Should we stay in Crazytown because there's no where to run?

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CULater
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Re: Should we stay in Crazytown because there's no where to run?

Post by CULater » Sat Sep 29, 2018 10:54 pm

KlangFool wrote:
Sat Sep 29, 2018 5:16 pm
CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
CULater,

My family member worked in the financial industry over 30+ years. His annual salary and bonus are in the 7 figures range. He has a master degree in economics from the University of Chicago. I lost 50% of my whole life savings during Telecom Bust. He lost 10 million during Telecom bust.

Are you smarter than my family member?

My AA is 60/40. I know that I know nothing. How about you?

KlangFool
I must be because I lost $0 in the telecom bust. I thought stock prices were nuts then too.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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stemikger
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Re: Should we stay in Crazytown because there's no where to run?

Post by stemikger » Sun Sep 30, 2018 6:47 am

Charlie Munger once said in an interview that he has seen Berkshire stock go from top tick to bottom tick down by 50%. He also said ask me how much it bothered him. Zero. He said it was a non-event all three times.

This is how a brilliant man and investor thinks about investing because he knows that this is part of the process. Now I am not 100% Berkshire or stocks but even a balanced fund (like I have) has gone down by 22%. What will I do? Nothing, it already rebalanced for me and I would probably just take a smaller about out that year or maybe something from my cash account.

As an investor you must go through these events a few times in your lifetime to understand this is what the market does and will continue to do. If you really can't deal with this you should not invest in stocks at all. That last sentence came from none other than Warren Buffett.
Last edited by stemikger on Sun Sep 30, 2018 8:03 am, edited 1 time in total.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

PFInterest
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Re: Should we stay in Crazytown because there's no where to run?

Post by PFInterest » Sun Sep 30, 2018 7:09 am

CULater wrote:
Sat Sep 29, 2018 10:54 pm
KlangFool wrote:
Sat Sep 29, 2018 5:16 pm
CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
CULater,

My family member worked in the financial industry over 30+ years. His annual salary and bonus are in the 7 figures range. He has a master degree in economics from the University of Chicago. I lost 50% of my whole life savings during Telecom Bust. He lost 10 million during Telecom bust.

Are you smarter than my family member?

My AA is 60/40. I know that I know nothing. How about you?

KlangFool
I must be because I lost $0 in the telecom bust. I thought stock prices were nuts then too.
Interested to see your long term xirr if you are moving to cash so often.

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jeffyscott
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Re: Should we stay in Crazytown because there's no where to run?

Post by jeffyscott » Sun Sep 30, 2018 8:34 am

CULater wrote:
Sat Sep 29, 2018 10:54 pm
KlangFool wrote:
Sat Sep 29, 2018 5:16 pm
My family member worked in the financial industry over 30+ years. His annual salary and bonus are in the 7 figures range. He has a master degree in economics from the University of Chicago. I lost 50% of my whole life savings during Telecom Bust. He lost 10 million during Telecom bust.

Are you smarter than my family member?

My AA is 60/40. I know that I know nothing. How about you?

KlangFool
I must be because I lost $0 in the telecom bust. I thought stock prices were nuts then too.
"Telecom bust"? What was that, or is it referring to dotcom bust circa. 2000?

If so, a lot of that was avoided by differing from the market and not loading up on US tech stocks and large cap growth stocks. Perhaps foreign stocks are the small cap value stocks of this era?
press on, regardless - John C. Bogle

Namashkar
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Re: Should we stay in Crazytown because there's no where to run?

Post by Namashkar » Sun Sep 30, 2018 8:41 am

CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
Hi CULater,

I have been thinking just the same as you have been. During the last 15 days I changed my AA from 60/40 S/B to 50/30/20 S/B/MM. To me this is just a reasonable move to protect my investment to some extent, to others it may be market timing. No tax considerations since my changes were made using IRA accounts. I know I will have to face some difficulties and perhaps a financial loss to get back to my original AA, but that is a risk I am willing to take to sleep better now.

Yes you have a company.

staythecourse
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Re: Should we stay in Crazytown because there's no where to run?

Post by staythecourse » Sun Sep 30, 2018 8:58 am

Namashkar wrote:
Sun Sep 30, 2018 8:41 am
CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
Hi CULater,

I have been thinking just the same as you have been. During the last 15 days I changed my AA from 60/40 S/B to 50/30/20 S/B/MM. To me this is just a reasonable move to protect my investment to some extent, to others it may be market timing. No tax considerations since my changes were made using IRA accounts. I know I will have to face some difficulties and perhaps a financial loss to get back to my original AA, but that is a risk I am willing to take to sleep better now.

Yes you have a company.
You are definitely market timing as your actions are the very definition of market timing. Your are shifting money around based on your perception of current valuations.

Okay to do as it is your money, but like many things in life it is best to do something with your eyes wide open.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Carlos Danger
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Re: Should we stay in Crazytown because there's no where to run?

Post by Carlos Danger » Sun Sep 30, 2018 9:34 am

Yes we should stay in crazytown OP, but you should have only had one foot in in the first place and should be diversified.

I am comfortable with our asset allocation. And if that light at the end of the tunnel IS another train, I'll engage in that big no-no of "market timing" and cheaply scoop up as much of the wreckage as I can after the crash, probably by selling off a bunch of our holdings that are unlikely to have declined by very much in comparison to the S&P/U.S. stocks.

KlangFool
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Re: Should we stay in Crazytown because there's no where to run?

Post by KlangFool » Sun Sep 30, 2018 9:36 am

CULater wrote:
Sat Sep 29, 2018 10:54 pm
KlangFool wrote:
Sat Sep 29, 2018 5:16 pm
CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
CULater,

My family member worked in the financial industry over 30+ years. His annual salary and bonus are in the 7 figures range. He has a master degree in economics from the University of Chicago. I lost 50% of my whole life savings during Telecom Bust. He lost 10 million during Telecom bust.

Are you smarter than my family member?

My AA is 60/40. I know that I know nothing. How about you?

KlangFool
I must be because I lost $0 in the telecom bust. I thought stock prices were nuts then too.
CULater,

My family member is a multimillionaire even after losing 10 million in the Telecom bust. If you are smarter than him, you must be richer than him. Then, why do you need to worry about the next crash?

KlangFool

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nedsaid
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Re: Should we stay in Crazytown because there's no where to run?

Post by nedsaid » Sun Sep 30, 2018 10:12 am

CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
Current forward P/E ratios of 17-18 and trailing P/E ratios of 20 is hardly crazytown. A CAPE or P?E 10 of 33.36 just seems way out of whack. Something is wrong with the metric.
A fool and his money are good for business.

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whodidntante
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Re: Should we stay in Crazytown because there's no where to run?

Post by whodidntante » Sun Sep 30, 2018 10:16 am

If you are currently underweight foreign stocks, consider diversifying. While some foreign markets are at even higher valuations, valuations are not "crazytown" everywhere.

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goodenyou
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Re: Should we stay in Crazytown because there's no where to run?

Post by goodenyou » Sun Sep 30, 2018 10:17 am

History shows that trying to get out and back in at the right time is a fool's errand. This is not Amityville Horror (cue the ghost "GET OUT!"). A diversified portfolio should be paramount for those with a short(er) time horizon.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

PFInterest
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Re: Should we stay in Crazytown because there's no where to run?

Post by PFInterest » Sun Sep 30, 2018 11:03 am

Namashkar wrote:
Sun Sep 30, 2018 8:41 am
Hi CULater,

I have been thinking just the same as you have been. During the last 15 days I changed my AA from 60/40 S/B to 50/30/20 S/B/MM. To me this is just a reasonable move to protect my investment to some extent, to others it may be market timing. No tax considerations since my changes were made using IRA accounts. I know I will have to face some difficulties and perhaps a financial loss to get back to my original AA, but that is a risk I am willing to take to sleep better now.

Yes you have a company.
adjusting your AA is fine, but what is your future plan? did you write down if you will go back to 60:40, if so when? and if so how to avoid taxes? and if not, and your new risk tolerance is 50:50, then ok. write that down.

MnD
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Re: Should we stay in Crazytown because there's no where to run?

Post by MnD » Sun Sep 30, 2018 12:12 pm

Crazytown (US stocks) is 11% of our net worth including almost everything (entire portfolio, real estate, NPV of pension and SS).
Sleeping very well.

jehovasfitness
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Re: Should we stay in Crazytown because there's no where to run?

Post by jehovasfitness » Sun Sep 30, 2018 12:22 pm

Somewhat on this topic if one is worried there will be a huge hit soon and behind where they should be.

Stay the course and keep maxing things out or pull back and pay off debt at 4% int rate?

Thinking of finishing the year to have accounts maxed, but at the start of the year pulling back to match to get rid of debt in 6 months then resume higher contributions

Nowizard
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Re: Should we stay in Crazytown because there's no where to run?

Post by Nowizard » Sun Sep 30, 2018 12:58 pm

We say that no one can predict the stock market, then use various metrics and algorithms to express our own predictions. Though they represent the best information available, we still have to determine our own interpretation of the "Facts."
Tim

balbrec2
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Re: Should we stay in Crazytown because there's no where to run?

Post by balbrec2 » Sun Sep 30, 2018 1:08 pm

CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
Crazytown is everywhere so yes, I'm staying! I just don't go out quite as often.
review, rebalance , repeat.
:beer

tibbitts
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Re: Should we stay in Crazytown because there's no where to run?

Post by tibbitts » Sun Sep 30, 2018 1:11 pm

stemikger wrote:
Sun Sep 30, 2018 6:47 am
Charlie Munger once said in an interview that he has seen Berkshire stock go from top tick to bottom tick down by 50%. He also said ask me how much it bothered him. Zero. He said it was a non-event all three times.
If I'd started with as much money as Charlie Munger, it wouldn't have bothered me either.

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HomerJ
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Re: Should we stay in Crazytown because there's no where to run?

Post by HomerJ » Sun Sep 30, 2018 1:21 pm

KlangFool wrote:
Sun Sep 30, 2018 9:36 am
If you are smarter than him, you must be richer than him.
This, of course, is false. Being smart helps, but it is no guarantee of riches.

Nor does being rich guarantee someone is smart.
The J stands for Jay

KlangFool
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Re: Should we stay in Crazytown because there's no where to run?

Post by KlangFool » Sun Sep 30, 2018 2:39 pm

HomerJ wrote:
Sun Sep 30, 2018 1:21 pm
KlangFool wrote:
Sun Sep 30, 2018 9:36 am
If you are smarter than him, you must be richer than him.
This, of course, is false. Being smart helps, but it is no guarantee of riches.

Nor does being rich guarantee someone is smart.
HomerJ,

My family member is smart enough in finance that he is paid 7 figures in salary and bonus every year. If OP is smarter, it should be easy enough for him to earn much more.

KlangFool

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CaliJim
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Re: Should we stay in Crazytown because there's no where to run?

Post by CaliJim » Sun Sep 30, 2018 2:50 pm

White Coat Investor wrote:
Sat Sep 29, 2018 9:23 am
Yes, by staying invested I will get hammered in the next downturn
I like b :sharebeer
Last edited by CaliJim on Sun Sep 30, 2018 3:09 pm, edited 1 time in total.
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Starfish
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Re: Should we stay in Crazytown because there's no where to run?

Post by Starfish » Mon Oct 01, 2018 1:12 am

KlangFool wrote:
Sun Sep 30, 2018 2:39 pm
HomerJ wrote:
Sun Sep 30, 2018 1:21 pm
KlangFool wrote:
Sun Sep 30, 2018 9:36 am
If you are smarter than him, you must be richer than him.
This, of course, is false. Being smart helps, but it is no guarantee of riches.

Nor does being rich guarantee someone is smart.
HomerJ,

My family member is smart enough in finance that he is paid 7 figures in salary and bonus every year. If OP is smarter, it should be easy enough for him to earn much more.

KlangFool
He must be a lot smarter than Einstein, Bohr or Jesus (assuming he existed). However nobody heard or will ever hear about him. Hmmm...

TM90
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Re: Should we stay in Crazytown because there's no where to run?

Post by TM90 » Mon Oct 01, 2018 2:15 am

I think index investors aren't in crazy town we are living in the suburbs of crazy town, close enough to have the benefits of living in the proximity of the center (tech stocks) but far enough to have all the risk.

goblue100
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Re: Should we stay in Crazytown because there's no where to run?

Post by goblue100 » Mon Oct 01, 2018 7:12 am

CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
You have posted many times on this topic. You are retired. You said you put 5% of your portfolio in gold recently.
What is your asset allocation? If you are worried about market valuations, adjust your AA accordingly. It seems like you are afraid of being the only one left out of the party, so you keep trying to convince the board to join you in your fears.
Can't take it with you when you're gone | But I want enough to get there on - Rollin with the flow - Jerry Hayes

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jeffyscott
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Re: Should we stay in Crazytown because there's no where to run?

Post by jeffyscott » Mon Oct 01, 2018 7:52 am

MotoTrojan wrote:
Sat Sep 29, 2018 11:11 am
What were the 12 month trailing and forward estimated P/E ratios in February 98?
I don't know about forward, but trailing was about the same, based on this chart of earnings yield (inverse of P/E):
Image
http://www.multpl.com/s-p-500-earnings-yield
press on, regardless - John C. Bogle

lostdog
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Re: Should we stay in Crazytown because there's no where to run?

Post by lostdog » Mon Oct 01, 2018 8:00 am

Vanguard Total World Index, Vanguard Total World Bond and cash to cover a few years. Sleeping well.

MotoTrojan
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Re: Should we stay in Crazytown because there's no where to run?

Post by MotoTrojan » Mon Oct 01, 2018 8:07 am

jeffyscott wrote:
Mon Oct 01, 2018 7:52 am
MotoTrojan wrote:
Sat Sep 29, 2018 11:11 am
What were the 12 month trailing and forward estimated P/E ratios in February 98?
I don't know about forward, but trailing was about the same, based on this chart of earnings yield (inverse of P/E):
Image
http://www.multpl.com/s-p-500-earnings-yield
Glad I didn’t invest in 2008! Crazy P/E.

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jeffyscott
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Re: Should we stay in Crazytown because there's no where to run?

Post by jeffyscott » Mon Oct 01, 2018 8:29 am

MotoTrojan wrote:
Mon Oct 01, 2018 8:07 am
Glad I didn’t invest in 2008! Crazy P/E.
That is what is known as a recession, at which time looking at the 1 year P/E is problematic for obvious reasons. We are not in a recession now, nor were we in one in 1998-2000, both periods feature similar CAPE as well as 1 year trailing P/E.
press on, regardless - John C. Bogle

moehoward
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Re: Should we stay in Crazytown because there's no where to run?

Post by moehoward » Mon Oct 01, 2018 8:33 am

MotoTrojan wrote:
Mon Oct 01, 2018 8:07 am
jeffyscott wrote:
Mon Oct 01, 2018 7:52 am
MotoTrojan wrote:
Sat Sep 29, 2018 11:11 am
What were the 12 month trailing and forward estimated P/E ratios in February 98?
I don't know about forward, but trailing was about the same, based on this chart of earnings yield (inverse of P/E):
Image
http://www.multpl.com/s-p-500-earnings-yield
Glad I didn’t invest in 2008! Crazy P/E.
Actually it was a good time to invest. We started buying more stocks/Bonds during late 2008 with our remaining cash, It has been profitable.

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EyeYield
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Re: Should we stay in Crazytown because there's no where to run?

Post by EyeYield » Mon Oct 01, 2018 8:38 am

OP,
Since all your questions have already been answered, here’s a response not touched on by previous responders and it’s not meant to be cruel, funny, facetious or sarcastic. It’s sincere.

One way to avoid the next coming downturn is to simply not live through it.

By incessantly worrying about the future, you are undoubtedly stressing your mind, body and behaviors. The negative health effects of stress are well documented and may well lead to a shortened life span. With a shorter life span you will not need your money to last as long. Problem solved.

So if you continue to stand firmly on the tracks and focus on the light coming at you, all the while flinching, you may not have to worry about the next coming downturn - or anything else!

Will you at least think about that?

Retirement is a time to relax and enjoy life. Maybe it’s time to take a vacation away from Bogleheads, brokerage totals and financial forecasts?
"The stock market is a giant distraction from the business of investing." - Jack Bogle

Gauntlet
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Re: Should we stay in Crazytown because there's no where to run?

Post by Gauntlet » Mon Oct 01, 2018 8:52 am

I hold a diverse portfolio of domestic stocks, international stocks, domestic bonds, and treasuries. While domestic stocks have had a great year, my other holdings have not. In fact, my portfolio is not up my much this year. I guess my point is that if you are diversified things are not looking like crazy town, just a typical year.

R2D2
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Re: Should we stay in Crazytown because there's no where to run?

Post by R2D2 » Mon Oct 01, 2018 9:04 am

Pinotage wrote:
Sat Sep 29, 2018 9:22 am
Maybe consider buying something expensive, but necessary*, with some of your gains or new contributions you aren't comfortable investing.

Replacement vehicle, new roof/water heater/HVAC, pay off mortgage etc... Deferrable expenses that will eventually come due.

So, if/when a downturn does hit, you aren't forced to sell equities to manage these same expenses.

You may pay a little more for some of these things now because the economy is doing well, but you will have the peace of mind of reducing future expenses.

*meaning something you will need to buy anyway, of a quality you would ordinarily purchase.
Actually, I really like this reply.

There probably are a number of high IRR things you can put money into that don't involve equity risk. Maybe getting solar panels or better insulation should be on that list, for instance.

Doing these things would probably increase your expected return and decrease overall risk. And you'd probably sleep better at night too.

(I also like the idea of getting some int'l equity exposure if you don't already have it.)

CULater
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Re: Should we stay in Crazytown because there's no where to run?

Post by CULater » Mon Oct 01, 2018 9:04 am

May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

deltaneutral83
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Re: Should we stay in Crazytown because there's no where to run?

Post by deltaneutral83 » Mon Oct 01, 2018 9:54 am

Sure would be a lot easier if the US market returned 0.75% a month with virtually no volatility decade after decade now wouldn't it? We could all take our 9% CAGR and start planning our retirement when we're 25. Doesn't work like that. Play the odds and keep costs low. There's no rolling 30/40 years where this wouldn't have worked out nicely for BH types. Will it continue the next 30/40 years, I have no idea, but I also have no better options in advance and I know nothing nor do I possess any knowledge to the contrary.

MotoTrojan
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Re: Should we stay in Crazytown because there's no where to run?

Post by MotoTrojan » Mon Oct 01, 2018 10:00 am

moehoward wrote:
Mon Oct 01, 2018 8:33 am
MotoTrojan wrote:
Mon Oct 01, 2018 8:07 am
jeffyscott wrote:
Mon Oct 01, 2018 7:52 am
MotoTrojan wrote:
Sat Sep 29, 2018 11:11 am
What were the 12 month trailing and forward estimated P/E ratios in February 98?
I don't know about forward, but trailing was about the same, based on this chart of earnings yield (inverse of P/E):
Image
http://www.multpl.com/s-p-500-earnings-yield
Glad I didn’t invest in 2008! Crazy P/E.
Actually it was a good time to invest. We started buying more stocks/Bonds during late 2008 with our remaining cash, It has been profitable.
Yup that’s my point :). Wish I had assets to invest back then.

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Re: Should we stay in Crazytown because there's no where to run?

Post by 2pedals » Mon Oct 01, 2018 10:17 am

CULater wrote:
Sat Sep 29, 2018 9:03 am
Anyone starting to flinch? I am.
CULater
Explain yourself -- what did you do? what are you going to do?
Make this an actionable thread, please!

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Re: Should we stay in Crazytown because there's no where to run?

Post by Tycoon » Mon Oct 01, 2018 10:24 am

CULater wrote:
Mon Oct 01, 2018 9:04 am
The path to Crazytown?

Image

https://www.marketwatch.com/story/were- ... op_stories
Please remove the "we" in "Should we stay in...". It should state "Should I stay in...".
Appeal to Pity:When pity is envoked to support a statement | Appeal to Popular Sentiment:Appealing to unrelated prejudices and attitudes | Hasty Generalization:Too little evidence to support the conclusion

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Re: Should we stay in Crazytown because there's no where to run?

Post by HomerJ » Mon Oct 01, 2018 10:40 am

CULater, here's something you wrote in Dec 2016.
CULater wrote:
Tue Dec 13, 2016 3:16 pm
I noticed that the Shiller PE/10 value now exceeds 28, which is the third highest value ever, after the runup to the 1929 crash and the dot-com mania. Of course, it can go a lot higher, but why would it? Valuations matter, don't they???
Did you do anything back then? Did you change your AA? Did you get out of the market? Why do you keep posting these threads? What steps do you suggest people take? What steps have YOU taken?

I have no problem with you preparing for a crash. I highly recommend it. I think people should ALWAYS assume a crash could happen tomorrow.

Because it could. Regardless of valuations.

So what have you done to prepare for a crash? Will you be okay if the market goes down 50% and takes 5 years to recover?

Because I'm close to retirement with a large nest egg, I'm 50/50. If I was younger, I'd be 90/10 or 80/20, and not worry about a crash (since I'd have plenty of years to recover). But being close to retirement, I'm 50/50 so that I have protection from a crash, AND I enjoy the upside if the markets keep moving up.

Note the market is up 33% since your post above. It may indeed still crash 50% tomorrow, but it should be obvious that "predicting the future is hard."

You thought 28 was crazy high back then, yet the market still moved higher. No one knows enough to accurately predict the future.
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Re: Should we stay in Crazytown because there's no where to run?

Post by watchnerd » Mon Oct 01, 2018 10:51 am

R2D2 wrote:
Mon Oct 01, 2018 9:04 am
Pinotage wrote:
Sat Sep 29, 2018 9:22 am
Maybe consider buying something expensive, but necessary*, with some of your gains or new contributions you aren't comfortable investing.

Replacement vehicle, new roof/water heater/HVAC, pay off mortgage etc... Deferrable expenses that will eventually come due.

So, if/when a downturn does hit, you aren't forced to sell equities to manage these same expenses.

You may pay a little more for some of these things now because the economy is doing well, but you will have the peace of mind of reducing future expenses.

*meaning something you will need to buy anyway, of a quality you would ordinarily purchase.
Actually, I really like this reply.

There probably are a number of high IRR things you can put money into that don't involve equity risk. Maybe getting solar panels or better insulation should be on that list, for instance.

Doing these things would probably increase your expected return and decrease overall risk. And you'd probably sleep better at night too.

(I also like the idea of getting some int'l equity exposure if you don't already have it.)
I also thought this was very wise.
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Re: Should we stay in Crazytown because there's no where to run?

Post by nedsaid » Mon Oct 01, 2018 10:56 am

If you truly believe that the US Stock Market is Crazytown, there are things you can do about it. For the record, I do not believe this. Indeed, P/E ratios, both based upon forward estimated earnings and historical trailing earnings are looking reasonable. Of course, earnings recently have been fantastic and the debate is whether those fantastic earnings are sustainable or not. My belief is that if the economy continues to grow sustainably at 3% rather than at 2%, that earnings are sustainable.

Anywho, back to the ranch. If you really believe that US Stocks are overvalued, you can buy more of the cheaper International stocks, particularly Emerging Markets. You can reduce your portfolio allocation to US Stocks. You can also tilt your US Stocks towards Value, which has been trailing the S&P 500 and US Total Stock Market Index for 10 years now. You can increase your allocation to safer investment grade, intermediate term bonds. Larry Swedroe took his US Stocks to Value in about 1997 and 1998, he missed some upside but really benefited when the 2000-2002 bear market arrived.

Diversifiers like REITs are looking better. They are solidly in Mid-Core in the Morningstar Style-Box and closer to Value than Growth. The Yield on the Vanguard REIT Index is at 4.16% for Investor Shares. It got down as low as 3.1%. Not putting in a "buy" here, REITs are somewhat cheaper than they were but still not cheap.

Minimum Volatility is another option. I checked the iShares Edge MSCI Minimum Volatility ETF and it is in Large Cap Core and close to the Large Value corner of the Morningstar Stylebox but not there yet. Forward P/E is 19.87 vs. Vanguard Total Stock Market P/E of 18.12. I would say Minimum Volatility is still too pricey here for me.

Vanguard Value Index, which is Large-Cap Value, has a forward P/E of 14.89 and looks like the best idea here in the United States for diversifying away from "Crazytown." Vanguard Small Value Index also looks fairly good with a forward P/E of 15.27.

Vanguard Total International Stock Market Index has a forward P/E of 13.26. Vanguard Emerging Markets Index has a forward P/E of 12.49. Looks a lot cheaper than the U.S.

So there you go, some things one can look into to guard against Crazytown. Looks like International is the best bet here. Here in the US, Large Value looks good but I would stay away from minimum volatility until it gets into Value territory. REITs are kind of take it or leave it, I don't have a lot of conviction here.
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Re: Should we stay in Crazytown because there's no where to run?

Post by goodenyou » Mon Oct 01, 2018 11:03 am

nedsaid wrote:
Mon Oct 01, 2018 10:56 am
If you truly believe that the US Stock Market is Crazytown, there are things you can do about it. For the record, I do not believe this. Indeed, P/E ratios, both based upon forward estimated earnings and historical trailing earnings are looking reasonable. Of course, earnings recently have been fantastic and the debate is whether those fantastic earnings are sustainable or not. My belief is that if the economy continues to grow sustainably at 3% rather than at 2%, that earnings are sustainable.

Anywho, back to the ranch. If you really believe that US Stocks are overvalued, you can buy more of the cheaper International stocks, particularly Emerging Markets. You can reduce your portfolio allocation to US Stocks. You can also tilt your US Stocks towards Value, which has been trailing the S&P 500 and US Total Stock Market Index for 10 years now. You can increase your allocation to safer investment grade, intermediate term bonds. Larry Swedroe took his US Stocks to Value in about 1997 and 1998, he missed some upside but really benefited when the 2000-2002 bear market arrived.

Diversifiers like REITs are looking better. They are solidly in Mid-Core in the Morningstar Style-Box and closer to Value than Growth. The Yield on the Vanguard REIT Index is at 4.16% for Investor Shares. It got down as low as 3.1%. Not putting in a "buy" here, REITs are somewhat cheaper than they were but still not cheap.

Minimum Volatility is another option. I checked the iShares Edge MSCI Minimum Volatility ETF and it is in Large Cap Core and close to the Large Value corner of the Morningstar Stylebox but not there yet. Forward P/E is 19.87 vs. Vanguard Total Stock Market P/E of 18.12. I would say Minimum Volatility is still too pricey here for me.

Vanguard Value Index, which is Large-Cap Value, has a forward P/E of 14.89 and looks like the best idea here in the United States for diversifying away from "Crazytown." Vanguard Small Value Index also looks fairly good with a forward P/E of 15.27.

Vanguard Total International Stock Market Index has a forward P/E of 13.26. Vanguard Emerging Markets Index has a forward P/E of 12.49. Looks a lot cheaper than the U.S.

So there you go, some things one can look into to guard against Crazytown. Looks like International is the best bet here. Here in the US, Large Value looks good but I would stay away from minimum volatility until it gets into Value territory. REITs are kind of take it or leave it, I don't have a lot of conviction here.
Some investors don’t sleep well at night when they put themselves in the position to sleep well at night. FOMO will keep them up.
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Re: Should we stay in Crazytown because there's no where to run?

Post by nedsaid » Mon Oct 01, 2018 11:11 am

goodenyou wrote:
Mon Oct 01, 2018 11:03 am


Some investors don’t sleep well at night when they put themselves in the position to sleep well at night. FOMO will keep them up.
Yes, Fear Of Missing Out (FOMO) is another issue. The thing is, if you want to cut risk it is pretty likely you are cutting return as well. Pretty much the whole reason I buy bonds, they are less risky and offer less return than stocks but allow me to sleep at night.

An investor could re-allocate his or her stocks, more International and less US, and less Growth and more Value. The hope is that you would keep returns the same while reducing risk but who knows what will happen in real life? Asset classes don't have to meet our expectations for performance.
A fool and his money are good for business.

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Re: Should we stay in Crazytown because there's no where to run?

Post by Namashkar » Mon Oct 01, 2018 11:50 am

staythecourse wrote:
Sun Sep 30, 2018 8:58 am
Namashkar wrote:
Sun Sep 30, 2018 8:41 am
CULater wrote:
Sat Sep 29, 2018 9:03 am
U.S. stocks are nuts. Shiller CAPE now stands at 33.36 and the only time in history it was higher was Feb, 1998 to Mar 2001 which would have been a wild ride. If you had gotten out of stocks in Feb 1998 you could have stayed out for 12 years and gotten back in at the price you sold, meanwhile making about 50% on safe 5-year treasuries. Should we really just hold our noses and wait? How do you manage this psychologically? Feels like standing on the train track watching the light coming toward you getting bigger. Are we just staying in Crazytown because other places, like bonds, seem even crazier? Tough times for the buy-and-hold crowd. Anyone starting to flinch? I am.
Hi CULater,

I have been thinking just the same as you have been. During the last 15 days I changed my AA from 60/40 S/B to 50/30/20 S/B/MM. To me this is just a reasonable move to protect my investment to some extent, to others it may be market timing. No tax considerations since my changes were made using IRA accounts. I know I will have to face some difficulties and perhaps a financial loss to get back to my original AA, but that is a risk I am willing to take to sleep better now.

Yes you have a company.
You are definitely market timing as your actions are the very definition of market timing. Your are shifting money around based on your perception of current valuations.

Okay to do as it is your money, but like many things in life it is best to do something with your eyes wide open.

Good luck.
Hi stay the course,

Thanks for your opinion. Did Mr. Bogle market time when he reportedly got out of equities (or reduced his equity holdings prior to dot com bubble) when he felt the equity valuation didn’t make sense to him? Now he is reportedly back to 50/50 AA. To me personally it is ok to have a reduced return for a while since the investment returns have no impact on my lifestyle.

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Re: Should we stay in Crazytown because there's no where to run?

Post by CULater » Mon Oct 01, 2018 12:01 pm

Note the market is up 33% since your post above. It may indeed still crash 50% tomorrow, but it should be obvious that "predicting the future is hard."
Yes, prediction is hard especially about the future. But the Fat Lady hasn't sung yet, has she? Note that the market went up by 60% from Jan 1998, when CAPE last crossed above 33, to April 2000, a period over two years. So it's not impossible that the market continues it's journey to Crazytown. But that 60% gain over 2+ years didn't prevent sitting on a loss 11 years later in 2009. I would suggest that one be prepared for that kind of worst-case scenario before getting too comfortable with one's AA. Only five years of zero return from stocks is too optimistic a stress test at today's valuations IMO. I'd be figuring if I could hold on for 10 years or longer. I can't do that, since I'm not Warren Buffett with an open-ended investment horizon. You only get one whack at the cat.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: Should we stay in Crazytown because there's no where to run?

Post by marcopolo » Mon Oct 01, 2018 12:25 pm

CULater wrote:
Mon Oct 01, 2018 12:01 pm
Note the market is up 33% since your post above. It may indeed still crash 50% tomorrow, but it should be obvious that "predicting the future is hard."
Yes, prediction is hard especially about the future. But the Fat Lady hasn't sung yet, has she? Note that the market went up by 60% from Jan 1998, when CAPE last crossed above 33, to April 2000, a period over two years. So it's not impossible that the market continues it's journey to Crazytown. But that 60% gain over 2+ years didn't prevent sitting on a loss 11 years later in 2009. I would suggest that one be prepared for that kind of worst-case scenario before getting too comfortable with one's AA. Only five years of zero return from stocks is too optimistic a stress test at today's valuations IMO. I'd be figuring if I could hold on for 10 years or longer. I can't do that, since I'm not Warren Buffett with an open-ended investment horizon. You only get one whack at the cat.
So what is your proposed solution, other than continuous hand-wringing? Did you actually DO something back then, when you thought the market was crazy, what are you DOING now? What do you suggest others do, other than fret a lot?
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Should we stay in Crazytown because there's no where to run?

Post by HomerJ » Mon Oct 01, 2018 12:40 pm

CULater wrote:
Mon Oct 01, 2018 12:01 pm
Note the market is up 33% since your post above. It may indeed still crash 50% tomorrow, but it should be obvious that "predicting the future is hard."
Yes, prediction is hard especially about the future. But the Fat Lady hasn't sung yet, has she? Note that the market went up by 60% from Jan 1998, when CAPE last crossed above 33, to April 2000, a period over two years. So it's not impossible that the market continues it's journey to Crazytown. But that 60% gain over 2+ years didn't prevent sitting on a loss 11 years later in 2009. I would suggest that one be prepared for that kind of worst-case scenario before getting too comfortable with one's AA. Only five years of zero return from stocks is too optimistic a stress test at today's valuations IMO. I'd be figuring if I could hold on for 10 years or longer. I can't do that, since I'm not Warren Buffett with an open-ended investment horizon. You only get one whack at the cat.
Technically you are correct. If one had $1 million in 100% stocks in 1998, one did technically dip below $1 million twice, once in 2003 (down to $900,000) and once in 2009 (down to $950,000). Of course one has $4.6 million today.

That 60% runup from 1998-2000 before the first crash however certainly DID help to mute your later drops quite a bit.

And if you invested $1 million in 100% stocks in 1996, back when valuations were also crazy high (for the time), back when Shiller himself warned of low returns going forward, the 130% run-up before the crash would have totally protected you from the downturns.

That 1996 investor still had $1.4 million at the bottom of 2003 and $1.5 million at the bottom of 2009, and $7.3 million today.

Heck even 1992 had some pretty high valuations. But that $1 million investor is worth $12 million today.

But that's without withdrawals. You are retired, correct? I agree you should definitely be more conservative in or near retirement.

We NEVER know if today is 1992, 1996, 1998, or 2000.

A 2000 100% stocks investor making 4% withdrawals would have dropped all the way into the $300,000s in 2009, and even after this huge recent bull market only have $500,000-$600,000 left. With inflation-adjusted withdrawals, that person would be pulling $58,000 a year now, or nearly 10% withdrawals. Another crash anytime soon and that 100% stocks 2000 retiree is going to be bankrupt.

(Although after 18 years of retirement, maybe they're old enough to buy a SPIA paying near 10% - Plan B!)

Anyway I agree 100% stocks in retirement is very dangerous. I'll even concede that it's probably even MORE dangerous with high valuations. But I submit it's always dangerous. The risk is never zero.

So what changes have you made?

I worry JUST like you... Except I worry regardless of valuations and without reading a bunch of doom and gloom articles like you have.

I have a ton of money in CDs and bonds. I'm 50/50 stocks/bonds. I rebalance, so I've already locked away some of 33% gains from 2016 into CDs and bonds.

What changes have you made?
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Re: Should we stay in Crazytown because there's no where to run?

Post by goodenyou » Mon Oct 01, 2018 1:16 pm

HomerJ wrote:
Mon Oct 01, 2018 12:40 pm
CULater wrote:
Mon Oct 01, 2018 12:01 pm
Note the market is up 33% since your post above. It may indeed still crash 50% tomorrow, but it should be obvious that "predicting the future is hard."
Yes, prediction is hard especially about the future. But the Fat Lady hasn't sung yet, has she? Note that the market went up by 60% from Jan 1998, when CAPE last crossed above 33, to April 2000, a period over two years. So it's not impossible that the market continues it's journey to Crazytown. But that 60% gain over 2+ years didn't prevent sitting on a loss 11 years later in 2009. I would suggest that one be prepared for that kind of worst-case scenario before getting too comfortable with one's AA. Only five years of zero return from stocks is too optimistic a stress test at today's valuations IMO. I'd be figuring if I could hold on for 10 years or longer. I can't do that, since I'm not Warren Buffett with an open-ended investment horizon. You only get one whack at the cat.
Technically you are correct. If one had $1 million in 100% stocks in 1998, one did technically dip below $1 million twice, once in 2003 (down to $900,000) and once in 2009 (down to $950,000). Of course one has $4.6 million today.

That 60% runup from 1998-2000 before the first crash however certainly DID help to mute your later drops quite a bit.

And if you invested $1 million in 100% stocks in 1996, back when valuations were also crazy high (for the time), back when Shiller himself warned of low returns going forward, the 130% run-up before the crash would have totally protected you from the downturns.

That 1996 investor still had $1.4 million at the bottom of 2003 and $1.5 million at the bottom of 2009, and $7.3 million today.

Heck even 1992 had some pretty high valuations. But that $1 million investor is worth $12 million today.

But that's without withdrawals. You are retired, correct? I agree you should definitely be more conservative in or near retirement.

We NEVER know if today is 1992, 1996, 1998, or 2000.

A 2000 100% stocks investor making 4% withdrawals would have dropped all the way into the $300,000s in 2009, and even after this huge recent bull market only have $500,000-$600,000 left. With inflation-adjusted withdrawals, that person would be pulling $58,000 a year now, or nearly 10% withdrawals. Another crash anytime soon and that 100% stocks 2000 retiree is going to be bankrupt.

(Although after 18 years of retirement, maybe they're old enough to buy a SPIA paying near 10% - Plan B!)

Anyway I agree 100% stocks in retirement is very dangerous. I'll even concede that it's probably even MORE dangerous with high valuations. But I submit it's always dangerous. The risk is never zero.

So what changes have you made?

I worry JUST like you... Except I worry regardless of valuations and without reading a bunch of doom and gloom articles like you have.

I have a ton of money in CDs and bonds. I'm 50/50 stocks/bonds. I rebalance, so I've already locked away some of 33% gains from 2016 into CDs and bonds.

What changes have you made?
Short of picking the very worst time to begin withdrawals with the worst sequence of returns, history has shown that time and time again investments will rebound. The burning question that will never be answered is, "is this (financial crisis) time different?" Trying to get out of Crazytown is foolish unless you have enough inflation-adjusted money to live on for the remainder of your life represented in cash or cash-equivalents. You can weather and ride out any financial storm provided you have impenetrable shelter. I see many posts here from people who panicked years ago and are sitting on a lot of cash only to watch a run up. They now are bemoaning their decision and can't re-enter because they are paralyzed by indecision and fear. Diversification is still the only free lunch in investing, as far as I know.
"Ignorance more frequently begets confidence than does knowledge" | "The best years you have left are the ones you have right now"

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Re: Should we stay in Crazytown because there's no where to run?

Post by CULater » Mon Oct 01, 2018 1:19 pm

What I do is irrelevant. Everyone has their own circumstances. In the late 90s, I got completely out of the market because it was obvious to me it was nuts. People thought I was nuts, but not so much anymore. I see it getting nutty again. This is a good time to get real about your true level of risk tolerance and act accordingly. Can you take a 50% loss that grinds on for several years? Can you handle high stock volatility with nothing to show for it over the next 10 years? I know what my answers are.
May you have the hindsight to know where you've been, The foresight to know where you're going, And the insight to know when you've gone too far. ~ Irish Blessing

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Re: Should we stay in Crazytown because there's no where to run?

Post by delamer » Mon Oct 01, 2018 1:25 pm

CULater wrote:
Mon Oct 01, 2018 1:19 pm
What I do is irrelevant. Everyone has their own circumstances. In the late 90s, I got completely out of the market because it was obvious to me it was nuts. People thought I was nuts, but not so much anymore. I see it getting nutty again. This is a good time to get real about your true level of risk tolerance and act accordingly. Can you take a 50% loss that grinds on for several years? Can you handle high stock volatility with nothing to show for it over the next 10 years? I know what my answers are.
But you posed a bunch of questions in your initial post about “we” should be doing now.

So it looked like you were asking for opinions on what actions to take.

If you already know what you are going to do, then do it.

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Re: Should we stay in Crazytown because there's no where to run?

Post by pennylane » Mon Oct 01, 2018 1:55 pm

HomerJ wrote:
Sun Sep 30, 2018 1:21 pm
KlangFool wrote:
Sun Sep 30, 2018 9:36 am
If you are smarter than him, you must be richer than him.
This, of course, is false. Being smart helps, but it is no guarantee of riches.

Nor does being rich guarantee someone is smart.
+1

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Re: Should we stay in Crazytown because there's no where to run?

Post by HomerJ » Mon Oct 01, 2018 2:07 pm

CULater wrote:
Mon Oct 01, 2018 1:19 pm
This is a good time to get real about your true level of risk tolerance and act
accordingly. Can you take a 50% loss that grinds on for several years?
It's ALWAYS a good time to ask that question. Nothing special about today.
The J stands for Jay

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