months.”
Source: Financial Times article link

#cinnamon
Last edited by Robot Monster on Thu May 26, 2022 8:56 am, edited 2 times in total.
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AnnetteLouisan
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Re: U.S. stocks in free fall

Post by AnnetteLouisan »

Beensabu wrote: Mon May 16, 2022 9:37 pm
Robot Monster wrote: Mon May 16, 2022 2:40 pm
NewbieBogle007 wrote: Mon May 16, 2022 2:35 pm Anybody buying today? And where is AnnetteL?
She has her very own thread across town in Personal Investments. It's very nice, with cozy chairs, and chamomile tea.
She did and it was, but now the doors are locked and the windows boarded up. I hope she comes back soon - she's interesting.
Why thank you everso.
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JoMoney
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Re: U.S. stocks in free fall

Post by JoMoney »

anon_investor wrote: Sun May 22, 2022 9:14 am
JoMoney wrote: Sun May 22, 2022 9:10 am The problem with having 0 cash is if you're in a withdrawal phase and need cash, a short-term bond fund isn't cash. There can be (and have been) instances where there market has unexpectedly closed (i.e. 9-11-2001) and/or mutual funds frozen for a period of time to protect the longer term investors as others flee for the exits. After 9/11 there were efforts made to get money market funds available again quickly, other mutual funds were delayed a little longer, similarly the Fed has made unusual moves in the past to ensure the liquidity and stability of money market funds. Short-term (or longer) bond investments aren't intended to be transaction accounts for immediate monies.
One reason to have a real bank and not rely on a CMA as a bank?
Maybe, but there have been unusual efforts made to ensure money market funds are kept liquid and available, and if the CMA is using the same ACH/Debit card system(s) as the banks, if that was gummed up I would imagine that's more a case for having a real "Brick and Mortar" local bank you can walk into versus relying on an online-only bank or brokerage.
For most scenarios of some financial system freeze though, I imagine the better mitigation is to have an emergency kit with physical cash available to tide over while the issues are sorted out.
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Re: U.S. stocks in free fall

Post by anon_investor »

JoMoney wrote: Sun May 22, 2022 9:27 am
anon_investor wrote: Sun May 22, 2022 9:14 am
JoMoney wrote: Sun May 22, 2022 9:10 am The problem with having 0 cash is if you're in a withdrawal phase and need cash, a short-term bond fund isn't cash. There can be (and have been) instances where there market has unexpectedly closed (i.e. 9-11-2001) and/or mutual funds frozen for a period of time to protect the longer term investors as others flee for the exits. After 9/11 there were efforts made to get money market funds available again quickly, other mutual funds were delayed a little longer, similarly the Fed has made unusual moves in the past to ensure the liquidity and stability of money market funds. Short-term (or longer) bond investments aren't intended to be transaction accounts for immediate monies.
One reason to have a real bank and not rely on a CMA as a bank?
Maybe, but there have been unusual efforts made to ensure money market funds are kept liquid and available, and if the CMA is using the same ACH/Debit card system(s) as the banks, if that was gummed up I would imagine that's more a case for having a real "Brick and Mortar" local bank you can walk into versus relying on an online-only bank or brokerage.
For most scenarios of some financial system freeze though, I imagine the better mitigation is to have an emergency kit with physical cash available to tide over while the issues are sorted out.
I was referencing people who do one-stop-shop and auto sweep in/out from a MM within Fido. No sure how a closed market impacts that function.
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Re: U.S. stocks in free fall

Post by JoMoney »

anon_investor wrote: Sun May 22, 2022 9:35 am
JoMoney wrote: Sun May 22, 2022 9:27 am
anon_investor wrote: Sun May 22, 2022 9:14 am
JoMoney wrote: Sun May 22, 2022 9:10 am The problem with having 0 cash is if you're in a withdrawal phase and need cash, a short-term bond fund isn't cash. There can be (and have been) instances where there market has unexpectedly closed (i.e. 9-11-2001) and/or mutual funds frozen for a period of time to protect the longer term investors as others flee for the exits. After 9/11 there were efforts made to get money market funds available again quickly, other mutual funds were delayed a little longer, similarly the Fed has made unusual moves in the past to ensure the liquidity and stability of money market funds. Short-term (or longer) bond investments aren't intended to be transaction accounts for immediate monies.
One reason to have a real bank and not rely on a CMA as a bank?
Maybe, but there have been unusual efforts made to ensure money market funds are kept liquid and available, and if the CMA is using the same ACH/Debit card system(s) as the banks, if that was gummed up I would imagine that's more a case for having a real "Brick and Mortar" local bank you can walk into versus relying on an online-only bank or brokerage.
For most scenarios of some financial system freeze though, I imagine the better mitigation is to have an emergency kit with physical cash available to tide over while the issues are sorted out.
I was referencing people who do one-stop-shop and auto sweep in/out from a MM within Fido. No sure how a closed market impacts that function.
The sweep account on Fidelity's CMA uses a bank account, banks don't require active market/exchanges to transact.
If you move that money from the bank account/sweep to a money market mutual fund, which Fidelity does allow you to access/debit like cash in the bank, that might have some interesting nuances in a closure of the exchanges... The money markets don't necessarily use central exchanges but brokerage transacted mutual funds and especially ETFs do. As far as accessing money in a money market mutual fund linked to a CMA, I imagine they would still allow you to debit against the account, it just might be a "pending" transaction a little longer (as is the case on weekends.) ... all just hypothetical though, it would depend on the scenario. There have been unusual efforts made though to keep money market funds liquid and trustworthy, including the Federal Reserve backing up money market funds in the global financial crisis and during the initial parts of the COVID panic.
Regarding what happened on 9/11, it was a bit different then to:
NYT: A Gradual Return for Mutual Funds
https://www.nytimes.com/2001/09/16/busi ... funds.html
https://web.archive.org/web/20200428012 ... funds.html
... Many people lost access to their money market funds after the Tuesday attack on the World Trade Center. Fidelity Investments, Charles Schwab & Company, T. Rowe Price, the Vanguard Group and other fund companies have sometimes taken unusual action to get their funds running again.
Schwab amended its money market fund bylaws to permit operations even when the New York Stock Exchange is closed, as it has been since Tuesday. The funds can now operate as long as the Federal Reserve Bank of New York is open. The New York Fed has kept functioning during the crisis, moving its open market operations to an emergency site in East Rutherford, N.J.
Fidelity began reopening some bond funds when fixed-income markets resumed limited trading on Thursday...
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Re: U.S. stocks in free fall

Post by JoMoney »

anon_investor wrote: Sun May 22, 2022 10:00 am...
Interesting. It sure sounds like funds in a MM fund were not available for a couple of days.
Not just "sounds like" It says that explicitly. But in some instances changes were made because of that event to get them back open quickly.. quicker than other mutual funds which was what my initial comment was about, and back to your comment about Fidelity's CMA -it does not sweep to a money market mutual fund at all it sweeps to a bank account... which doesn't mean there isn't other ways the system could get stalled... but most any of these scenarios are mitigated with having actual physical cash around.
A brick and mortar bank is a little further away from cash, an online bank or brokerage further from that, a bond that isn't matured and requires selling to someone else to cash out further from that, and a mutual fund that holds those bonds even further abstracted.
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Re: U.S. stocks in free fall

Post by Triple digit golfer »

lostdog wrote: Sun May 22, 2022 9:03 am
Triple digit golfer wrote: Sat May 21, 2022 5:20 pm
HomerJ wrote: Sat May 21, 2022 12:41 pm
Triple digit golfer wrote: Sat May 21, 2022 9:59 am
m@ver1ck wrote: Sat May 21, 2022 9:57 am

If one is really 60/40 - would one not want to remain at 60/40 / even during down turn? Since there is no guarantee that a bounce will happen - and stocks could drop another 50% just as one is done with spending down their bonds…
Yes, and if stocks are down 50%, you'd need yo spend down bonds for a while to get back to 60/40. Or, rebalance and then you're spending at 60/40. Same end result theoretically
We've all learned that Total Bond Fund can drop a lot in short-term. We all knew that before this happened that intermediate bond funds are not really short-term investments. But now we've learned the lesson first-hand. Total Bond will bounce back too (as dividends rise), but it will take a while.

Which is why if one is 60/40 in retirement, at least 10% of that 40% should be short-term investments, like cash, CDs, stable-value funds, and you'd spend those first.
I totally agree with that.

I'd even say the first 10% in cash/bonds should be those things.

So a 90/10 would be 10% cash.
70/30 would be 10% cash, 20% total bond.

Or maybe dollars instead. The first X years of expenses should be cash.

I don't follow this but I should.
Or maybe just all short term bond fund. That method might average out to having just short bonds. Sounds simple.
Also a good plan. But I'd add to that, any cash that is absolutely needed and cannot afford to decrease in value should be in cash, always.
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Re: U.S. stocks in free fall

Post by abuss368 »

Backing up the rocket ship and buying even more shares!🚀

Long term investors will be smiling in the future.

Best.
Tony
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Re: U.S. stocks in free fall

Post by Beensabu »

m@ver1ck wrote: Sun May 22, 2022 9:01 am If one’s AA is say. 60/40, shouldn’t it stay that always - good times and bad? So even in times of crash, one would rebalance back to 60/40 - and then withdraw from them
Both in 60/40 ratio?
Makes sense to me. Except withdraw first, then rebalance if necessary.

When stocks go up more than bonds, and you are withdrawing, then you're going to end up withdrawing primarily (and probably entirely) from the stock allocation in order to bring your AA back into balance. And you'll likely have to rebalance on top of that as well, if it's been a particularly good year.

When stocks go down more than bonds, and you are withdrawing, then you're going to end up withdrawing primarily (and perhaps entirely) from the bond allocation in order to bring your AA back into balance. And you might have to rebalance on top of that as well, if it's been a particularly bad year.

When stocks and bonds go down about the same, you withdraw from each in a way that brings your AA back into balance. And you probably don't have to rebalance on top of that.

If you withdraw only from cash/bonds and end up over-rebalancing your AA towards stocks, then your AA goes out of whack and you've increased your risk. Unless you then refill that bucket, but that means selling stocks, so you might as well have just sold as needed to maintain AA in the first place.

Or, there's the thing that I think Homer J was doing, which was over-rebalancing AA towards fixed income by building a cash cushion prior to retirement. So you spend from the cash cushion at the beginning of retirement (whether or not stocks are down) and then maintain the pre-cash AA going forward. That aligns with the idea of going more conservative with AA prior to retirement, just in case. But you're doing it by building a temporary cash cushion, not permanently re-allocating more to bonds. And since the cash gets spent relatively quickly in early retirement, there's no long-term cash drag on the portfolio.
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Re: U.S. stocks in free fall

Post by Beensabu »

AnnetteLouisan wrote: Sun May 22, 2022 9:23 am
Beensabu wrote: Mon May 16, 2022 9:37 pm
Robot Monster wrote: Mon May 16, 2022 2:40 pm
NewbieBogle007 wrote: Mon May 16, 2022 2:35 pm Anybody buying today? And where is AnnetteL?
She has her very own thread across town in Personal Investments. It's very nice, with cozy chairs, and chamomile tea.
She did and it was, but now the doors are locked and the windows boarded up. I hope she comes back soon - she's interesting.
Why thank you everso.
Yay! There you are! I give you two weeks before you're back in full force :wink: Thanks for being you!
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Re: U.S. stocks in free fall

Post by Misenplace »

A post with a naked link to a video discussing US economic policy has been deleted, as well as quoting replies.

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Re: U.S. stocks in free fall

Post by Hoongajji »

abuss368 wrote: Sun May 22, 2022 12:03 pm Backing up the rocket ship and buying even more shares!🚀

Long term investors will be smiling in the future.

Best.
Tony
The truck will run you over.

The rocket is already descending.

Long term investors in 20 years might break even.

YUM will drop 50%
F will drop 70%
TMUS will drop 70%
MCD will drop 53%
CMG will drop 70%
AMD will drop 95%
DE will drop 73%

Those are ice cubes…look at the icebergs and enjoy your rocket ride.

Invest wise.

Adjust accordingly.

H.
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Re: U.S. stocks in free fall

Post by LadyGeek »

A contentious interchange regarding macro-economic policy has been removed. As a reminder, see: Non-actionable (Trolling) Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
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Re: U.S. stocks in free fall

Post by bigblue1ca »

A contentious interchange regarding macro-economic policy
$ hit's getting real around here. 😉
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Re: U.S. stocks in free fall

Post by Forester »

Weaker US dollar over time will = rotation from Blue Chip Quality (S&P 500, Nasdaq) into Toxic Garbage (Small Cap Value). Selling pressure from foreigners.
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Re: U.S. stocks in free fall

Post by Firemenot »

Hoongajji wrote: Sun May 22, 2022 8:08 pm
abuss368 wrote: Sun May 22, 2022 12:03 pm Backing up the rocket ship and buying even more shares!🚀

Long term investors will be smiling in the future.

Best.
Tony
The truck will run you over.

The rocket is already descending.

Long term investors in 20 years might break even.

YUM will drop 50%
F will drop 70%
TMUS will drop 70%
MCD will drop 53%
CMG will drop 70%
AMD will drop 95%
DE will drop 73%

Those are ice cubes…look at the icebergs and enjoy your rocket ride.

Invest wise.

Adjust accordingly.

H.
“ Long term investors in 20 years might break even.” That’s some serious pessimism! I’d happily take the other side of that bet.
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Re: U.S. stocks in free fall

Post by elderwise »

What's with FB dropping so much in after hours AH?..

Tesla is down too

The chart looks like FB jumped off a cliff

I was really hoping we get 2 more solid fake pump days oh well should know better

We barely last 1 trading session if at all before going kaput
barberakb
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Re: U.S. stocks in free fall

Post by barberakb »

Firemenot wrote: Mon May 23, 2022 4:26 pm
Hoongajji wrote: Sun May 22, 2022 8:08 pm
abuss368 wrote: Sun May 22, 2022 12:03 pm Backing up the rocket ship and buying even more shares!🚀

Long term investors will be smiling in the future.

Best.
Tony
The truck will run you over.

The rocket is already descending.

Long term investors in 20 years might break even.

YUM will drop 50%
F will drop 70%
TMUS will drop 70%
MCD will drop 53%
CMG will drop 70%
AMD will drop 95%
DE will drop 73%

Those are ice cubes…look at the icebergs and enjoy your rocket ride.

Invest wise.

Adjust accordingly.

H.
“ Long term investors in 20 years might break even.” That’s some serious pessimism! I’d happily take the other side of that bet.
Maybe he meant Long term crypto investors in 20 years might break even...
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Re: U.S. stocks in free fall

Post by newyorker »

elderwise wrote: Mon May 23, 2022 4:35 pm What's with FB dropping so much in after hours AH?..

Tesla is down too

The chart looks like FB jumped off a cliff

I was really hoping we get 2 more solid fake pump days oh well should know better

We barely last 1 trading session if at all before going kaput
Zuckerberg got sued or sth.
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Re: U.S. stocks in free fall

Post by elderwise »

barberakb wrote: Mon May 23, 2022 4:36 pm
Firemenot wrote: Mon May 23, 2022 4:26 pm
Hoongajji wrote: Sun May 22, 2022 8:08 pm
abuss368 wrote: Sun May 22, 2022 12:03 pm Backing up the rocket ship and buying even more shares!🚀

Long term investors will be smiling in the future.

Best.
Tony
The truck will run you over.

The rocket is already descending.

Long term investors in 20 years might break even.

YUM will drop 50%
F will drop 70%
TMUS will drop 70%
MCD will drop 53%
CMG will drop 70%
AMD will drop 95%
DE will drop 73%

Those are ice cubes…look at the icebergs and enjoy your rocket ride.

Invest wise.

Adjust accordingly.

H.
“ Long term investors in 20 years might break even.” That’s some serious pessimism! I’d happily take the other side of that bet.
Maybe he meant Long term crypto investors in 20 years might break even...
Crypto will launch past Luna, it will be the number 1 wealth creation thing out of this universe 😀.
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Re: U.S. stocks in free fall

Post by Silverado »

Hoongajji wrote: Sun May 22, 2022 8:08 pm
abuss368 wrote: Sun May 22, 2022 12:03 pm Backing up the rocket ship and buying even more shares!🚀

Long term investors will be smiling in the future.

Best.
Tony
The truck will run you over.

The rocket is already descending.

Long term investors in 20 years might break even.

YUM will drop 50%
F will drop 70%
TMUS will drop 70%
MCD will drop 53%
CMG will drop 70%
AMD will drop 95%
DE will drop 73%

Those are ice cubes…look at the icebergs and enjoy your rocket ride.

Invest wise.

Adjust accordingly.

H.
And I’ll buy them all the way down and back up.
bigbadbuff
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Re: U.S. stocks in free fall

Post by bigbadbuff »

newyorker wrote: Mon May 23, 2022 4:37 pm
elderwise wrote: Mon May 23, 2022 4:35 pm What's with FB dropping so much in after hours AH?..

Tesla is down too

The chart looks like FB jumped off a cliff

I was really hoping we get 2 more solid fake pump days oh well should know better

We barely last 1 trading session if at all before going kaput
Zuckerberg got sued or sth.
That news came early afternoon, so if that is the reason it's pretty weird it isn't showing up until AH.
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Re: U.S. stocks in free fall

Post by HomerJ »

Hoongajji wrote: Sun May 22, 2022 8:08 pm Long term investors in 20 years might break even.

YUM will drop 50%
F will drop 70%
TMUS will drop 70%
MCD will drop 53%
CMG will drop 70%
AMD will drop 95%
DE will drop 73%
Long-term investors will be buying those stocks (via the index) at 70%-95% discounts, and will break even long before the market gets back to it's old all-time high.

Deep discounts like that make it fairly easy to break even.

A stock that drops from $100 a share to $5 a share (95% drop like your AMD example), only has to go back to $10 a share before an investor doubles their investment.

By the time the stock gets back to $100 a share, even if it takes 20 years, the investor will have made 20x their investment on that low price.

The price may be "back to even". And the long-term investor's original money is "back to even". But all the new money they invested in those shares when it was down are up 10x,15x,20x.

Which puts the long-term investor at that point at far better than "even".
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Re: U.S. stocks in free fall

Post by corpgator »

bigbadbuff wrote: Mon May 23, 2022 4:55 pm
newyorker wrote: Mon May 23, 2022 4:37 pm
elderwise wrote: Mon May 23, 2022 4:35 pm What's with FB dropping so much in after hours AH?..

Tesla is down too

The chart looks like FB jumped off a cliff

I was really hoping we get 2 more solid fake pump days oh well should know better

We barely last 1 trading session if at all before going kaput
Zuckerberg got sued or sth.
That news came early afternoon, so if that is the reason it's pretty weird it isn't showing up until AH.
The market is dumb and controlled by bots. It was probably so stupid bot that didn't see the news until later. It also shouldn't matter - some might even see it as a positive if he gets sued and is forced to divest control.

Edit: this is related to SNAP's poor earnings. Still dumb since it wrecked 2 much more profitable companies, but not as dumb as dropping the market for Zuck being sued.
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Re: U.S. stocks in free fall

Post by drk »

elderwise wrote: Mon May 23, 2022 4:35 pm What's with FB dropping so much in after hours AH?..
Snap with the Wile E. Coyote effect:
SNAP wrote: Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range. We remain excited about the long-term opportunity to grow our business. Our community continues to grow, and we continue to see strong engagement across Snapchat, and continue to see significant opportunities to grow our average revenue per user over the long term.
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Re: U.S. stocks in free fall

Post by lostdog »

Looks like it will be a rough one tomorrow. Hold on tight!
VT and chill...
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