U.S. stocks in freefall

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Taylor Larimore
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Holding a fund "forever."

Post by Taylor Larimore » Mon Sep 07, 2015 11:00 am

We often talk about holding "forever" here on the forums.

Tibbits:

We try to stress the importance in taxable accounts to only buy tax-efficient funds that can be held "forever." We're trying to say that it is important not to buy a fund you will later exchange -- thereby triggering an unnecessary capital-gain tax.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: U.S. stocks in freefall

Post by Grogs » Mon Sep 07, 2015 11:42 am

tibbitts wrote:
adave wrote:In general I find trying to figure out/predict/deal with the markets very stomach-turning and anxiety creating -- so I do the only thing I know how to. Buy some more stocks/funds when it goes down and plan to hold forever. Never sell even when it gets really ugly. Never lock in those losses and just hope for the best long-term. I haven't really figured out any other way to deal.

This is the only way I can deal with stock investing mentally! That and drinking lots of red wine!

We often talk about holding "forever" here on the forums, but that's not practical for 98% of investors; only for institutions. Most of us will need, or at least hope, to spend down all or nearly all of our investments at some point, and to spend them, we'll have to sell. So by definition, some of us will sell when it's "really ugly" and thus lock in losses, because at the time we won't know if "really ugly" will get better or worse, and/or we will have run out of other funds to spend and will have no alternative.


That's where asset allocation comes in. Let's say you're just hitting retirement, and you have $1MM saved up, split equally between stocks and bonds. If the stock market drops by 50%, your AA is now 67% bonds and 33% stocks. You would sell bonds until you AA was back down to 50/50. If doing a 4% SWR, that would be about 6.25 years of selling bonds. Hopefully the stocks recover before then, and you can rebalance back to 50/50. If it's "really ugly" and stocks are still down 50% after 6+ years, then sure, you might have to start selling at a big loss.

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Re: U.S. stocks in freefall

Post by Leeraar » Mon Sep 07, 2015 1:29 pm

Grogs wrote:
tibbitts wrote:
adave wrote:In general I find trying to figure out/predict/deal with the markets very stomach-turning and anxiety creating -- so I do the only thing I know how to. Buy some more stocks/funds when it goes down and plan to hold forever. Never sell even when it gets really ugly. Never lock in those losses and just hope for the best long-term. I haven't really figured out any other way to deal.

This is the only way I can deal with stock investing mentally! That and drinking lots of red wine!

We often talk about holding "forever" here on the forums, but that's not practical for 98% of investors; only for institutions. Most of us will need, or at least hope, to spend down all or nearly all of our investments at some point, and to spend them, we'll have to sell. So by definition, some of us will sell when it's "really ugly" and thus lock in losses, because at the time we won't know if "really ugly" will get better or worse, and/or we will have run out of other funds to spend and will have no alternative.


That's where asset allocation comes in. Let's say you're just hitting retirement, and you have $1MM saved up, split equally between stocks and bonds. If the stock market drops by 50%, your AA is now 67% bonds and 33% stocks. You would sell bonds until you AA was back down to 50/50. If doing a 4% SWR, that would be about 6.25 years of selling bonds. Hopefully the stocks recover before then, and you can rebalance back to 50/50. If it's "really ugly" and stocks are still down 50% after 6+ years, then sure, you might have to start selling at a big loss.

Not a very robust plan, IMO.

Spend $600k on an SPIA that will pay you $40k per year forever. You then don't much care what the market does, particularly in the short term. It is nuts to have an exposure to stocks that might require you to sell after a drop.

And, you have a $400k emergency fund left over.

L.
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Re: U.S. stocks in freefall

Post by nalor511 » Mon Sep 07, 2015 1:57 pm

My quotes for an SPIA partying $40k/yr cost waaaaaay higher than $600k, around 9.5x higher

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Re: U.S. stocks in freefall

Post by Leeraar » Mon Sep 07, 2015 2:16 pm

nalor511 wrote:My quotes for an SPIA partying $40k/yr cost waaaaaay higher than $600k, around 9.5x higher

Last time I looked, SPIAs for someone in their late 60s were paying a shade under 7%. 7% of $600k is $42k.

Yes, I know this is not indexed for inflation, and that a substantial amount of the payment is return of principal. And, if you die, there is nothing left.

I look at www.immediateannuities.com.

L.
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Re: U.S. stocks in freefall

Post by Browser » Mon Sep 07, 2015 2:31 pm

And, if you die, there is nothing left.

Quite true. :( I was hoping I'd be left, but that's probably hoping for too much.
We don't know where we are, or where we're going -- but we're making good time.

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Re: U.S. stocks in freefall

Post by Leeraar » Mon Sep 07, 2015 2:55 pm

Browser wrote:
And, if you die, there is nothing left.

Quite true. :( I was hoping I'd be left, but that's probably hoping for too much.

But, perhaps, you may be right? :)

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

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Re: U.S. stocks in freefall

Post by gkaplan » Mon Sep 07, 2015 5:43 pm

Taylor Larimore wrote:
Browser wrote:
cfs wrote:Reality check time

At times the US Market will go Up

At times the US Market will go Down

At times the US Market will go Sideways

. . . And that's the way it its . . .

Is this your prediction? :confused

Browser:

It's my prediction also.

Best wishes.
Taylor



And mine.
Gordon

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Re: U.S. stocks in freefall

Post by gkaplan » Mon Sep 07, 2015 5:45 pm

ruralavalon wrote:
Taylor Larimore wrote:
Browser wrote:
cfs wrote:Reality check time

At times the US Market will go Up

At times the US Market will go Down

At times the US Market will go Sideways

. . . And that's the way it its . . .

Is this your prediction? :confused

Browser:

It's my prediction also.

Best wishes.
Taylor

I predict that the stock market will open on Tuesday.


I predict that Browser will start a doomsday thread later this week. And the next. And the next. And the ....
Gordon

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Re: U.S. stocks in freefall

Post by nisiprius » Mon Sep 07, 2015 9:02 pm

tibbitts wrote:...We often talk about holding "forever" here on the forums, but that's not practical for 98% of investors; only for institutions...
I'm not even sure it's practical for institutions. Why was Harvard laying off hundreds of employees, suspending construction on lab facilities, and so forth in 2009? Because they needed money for day-to-day operations and they had invested that money in the endowment fund and they were selling into a bear market. There's a lot of talk about institutions having a long time horizon, but in practice they don't really seem to have it.
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Re: U.S. stocks in freefall

Post by adave » Mon Sep 07, 2015 9:31 pm

My goal is to save a large enough nest egg that I don't have to sell anything during my lifetime - support my lifestyle without dipping into principal.

Granted it is a lofty goal but worth a shot. Retirement is not a big goal of mine but financial independence is.

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Re: U.S. stocks in freefall

Post by Toons » Tue Sep 08, 2015 8:38 am

adave wrote:My goal is to save a large enough nest egg that I don't have to sell anything during my lifetime - support my lifestyle without dipping into principal.

Granted it is a lofty goal but worth a shot. Retirement is not a big goal of mine but financial independence is.


That also was one of my goals,enough dividends ,interest,capital gains so as to not have to sell investments :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: U.S. stocks in freefall

Post by Toons » Tue Sep 08, 2015 8:39 am

adave wrote:My goal is to save a large enough nest egg that I don't have to sell anything during my lifetime - support my lifestyle without dipping into principal.

Granted it is a lofty goal but worth a shot. Retirement is not a big goal of mine but financial independence is.


That also was one of my goals,enough dividends ,interest,capital gains so as to not have to sell investments :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: U.S. stocks in freefall

Post by HomerJ » Tue Sep 08, 2015 2:11 pm

adave wrote:My goal is to save a large enough nest egg that I don't have to sell anything during my lifetime - support my lifestyle without dipping into principal.

Granted it is a lofty goal but worth a shot. Retirement is not a big goal of mine but financial independence is.


That would be great, but it will require you working 10 years longer than you probably need to.

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Tue Sep 08, 2015 3:19 pm

The market timers have been silent lately. We have to know when to get back in. The "Oracle of Omaha" today said he has no idea what the market will do tomorrow let along what it will do in nine months. So who should I believe, a poster on the Internet or Mr. Buffet? :confused

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Re: U.S. stocks in freefall

Post by JoMoney » Tue Sep 08, 2015 3:39 pm

Uncle Pennybags wrote:The market timers have been silent lately. We have to know when to get back in. The "Oracle of Omaha" today said he has no idea what the market will do tomorrow let along what it will do in nine months. So who should I believe, a poster on the Internet or Mr. Buffet? :confused

BUFFETT: I'M NO GOOD ON WHAT'S GOING ON IN MARKETS. I HAVE NO IDEA WHAT WILL HAPPEN TOMORROW OR NEXT WEEK AND SOMETIMES THEY'RE, THEY GET VERY VOLATILE LIKE THIS AND OTHER TIMES THEY PUT YOU TO SLEEP. BUT THE IMPORTANT THING IS WHERE THEY'RE GOING TO HAVE IN FIVE OR TEN YEARS. AND I'M CONFIDENT THEY'LL BE CONSIDERABLY HIGHER IN TEN YEARS. AND I REALLY HAVE NO IDEA WHERE THEY'LL IN TEN DAYS OR TEN MONTHS. ...
http://www.cnbc.com/2015/09/08/cnbc-tra ... today.html

What you should do is focus on your own need/willingness/ability to take the risks in the stock market, set an appropriate allocation, and stay the course.
In aggregate people aren't going to be able beat themselves racing to get out of stocks before the other guy, then if it goes down trying to get back in before the average does. It's a nonsensical zero-sum game that adds nothing to the returns of the businesses or the economy (outside of transaction expenses for the middlemen).
Businesses and the stock market have done very well for people who just avoid making big mistakes. You don't have to beat someone else or some average, and the odds are against you trying to.
Average isn't going to beat average. Don't beat yourself.
http://www.usatoday.com/story/money/per ... e/3188499/
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USA TODAY asked Buffett to put on his personal finance hat and to tick off the three biggest mistakes amateur investors make. Here's Buffett's "Top 3 Mistakes to Avoid":
1. Trying to time the market.
2. Trying to mimic high-frequency traders.
3. Paying too much in fees and expenses.
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Re: U.S. stocks in freefall

Post by Martin » Wed Sep 09, 2015 6:22 am

the Asian markets shot up overnight with Nikkei going up 7.7% and both Asia and Europe following. This is some incredible volatility. Don't like the pricing wait a day, or a couple of hours. There has to be some major money being made and lost on these moves.

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Re: U.S. stocks in freefall

Post by flyingaway » Wed Sep 09, 2015 8:05 am

It Ii difficult to do anything in is environment. On the down day Friday, one could not buy for fear of catching a falling knife. On the up day Tuesday, one could not buy because the price was up too much. This morning, I wish I made a purchase yesterday.

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Re: U.S. stocks in freefall

Post by MrVargas » Wed Sep 09, 2015 8:38 am

flyingaway wrote:It Ii difficult to do anything in is environment. On the down day Friday, one could not buy for fear of catching a falling knife. On the up day Tuesday, one could not buy because the price was up too much. This morning, I wish I made a purchase yesterday.
As far as I'm concerned buying "dips" is just another form of market timing. Stick to your allocation. Volatility can begin or end suddenly and if it were possible to increase returns by exploiting them, Wall Street will do it first making it impossible for you or I to exploit it.

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Re: U.S. stocks in freefall

Post by fortyofforty » Wed Sep 09, 2015 9:52 am

If the market continues to drop, drop, drop, would a balanced fund end up doing worse than a periodic rebalancer? I am sorely tempted to move completely into one of the LifeStrategy or Balanced Index funds and just let it ride.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell

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Re: U.S. stocks in freefall

Post by GoldenFinch » Wed Sep 09, 2015 10:53 am

flyingaway wrote:It Ii difficult to do anything in is environment. On the down day Friday, one could not buy for fear of catching a falling knife. On the up day Tuesday, one could not buy because the price was up too much. This morning, I wish I made a purchase yesterday.


What you are describing is the reason why automatic investing and following a predetermined written plan are advised by most on this forum. Emotion and the uncertainty of decision making are removed from how money is invested when you aren't making your plan up as you go along. I do buy big dips when I have extra cash on hand, but I realize it probably won't buy me anything much in the long run and it is market timing. I usually do not have extra cash because I like it to be invested. If the market makes you nervous, automate, stop paying attention and do something else.

I think the TIME IN THE MARKET, NOT TIMING THE MARKET mantra is a good one.

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Re: U.S. stocks in freefall

Post by theunknowntech » Wed Sep 09, 2015 1:57 pm

Martin wrote:the Asian markets shot up overnight with Nikkei going up 7.7% and both Asia and Europe following. This is some incredible volatility. Don't like the pricing wait a day, or a couple of hours. There has to be some major money being made and lost on these moves.


There was an interesting article in the New York Times this morning:

http://www.nytimes.com/2015/09/09/busin ... odayspaper

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Re: U.S. stocks in freefall

Post by Toons » Wed Sep 09, 2015 2:25 pm

I don't "grasp" everything that is in that article.
I thing I might be better off. :happy
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Re: U.S. stocks in freefall

Post by JoMoney » Wed Sep 09, 2015 3:03 pm

fortyofforty wrote:If the market continues to drop, drop, drop, would a balanced fund end up doing worse than a periodic rebalancer? I am sorely tempted to move completely into one of the LifeStrategy or Balanced Index funds and just let it ride.

When the market is falling, the faster you add money to the falling asset the faster the overall portfolio will fall. When the market is rising the faster you put money in the rising asset the faster it will rise.
In PortfolioVisualizer you can compare the Vanguard Balanced Index (VBINX) which frequently rebalances to an annually rebalanced portfolio of 60%/40% Total Stock and Total Bond
From 2006-2008 -2.85% (CAGR of VBINX) vs -2.05% (CAGR Annually reabalanced)
From 2009-2011 12.25% (CAGR of VBINX) vs 11.80% (CAGR Annually reabalanced)

Where it "ends up" though depends on where you decide to call it an end.
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Re: U.S. stocks in freefall

Post by roymeo » Wed Sep 09, 2015 5:32 pm

Browser wrote:I agree that it doesn't seem as ominous, which can mean one of two things: (1) it's not as good a time to buy because there's not enough blood in the streets, or (2) it can turn really ugly down the road. Either way, I'm keeping my powder dry right now.


"as good"? I only get points if I buy at the absolute bottom? (Realistically far too many people hold out til they see things moving up steadily for a while.)

If I'm investing for 5+ years, do I really care if there's a local minima still in the future?
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Re: U.S. stocks in freefall

Post by fortyofforty » Wed Sep 09, 2015 5:44 pm

JoMoney wrote:
fortyofforty wrote:If the market continues to drop, drop, drop, would a balanced fund end up doing worse than a periodic rebalancer? I am sorely tempted to move completely into one of the LifeStrategy or Balanced Index funds and just let it ride.

When the market is falling, the faster you add money to the falling asset the faster the overall portfolio will fall. When the market is rising the faster you put money in the rising asset the faster it will rise.
In PortfolioVisualizer you can compare the Vanguard Balanced Index (VBINX) which frequently rebalances to an annually rebalanced portfolio of 60%/40% Total Stock and Total Bond
From 2006-2008 -2.85% (CAGR of VBINX) vs -2.05% (CAGR Annually reabalanced)
From 2009-2011 12.25% (CAGR of VBINX) vs 11.80% (CAGR Annually reabalanced)

Where it "ends up" though depends on where you decide to call it an end.


You could probably drive yourself crazy trying to figure out when exactly to rebalance, and if annually, or quarterly, or biannually, or biennially, or based on percentage deviation. The variables are endless. Maybe the simple path is the best, and the simplest of all being the "one fund of funds" portfolio.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell

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Re: U.S. stocks in freefall

Post by cfs » Fri Sep 11, 2015 10:20 am

fortyofforty wrote:. . . Maybe the simple path is the best, and the simplest of all being the "one fund of funds" portfolio.

On the re-balancing act, yes, the SFS or single fund solution (total world, target retirement, life strategy, balanced index, tax-managed balanced, and their other cousins) could be the bets and "the simplest." Simplicity is very important (you can ask our shipmate Taylor). And now let me do something productive, such as taking care of my LUng distance workout before our temperature hit the 90s [again].
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Re: U.S. stocks in freefall

Post by DonCamillo » Mon Sep 14, 2015 8:47 pm

Leeraar wrote:
nisiprius wrote:I was scared in 2011. Were you? I didn't do anything about it, though. "Feel the fear and do nothing anyway"

Yes, and since the blip of 2011 does not appear in the year over year numbers, it's being forgotten that much faster.
L.

I got really lucky in 2011. Bought a foreclosed Florida condo at auction end of January. Cashed in stock to pay for it. Deutsch Bank could not get their act together to finish the paperwork, deal finally fell through end of May, put money back in market in mid August. Timed the drop in the market almost perfectly! I love telling people I made money on a house I did not buy.
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Re: U.S. stocks in freefall

Post by ofcmetz » Mon Sep 14, 2015 8:54 pm

DonCamillo wrote:
Leeraar wrote:
nisiprius wrote:I was scared in 2011. Were you? I didn't do anything about it, though. "Feel the fear and do nothing anyway"

Yes, and since the blip of 2011 does not appear in the year over year numbers, it's being forgotten that much faster.
L.

I got really lucky in 2011. Bought a foreclosed Florida condo at auction end of January. Cashed in stock to pay for it. Deutsch Bank could not get their act together to finish the paperwork, deal finally fell through end of May, put money back in market in mid August. Timed the drop in the market almost perfectly! I love telling people I made money on a house I did not buy.


Nice story.

I mad a bit of money in 2011 on a 403B transfer. I was switching from VALIC to TIAA CREF and the money went out before the drop and finally made it back right after near the bottom. Dumb luck worked out that time.
Never underestimate the power of the force of low cost index funds.

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Re: U.S. stocks in freefall

Post by broadstone » Mon Sep 14, 2015 10:07 pm

As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.

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Re: U.S. stocks in freefall

Post by VictoriaF » Tue Sep 15, 2015 8:17 am

broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.


If the Fed will announce its lending rate increase, then cash will soon be earning more than it does now.

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Re: U.S. stocks in freefall

Post by goodenyou » Tue Sep 15, 2015 11:12 am

VictoriaF wrote:
broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.


If the Fed will announce its lending rate increase, then cash will soon be earning more than it does now.

Victoria


True. Most likely $250/yr. more for each $100,000 invested in cash.
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Re: U.S. stocks in freefall

Post by letsgobobby » Tue Sep 15, 2015 11:43 am

broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.

let us know after you've done the deed. also let us know exactly what you own then.

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Re: U.S. stocks in freefall

Post by TomatoTomahto » Tue Sep 15, 2015 12:20 pm

I think it might be fun to have these audits of traders, but IRL, don't you think survivorship bias will distort the results? I foresee noobie Bogleheads overweighting the good results of a handful of traders, and not being aware that more traders had bad results and disappeared into the ether from whence they came. Net result: negative for noobies; old hands are probably immune but who knows, some of them might take the bait.

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Re: U.S. stocks in freefall

Post by HomerJ » Tue Sep 15, 2015 12:25 pm

broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.


What do you think they will announce? How far into stocks are you going to go? 100% stocks? 50% stocks?

broadstone wrote:I wrote on Aug 12th about this "correction". I don't understand why the board turns salty when people make educated decisions that happens to coincide with obvious red flag warning signs that are staring us right in our faces. The economy / financial markets could not sustain at those bullish levels, especially with our debt levels which are out of control. Personally I believe this is only the beginning of some very turbulent times. I just feel sorry for the retirees.


So 1 month later, are our debt levels now under control? I'm little confused on what signals you are using.

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Re: U.S. stocks in freefall

Post by HomerJ » Tue Sep 15, 2015 12:28 pm

TomatoTomahto wrote:I think it might be fun to have these audits of traders, but IRL, don't you think survivorship bias will distort the results?


True... There were a few from 2011 and a few from 2014 that have disappeared from these boards after going 100% cash way too early.

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Re: U.S. stocks in freefall

Post by Thebigc » Tue Sep 15, 2015 2:00 pm

Pulled out of CHK today at 8.10, it may rally again but it has been bouncing off 8.20. Over the next year it may still be a good buy, but I made over 20% and that is good sell point for me. It's to small to matter much to me and I picked up about 1k, so I am happy with it. If it has a strong rally within the next week I will kick myself a bit. But I got tired of the low volume and constant shorts.

I can always get back in later, when I feel better about CHK's situation. It's still a long term value, or a disaster it's one of those stocks. Sure would love to see my funds turn it around, wouldn't have to be working stocks so much again.

Just posting this because I said I would, it's not about hey timing is great. Some of my stocks are down, though nothing compared to my funds. NFLX is down, and COP and XOM are down but less than half a percent. NFLX is down about 5-6 percent. INTEL has actully been doing it's job, very stable gone up a bit. JPM is down a bit or was, VZ is doing good. WLL is up a little but off the highs I had it at. Stock have not been bad, not great but not bad. CHK was great, still conflicted about the sell but I said if I hit 20% I would pull, so I did.

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Re: U.S. stocks in freefall

Post by miles monroe » Tue Sep 15, 2015 2:57 pm

HomerJ wrote:
TomatoTomahto wrote:I think it might be fun to have these audits of traders, but IRL, don't you think survivorship bias will distort the results?


True... There were a few from 2011 and a few from 2014 that have disappeared from these boards after going 100% cash way too early.


and here i was thinking it was just a coincidence that the BABA touts haven't had much to say during the stocks slide from 120 to 65...

but they'll be back if and when the stock hits 120 again -- and i bet every one of em picked up some more at 65.

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Re: U.S. stocks in freefall

Post by Jozxyqk » Tue Sep 15, 2015 4:06 pm

On Wed Aug 26, 2014 with the S&P 500 at 1940 or so:

broadstone wrote:Wednesdays gain will provide false security. It's the calm before the storm (downward).


[next day]

broadstone wrote:Definitely the calm before the storm. You will see a bounce upwards / downwards before the real correction happens.


Now, with the S&P 500 at 1980ish (and rising):

broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.


So did the downward "storm" not happen? Is the Fed doing something to prevent it? Probably for the best I didn't go to cash when you suggested.

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Re: U.S. stocks in freefall

Post by Dulocracy » Tue Sep 15, 2015 6:06 pm

Jozxyqk wrote:On Wed Aug 26, 2014 with the S&P 500 at 1940 or so:

broadstone wrote:Wednesdays gain will provide false security. It's the calm before the storm (downward).


[next day]

broadstone wrote:Definitely the calm before the storm. You will see a bounce upwards / downwards before the real correction happens.


Now, with the S&P 500 at 1980ish (and rising):

broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.


So did the downward "storm" not happen? Is the Fed doing something to prevent it? Probably for the best I didn't go to cash when you suggested.


The problem with this site is that people fact check and hold you accountable for what you say... And they are willing to tease you about it...
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: U.S. stocks in freefall

Post by EyeYield » Tue Sep 15, 2015 6:36 pm

Dulocracy wrote: The problem with this site is that people fact check and hold you accountable for what you say... And they are willing to tease you about it...

The problem isn't the fact checking. As for the teasing, consider the amount of people holding back after being taunted by a fortune teller and you'll see the majority of this site.
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: U.S. stocks in freefall

Post by Uncle Pennybags » Tue Sep 15, 2015 8:51 pm

broadstone wrote:As promised...I will be switching from a cash position Thursday or Friday if Fed announces what I think they will. If not, I'll be staying 100% cash.
They will raise rates 25 bases points, Insiders know this. If you didn't act today you missed it.

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It looks like our effective memory is about two weeks

Post by nisiprius » Wed Sep 16, 2015 7:05 am

It looks like effectively we have a memory span of about two weeks... I don't want to sound like I'm making fun of others, because this definitely applies to me.

Image

After a drop of about 12% over four days there is widespread anxiety, strong enough that people in this forum are posting saying they are seriously considering or have actually made major changes in their asset allocation (e.g. to 100% cash) on the basis of it. Then, after about two weeks of relative stability, everyone more or less calms down and accepts 16,500 as a new level for the Dow. Whew, glad that's over.

I think "whew, glad that's over" is the most general feeling. As at any time, there are going to be plenty of people--more than usual--saying calm before the storm, eye of the hurricane, you ain't seen nothin' yet, etc. etc.

It's perfectly reasonable to feel spooked by the speed of the fall, which was unusual. After all, if a fall of 12% in four days were to continue at that rate for two weeks, well, you can do the math.

And it is not necessarily reassuring to note that single-day drops of 1% happen all the time, and 2% isn't rare... or that on a time scale of a few months, ups and downs of around 7% are par for the course:

Image

Just because this kind of drop is fairly common doesn't mean that it's not the start of a crash. But if you interpret this kind of drop as "the start of a crash" and you act on it, you are going to be acting on a lot of false alarms, and acting on false alarms is expensive.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: U.S. stocks in freefall

Post by Dulocracy » Wed Sep 16, 2015 10:23 am

EyeYield wrote:
Dulocracy wrote: The problem with this site is that people fact check and hold you accountable for what you say... And they are willing to tease you about it...

The problem isn't the fact checking. As for the teasing, consider the amount of people holding back after being taunted by a fortune teller and you'll see the majority of this site.


For clarity (and because I am more of a semi-regular poster), that was irony. I like that members of this site pay attention to what others say and remember it or even research it to understand someone's full picture. I consider the teasing a part of why the site is fun as well as informative. I have to remember to start using those silly little faces again to make sure people know when my dry writing is light-hearted. To be fair, my wife cannot tell when I am joking or teasing, because I can be equally dry in person. She is a patient woman.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: U.S. stocks in freefall

Post by cfs » Wed Sep 16, 2015 10:34 am

Teasing happens.

Here teasing happens from time to time. However, I don't see anyone being chastised and ridiculed for what they post here (that type of behavior is not tolerated here and that is a good thing).

Already then, time to do something productive, let me start by taking care of my LUng distance workout.
~ Donating Member ~

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Re: It looks like our effective memory is about two weeks

Post by Uncle Pennybags » Wed Sep 16, 2015 11:08 am

nisiprius wrote:It's perfectly reasonable to feel spooked by the speed of the fall, which was unusual. After all, if a fall of 12% in four days were to continue at that rate for two weeks, well, you can do the math.
That equals 1929. Don't walk under open windows on Wall Street.

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Re: U.S. stocks in freefall

Post by EyeYield » Wed Sep 16, 2015 1:06 pm

Dulocracy wrote:
EyeYield wrote:
Dulocracy wrote: The problem with this site is that people fact check and hold you accountable for what you say... And they are willing to tease you about it...

The problem isn't the fact checking. As for the teasing, consider the amount of people holding back after being taunted by a fortune teller and you'll see the majority of this site.


For clarity (and because I am more of a semi-regular poster), that was irony. I like that members of this site pay attention to what others say and remember it or even research it to understand someone's full picture. I consider the teasing a part of why the site is fun as well as informative. I have to remember to start using those silly little faces again to make sure people know when my dry writing is light-hearted. To be fair, my wife cannot tell when I am joking or teasing, because I can be equally dry in person. She is a patient woman.

I consider myself fairly fluent in the vernacular of dry wit, but I missed it.
It happens sometimes when speed browsing.

You're right about the fun part, I can guarantee that if the market drops 30%, up will pop my "crash strategy" thread and my feet will be held to the fire.

Fun and market drops 30% in the same sentence? How's that for dry? :sharebeer
"The stock market is a giant distraction from the business of investing." - Jack Bogle

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Re: U.S. stocks in freefall

Post by Dulocracy » Wed Sep 16, 2015 1:25 pm

EyeYield wrote:Fun and market drops 30% in the same sentence? How's that for dry? :sharebeer


I am in the accumulation phase. A 30% drop would be a party for me, as everything goes on sale! :sharebeer
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: U.S. stocks in freefall

Post by nisiprius » Wed Sep 16, 2015 2:16 pm

Dulocracy wrote:
EyeYield wrote:Fun and market drops 30% in the same sentence? How's that for dry? :sharebeer
I am in the accumulation phase. A 30% drop would be a party for me, as everything goes on sale! :sharebeer
If, of course, it's really the very same stock that it was before the drop. But what if the stock you buy at a 30% discount is past its sell-by date?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: U.S. stocks in freefall

Post by GoldenFinch » Wed Sep 16, 2015 4:16 pm

nisiprius wrote:
Dulocracy wrote:
EyeYield wrote:Fun and market drops 30% in the same sentence? How's that for dry? :sharebeer
I am in the accumulation phase. A 30% drop would be a party for me, as everything goes on sale! :sharebeer
If, of course, it's really the very same stock that it was before the drop. But what if the stock you buy at a 30% discount is past its sell-by date?


Isn't this why Bogleheads don't buy individual stocks? It's so hard to find the sell-by date. :happy

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