Retreat to cash

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Toons
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Re: Retreat to cash

Post by Toons » Sat Aug 05, 2017 4:54 pm

Retreat-an act of moving back or withdrawing.
Personally for me,,,,
Never.
Stay The Course Keep Moving Forward :thumbsup :thumbsup
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

arsenalfan
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Re: Retreat to cash

Post by arsenalfan » Sat Aug 05, 2017 4:56 pm

itstoomuch wrote:
itstoomuch wrote:
lostdog wrote:Classic fear took over and she missed the 10.5% increase. Stay the course.
And I have too :D Infact I am -1% because I bought some equity that had fallen -10% and continue to fall to -15%.
But I don't need the Discretionary Accts to make my month.
Do you? :annoyed :P :idea:
Until last week, i was about positive 3-4% in about 30% cash Discretionary, YTD.
In May, I gave up on the high cash holdings and gradually purchased my favorite stocks.
Monday, won the bidding war for a downsize, eastside Seattle home :oops: :annoyed :( .
Liquidated taxables and Roths Tues-Fri, for the down payment.
I took a pretty big chance to get back into the Market with the down payment money :|
Remaining Discretionary is now ~80% invested.
I'm still pretty nervous, and like OP, its Discretionary money.
I take it "discretionary" = not needed.
In my book, any needed money is at work in my AA.
My only "not needed" money is the 1% I have in "play money" to take fliers on various theories (and get humbled, more often than not). It can go to zero, but is fun for me to see (and keeps me faithful to my AA, I have to say!)

So if it's discretionary/not needed/play money, why bother investing if it making you nervous? Discretionary money should be for enjoyment - invest it in fun theories, go on vaca, buy a toy, YMMV.

itstoomuch
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Re: Retreat to cash

Post by itstoomuch » Sat Aug 05, 2017 5:57 pm

arsenalfan wrote:So if it's discretionary/not needed/play money, why bother investing if it making you nervous? Discretionary money should be for enjoyment - invest it in fun theories, go on vaca, buy a toy, YMMV.
Part of "investing" is not losing the "investment" regardless of being Discretionary or not.
see notes below.
We have 4 buckets. Two buckets are suffice. The Discretionary is purely, 100% Discretionary and is the only bucket that is directly exposed to the Markets.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

anoop
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Re: Retreat to cash

Post by anoop » Sat Aug 05, 2017 6:02 pm

itstoomuch wrote:
arsenalfan wrote:So if it's discretionary/not needed/play money, why bother investing if it making you nervous? Discretionary money should be for enjoyment - invest it in fun theories, go on vaca, buy a toy, YMMV.
Part of "investing" is not losing the "investment" regardless of being Discretionary or not.
see notes below.
We have 4 buckets. Two buckets are suffice. The Discretionary is purely, 100% Discretionary and is the only bucket that is directly exposed to the Markets.
What are the other buckets invested in?

itstoomuch
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Re: Retreat to cash

Post by itstoomuch » Sat Aug 05, 2017 6:05 pm

^see notes below:
Last edited by itstoomuch on Sat Aug 05, 2017 6:25 pm, edited 1 time in total.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

Bastiat
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Re: Retreat to cash

Post by Bastiat » Sat Aug 05, 2017 6:15 pm

patrick013 wrote:I can't decide either.....

One advisor says get in while you still can, the other one says
valuations can't get much higher. One even predicts the DOW
at 25,000. I remember what happened the last time someone
predicted that.

Image

The 2 arrows are at market peaks where PE is 25 or higher. Almost as easy as
investing in bonds. So far so good.
A logarithmic scale would be much more informative... the linear scale of the chart you posted makes it nearly useless.

The PE at the arrows was 45 and 65, respectively. At the first arrow, PE had been above 25 for 4 years.

arsenalfan
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Re: Retreat to cash

Post by arsenalfan » Sat Aug 05, 2017 6:57 pm

itstoomuch wrote:
arsenalfan wrote:So if it's discretionary/not needed/play money, why bother investing if it making you nervous? Discretionary money should be for enjoyment - invest it in fun theories, go on vaca, buy a toy, YMMV.
Part of "investing" is not losing the "investment" regardless of being Discretionary or not.
see notes below.
We have 4 buckets. Two buckets are suffice. The Discretionary is purely, 100% Discretionary and is the only bucket that is directly exposed to the Markets.
Misinterpretation: I over-interpreted an earlier post stating that you didn't need Discretionary to "make your month" to mean that you didn't need it overall - that it was play money, and that's why you tried to market time.

So....is the take home from this thread not to market time, and adjust your AA?

itstoomuch
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Re: Retreat to cash

Post by itstoomuch » Sat Aug 05, 2017 7:35 pm

arsenalfan wrote:
itstoomuch wrote:
arsenalfan wrote:So if it's discretionary/not needed/play money, why bother investing if it making you nervous? Discretionary money should be for enjoyment - invest it in fun theories, go on vaca, buy a toy, YMMV.
Part of "investing" is not losing the "investment" regardless of being Discretionary or not.
see notes below.
We have 4 buckets. Two buckets are suffice. The Discretionary is purely, 100% Discretionary and is the only bucket that is directly exposed to the Markets.
Misinterpretation: I over-interpreted an earlier post stating that you didn't need Discretionary to "make your month" to mean that you didn't need it overall - that it was play money, and that's why you tried to market time.No misinterpretation. Discretionary is purely discretionary. It is not play money but funds that we can afford to lose entirely. Market timing is an unfortunate concept. The individual stocks in the Discretionary did very well in 2016, far outpacing SP500. Whether they could continue to beat the SP500 or TSM in 2017 was then questionable in Nov 2016.

Is there ANY rationale for a market-timing "retreat to cash", versus adjusting your AA? The way we have the buckets invested, it is very hard to AA in the thinking of BH. Annuities, small pension, rental condo are not BH assets that can be AA. Only the Discretionary can be AA, if I so desired, but see little sense in doing so other than "letting it ride".

My stock/bonds are 80/20 and fine with it, because I don't need the money for 30 years (knock wood for jobs/rentals/alternative investments). If I were dependent on stocks & bonds sooner, I'd just go to a different AA. We are retirement. We don't need the Discretionary at all.
We do have some plans that allow us to manipulate where cash will come from.


Praying for a market crash and a RE crash, to buy more of both I don't. We have a property in contract. And we bought another condo in Redmond WA using much of the Discretionary Roth & taxable funds. .
In 2008, we moved from an S/B Asset based investment concept to a retirement FundingRatio (FundedRatio) investment theory.
YMMV
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

arsenalfan
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Re: Retreat to cash

Post by arsenalfan » Sat Aug 05, 2017 8:03 pm

Thanks for the explanations!

Wouldn't you put annuity, pension, and (proven) rental cash flow into your fixed income part of your AA? That's what elders in my family have been doing - safer, sure things, so they put them in the fixed income part. It has panned out (they're 80, 76, 78, and 73).

It seems we agree that my "play money" = your "discretionary" in the sense that this account is for individual stocks (deviating from BH theory) and can go to zero with no impact on overall finances. For me, it reinforces that the rest of my portfolio is best in a BH-type portfolio. What purpose does it serve for you - guessing it lets you test your strategies against the market as well?

Funded ratio is new to me and interesting. I've just been using firecalc, cfiresim and all the other models, but not known how conservative to be (i.e. 0 for Social Security? 2% real growth? etc). My Funded Ratio is about 7, but not sure how that is actionable - but I don't want to hijack this thread.

I hope Seattle stays great and wish you the best on your property closing!

itstoomuch
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Re: Retreat to cash

Post by itstoomuch » Sat Aug 05, 2017 9:03 pm

arsenalfan wrote:Thanks for the explanations!

Wouldn't you put annuity, pension, and (proven) rental cash flow into your fixed income part of your AA? That's what elders in my family have been doing - safer, sure things, so they put them in the fixed income part. It has panned out (they're 80, 76, 78, and 73). For the most part BH do not post their ages. Bernstein says that there are investment phases. Bogle alludes to this but never quite says it. Some BH will occasionally reveal themselves. I purposely do not allocate a S/B ratio because for us, it has no meaning in a FundedRatio concept of investing. For those in an AA investment model they need to gauge their Risk tolerance, doing so by AA.

It seems we agree that my "play money" = your "discretionary" in the sense that this account is for individual stocks (deviating from BH theory) and can go to zero with no impact on overall finances. For me, it reinforces that the rest of my portfolio is best in a BH-type portfolio. What purpose does it serve for you - guessing it lets you test your strategies against the market as well?I really don't like to benchmark the Discretionary because it is entirely discretionary. example, Earlier this year I was nearly 85% cash, now I am 85% stock, what benchmark do I use? My market strategy is simple: Invest carefully to make money and avoid losing.

Funded ratio is new to me and interesting. I've just been using firecalc, cfiresim and all the other models, but not known how conservative to be (i.e. 0 for Social Security? 2% real growth? etc). My Funded Ratio is about 7, but not sure how that is actionable - but I don't want to hijack this thread. see bobcat2, posts. see Bogleheads' wiki & google. "FundedRatio" most commonly found in descriptions and solvency of pension plans, SS, Medicare/medicare, bank ratios, debt to income (ie debt obligation to tax receipts or bugeting ),.

I hope Seattle stays great and wish you the best on your property closing!both of them. We are selling and buying :x Not related nor dependent to each other.
YMMV
Last edited by itstoomuch on Sat Aug 05, 2017 10:12 pm, edited 1 time in total.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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patrick013
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Re: Retreat to cash

Post by patrick013 » Sat Aug 05, 2017 10:02 pm

Bastiat wrote:
patrick013 wrote:I can't decide either.....

One advisor says get in while you still can, the other one says
valuations can't get much higher. One even predicts the DOW
at 25,000. I remember what happened the last time someone
predicted that.

Image

The 2 arrows are at market peaks where PE is 25 or higher. Almost as easy as
investing in bonds. So far so good.
A logarithmic scale would be much more informative... the linear scale of the chart you posted makes it nearly useless.

The PE at the arrows was 45 and 65, respectively. At the first arrow, PE had been above 25 for 4 years.
According to my data PE exceeded 25 in 1998, varied and went down, and exceeded 25
again in 2008, both valuations preceeded substantial downturns. I like regular scales
as they portray the time series better at least to me, also for yield curves, it makes them
look worse. PE's over 25 and higher certainly are too high. Stocks are more buyable
to more people if PE's are 20ish or lower like they were a few years ago. Doesn't matter
what your beta or correlation is they are just too high. Like buying bonds at a very low spread.

Image
age in bonds, buy-and-hold, 10 year business cycle

Bastiat
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Re: Retreat to cash

Post by Bastiat » Sun Aug 06, 2017 7:11 pm

patrick013 wrote:
Bastiat wrote:
patrick013 wrote:I can't decide either.....

One advisor says get in while you still can, the other one says
valuations can't get much higher. One even predicts the DOW
at 25,000. I remember what happened the last time someone
predicted that.

Image

The 2 arrows are at market peaks where PE is 25 or higher. Almost as easy as
investing in bonds. So far so good.
A logarithmic scale would be much more informative... the linear scale of the chart you posted makes it nearly useless.

The PE at the arrows was 45 and 65, respectively. At the first arrow, PE had been above 25 for 4 years.
According to my data PE exceeded 25 in 1998, varied and went down, and exceeded 25
again in 2008, both valuations preceeded substantial downturns. I like regular scales
as they portray the time series better at least to me, also for yield curves, it makes them
look worse. PE's over 25 and higher certainly are too high. Stocks are more buyable
to more people if PE's are 20ish or lower like they were a few years ago. Doesn't matter
what your beta or correlation is they are just too high. Like buying bonds at a very low spread.

Image
Our statements about PE relative to those peaks are not mutually exclusive...

Apart from that, if PE >25 is certainly too high it sounds like you've found a way to beat the market! When we breach PE 25 will you short the market or go to all cash?

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patrick013
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Re: Retreat to cash

Post by patrick013 » Sun Aug 06, 2017 8:24 pm

Bastiat wrote:
Our statements about PE relative to those peaks are not mutually exclusive...

Apart from that, if PE >25 is certainly too high it sounds like you've found a way to beat the market! When we breach PE 25 will you short the market or go to all cash?
Well when the market does crash it looks like it takes several years to
recover initial value in price of the index. Several years of negative price
return and then a recovery starts, a beginning of a new business cycle
hopefully where market share provides profits again, rather than an oil crisis,
bank failures, or just plain overproduction. So I think I'll go all cash this time
and sit it out.

How long will people pay 25 PE for current index earnings. However, recent
adjusted earnings reported are 6% higher than last year at last guess so the
market crash is being postponed again. The inevitable price correction delayed
so it seems.

Watch out for shock journalists on the bull and bear side. If stocks crashed
when PE was 22 I would just miss the shift to all cash.
age in bonds, buy-and-hold, 10 year business cycle

lazyday
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Re: Retreat to cash

Post by lazyday » Mon Aug 07, 2017 5:24 am

patrick013 wrote:How long will people pay 25 PE for current index earnings. However, recent
adjusted earnings reported are 6% higher than last year at last guess so the
market crash is being postponed again. The inevitable price correction delayed
so it seems.
http://www.fa-mag.com/news/the-lion-in- ... 33853.html
After penning his May letter, Grantham discovered another factoid about trailing-12-month PE multiples, which peaked at 21 times earnings in 1929 and never reached that figure again until late 1997. “The entire block of 20 years I’m obsessed with”—1997 to 2017—“has an average PE higher than 1929. Don’t tell me that things aren’t different,” he retorts.
In the latest quarterly report, he says that PE10 has been 90% correlated to measures of investor comfort like inflation volatility and profit margins, which explains the expensive market of the last 2 decades.

https://www.gmo.com/docs/default-source ... -high-.pdf free account may be required

Tamalak
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Re: Retreat to cash

Post by Tamalak » Mon Aug 07, 2017 8:34 am

The best time in the last few decades to buy stocks was when P/E was over 100 - the bottom of the 2008 crisis. Prices were deflated, but Earnings were deflated a whole lot more!

P/E fetishizing concerns me. It's a useful tool but so simple it's easily abused..

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Re: Retreat to cash

Post by itstoomuch » Mon Aug 07, 2017 10:16 am

arsenalfan wrote:
Misinterpretation: I over-interpreted an earlier post stating that you didn't need Discretionary to "make your month" to mean that you didn't need it overall - that it was play money, and that's why you tried to market time.

So....is the take home from this thread not to market time, and adjust your AA?
Everyone has an interpretation.
Marge-g, has enough retirement funds and simply moved to cash as a risk management move and wants to see a debate of the wisdom of such a move.
I did it also as a risk management move because I have the tools to make such move. I gave up on holding cash. But holding cash enable me to say to wife that if she wanted to buy another house for our final retirement home, then we have the risk free funds to swing the downpay. It worked out fine for us. Quantiyfing the risk the premium, to go cash, OUR portfolio, for the approx 6 months, was a couple percent, maybe 5-10k, in this period, my trading and AA style.

Investing is so much more interesting as a human behavior experiment than just making or losing money :annoyed :oops: :mrgreen:
YMMV.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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patrick013
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Re: Retreat to cash

Post by patrick013 » Mon Aug 07, 2017 12:44 pm

Since 2009 most PE's have been around 20 ttm and around 17 forward.
You couldn't ask for better valuations or quality of earnings for the most
part. The buy and hold'rs saw that. Last couple of years PE 25 ttm has
been very common. Consider the 500 at 3000. All it would take is a
EPS of 125 and PE of 24.

They'd call it a new era of valuations.
age in bonds, buy-and-hold, 10 year business cycle

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willthrill81
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Re: Retreat to cash

Post by willthrill81 » Mon Aug 07, 2017 2:41 pm

patrick013 wrote:Since 2009 most PE's have been around 20 ttm and around 17 forward.
You couldn't ask for better valuations or quality of earnings for the most
part. The buy and hold'rs saw that. Last couple of years PE 25 ttm has
been very common. Consider the 500 at 3000. All it would take is a
EPS of 125 and PE of 24.

They'd call it a new era of valuations.
We appear to have been in a "new era of valuations" since 1992, since CAPE has been above its historic mean since that time, except for a brief period in 2008-2009.

Larry Swedroe has written about the logical reasons why CAPE should be higher today than it historically has been and made the case that it's unlikely to revert to that mean.
“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

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patrick013
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Re: Retreat to cash

Post by patrick013 » Mon Aug 07, 2017 2:47 pm

willthrill81 wrote:
patrick013 wrote:Since 2009 most PE's have been around 20 ttm and around 17 forward.
You couldn't ask for better valuations or quality of earnings for the most
part. The buy and hold'rs saw that. Last couple of years PE 25 ttm has
been very common. Consider the 500 at 3000. All it would take is a
EPS of 125 and PE of 24.

They'd call it a new era of valuations.
We appear to have been in a "new era of valuations" since 1992, since CAPE has been above its historic mean since that time, except for a brief period in 2008-2009.

Larry Swedroe has written about the logical reasons why CAPE should be higher today than it historically has been and made the case that it's unlikely to revert to that mean.
I wish I had the answer. Trailing years has valuation weight but future years
and forward PE is what usually makes the market optimistic. Have to wait
and see.
age in bonds, buy-and-hold, 10 year business cycle

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HomerJ
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Re: Retreat to cash

Post by HomerJ » Mon Aug 07, 2017 2:52 pm

patrick013 wrote:I can't decide either.....

One advisor says get in while you still can, the other one says
valuations can't get much higher. One even predicts the DOW
at 25,000. I remember what happened the last time someone
predicted that.

Image

The 2 arrows are at market peaks where PE is 25 or higher. Almost as easy as
investing in bonds. So far so good.
I'm not quite sure what you are saying here. Are you saying it's easy to get out at a peak?

PE10 crossed 25 in 1996, when the S&P 500 was around 650. Anyone getting out missed a 120% run up, and the price never got below 650 again. Read that again. The cheapest time to buy stocks in the past 21 years was when PE10 was higher than 25.

Edit: Maybe I'm talking about PE10 and you are talking about just PE. Hmmm... If you're just talking about PE, it crossed 25 in 1992 when the S&P 500 was in the 400s. I don't think getting out in 1992 would have been a good idea. And even in 1998, S&P 500 was in the 900s, nowhere near 1500.

You show a chart that makes it look like it's easy to jump out at the top, but no one who actually follows PEs or PE10s seriously ever stuck around to actually see the top in 2000. They all got out years before, and then had to stick to their convictions for YEARS watching the market continue to go up up up.
Last edited by HomerJ on Mon Aug 07, 2017 3:11 pm, edited 3 times in total.

lazyday
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Re: Retreat to cash

Post by lazyday » Mon Aug 07, 2017 3:00 pm

If you don't like paying 300x the last 10 years of earnings, you can buy ex-US.

WhiteMaxima
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Re: Retreat to cash

Post by WhiteMaxima » Mon Aug 07, 2017 3:19 pm

I always keep 10% as cash. But remain in market for the most of time. I can't predict the future but I believe remain in the market is the only way to beat inflation.

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patrick013
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Re: Retreat to cash

Post by patrick013 » Mon Aug 07, 2017 3:28 pm

HomerJ wrote: I'm not quite sure what you are saying here. Are you saying it's easy to get out at a peak?

PE crossed 25 in 1996, when the S&P 500 was around 650. Anyone getting out missed a 120% run up, and the price never got below 650 again. Read that again. The cheapest time to buy stocks in the past 21 years was when PE was higher than 25.
You're absolutely right. Risks like that have to be taken. But in
1996 standard PE's end of month were all under 20.

The idea if taken is to get out, pay some taxes, and re-enter when PE's are much
lower and stay invested till the market peaks again. No methodology is perfect.

No problem. I'm sure there's a study somewhere that evaluates this, but it
would keep people out of the market for several years at a time.
Last edited by patrick013 on Mon Aug 07, 2017 3:43 pm, edited 1 time in total.
age in bonds, buy-and-hold, 10 year business cycle

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HomerJ
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Re: Retreat to cash

Post by HomerJ » Mon Aug 07, 2017 3:38 pm

patrick013 wrote:
HomerJ wrote: I'm not quite sure what you are saying here. Are you saying it's easy to get out at a peak?

PE crossed 25 in 1996, when the S&P 500 was around 650. Anyone getting out missed a 120% run up, and the price never got below 650 again. Read that again. The cheapest time to buy stocks in the past 21 years was when PE was higher than 25.
You're absolutely right. Risks like that have to be taken. But in
1996 PE's end of month were all under 20.
You may have missed my edit... My apologies...
Edit: Maybe I'm talking about PE10 and you are talking about just PE. Hmmm... If you're just talking about PE, it crossed 25 in 1992 when the S&P 500 was in the 400s. I don't think getting out in 1992 would have been a good idea. And even in 1998, S&P 500 was in the 900s, nowhere near 1500.

You show a chart that makes it look like it's easy to jump out at the top, but no one who actually follows PEs or PE10s seriously ever stuck around to actually see the top in 2000. They all got out years before, and then had to stick to their convictions for YEARS watching the market continue to go up up up.

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Tycoon
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Re: Retreat to cash

Post by Tycoon » Fri Sep 15, 2017 9:30 pm

:oops:
...I might be just beginning | I might be near the end. Enya | | C'est la vie

james22
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Re: Retreat to cash

Post by james22 » Sat Sep 16, 2017 1:23 am

If frantic day-to-day attention to market movements serves to do anything, it is to convince investors that they cannot afford to miss any short-term rally; that they can't afford to miss the latest utterance from the Fed; that they can't afford to miss the latest “hot play” offered up to the masses. It does not, however, serve to earn investors sustainable profits.

...

At the other extreme is Papa Van Winkle, asleep beneath a shady tree. He's made just 11 trades in a half-century. He falls asleep for years at a time. I'd never recommend his approach in practice – there are far better ones, with less risk. Also, it would be excruciatingly difficult to live through at times, if you were awake, because it would seem that you were missing opportunities of a lifetime.

Nevertheless, old Rip has come out pretty well over the years. He's outperformed the S&P 500 since 1960, 1970, 1980, 1990, and even over the past decade. And though he's earned over three times what the S&P 500 has achieved, including dividends, his deepest pullback over that period has been less than half of what the S&P 500 has periodically lost. He slept through most of the 1973-74 bear market, through the '87 crash, through the 2000-2002 bear market. Shhhhh. He's asleep now too.

What's Papa Van Winkle's secret? Simple. He doesn't overstay his welcome in overvalued markets.

Once the price/peak earnings multiple on the S&P 500 hits 19, he looks for minimal confirmation to get out – a decline in the S&P 500 below its 10-week moving average, and investment advisory bearishness (Investors' Intelligence) below 30% bears. Then he goes to sleep. Once he does, he snores through everything – even improvements in valuations – until the S&P 500 drops 30% from its highs on a weekly closing basis. No less. Sometimes he sleeps for years on end. Sometimes he misses enormous short-term advances. No matter. They're never retained by investors anyway.

Again, I wouldn't recommend old Rip's strategy in practice. It would be psychologically impossible to follow, and there are far better ones that capture greater gains with more controlled risk.

Still, the Rip Van Winkle strategy illustrates an essential point: advances in overvalued markets are regularly given back at great cost to investors who overstay, and can be avoided at no cost to long-term investors. I believe that there are ways to capture a reasonable portion of such advances at controlled risk. But there are also times when the attempt to capture speculative gains in overvalued markets would demand too much precision and leave risks poorly controlled. At those times, investors can and should sleep through them (or at least hedge their portfolios), comfortable that any missed, incremental market gains are unlikely to be retained over time.


http://www.hussmanfunds.com/wmc/wmc070220.htm
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

james22
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Re: Retreat to cash

Post by james22 » Sat Sep 16, 2017 1:26 am

... low prospective returns have produced deep losses with enough regularity that historically, once prospective returns have dropped below about 7.5%, investors could have adopted what I've called a "Rip van Winkle" strategy: just going to sleep until stocks dropped by at least 30% or moved back to prospective returns above 10% - a strategy that would have historically outperformed the S&P 500 with about half the overall risk.

Now, there are certainly better and more practical strategies that have less tracking risk, but the point is essential: once stocks have been priced to achieve disappointingly low prospective returns, whatever additional returns are achieved by the market are ultimately surrendered.


http://www.hussman.net/wmc/wmc110523.htm
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

CoAndy
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Re: Retreat to cash

Post by CoAndy » Mon Dec 04, 2017 11:44 am

:oops:

itstoomuch
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Re: Retreat to cash

Post by itstoomuch » Mon Dec 04, 2017 12:08 pm

Discretionary, main trading acct:
Last Monday, 85% invested.
Last Friday, 95% cash. Which is close to where I was in Dec 2016, but now 18% higher in 2017.
Ymmv
:mrgreen: :greedy :mrgreen:
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

GoldenFinch
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Re: Retreat to cash

Post by GoldenFinch » Mon Dec 04, 2017 3:14 pm

ruralavalon wrote:
Tue Nov 22, 2016 10:33 am
In my opinion this is a very bad idea.
It turned out you were right!

jrbdmb
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Re: Retreat to cash

Post by jrbdmb » Mon Dec 04, 2017 3:45 pm

Still hoping for the OP to return and let us know how they got back in to the market.

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DaftInvestor
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Re: Retreat to cash

Post by DaftInvestor » Mon Dec 04, 2017 3:53 pm

Unfortunately a lot of people listened to the Media last year around this time and pulled out of the market and missed this year's gains.
Some folks will never learn (to stay the course) or haven't lived through the exaggerations in the media in the past nor the real the ups/downs in the markets.

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Tycoon
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Re: Retreat to cash

Post by Tycoon » Mon Dec 04, 2017 7:22 pm

I'll bet the OP is still sitting on cash, waiting...
...I might be just beginning | I might be near the end. Enya | | C'est la vie

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ruralavalon
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Re: Retreat to cash

Post by ruralavalon » Mon Dec 04, 2017 7:28 pm

Tycoon wrote:
Mon Dec 04, 2017 7:22 pm
I'll bet the OP is still sitting on cash, waiting...
That's my guess as well.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Grt2bOutdoors
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Re: Retreat to cash

Post by Grt2bOutdoors » Mon Dec 04, 2017 7:58 pm

livesoft wrote:
Tue Nov 22, 2016 11:48 am
marge-g wrote:I have been seriously considering getting out of the equity and bond markets and retreating to cash during the next year. )
I love, Love, LOVE to read statements like that. That's a signal to me that the markets will be going up very nicely. Thank you!

There haven't been many statements like that in a while, but there have been quite a few just this week.

More to the point: There will be a great sucking sound as all the world's money comes into the USA.
+1. The money from overseas is pouring into the U.S. this year, even as international markets have outperformed domestic equities.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

malabargold
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Re: Retreat to cash

Post by malabargold » Mon Dec 04, 2017 8:33 pm

DaftInvestor wrote:
Mon Dec 04, 2017 3:53 pm
Unfortunately a lot of people listened to the Media last year around this time and pulled out of the market and missed this year's gains.
Some folks will never learn (to stay the course) or haven't lived through the exaggerations in the media in the past nor the real the ups/downs in the markets.

Nah that’s a good thing . . .
If one doesn’t outperform the Smiths, one is merely
Keeping up with the Joneses

GoldenFinch
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Re: Retreat to cash

Post by GoldenFinch » Mon Dec 04, 2017 9:45 pm

Someone I know who went to cash in the summer of 2014 and stayed out waiting for the big crash just went to 100% equities last week.

:confused

RRAAYY3
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Re: Retreat to cash

Post by RRAAYY3 » Mon Dec 04, 2017 9:53 pm

GoldenFinch wrote:
Mon Dec 04, 2017 9:45 pm
Someone I know who went to cash in the summer of 2014 and stayed out waiting for the big crash just went to 100% equities last week.

:confused
... yikes

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ruralavalon
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Re: Retreat to cash

Post by ruralavalon » Tue Dec 05, 2017 8:53 am

GoldenFinch wrote:
Mon Dec 04, 2017 9:45 pm
Someone I know who went to cash in the summer of 2014 and stayed out waiting for the big crash just went to 100% equities last week.

:confused
So now it's time to go to cash :shock:

NAH.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Tamalak
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Re: Retreat to cash

Post by Tamalak » Tue Dec 05, 2017 9:27 am

GoldenFinch wrote:
Mon Dec 04, 2017 9:45 pm
Someone I know who went to cash in the summer of 2014 and stayed out waiting for the big crash just went to 100% equities last week.

:confused
Probably means we're about to crash.

When the last bear gives up, the bull market ends.
When the last bull gives up, the bear market ends.

AnalogKid22
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Re: Retreat to cash

Post by AnalogKid22 » Tue Dec 05, 2017 12:06 pm

I've been meaning to reply to one of those many posts from 6+ months ago about the market being overpriced and whether to keep money on the sideline. This one will do... There was one where someone had been on the sideline for over 3 years with over 1 million to invest and was still holding back - they'd probably be up around ~100K had they just jumped in!

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zonto
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Re: Retreat to cash

Post by zonto » Tue Dec 05, 2017 12:22 pm

I posted this in another thread yesterday, but thought it relevant here as well. Vanguard published a white paper on November 29 titled As U.S. stock prices rise, the risk-return trade-off gets tricky.

In it, Vanguard discusses how, using conventional valuation methods, valuations are unusually high. However, Vanguard also discusses its proprietary fair-value CAPE system which adjusts for "changes in the economy and markets, including inflation levels and interest rates that can influence the fair values for these multiples." (p.2) Using this valuation method, Vanguard concludes that, as of September 2017 at least, U.S. stocks were "[o]vervalued maybe, but not a bubble." Ibid.

The most interesting part of the paper to me is on page 3 where Vanguard discusses its expectations for three portfolios over the coming five years: (1) 100% U.S. equities; (2) 100% equities split 60% U.S. and 40% international; and (3) a 60/40 stock/bond split using a 60/40 U.S. / international split on the equity side and 70/30 U.S. / international (USD hedged) on the bond side (i.e., the exact allocation of Vanguard LifeStrategy Moderate Growth Fund (VSMGX)). These statistics were presented as of September 2017 as well. Since September 1, 2017, the broad U.S. stock market has gained another 7.45%.

Vanguard concludes:
[A] global balanced 60% stock/40% bond portfolio has similar potential for return as U.S. equities, with much lower downside risk. Although global bonds are likely to have muted returns themselves, low correlation with equities provides a ballast during times of equity market turmoil, making diversification the only free lunch.

Investing is always a balancing act between return objectives and risk preferences. Given current valuations, risky portfolios appear to offer low return with even-higher-than-usual odds of loss, while a global balanced 60% stock/40% bond portfolio offers an unusually compelling trade-off. The next few years could be challenging for investors, who may have to navigate an environment with low returns and a compressed equity risk premium. Decisions around saving more or spending less will be as important as staying diversified and controlling costs. Adhering to investment principles such as long-term focus, disciplined asset allocation, and periodic portfolio rebalancing will be more crucial than ever before.

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HomerJ
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Re: Retreat to cash

Post by HomerJ » Tue Dec 05, 2017 12:28 pm

AnalogKid22 wrote:
Tue Dec 05, 2017 12:06 pm
I've been meaning to reply to one of those many posts from 6+ months ago about the market being overpriced and whether to keep money on the sideline. This one will do... There was one where someone had been on the sideline for over 3 years with over 1 million to invest and was still holding back - they'd probably be up around ~100K had they just jumped in!
Actually, they'd be up $350,000... but that's if they had gone in 100% Vanguard Total Stock Market Index, which is very aggressive and risky.

If they had been more conservative with a 60/40 portfolio, they'd still be up $210,000 in their stocks.

thangngo
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Re: Retreat to cash

Post by thangngo » Tue Dec 05, 2017 12:31 pm

AnalogKid22 wrote:
Tue Dec 05, 2017 12:06 pm
I've been meaning to reply to one of those many posts from 6+ months ago about the market being overpriced and whether to keep money on the sideline. This one will do... There was one where someone had been on the sideline for over 3 years with over 1 million to invest and was still holding back - they'd probably be up around ~100K had they just jumped in!
Don't underestimate their fear of losing. They would rather lose 1-3% of their money to inflation. And don't underestimate their ability to think that they are smarter than everyone else.

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patrick013
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Re: Retreat to cash

Post by patrick013 » Tue Dec 05, 2017 3:39 pm

Journalists today are watching net inflows to money markets increase
while floor brokers expect big increases in the DOW and the 500 due
to favorable economic conditions persisting. The market isn't selling
the big indexes at a discount.
age in bonds, buy-and-hold, 10 year business cycle

Stormbringer
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Re: Retreat to cash

Post by Stormbringer » Tue Dec 05, 2017 4:09 pm

marge-g wrote:
Tue Jan 03, 2017 6:56 pm
Well, let's see what happens. Unconvinced by the feedback here, I've decided to get out of the market for a while.

....

For those of you that want the opportunity to say “I told you so.”, today’s market indexes at the time I placed the orders:

Dow: 19,900
S&P: 2260
NAS: 5441
VTI: 116.34
I'm going to bookmark this thread and refer to it every time I contemplate doing anything other than rebalancing to my planned asset allocation.

Dow: 24,810
S&P: 2629
NAS: 6762.21
VTI: 135.30

Plus about 2% yield in 2017.
"Compound interest is the most powerful force in the universe." - Albert Einstein

lack_ey
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Re: Retreat to cash

Post by lack_ey » Tue Dec 05, 2017 4:50 pm

It sure doesn't look now that valuations are particularly favorable, with all kinds of different risks being priced for uninspiring forward returns, not just in stocks... but much of the same could have been said to a little lesser extent a year ago or two. On the other hand, maybe the forward risks are simply not that high. (famous last words?)

Regardless, as before, the market is very unpredictable, especially (in annualized terms) on a short time scale. You never know what's going to happen.

Diversify as you can, hold on, and don't make rash asset allocation decisions, especially emotional ones or something that could lead to some regrets and second-guessing*. Chances are, whatever you think could be wrong. Whatever you think of the market, the safe assumption is that you're probably dumber than it is.


*like this:
GoldenFinch wrote:
Mon Dec 04, 2017 9:45 pm
Someone I know who went to cash in the summer of 2014 and stayed out waiting for the big crash just went to 100% equities last week.

:confused

garlandwhizzer
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Re: Retreat to cash

Post by garlandwhizzer » Wed Dec 06, 2017 2:05 pm

lack_ey wrote:
Diversify as you can, hold on, and don't make rash asset allocation decisions, especially emotional ones or something that could lead to some regrets and second-guessing*. Chances are, whatever you think could be wrong. Whatever you think of the market, the safe assumption is that you're probably dumber than it is.
1+

Good advice IMO.

Garland Whizzer

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