U.S. stocks in freefall

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gmaynardkrebs
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Re: U.S. stocks in freefall

Post by gmaynardkrebs » Sat Apr 28, 2018 10:10 pm

willthrill81 wrote:
Sat Apr 28, 2018 10:03 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:02 pm
willthrill81 wrote:
Sat Apr 28, 2018 9:47 pm

I don't see why people think that bonds are 'safe' from drawdowns and volatility; it's probably another case of recency bias. From 1977 to 1981, intermediate term Treasuries had a real drawdown of -32.5%.
Do you mean a real decline of 32.5%?
Yes. By real drawdown, I mean peak to trough decline in real dollars.
The reason why I think bonds are "safe" is the rather obvious fact that if I buy $100,000 of 10Y T-Notes at 3%, I know I am guaranteed to receive $3,000 a year for ten years, plus my money back at maturity, no matter what. One cannot make an equivalent statement about stocks.

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willthrill81
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Re: U.S. stocks in freefall

Post by willthrill81 » Sat Apr 28, 2018 10:14 pm

gmaynardkrebs wrote:
Sat Apr 28, 2018 10:10 pm
willthrill81 wrote:
Sat Apr 28, 2018 10:03 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:02 pm
willthrill81 wrote:
Sat Apr 28, 2018 9:47 pm

I don't see why people think that bonds are 'safe' from drawdowns and volatility; it's probably another case of recency bias. From 1977 to 1981, intermediate term Treasuries had a real drawdown of -32.5%.
Do you mean a real decline of 32.5%?
Yes. By real drawdown, I mean peak to trough decline in real dollars.
The reason why I think of bonds are "safe" is the rather obvious fact that if I buy $100,000 of 10Y T-Notes at 3%, I know I am guaranteed to receive $3,000 a year for ten years, plus my money back at maturity, no matter what. One cannot make an equivalent statement about stocks.
That's true, but there's no guarantee of your purchasing power with those notes either. During that 32.5% real drawdown, the nominal returns were close to 4% annually. Nevertheless, had you actually needed to cash in those bonds to go buy stuff, the drawdown would have been very evident.

Nominal returns don't matter; only real ones do.
“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

gmaynardkrebs
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Re: U.S. stocks in freefall

Post by gmaynardkrebs » Sat Apr 28, 2018 10:20 pm

willthrill81 wrote:
Sat Apr 28, 2018 10:14 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:10 pm
willthrill81 wrote:
Sat Apr 28, 2018 10:03 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:02 pm
willthrill81 wrote:
Sat Apr 28, 2018 9:47 pm

I don't see why people think that bonds are 'safe' from drawdowns and volatility; it's probably another case of recency bias. From 1977 to 1981, intermediate term Treasuries had a real drawdown of -32.5%.
Do you mean a real decline of 32.5%?
Yes. By real drawdown, I mean peak to trough decline in real dollars.
The reason why I think of bonds are "safe" is the rather obvious fact that if I buy $100,000 of 10Y T-Notes at 3%, I know I am guaranteed to receive $3,000 a year for ten years, plus my money back at maturity, no matter what. One cannot make an equivalent statement about stocks.
That's true, but there's no guarantee of your purchasing power with those notes either. During that 32.5% real drawdown, the nominal returns were close to 4% annually. Nevertheless, had you actually needed to cash in those bonds to go buy stuff, the drawdown would have been very evident.

Nominal returns don't matter; only real ones do.
So buy TIPS. Forced sales are no good for any asset. Hence, the need for cash, or a good credit line.

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willthrill81
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Re: U.S. stocks in freefall

Post by willthrill81 » Sat Apr 28, 2018 10:27 pm

gmaynardkrebs wrote:
Sat Apr 28, 2018 10:20 pm
willthrill81 wrote:
Sat Apr 28, 2018 10:14 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:10 pm
willthrill81 wrote:
Sat Apr 28, 2018 10:03 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:02 pm
Do you mean a real decline of 32.5%?
Yes. By real drawdown, I mean peak to trough decline in real dollars.
The reason why I think of bonds are "safe" is the rather obvious fact that if I buy $100,000 of 10Y T-Notes at 3%, I know I am guaranteed to receive $3,000 a year for ten years, plus my money back at maturity, no matter what. One cannot make an equivalent statement about stocks.
That's true, but there's no guarantee of your purchasing power with those notes either. During that 32.5% real drawdown, the nominal returns were close to 4% annually. Nevertheless, had you actually needed to cash in those bonds to go buy stuff, the drawdown would have been very evident.

Nominal returns don't matter; only real ones do.
So buy TIPS. Forced sales are no good for any asset. Hence, the need for cash, or a good credit line.
TIPS can be an excellent solution, but they can be very volatile.

The more that time goes on, the more that I think that short-term Treasuries, CDs, high yield savings accounts, and T-bills (cash) are the best fixed-income vehicles for many situations.
“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

gmaynardkrebs
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Re: U.S. stocks in freefall

Post by gmaynardkrebs » Sat Apr 28, 2018 10:37 pm

willthrill81 wrote:
Sat Apr 28, 2018 10:27 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:20 pm
willthrill81 wrote:
Sat Apr 28, 2018 10:14 pm
gmaynardkrebs wrote:
Sat Apr 28, 2018 10:10 pm
willthrill81 wrote:
Sat Apr 28, 2018 10:03 pm


Yes. By real drawdown, I mean peak to trough decline in real dollars.
The reason why I think of bonds are "safe" is the rather obvious fact that if I buy $100,000 of 10Y T-Notes at 3%, I know I am guaranteed to receive $3,000 a year for ten years, plus my money back at maturity, no matter what. One cannot make an equivalent statement about stocks.
That's true, but there's no guarantee of your purchasing power with those notes either. During that 32.5% real drawdown, the nominal returns were close to 4% annually. Nevertheless, had you actually needed to cash in those bonds to go buy stuff, the drawdown would have been very evident.

Nominal returns don't matter; only real ones do.
So buy TIPS. Forced sales are no good for any asset. Hence, the need for cash, or a good credit line.
TIPS can be an excellent solution, but they can be very volatile.

The more that time goes on, the more that I think that short-term Treasuries, CDs, high yield savings accounts, and T-bills (cash) are the best fixed-income vehicles for many situations.
With rates going up as they appear to be doing now, I agree. However, the real return is still barely above 0% on ST, and negative for T-Bills. But, at least it's not as bad as it was 1 year ago. TIPS are volatile -- I use them only for hold to maturity.

wrongfunds
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Re: U.S. stocks in freefall

Post by wrongfunds » Sun Apr 29, 2018 7:55 am

The S&P 500 index closed yesterday at about the same level as it did on Dec 15, 2017, so all those ups and downs in the last four and a half months have been like running in place: lots of energy expended with no real progress.
Do people have expectation that every quarter / month /week should show positive gain in S&P 500 ? I so, I think they have been spoiled.

BD w/ Kung-Fu Grip
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Re: U.S. stocks in freefall

Post by BD w/ Kung-Fu Grip » Tue May 01, 2018 7:53 am

wrongfunds wrote:
Sun Apr 29, 2018 7:55 am
The S&P 500 index closed yesterday at about the same level as it did on Dec 15, 2017, so all those ups and downs in the last four and a half months have been like running in place: lots of energy expended with no real progress.
Do people have expectation that every quarter / month /week should show positive gain in S&P 500 ? I so, I think they have been spoiled.
I had two dividend payouts on my S&P 500 fund since Dec 15, 2017. Same NAV with more shares sounds like progress to me.

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willthrill81
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Re: U.S. stocks in freefall

Post by willthrill81 » Tue May 01, 2018 10:28 am

We must be getting accustomed to seeing the market drop. The S&P 500 dropped nearly 1% yesterday and is down half a percent so far today with nary a post regarding the drop in sight.

Bunny hopping seems to be the new norm.
“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

gmaynardkrebs
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Re: U.S. stocks in freefall

Post by gmaynardkrebs » Tue May 01, 2018 10:36 am

willthrill81 wrote:
Tue May 01, 2018 10:28 am
We must be getting accustomed to seeing the market drop. The S&P 500 dropped nearly 1% yesterday and is down half a percent so far today with nary a post regarding the drop in sight.

Bunny hopping seems to be the new norm.
I agree -- I just figure it's temporary at this point. So far, so good. I think if there were a 5% drop, with a reason for pessimism -- god forbid a war, serious political insatiability in China, raging inflation -- all unlikely at this point, I'd probably be worried.

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JoMoney
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Re: U.S. stocks in freefall

Post by JoMoney » Tue May 01, 2018 10:45 am

Need to see it break through the lows it's been bouncing off of this year or back to making new highs... being range bound doesn't cause much of a stir.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Crushtheturtle
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Re: U.S. stocks in freefall

Post by Crushtheturtle » Tue May 01, 2018 12:34 pm

Why does it keep going down?

I don't want it to go down, I want it to go up! It keeps going down, which is almost the complete opposite of what I want!

Go up!

MotoTrojan
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Re: U.S. stocks in freefall

Post by MotoTrojan » Tue May 01, 2018 12:40 pm

Crushtheturtle wrote:
Tue May 01, 2018 12:34 pm
Why does it keep going down?

I don't want it to go down, I want it to go up! It keeps going down, which is almost the complete opposite of what I want!

Go up!
Please let it drop until my windfall hits the bank. Thank you.

rudeboy
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Re: U.S. stocks in freefall

Post by rudeboy » Tue May 01, 2018 1:04 pm

Crushtheturtle wrote:
Tue May 01, 2018 12:34 pm
Why does it keep going down?

I don't want it to go down, I want it to go up! It keeps going down, which is almost the complete opposite of what I want!

Go up!
Lol. Hey, it's working!

Slothmeister
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Re: U.S. stocks in freefall

Post by Slothmeister » Tue May 01, 2018 1:32 pm

I'm just glad I'm not looking to rebalance at one year. Still have time for it to go up. Hahaha.

dknightd
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Re: U.S. stocks in freefall

Post by dknightd » Tue May 01, 2018 1:38 pm

I wish it would drop and get it over with. It is not if in my mind, but when and how much. I'd like to see it done with so I know where I really stand . . .

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Re: U.S. stocks in freefall

Post by Grt2bOutdoors » Tue May 01, 2018 1:43 pm

Crushtheturtle wrote:
Tue May 01, 2018 12:34 pm
Why does it keep going down?

I don't want it to go down, I want it to go up! It keeps going down, which is almost the complete opposite of what I want!

Go up!
Go down so I can accumulate more shares!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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corn18
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Re: U.S. stocks in freefall

Post by corn18 » Tue May 01, 2018 2:37 pm

Weird day. My megacorp announced kick butt earnings and the stock is down 5%. At least our P/E is more reasonable now :confused

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cfs
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Re: U.S. stocks in freefall

Post by cfs » Tue May 01, 2018 3:00 pm

willthrill81 wrote:
Tue May 01, 2018 10:28 am
. . . We must be getting accustomed to seeing the market drop . . .
Thank you Mister Will, good point. The USA investors are at ease because they know that "markets always come back up." The same thing happened in Japan a couple of decades ago, for the Japanese investors a regular market drop was not a big deal because "the market always come back up to new levels after the drop." Closing now, gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

Day9
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Re: U.S. stocks in freefall

Post by Day9 » Tue May 01, 2018 3:04 pm

cfs wrote:
Tue May 01, 2018 3:00 pm
willthrill81 wrote:
Tue May 01, 2018 10:28 am
. . . We must be getting accustomed to seeing the market drop . . .
Thank you Mister Will, good point. The USA investors are at ease because they know that "markets always come back up." The same thing happened in Japan a couple of decades ago, for the Japanese investors a regular market drop was not a big deal because "the market always come back up to new levels after the drop." Closing now, gracias por leer ~cfs~
Good thing Bogleheads diversify globally and across asset classes. Thanks for reading :wink:
I'm just a fan of the person I got my user name from

supersharpie
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Re: U.S. stocks in freefall

Post by supersharpie » Tue May 01, 2018 3:07 pm

cfs wrote:
Tue May 01, 2018 3:00 pm
willthrill81 wrote:
Tue May 01, 2018 10:28 am
. . . We must be getting accustomed to seeing the market drop . . .
Thank you Mister Will, good point. The USA investors are at ease because they know that "markets always come back up." The same thing happened in Japan a couple of decades ago, for the Japanese investors a regular market drop was not a big deal because "the market always come back up to new levels after the drop." Closing now, gracias por leer ~cfs~
Oh God, here we go with the comparisons to the Japanese economy in the 1980s.

Apples and oranges, nothing to see here.

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cfs
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Re: U.S. stocks in freefall

Post by cfs » Tue May 01, 2018 3:13 pm

Day9 wrote:
Tue May 01, 2018 3:04 pm
. . . Good thing Bogleheads diversify globally and across asset classes . . .
supersharpie wrote:
Tue May 01, 2018 3:07 pm
. . . Oh God, here we go with the comparisons to the Japanese economy in the 1980s . . .
Inputs appreciated, thank you for your note, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

Whakamole
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Re: U.S. stocks in freefall

Post by Whakamole » Thu May 03, 2018 9:37 am

Not again :oops:

alfaspider
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Re: U.S. stocks in freefall

Post by alfaspider » Thu May 03, 2018 10:04 am

Whakamole wrote:
Thu May 03, 2018 9:37 am
Not again :oops:
Perfect timing for me. Just sold some RSUs, can buy some VTSAX tomorrow at a discount :happy

MotoTrojan
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Re: U.S. stocks in freefall

Post by MotoTrojan » Thu May 03, 2018 10:18 am

alfaspider wrote:
Thu May 03, 2018 10:04 am
Whakamole wrote:
Thu May 03, 2018 9:37 am
Not again :oops:
Perfect timing for me. Just sold some RSUs, can buy some VTSAX tomorrow at a discount :happy
Yesterday I doubled my portfolio nearly with an RSU sale. Oh well. Maybe I’ll get to TLH for the first time.

blackcat allie
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Re: U.S. stocks in freefall

Post by blackcat allie » Thu May 03, 2018 10:19 am

Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance. I know that reactivity to market conditions is discouraged, but it seems like reasonable time to re-evaluate IPS.)
Last edited by blackcat allie on Thu May 03, 2018 10:22 am, edited 1 time in total.

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Earl Lemongrab
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Re: U.S. stocks in freefall

Post by Earl Lemongrab » Thu May 03, 2018 10:21 am

Black Cat wrote:
Thu May 03, 2018 10:19 am
Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance)
That's what I do all the time. Besides adjusting allocation, I use ETFs and prefer not to have fractional shares.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

MotoTrojan
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Re: U.S. stocks in freefall

Post by MotoTrojan » Thu May 03, 2018 10:24 am

Black Cat wrote:
Thu May 03, 2018 10:19 am
Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance. I know that reactivity to market conditions is discouraged, but it seems like reasonable time to re-evaluate IPS.)
I don’t see the relation. But like above poster I like integer values for my taxable shares.

sreynard
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Re: U.S. stocks in freefall

Post by sreynard » Thu May 03, 2018 10:42 am

Black Cat wrote:
Thu May 03, 2018 10:19 am
Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance. I know that reactivity to market conditions is discouraged, but it seems like reasonable time to re-evaluate IPS.)
And the advantage of that would be? If your knowledge and skill is so great you know what to buy and when why not just day trade? Why just restrict yourself to dividends? :shock:

The only two reasons I could see to turn off auto reinvestment is, 1. I need the money (retired), or 2. I want to rebalance by buying something else (probably not enough money to have a meaningful effect). Otherwise, I just set my asset allocation and let it ride.

sreynard
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Re: U.S. stocks in freefall

Post by sreynard » Thu May 03, 2018 10:58 am

Earl Lemongrab wrote:
Thu May 03, 2018 10:21 am
Black Cat wrote:
Thu May 03, 2018 10:19 am
Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance)
That's what I do all the time. Besides adjusting allocation, I use ETFs and prefer not to have fractional shares.
OK, that's a reason I didn't think of! My broker and Quicken keep track of those for me, so I've never concerned myself with them. I was always much more concerned with the size of the number to the left of the decimal point. Wishing it was far lefter.... :D

I have a couple of ETFs that I sold out of that left fractional shares on Schwab, but I just ignore them. $14 dollars in a long term treasuries ETF, Whoop-de-do!... I think I used to have $1.49, plus dividends, in Allstate stock for years before Schwab finally liquidated it for me for free. Didn't bother me at all. I sure wasn't going to pay for the privilege! I figured some day the dividends may actually get me to a whole share. Would have been fun to request a certificate. I've never actually had one. Do companies still do that?

Oh ya, forgot! Dive! Dive! Dive! And all that....

flyingaway
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Re: U.S. stocks in freefall

Post by flyingaway » Thu May 03, 2018 11:04 am

I seem to see a pattern: big drop, small rebound, big drop, small rebound, ..., and the stocks are slowly going down.

BlackcatCA
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Re: U.S. stocks in freefall

Post by BlackcatCA » Thu May 03, 2018 11:06 am

The main reason I don't use auto reinvest is to avoid wash sale if I want to TLH.

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ruralavalon
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Re: U.S. stocks in freefall

Post by ruralavalon » Thu May 03, 2018 11:16 am

Black Cat wrote:
Thu May 03, 2018 10:19 am
Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance. I know that reactivity to market conditions is discouraged, but it seems like reasonable time to re-evaluate IPS.)
Before retirement, I used automatic reinvestment of dividends and gains in all accounts. I did occasional rebalancing in tax-advantaged accounts. Rebalancing was very infrequent.

Since retirement I still use automatic reinvestment of dividends and gains in the tax-advantaged accounts, but not the joint taxable account (so we never have a short-term capital gain, if we withdraw from the taxable account).

Even in this "volatile/rabbit" market I haven't had to rebalance.

We use regular mutual funds, not Exchange Traded Funds (ETFs).
Last edited by ruralavalon on Thu May 03, 2018 11:21 am, edited 1 time in total.
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dspencer
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Re: U.S. stocks in freefall

Post by dspencer » Thu May 03, 2018 11:19 am

Am I the only one that is experiencing a sense of relief over the last few months? I can't predict the future, but I would rather have this up and down activity that amounts to a roughly flat market than a continued run-up and then huge crash. It's seems much healthier to have a "correction" now while there is no major crisis taking place than a panicked sell-off later when there's a significant trigger and valuations are sky high. Companies are still profitable and dividends continue to be paid as well. I'm still accumulating, but even for retirees this doesn't seem disastrous yet. Just my two cents.

rudeboy
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Re: U.S. stocks in freefall

Post by rudeboy » Thu May 03, 2018 11:25 am

dspencer wrote:
Thu May 03, 2018 11:19 am
Am I the only one that is experiencing a sense of relief over the last few months? I can't predict the future, but I would rather have this up and down activity that amounts to a roughly flat market than a continued run-up and then huge crash. It's seems much healthier to have a "correction" now while there is no major crisis taking place than a panicked sell-off later when there's a significant trigger and valuations are sky high. Companies are still profitable and dividends continue to be paid as well. I'm still accumulating, but even for retirees this doesn't seem disastrous yet. Just my two cents.
There's no guarantee that this 'healthy correction' won't turn into a huge crash. But, yes, I agree that a standard correction would be healthy were that to be the outcome.

dspencer
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Re: U.S. stocks in freefall

Post by dspencer » Thu May 03, 2018 11:33 am

sreynard wrote:
Thu May 03, 2018 10:42 am

And the advantage of that would be? If your knowledge and skill is so great you know what to buy and when why not just day trade? Why just restrict yourself to dividends? :shock:

The only two reasons I could see to turn off auto reinvestment is, 1. I need the money (retired), or 2. I want to rebalance by buying something else (probably not enough money to have a meaningful effect). Otherwise, I just set my asset allocation and let it ride.
TLH is a big reason, but for me I find there is also a psychological benefit. I like the sense of control and involvement I get from manually buying on a regular basis. However, if I am only buying with small portion of my portfolio, not trying to time, maintaining an asset allocation and picking among pre-selected funds there is not much damage I can do. It's kind of like those steering wheels they put in toddler's toy cars so they can pretend they are doing stuff while you push them or the (often) non-functional crosswalk buttons that you push. It helps satisfy the craving to "do something!" while not really moving the needle on actual results from my overall plan. I fully acknowledge that some people would find this silly. :D

aristotelian
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Re: U.S. stocks in freefall

Post by aristotelian » Thu May 03, 2018 11:34 am

dspencer wrote:
Thu May 03, 2018 11:19 am
Am I the only one that is experiencing a sense of relief over the last few months? I can't predict the future, but I would rather have this up and down activity that amounts to a roughly flat market than a continued run-up and then huge crash. It's seems much healthier to have a "correction" now while there is no major crisis taking place than a panicked sell-off later when there's a significant trigger and valuations are sky high. Companies are still profitable and dividends continue to be paid as well. I'm still accumulating, but even for retirees this doesn't seem disastrous yet. Just my two cents.
I agree. Fundamentals seem good more so than 2008.

dspencer
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Re: U.S. stocks in freefall

Post by dspencer » Thu May 03, 2018 11:38 am

rudeboy wrote:
Thu May 03, 2018 11:25 am
dspencer wrote:
Thu May 03, 2018 11:19 am
Am I the only one that is experiencing a sense of relief over the last few months? I can't predict the future, but I would rather have this up and down activity that amounts to a roughly flat market than a continued run-up and then huge crash. It's seems much healthier to have a "correction" now while there is no major crisis taking place than a panicked sell-off later when there's a significant trigger and valuations are sky high. Companies are still profitable and dividends continue to be paid as well. I'm still accumulating, but even for retirees this doesn't seem disastrous yet. Just my two cents.
There's no guarantee that this 'healthy correction' won't turn into a huge crash. But, yes, I agree that a standard correction would be healthy were that to be the outcome.
Definitely. However, if you believe that there is at least some connection to the underlying values, then the relatively slow decline from January should at least take some of the drama out of a deeper crash in the near future. Or at least that's my theory.

rudeboy
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Re: U.S. stocks in freefall

Post by rudeboy » Thu May 03, 2018 11:44 am

dspencer wrote:
Thu May 03, 2018 11:38 am
rudeboy wrote:
Thu May 03, 2018 11:25 am
dspencer wrote:
Thu May 03, 2018 11:19 am
Am I the only one that is experiencing a sense of relief over the last few months? I can't predict the future, but I would rather have this up and down activity that amounts to a roughly flat market than a continued run-up and then huge crash. It's seems much healthier to have a "correction" now while there is no major crisis taking place than a panicked sell-off later when there's a significant trigger and valuations are sky high. Companies are still profitable and dividends continue to be paid as well. I'm still accumulating, but even for retirees this doesn't seem disastrous yet. Just my two cents.
There's no guarantee that this 'healthy correction' won't turn into a huge crash. But, yes, I agree that a standard correction would be healthy were that to be the outcome.
Definitely. However, if you believe that there is at least some connection to the underlying values, then the relatively slow decline from January should at least take some of the drama out of a deeper crash in the near future. Or at least that's my theory.
True, and a slow decline would allow for more time to buy low than a relatively quicker, sharper, drop and recovery. That said, I try not to think about this stuff too much because I have no control over it. :confused

blackcat allie
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Re: U.S. stocks in freefall

Post by blackcat allie » Thu May 03, 2018 12:06 pm

sreynard wrote:
Thu May 03, 2018 10:42 am
Black Cat wrote:
Thu May 03, 2018 10:19 am
Wondering about auto "dividend reinvestment" in this volatile/rabbit market.
Still new to this, but considering switching dividends to cash & rebalancing funds manually within the tax advantaged account. :?:
Any thoughts or words of wisdom here ? (thanks in advance. I know that reactivity to market conditions is discouraged, but it seems like reasonable time to re-evaluate IPS.)
And the advantage of that would be? If your knowledge and skill is so great you know what to buy and when why not just day trade? Why just restrict yourself to dividends? :shock:

The only two reasons I could see to turn off auto reinvestment is, 1. I need the money (retired), or 2. I want to rebalance by buying something else (probably not enough money to have a meaningful effect). Otherwise, I just set my asset allocation and let it ride.
Hah, no I don't think my knowledge and skill are so great - quite the opposite. :|
I can say however, a few days after the March distribution of Total Stock domestic index (which occured 3/21-3/22) there was a significant downward hop. So a potential plan would be to mandatorily do the manual reinvest by the end of the month/quarter.

I guess I was curious to see if manual reinvestments/rebalances between pre-existing funds were becoming more of a compelling approach. From reading past posts, it seems like people on forum do have different stances (manual for more exact/controlled rebalance, and auto reinvest for simplicity). I posted the question within this thread, because I was curious if others now were more likely to strategize to manual reinvest.

rgs92
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Re: U.S. stocks in freefall

Post by rgs92 » Thu May 03, 2018 12:25 pm

Good things:
1. Lower corporate taxes.
2. Good earnings.
3. Lots of buybacks.
4. Favorable P/E ratios overall.
5. Nominal S&P price only 75% higher than 18 years ago.
6. Low inflation.
7. Low but not rock-bottom/negative interest rates.

Bad things:
1. Big deficits.
2. Washington turmoil.
3. Concentrated gains in tech sector

Conclusion: no compelling reason not to stay the course and maintain long-term asset allocation (if there ever is, but that's not the topic here).

sreynard
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Re: U.S. stocks in freefall

Post by sreynard » Thu May 03, 2018 12:41 pm

dspencer wrote:
Thu May 03, 2018 11:33 am
sreynard wrote:
Thu May 03, 2018 10:42 am

And the advantage of that would be? If your knowledge and skill is so great you know what to buy and when why not just day trade? Why just restrict yourself to dividends? :shock:

The only two reasons I could see to turn off auto reinvestment is, 1. I need the money (retired), or 2. I want to rebalance by buying something else (probably not enough money to have a meaningful effect). Otherwise, I just set my asset allocation and let it ride.
TLH is a big reason, but for me I find there is also a psychological benefit. I like the sense of control and involvement I get from manually buying on a regular basis. However, if I am only buying with small portion of my portfolio, not trying to time, maintaining an asset allocation and picking among pre-selected funds there is not much damage I can do. It's kind of like those steering wheels they put in toddler's toy cars so they can pretend they are doing stuff while you push them or the (often) non-functional crosswalk buttons that you push. It helps satisfy the craving to "do something!" while not really moving the needle on actual results from my overall plan. I fully acknowledge that some people would find this silly. :D
Sure, TLH would be a big reason, but the question was about tax-advantaged accounts, so that doesn't apply.

I guess I just don't understand the thinking. Deceiving myself with a false sense of control adds some kind of benefit? To me that would just add stress and frustration. Turn the wheel to the right and it doesn't do anything!... It would take about three tries to figure out that's a dumb idea and give up. Hopefully, little children forget about that "lesson", though the some of the drivers on my morning commute suggest that some don't. As my wife would tell you, I have no craving to "do something". :wink:

As Mr. Bogle says, "Don't just do something, stand there!"

alfaspider
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Re: U.S. stocks in freefall

Post by alfaspider » Thu May 03, 2018 12:43 pm

Looks like we've had a rally for the day. VTI now basically flat.

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ReformedSpender
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Re: U.S. stocks in freefall

Post by ReformedSpender » Thu May 03, 2018 12:47 pm

rgs92 wrote:
Thu May 03, 2018 12:25 pm
Good things:
1. Lower corporate taxes.
2. Good earnings.
3. Lots of buybacks.
4. Favorable P/E ratios overall.
5. Nominal S&P price only 75% higher than 18 years ago.
6. Low inflation.
7. Low but not rock-bottom/negative interest rates.

Bad things:
1. Big deficits.
2. Washington turmoil.
3. Concentrated gains in tech sector

Conclusion: no compelling reason not to stay the course and maintain long-term asset allocation (if there ever is, but that's not the topic here).
Overall agree but since when were buybacks a "good" thing? This is all too common these days imo.

Look at recent Apple news. One Hundred BILLION dollar buyback authorized. They couldn't think of one single thing to spend that money on to fuel business growth?
Last edited by ReformedSpender on Thu May 03, 2018 2:42 pm, edited 1 time in total.
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

rgs92
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Re: U.S. stocks in freefall

Post by rgs92 » Thu May 03, 2018 12:52 pm

Point taken about stock buybacks. I have just been influenced by listening to CNBC I guess. I did think buybacks were the equivalent of dividends, which were not necessarily a good thing (from all my reading here over the years), but not really a negative either.
Thoughts? Thanks.

dspencer
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Re: U.S. stocks in freefall

Post by dspencer » Thu May 03, 2018 1:06 pm

sreynard wrote:
Thu May 03, 2018 12:41 pm
dspencer wrote:
Thu May 03, 2018 11:33 am
sreynard wrote:
Thu May 03, 2018 10:42 am

And the advantage of that would be? If your knowledge and skill is so great you know what to buy and when why not just day trade? Why just restrict yourself to dividends? :shock:

The only two reasons I could see to turn off auto reinvestment is, 1. I need the money (retired), or 2. I want to rebalance by buying something else (probably not enough money to have a meaningful effect). Otherwise, I just set my asset allocation and let it ride.
TLH is a big reason, but for me I find there is also a psychological benefit. I like the sense of control and involvement I get from manually buying on a regular basis. However, if I am only buying with small portion of my portfolio, not trying to time, maintaining an asset allocation and picking among pre-selected funds there is not much damage I can do. It's kind of like those steering wheels they put in toddler's toy cars so they can pretend they are doing stuff while you push them or the (often) non-functional crosswalk buttons that you push. It helps satisfy the craving to "do something!" while not really moving the needle on actual results from my overall plan. I fully acknowledge that some people would find this silly. :D
Sure, TLH would be a big reason, but the question was about tax-advantaged accounts, so that doesn't apply.

I guess I just don't understand the thinking. Deceiving myself with a false sense of control adds some kind of benefit? To me that would just add stress and frustration. Turn the wheel to the right and it doesn't do anything!... It would take about three tries to figure out that's a dumb idea and give up. Hopefully, little children forget about that "lesson", though the some of the drivers on my morning commute suggest that some don't. As my wife would tell you, I have no craving to "do something". :wink:

As Mr. Bogle says, "Don't just do something, stand there!"
My understanding, potentially flawed, is that if you own the same funds in a tax-advantaged account that you own in a taxable account you can still create a wash sale e.g. selling shares in taxable within 30 days of an automatic dividend reinvestment in tax-advantaged. Obviously that might not be applicable to everyone and probably isn't here.

I said that I understand some might find it silly, but it gives me satisfaction to do the buys manually. It makes me feel more involved in the process of saving and investing. My analogy isn't perfect as putting in a real buy order does have some real effect, just a small one. Maybe bumper bowling with very narrow rails?

Boxtrap
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Re: U.S. stocks in freefall

Post by Boxtrap » Thu May 03, 2018 1:08 pm

Crushtheturtle wrote:
Tue May 01, 2018 12:34 pm
Why does it keep going down?

I don't want it to go down, I want it to go up! It keeps going down, which is almost the complete opposite of what I want!

Go up!
Finally, someone has perfectly captured the true essence of what we're all thinking every day!

dspencer
Posts: 143
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Re: U.S. stocks in freefall

Post by dspencer » Thu May 03, 2018 1:10 pm

rgs92 wrote:
Thu May 03, 2018 12:52 pm
Point taken about stock buybacks. I have just been influenced by listening to CNBC I guess. I did think buybacks were the equivalent of dividends, which were not necessarily a good thing (from all my reading here over the years), but not really a negative either.
Thoughts? Thanks.
Apple claims they believe their stock is undervalued. I think it's reasonable to consider that if a company believes their stock is undervalued that's a good thing. I wouldn't say buybacks are equivalent but they serve a similar purpose.

I believe that Apple also claimed they had enough cash to do a huge buyback and also reinvest in growth. In other words, they weren't mutually exclusive.

david1082b
Posts: 368
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Re: U.S. stocks in freefall

Post by david1082b » Thu May 03, 2018 1:21 pm

ReformedSpender wrote:
Thu May 03, 2018 12:47 pm
rgs92 wrote:
Thu May 03, 2018 12:25 pm
Good things:
1. Lower corporate taxes.
2. Good earnings.
3. Lots of buybacks.
4. Favorable P/E ratios overall.
5. Nominal S&P price only 75% higher than 18 years ago.
6. Low inflation.
7. Low but not rock-bottom/negative interest rates.

Bad things:
1. Big deficits.
2. Washington turmoil.
3. Concentrated gains in tech sector

Conclusion: no compelling reason not to stay the course and maintain long-term asset allocation (if there ever is, but that's not the topic here).
Overall agree but since when were buybacks a "good" thing? This is all too common these days imo.

Look at recent Apple news. One Hundred BILLION dollar buyback authorized. They couldn't think of one single thing to spend that money on to fuel further growth their business further?
Apple might argue that Google has thrown stacks of money at R&D without much to show for it. Apple seems to concentrate on a smaller set of projects and could argue that they've gotten more success than Google in terms of shareholder value growth. I found this from earlier in the year:
Asked about what Apple could expand into in the future, given the march of technology and society, Cook said that Apple won't be distracted by what doesn't matter.

"The priorities are about saying no to a bunch of great ideas. We can do more things than we used to do because we're a bit bigger. But in the scheme of things versus our revenue, we're doing very few things," said Cook. "I mean, you could put every product we're making on this table, to put it in perspective. I doubt anybody that is anywhere near our revenue could say that."
https://appleinsider.com/articles/18/02 ... -the-2020s

Boxtrap
Posts: 86
Joined: Tue Oct 10, 2017 1:13 pm

Re: U.S. stocks in freefall

Post by Boxtrap » Thu May 03, 2018 1:26 pm

dspencer wrote:
Thu May 03, 2018 11:19 am
Am I the only one that is experiencing a sense of relief over the last few months? I can't predict the future, but I would rather have this up and down activity that amounts to a roughly flat market than a continued run-up and then huge crash. It's seems much healthier to have a "correction" now while there is no major crisis taking place than a panicked sell-off later when there's a significant trigger and valuations are sky high. Companies are still profitable and dividends continue to be paid as well. I'm still accumulating, but even for retirees this doesn't seem disastrous yet. Just my two cents.
I don't know that I'd say I'm "relieved", but I think it is healthy, even if uncomfortable, that we are all experiencing a volatility wake up call again. Because the truth is the stock market is volatile. End of story. The bull market that has been raging for the last 7 years or so is not indicative of the underlying volatility inherent in stock market investing. It just isn't. Yes, there have been similar periods before where we've had similar prolonged run-ups - periods where it just keeps climbing and climbing and it seems like it will never stop - like the stretch leading up to the dot-com crash in 2000. But just because it has happened before doesn't mean that's its true character.

The way I see the market ever since early February, is simply that the market is showing its true colors again and we're collectively still in shock and denial. It may have commenced with concerns about peak earnings and interest rate worries, but I don't think that's why we have remained in such see-saw mode for the last couple of months. I think we were spoiled for a long time and the lack of consistent buyers in the market right now is, at least in some part, an emotional response to not being able to walk down easy street anymore. Fundamentals are largely good right now, aren't they?
I think the markets are being cranky and emotional.

Just my two cents. And worth every penny, I might add.

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Earl Lemongrab
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Re: U.S. stocks in freefall

Post by Earl Lemongrab » Thu May 03, 2018 1:39 pm

sreynard wrote:
Thu May 03, 2018 10:58 am
Earl Lemongrab wrote:
Thu May 03, 2018 10:21 am
That's what I do all the time. Besides adjusting allocation, I use ETFs and prefer not to have fractional shares.
OK, that's a reason I didn't think of! My broker and Quicken keep track of those for me, so I've never concerned myself with them.
The reason that I don't want fractionals is that I move my assets around frequently for transfer bonuses. If you have fractional shares, those generally have to be sold. This complicates transfer and can add cost depending on the brokerage and policies.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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