That's enough for me in 2019

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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Tycoon
Posts: 1422
Joined: Wed Mar 28, 2012 7:06 pm

Re: That's enough for me in 2019

Post by Tycoon » Sun Apr 14, 2019 5:28 pm

KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
“To know what you know and what you do not know, that is true knowledge.” Confucius

User avatar
gmaynardkrebs
Posts: 1525
Joined: Sun Feb 10, 2008 11:48 am

Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Apr 14, 2019 5:37 pm

Tycoon wrote:
Sun Apr 14, 2019 5:28 pm
KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
Why? Because valuations don’t matter?

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 6:02 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 5:37 pm
Tycoon wrote:
Sun Apr 14, 2019 5:28 pm
KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
Why? Because valuations don’t matter?
gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool

marcopolo
Posts: 1971
Joined: Sat Dec 03, 2016 10:22 am

Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 6:37 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 2:49 pm
KlangFool wrote:
Sun Apr 14, 2019 2:23 pm
Folks,

For those people that adjust your AA because you believe that the valuation is too high and stock return will be low, please explain why your approach is better versus a fixed AA like 60/40 with annual and/or band based rebalancing.

With a fixed AA like 60/40, I am buying fixed income with my new money. It has nothing to do with whether I think the valuation is high or low. It has to do with my stock allocation is higher than 60% due to market movement.

And, if and when the stock market goes crazy, my band based rebalancing will trigger. I do not need to market time or predict the future of the stock market.

I made money from my REIT index fund before the 2008/2009 market crash. It has nothing to do with I was very good with my market timing. I had 10% allocation to REIT index. And, it went up above 25% and it triggered my band based rebalancing. I sold before the market crashed.

KlangFool
You should address your question to the investors in Japanese stocks at the peak of the bubble.
Well, only to the handful of Japanese investors that happened to put all their money into their stock market just before the crash. The rest who had been investing in a divesified way for years, also enjoyed the massive run up instead of sitting on the sidelines waiting fo the crash.
Once in a while you get shown the light, in the strangest of places if you look at it right.

marcopolo
Posts: 1971
Joined: Sat Dec 03, 2016 10:22 am

Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 6:39 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 4:36 pm
KlangFool wrote:
Sun Apr 14, 2019 3:01 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 2:49 pm
KlangFool wrote:
Sun Apr 14, 2019 2:23 pm
Folks,

For those people that adjust your AA because you believe that the valuation is too high and stock return will be low, please explain why your approach is better versus a fixed AA like 60/40 with annual and/or band based rebalancing.

With a fixed AA like 60/40, I am buying fixed income with my new money. It has nothing to do with whether I think the valuation is high or low. It has to do with my stock allocation is higher than 60% due to market movement.

And, if and when the stock market goes crazy, my band based rebalancing will trigger. I do not need to market time or predict the future of the stock market.

I made money from my REIT index fund before the 2008/2009 market crash. It has nothing to do with I was very good with my market timing. I had 10% allocation to REIT index. And, it went up above 25% and it triggered my band based rebalancing. I sold before the market crashed.

KlangFool
You should address your question to the investors in Japanese stocks at the peak of the bubble.
gmaynardkrebs,

A) I am not 100% in Japan stock and/or US stock. So, why is that relevant?

B) I am 60/40. So, in a bubble, I would rebalance away from the bubble and capture my gain.

KlangFool
Maybe we are talking about different things. Agreed, rebalancing as the bubble inflates is better than not re-balancing at all. But it's not as good as having sold off more at or near the peak. Your base case seems to be that the bubble is going to keep inflating for a while longer. But for all we know, it could crash tomorrow. If one believes, based on excessive valuations that the bubble is about to burst, one is better off selling off a lot more than just maintaining 60/40.
Please do let us know when we are at the peak. It sounds so easy to just sell as the peak.

You are comparing an implementable strategy (60/40, with rebalancing), to a fantasy (sell at the peak, and presumably buy back at the trough)!

Good luck with that.
Once in a while you get shown the light, in the strangest of places if you look at it right.

User avatar
gmaynardkrebs
Posts: 1525
Joined: Sun Feb 10, 2008 11:48 am

Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Apr 14, 2019 7:28 pm

KlangFool wrote:
Sun Apr 14, 2019 6:02 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 5:37 pm
Tycoon wrote:
Sun Apr 14, 2019 5:28 pm
KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
Why? Because valuations don’t matter?
gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool
Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 7:46 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 7:28 pm
KlangFool wrote:
Sun Apr 14, 2019 6:02 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 5:37 pm
Tycoon wrote:
Sun Apr 14, 2019 5:28 pm
KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
Why? Because valuations don’t matter?
gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool
Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.
gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool

marcopolo
Posts: 1971
Joined: Sat Dec 03, 2016 10:22 am

Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 8:43 pm

KlangFool wrote:
Sun Apr 14, 2019 7:46 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 7:28 pm
KlangFool wrote:
Sun Apr 14, 2019 6:02 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 5:37 pm
Tycoon wrote:
Sun Apr 14, 2019 5:28 pm
KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
Why? Because valuations don’t matter?
gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool
Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.
gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool
This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Chris42163
Posts: 84
Joined: Fri Feb 15, 2019 8:03 pm

Re: That's enough for me in 2019

Post by Chris42163 » Sun Apr 14, 2019 9:09 pm

About 13% in my case in 2018. How much did your 60/40 strategy make? If you're serious about your question, then what you missed is the difference. Is that what you'll miss in the future? No one knows. Only time will tell.
Last edited by Chris42163 on Sun Apr 14, 2019 9:13 pm, edited 1 time in total.

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 9:10 pm

marcopolo wrote:
Sun Apr 14, 2019 8:43 pm
KlangFool wrote:
Sun Apr 14, 2019 7:46 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 7:28 pm
KlangFool wrote:
Sun Apr 14, 2019 6:02 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 5:37 pm
Why? Because valuations don’t matter?
gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool
Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.
gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool
This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool

marcopolo
Posts: 1971
Joined: Sat Dec 03, 2016 10:22 am

Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 9:15 pm

Chris42163 wrote:
Sun Apr 14, 2019 9:09 pm
About 13% in my case in 2018. How much did your 60/40 strategy make?
Congratulations.
Perhaps you are one of the small minority of market timers that will outperform in the long run. Just keep in mind that all of them felt they had the ability to do so.

I have no faith in my own ability to do so. Evan if I did, i probably would not be spiking the ball on the 5 yard line.

Good luck to you. Please do keep us posted on how things work out for you in the long run.
Once in a while you get shown the light, in the strangest of places if you look at it right.

marcopolo
Posts: 1971
Joined: Sat Dec 03, 2016 10:22 am

Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 9:19 pm

KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo wrote:
Sun Apr 14, 2019 8:43 pm
KlangFool wrote:
Sun Apr 14, 2019 7:46 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 7:28 pm
KlangFool wrote:
Sun Apr 14, 2019 6:02 pm


gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool
Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.
gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool
This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
Well, if you actually knew the market was at a peak, you could get out and get back in at a lower price.

The challenge, of course, is actually identifying the peak.
Once in a while you get shown the light, in the strangest of places if you look at it right.

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 9:20 pm

Chris42163 wrote:
Sun Apr 14, 2019 9:09 pm
About 13% in my case in 2018. How much did your 60/40 strategy make? If you're serious about your question, then what you missed is the difference. Is that what you'll miss in the future? No one knows. Only time will tell.
Chris42163,

<<How much did your 60/40 strategy make? >>

I lose 3% with my 60/40 portfolio in 2018.

<<If you're serious about your question, then what you missed is the difference. >>

Please tell me what is the difference?

KlangFool

Chris42163
Posts: 84
Joined: Fri Feb 15, 2019 8:03 pm

Re: That's enough for me in 2019

Post by Chris42163 » Sun Apr 14, 2019 9:21 pm

KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
As far as I can tell, nobody here is trying to do that. We don't need to be out at the peak or in at the bottom.

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 9:22 pm

marcopolo wrote:
Sun Apr 14, 2019 9:19 pm
KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo wrote:
Sun Apr 14, 2019 8:43 pm
KlangFool wrote:
Sun Apr 14, 2019 7:46 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 7:28 pm

Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.
gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool
This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
Well, if you actually knew the market was at a peak, you could get out and get back in at a lower price.

The challenge, of course, is actually identifying the peak.
marcopolo,

If I really know that, I just need to short the market and make a lot of money. Then, I never need to get back to the market. I only need to be right once.

KlangFool

Chris42163
Posts: 84
Joined: Fri Feb 15, 2019 8:03 pm

Re: That's enough for me in 2019

Post by Chris42163 » Sun Apr 14, 2019 9:24 pm

KlangFool wrote:
Sun Apr 14, 2019 9:20 pm
Please tell me what is the difference?
It looks to me like 13 - -3 = 16%. I will keep you guys posted for better or worse. I hope the market doesn't stay at extreme valuations where I feel the need to take action. Outside of extremes, I have never and won't make changes.

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 9:25 pm

Chris42163 wrote:
Sun Apr 14, 2019 9:21 pm
KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
As far as I can tell, nobody here is trying to do that. We don't need to be out at the peak or in at the bottom.
Chris42163,

Then, please explain to me why do I need to know anything about the market?

This will be taken care of by

A) Fixed 60/40 AA with buy, hold, and rebalancing.

B) Glide path AA adjustment according to the portfolio size.

What else is there?

KlangFool

User avatar
gmaynardkrebs
Posts: 1525
Joined: Sun Feb 10, 2008 11:48 am

Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Apr 14, 2019 9:25 pm

KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo wrote:
Sun Apr 14, 2019 8:43 pm
KlangFool wrote:
Sun Apr 14, 2019 7:46 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 7:28 pm
KlangFool wrote:
Sun Apr 14, 2019 6:02 pm


gmaynardkrebs,

Why do you think that a fixed AA (60/40) with rebalancing does not take care of the valuation effect?

KlangFool
Only partially. For one thing, doesn't work unless you've ridden the bubble up. You have (and so have I), but an investor starting at the top, arguably tomorrow, can't be assured that stocks will ever be higher than they are today. Such a person could lose 1/2 of his 60% tomorrow. So could you. So answer a question: Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not), you would wish to go to a lower allocation to avoid that loss. I'm not saying you or anyone should do this is as plan, or that I am calling a market peak, but I think it explains why someone at 60/40 might want to de-risk at high valuations. That's my answer to the question you asked earlier on. Nothing more.
gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool
This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.

marcopolo
Posts: 1971
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Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 9:33 pm

KlangFool wrote:
Sun Apr 14, 2019 9:22 pm
marcopolo wrote:
Sun Apr 14, 2019 9:19 pm
KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo wrote:
Sun Apr 14, 2019 8:43 pm
KlangFool wrote:
Sun Apr 14, 2019 7:46 pm


gmaynardkrebs,

<<Only partially. For one thing, doesn't work unless you've ridden the bubble up.>>

Even it is not a stock bull market, it will still work for me. With my 60/40 portfolio, I just make money on the fixed income side.

<< Would you rather lose 1/2 of 60% or 30% if the market crashes tomorrow? If the latter (and who would not)>>

My AA is 60/40 because I am prepared to lose 30% at any time.

<<you would wish to go to a lower allocation to avoid that loss.>.

Why? I am prepared for the loss. If I cannot afford the 30% loss, my AA would not be 60/40. Please note that my AA has nothing to do with my ability to call the market peak or check the valuation.

And, with my fixed AA of 60/40, more money will go to the fixed income side as part of my normal strategy.

<<I think it explains why someone at 60/40 might want to de-risk at high valuations.>>

I am prepared for the risk all the time. So, why would I need to derisk? And, as my portfolio gets bigger, the AA is adjusted to be more conservative. This has nothing to do with prediction or market valuation. It is part of the normal strategy.

Please explain to me what do you add in this market timing that is not taken care of by

1) Buy, hold, and rebalance of a fixed AA

2) Glide path AA adjustment by portfolio size.

I do not need to know or care about market valuation. This is a "know nothing" strategy.

KlangFool
This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
Well, if you actually knew the market was at a peak, you could get out and get back in at a lower price.

The challenge, of course, is actually identifying the peak.
marcopolo,

If I really know that, I just need to short the market and make a lot of money. Then, I never need to get back to the market. I only need to be right once.

KlangFool
That is a good point.
I wonder why all the people that are convinced we are about to crash any day now, only suggest trimming equity allocation, why not do as you suggest and short the market?
Once in a while you get shown the light, in the strangest of places if you look at it right.

KlangFool
Posts: 12300
Joined: Sat Oct 11, 2008 12:35 pm

Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 9:34 pm

Chris42163 wrote:
Sun Apr 14, 2019 9:24 pm
KlangFool wrote:
Sun Apr 14, 2019 9:20 pm
Please tell me what is the difference?
It looks to me like 13 - -3 = 16%. I will keep you guys posted for better or worse. I hope the market doesn't stay at extreme valuations where I feel the need to take action. Outside of extremes, I have never and won't make changes.
Chris42163,

1) And, there is no guarantee that your guess/prediction when to go into the market will work out. You need to be right the second time too.

2) And, for the first 3 months of 2019, my portfolio had gained 8.6%. How did your portfolio do for the first 3 months?

This is by doing nothing.

KlangFool

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 9:43 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 9:25 pm

If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.
gmaynardkrebs,

I did survive the 2008/2009 crash by doing absolutely nothing. My portfolios were 50% Wellington (65/35) fund and 50% VSMGX Lifestrategy Moderate Growth fund (60/40) fund. The funds rebalanced for me automatically. It bought more fixed income as the stock market goes up. It buffered the crash.

<< But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.>>

This is not by accident. I planned this. My AA is designed to handle this.

KlangFool

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Apr 14, 2019 9:57 pm

KlangFool wrote:
Sun Apr 14, 2019 9:43 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:25 pm

If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.
gmaynardkrebs,

I did survive the 2008/2009 crash by doing absolutely nothing. My portfolios were 50% Wellington (65/35) fund and 50% VSMGX Lifestrategy Moderate Growth fund (60/40) fund. The funds rebalanced for me automatically. It bought more fixed income as the stock market goes up. It avoided the crash.

KlangFool
No. They mitigated the impact of the crash. They did not avoid it. The only way to avoid a crash is market timing. That’s simply a fact. Both funds were down substantially in 2008. Neither “avoided” the crash.
PS: I see you edited your post. I agree with your edited post.

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 10:05 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 9:57 pm
KlangFool wrote:
Sun Apr 14, 2019 9:43 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:25 pm

If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.
gmaynardkrebs,

I did survive the 2008/2009 crash by doing absolutely nothing. My portfolios were 50% Wellington (65/35) fund and 50% VSMGX Lifestrategy Moderate Growth fund (60/40) fund. The funds rebalanced for me automatically. It bought more fixed income as the stock market goes up. It avoided the crash.

KlangFool
No. They mitigated the impact of the crash. They did not avoid it. The only way to avoid a crash is market timing. That’s simply a fact. Both funds were down substantially in 2008. Neither “avoided” the crash.
PS: I see you edited your post. I agree with your edited post.
gmaynardkrebs,

And, my AA and the emergency fund allowed me to survive even if the market did not recover quickly. I had to. My employer laid off 50% of its employee at my location on 1/1/2009. I could be next.

KlangFool

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Apr 14, 2019 10:08 pm

marcopolo wrote:
Sun Apr 14, 2019 9:33 pm
KlangFool wrote:
Sun Apr 14, 2019 9:22 pm
marcopolo wrote:
Sun Apr 14, 2019 9:19 pm
KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo wrote:
Sun Apr 14, 2019 8:43 pm


This is my approach as well. I do not pretend to be smart enough to predict market crashes, or know when things are "over valued". Others may believe they have some special knowledge the rest of the market does not, but their historical track record indicate otherwise.
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
Well, if you actually knew the market was at a peak, you could get out and get back in at a lower price.

The challenge, of course, is actually identifying the peak.
marcopolo,

If I really know that, I just need to short the market and make a lot of money. Then, I never need to get back to the market. I only need to be right once.

KlangFool
That is a good point.
I wonder why all the people that are convinced we are about to crash any day now, only suggest trimming equity allocation, why not do as you suggest and short the market?
If you are referring to me, I did not say I was convinced of a crash. What I am sure of is that crashes are much more likely at high valuations. Likely is a probabilistic term, not a certainty.

marcopolo
Posts: 1971
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Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 10:14 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 9:57 pm
KlangFool wrote:
Sun Apr 14, 2019 9:43 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:25 pm

If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.
gmaynardkrebs,

I did survive the 2008/2009 crash by doing absolutely nothing. My portfolios were 50% Wellington (65/35) fund and 50% VSMGX Lifestrategy Moderate Growth fund (60/40) fund. The funds rebalanced for me automatically. It bought more fixed income as the stock market goes up. It avoided the crash.

KlangFool
No. They mitigated the impact of the crash. They did not avoid it. The only way to avoid a crash is market timing. That’s simply a fact. Both funds were down substantially in 2008. Neither “avoided” the crash.
PS: I see you edited your post. I agree with your edited post.
"The only way to avoid a crash is market timing. "

Actually the only way to avoid the crash is to perfectly time the market. You seem to think that is a trivial thing. History suggests otherwise.

I am also a bit confused by what you suggest the solution should be. You say you follow "age in bonds" strategy, which seems reasonable, but then think one should get out of equities due to high valuations. You are around 70, and have 30% in equities. That does not sound like you are getting out of equities ant more than "age in bonds" would dictate. So, what are you doing with your knowledge of impending crash?
What should someone who is 40 do, If they follow "age in bonds", they would be 60% equities, should they go lower even though you are not following the same advice, why?
Once in a while you get shown the light, in the strangest of places if you look at it right.

coachd50
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Re: That's enough for me in 2019

Post by coachd50 » Sun Apr 14, 2019 10:18 pm

Seems like some of the people in this thread would stay on 13 with the dealer showing a face card in blackjack because "they just know" the dealer has a 6 :oops:

james22
Posts: 1313
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Re: That's enough for me in 2019

Post by james22 » Sun Apr 14, 2019 10:28 pm

coachd50 wrote:
Sun Apr 14, 2019 10:18 pm
Seems like some of the people in this thread would stay on 13 with the dealer showing a face card in blackjack because "they just know" the dealer has a 6 :oops:
Because Bogleheads don't know what the dealer will next deal themself, they believe it doesn't matter what card/s the dealer is showing. :oops: :oops:
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

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Re: That's enough for me in 2019

Post by market timer » Sun Apr 14, 2019 10:37 pm

marcopolo wrote:
Sun Apr 14, 2019 9:33 pm
I wonder why all the people that are convinced we are about to crash any day now, only suggest trimming equity allocation, why not do as you suggest and short the market?
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.

marcopolo
Posts: 1971
Joined: Sat Dec 03, 2016 10:22 am

Re: That's enough for me in 2019

Post by marcopolo » Sun Apr 14, 2019 10:43 pm

market timer wrote:
Sun Apr 14, 2019 10:37 pm
marcopolo wrote:
Sun Apr 14, 2019 9:33 pm
I wonder why all the people that are convinced we are about to crash any day now, only suggest trimming equity allocation, why not do as you suggest and short the market?
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
For better or worse, you are an outlier.
Good luck to you.
Once in a while you get shown the light, in the strangest of places if you look at it right.

User avatar
gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Apr 14, 2019 10:49 pm

marcopolo wrote:
Sun Apr 14, 2019 10:14 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:57 pm
KlangFool wrote:
Sun Apr 14, 2019 9:43 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:25 pm

If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.
gmaynardkrebs,

I did survive the 2008/2009 crash by doing absolutely nothing. My portfolios were 50% Wellington (65/35) fund and 50% VSMGX Lifestrategy Moderate Growth fund (60/40) fund. The funds rebalanced for me automatically. It bought more fixed income as the stock market goes up. It avoided the crash.

KlangFool
No. They mitigated the impact of the crash. They did not avoid it. The only way to avoid a crash is market timing. That’s simply a fact. Both funds were down substantially in 2008. Neither “avoided” the crash.
PS: I see you edited your post. I agree with your edited post.
"The only way to avoid a crash is market timing. "

Actually the only way to avoid the crash is to perfectly time the market. You seem to think that is a trivial thing. History suggests otherwise.

I am also a bit confused by what you suggest the solution should be. You say you follow "age in bonds" strategy, which seems reasonable, but then think one should get out of equities due to high valuations. You are around 70, and have 30% in equities. That does not sound like you are getting out of equities ant more than "age in bonds" would dictate. So, what are you doing with your knowledge of impending crash?
What should someone who is 40 do, If they follow "age in bonds", they would be 60% equities, should they go lower even though you are not following the same advice, why?
I never said most of the things you seem to think I said, eg., getting completely out of equities, or saying a crash is “impending.” If I were 40 today, I’d probably be 40/60 due to the high valuations. If valuations were low, I’d probably be 60/40. I don’t expect a crash, but I expect the market to be range bound for many years to come, with lousy returns. That’s what I believe, but if I were a professional investment advisor I would be out of business if I gave that advice. I think cynicism among professional money managers has been a great factor driving today’s excessive valuations.

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Sun Apr 14, 2019 11:02 pm

gmaynardkrebs wrote:
Sun Apr 14, 2019 10:49 pm

I never said most of the things you seem to think I said, eg., getting completely out of equities, or saying a crash is “impending.” If I were 40 today, I’d probably be 40/60 due to the high valuations. If valuations were low, I’d probably be 60/40. I don’t expect a crash, but I expect the market to be range bound for many years to come, with lousy returns. That’s what I believe, but if I were a professional investment advisor I would be out of business if I gave that advice. I think cynicism among professional money managers has been a great factor driving today’s excessive valuations.
gmaynardkrebs,

My answer to that is instead of guessing whether the market valuation is high or low, the person should pick the AA of 40/60 instead. Then, no guess or prediction is needed.

KlangFool

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Re: That's enough for me in 2019

Post by EnjoyIt » Sun Apr 14, 2019 11:29 pm

KlangFool wrote:
Sun Apr 14, 2019 2:23 pm
Folks,

For those people that adjust your AA because you believe that the valuation is too high and stock return will be low, please explain why your approach is better versus a fixed AA like 60/40 with annual and/or band based rebalancing.

With a fixed AA like 60/40, I am buying fixed income with my new money. It has nothing to do with whether I think the valuation is high or low. It has to do with my stock allocation is higher than 60% due to market movement.

And, if and when the stock market goes crazy, my band based rebalancing will trigger. I do not need to market time or predict the future of the stock market.

I made money from my REIT index fund before the 2008/2009 market crash. It has nothing to do with I was very good with my market timing. I had 10% allocation to REIT index. And, it went up above 25% and it triggered my band based rebalancing. I sold before the market crashed.

KlangFool
Thanks for the above post. You added so much more clarity to my 70/30 AA.

It’s amazing how simple and easy it all is when we tune out the noise.

Chris42163
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Re: That's enough for me in 2019

Post by Chris42163 » Mon Apr 15, 2019 12:44 am

KlangFool wrote:
Sun Apr 14, 2019 9:25 pm
Chris42163 wrote:
Sun Apr 14, 2019 9:21 pm
KlangFool wrote:
Sun Apr 14, 2019 9:10 pm
marcopolo,

I am genuine trying to understand what is there to be gained by guessing when is the market peaked. As far as I know, it is a piece of useless unreliable information. It is easier and simpler to be prepared all the time.

KlangFool
As far as I can tell, nobody here is trying to do that. We don't need to be out at the peak or in at the bottom.
Chris42163,

Then, please explain to me why do I need to know anything about the market?

This will be taken care of by

A) Fixed 60/40 AA with buy, hold, and rebalancing.

B) Glide path AA adjustment according to the portfolio size.

What else is there?

KlangFool
Nah, you're not open-minded, and your questions are disingenuous. Plus, I've already answered. Your portfolio lost 16% to mine, last year. It was not "taken care of" by your 60/40 AA. I didn't get in at the peak, and I didn't get out at the bottom, though I was closer than I expected to be on both counts. If I'm right about the extreme valuations, then I'm protecting myself from added risk that you aren't. [OT comment removed by admin LadyGeek]

Chris42163
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Re: That's enough for me in 2019

Post by Chris42163 » Mon Apr 15, 2019 12:51 am

KlangFool wrote:
Sun Apr 14, 2019 9:34 pm
Chris42163,

1) And, there is no guarantee that your guess/prediction when to go into the market will work out. You need to be right the second time too.

2) And, for the first 3 months of 2019, my portfolio had gained 8.6%. How did your portfolio do for the first 3 months?

This is by doing nothing.

KlangFool
I was 100% stocks from Dec 22nd, until the day the S&P hit 2811, and I've been 60/40 since then. So, I've outperformed this year, too. Looks like the portfolio is up 15.9% since I reinvested, this is not counting the Money Markets minor returns. Not sure from January 1st.
Last edited by Chris42163 on Mon Apr 15, 2019 12:55 am, edited 1 time in total.

DonIce
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Re: That's enough for me in 2019

Post by DonIce » Mon Apr 15, 2019 12:55 am

Chris42163 wrote:
Mon Apr 15, 2019 12:51 am
I was 100% stocks from Dec 22nd, until the day the S&P hit 2811, and I've been 60/40 since then. So, I've outperformed this year, too. Looks like the portfolio is up 15.9% since I reinvested. Not sure from January 1st.
But you'd be even better if you were still 100% stocks though. S&P is at ~2900 now.

Chris42163
Posts: 84
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Re: That's enough for me in 2019

Post by Chris42163 » Mon Apr 15, 2019 1:01 am

DonIce wrote:
Mon Apr 15, 2019 12:55 am
But you'd be even better if you were still 100% stocks though. S&P is at ~2900 now.
I'm not worried about that. You have to consider the whole strategy. I wouldn't be surprised to see 3,100. I don't even want to time the peak. I want to get away BEFORE sentiment shifts, because when it does, it happens too fast. Big money is out before you can be. I gave up a few percent from the peak and from the bottom last year. I still came out way [(removed) --admin LadyGeek] ahead overall.

I realize that's short term, and a lot of people get lucky in the short term. I don't think that's really even evidence supporting my beliefs. I only ever consider period of years in the future. It just so happened that it happened within months, last year. But the numbers suggested getting out, and they suggested getting back in.
coachd50 wrote:
Sun Apr 14, 2019 10:18 pm
Seems like some of the people in this thread would stay on 13 with the dealer showing a face card in blackjack because "they just know" the dealer has a 6 :oops:

I think you're referring to the other side of the argument, because I've studied basic strategy, and adjustments based on the count. I don't make decisions in Black Jack. I just follow the script.

Poker is more interesting ;-). There, you have to make decisions, and play the opponent. I prefer no-rake home games, too. The house's cut is actually a pretty substantial % over the long run.
james22 wrote:
Sun Apr 14, 2019 10:28 pm
Because Bogleheads don't know what the dealer will next deal themself, they believe it doesn't matter what card/s the dealer is showing. :oops: :oops:
lol. That's the way I interpreted the statement.
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
I see where you're coming from. You can't shift AA for your income, lol. The reason I do not short is because I believe it can take years before an inflated market turns. I don't want to buy shorts for that long. I'd rather just park outside of stocks.

Dudley
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Re: That's enough for me in 2019

Post by Dudley » Mon Apr 15, 2019 2:07 am

market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
Market Timer,

In Sept last year you gave your portfolio as :

20% gold
15% crude oil (via long-dated futures)
15% emerging markets equities
10% non-US developed markets equities
25% long term bonds
15% cash

so what is it now ?

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Re: That's enough for me in 2019

Post by market timer » Mon Apr 15, 2019 2:20 am

Dudley wrote:
Mon Apr 15, 2019 2:07 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
Market Timer,

In Sept last year you gave your portfolio as :

20% gold
15% crude oil (via long-dated futures)
15% emerging markets equities
10% non-US developed markets equities
25% long term bonds
15% cash

so what is it now ?
At this exact moment:
10% gold
15% crude oil and oil majors
15% long term bonds
-20% US equities
80% cash and short term investment grade bonds

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market timer
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Re: That's enough for me in 2019

Post by market timer » Mon Apr 15, 2019 2:36 am

market timer wrote:
Mon Apr 15, 2019 2:20 am
Dudley wrote:
Mon Apr 15, 2019 2:07 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
Market Timer,

In Sept last year you gave your portfolio as :

20% gold
15% crude oil (via long-dated futures)
15% emerging markets equities
10% non-US developed markets equities
25% long term bonds
15% cash

so what is it now ?
At this exact moment:
10% gold
15% crude oil and oil majors
15% long term bonds
-20% US equities
80% cash and short term investment grade bonds
It's a big change from late December:
market timer wrote:
Thu Dec 20, 2018 11:26 pm
Now at 70% equities, 20% gold, 20% oil, and -10% cash.

Dudley
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Re: That's enough for me in 2019

Post by Dudley » Mon Apr 15, 2019 2:55 am

market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
and how have you taken out this short position ?

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Re: That's enough for me in 2019

Post by market timer » Mon Apr 15, 2019 3:11 am

Dudley wrote:
Mon Apr 15, 2019 2:55 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
and how have you taken out this short position ?
Short futures on the Nasdaq 100

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Apr 15, 2019 6:02 am

market timer wrote:
Mon Apr 15, 2019 3:11 am
Dudley wrote:
Mon Apr 15, 2019 2:55 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
and how have you taken out this short position ?
Short futures on the Nasdaq 100
Naked short?
I admire your independent thinking. I'm afraid I lack the conviction (and knowledge) to play it as you do. I just feel that the US equity market is a crowded trade now, and that therefore, the best opportunities lie elsewhere.

KlangFool
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Re: That's enough for me in 2019

Post by KlangFool » Mon Apr 15, 2019 8:01 am

Chris42163 wrote:
Mon Apr 15, 2019 12:51 am
KlangFool wrote:
Sun Apr 14, 2019 9:34 pm
Chris42163,

1) And, there is no guarantee that your guess/prediction when to go into the market will work out. You need to be right the second time too.

2) And, for the first 3 months of 2019, my portfolio had gained 8.6%. How did your portfolio do for the first 3 months?

This is by doing nothing.

KlangFool
I was 100% stocks from Dec 22nd, until the day the S&P hit 2811, and I've been 60/40 since then. So, I've outperformed this year, too. Looks like the portfolio is up 15.9% since I reinvested, this is not counting the Money Markets minor returns. Not sure from January 1st.
Chris42163,

So, what is your plan? Switch back to 100/0 when the stock market crashes?

KlangFool

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Tycoon
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Re: That's enough for me in 2019

Post by Tycoon » Mon Apr 15, 2019 8:05 am

gmaynardkrebs wrote:
Sun Apr 14, 2019 5:37 pm
Tycoon wrote:
Sun Apr 14, 2019 5:28 pm
KlangFool, you aren't missing anything. Your plan is sound and you'll do fine.
Why? Because valuations don’t matter?
For the same reason you'll be fine. Diversification.
“To know what you know and what you do not know, that is true knowledge.” Confucius

marcopolo
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Re: That's enough for me in 2019

Post by marcopolo » Mon Apr 15, 2019 8:25 am

gmaynardkrebs wrote:
Sun Apr 14, 2019 10:49 pm
marcopolo wrote:
Sun Apr 14, 2019 10:14 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:57 pm
KlangFool wrote:
Sun Apr 14, 2019 9:43 pm
gmaynardkrebs wrote:
Sun Apr 14, 2019 9:25 pm

If you thought valuations were useful, you might have avoided the Tech crash and the 2008 crash. Both were proceeded by excessive valuations. I think that is important. But since you have enough in safe, diversified assets, valuation probably is irrelevant to someone in your fortunate position.
gmaynardkrebs,

I did survive the 2008/2009 crash by doing absolutely nothing. My portfolios were 50% Wellington (65/35) fund and 50% VSMGX Lifestrategy Moderate Growth fund (60/40) fund. The funds rebalanced for me automatically. It bought more fixed income as the stock market goes up. It avoided the crash.

KlangFool
No. They mitigated the impact of the crash. They did not avoid it. The only way to avoid a crash is market timing. That’s simply a fact. Both funds were down substantially in 2008. Neither “avoided” the crash.
PS: I see you edited your post. I agree with your edited post.
"The only way to avoid a crash is market timing. "

Actually the only way to avoid the crash is to perfectly time the market. You seem to think that is a trivial thing. History suggests otherwise.

I am also a bit confused by what you suggest the solution should be. You say you follow "age in bonds" strategy, which seems reasonable, but then think one should get out of equities due to high valuations. You are around 70, and have 30% in equities. That does not sound like you are getting out of equities ant more than "age in bonds" would dictate. So, what are you doing with your knowledge of impending crash?
What should someone who is 40 do, If they follow "age in bonds", they would be 60% equities, should they go lower even though you are not following the same advice, why?
I never said most of the things you seem to think I said, eg., getting completely out of equities, or saying a crash is “impending.” If I were 40 today, I’d probably be 40/60 due to the high valuations. If valuations were low, I’d probably be 60/40. I don’t expect a crash, but I expect the market to be range bound for many years to come, with lousy returns. That’s what I believe, but if I were a professional investment advisor I would be out of business if I gave that advice. I think cynicism among professional money managers has been a great factor driving today’s excessive valuations.
While our belief in how actionable are current valuations may be different, it seems to me we are splitting hairs when it comes to actual implementation.

You use "age in bonds", so at ~age 70, you have 30% equities. So, despite your worries about current valuations, you don't seem to have let that actually affect your glide path (that does seem curious given how strongly you seem to feel about valuations). I am in my early 50s, and am maintaining a 60/40 AA, so not that far off from what age in bonds would dictate. While I can see the argument that high valuations probably means lower expected returns going forward, I don't see how i can use that in any actionable way to time the market, other than to plan on lower growth of my portfolio, which I am doing anyway.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Mon Apr 15, 2019 8:43 am

market timer wrote:
Mon Apr 15, 2019 3:11 am
Dudley wrote:
Mon Apr 15, 2019 2:55 am
market timer wrote:
Sun Apr 14, 2019 10:37 pm
In fact, I am now short equities with 20% of my portfolio. My income is correlated with equity prices, so I justified this to myself as a hedge against my income declining.
and how have you taken out this short position ?
Short futures on the Nasdaq 100
What is the strike, what is the date, what did you pay for this privilege?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

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TheTimeLord
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Re: That's enough for me in 2019

Post by TheTimeLord » Mon Apr 15, 2019 8:45 am

Can anyone tell explain how you get to a correlation between pre-crash Japan and current day U.S.? Not seeing the parallels.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

james22
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Re: That's enough for me in 2019

Post by james22 » Mon Apr 15, 2019 9:12 am

I still think the economy is okay for now. I still see recession odds rising considerably in 2020. Maybe it will get pushed back another year or two, but at some point this growth phase will end, either in recession or an extended flat period (even flatter than the last decade, which says a lot). And I still think we are headed toward a global credit crisis I’ve dubbed The Great Reset.

What’s evolved is my judgment on the coming slowdown’s severity and duration. I think the rest of the world will enter a period something like Japan endured following 1990, and is still grappling with today. It won’t be the end of the world; Japan is still there, but the little growth it’s had was due mainly to exports. That won’t work when every major economy is in the same position.

Describing this decline as “Japanification” may be unfair to Japan but it’s the best paradigm we have. The good news is it will spread slowly. The bad news is it will end slowly, too.

I believe we will avoid literal blood in the streets but it will be a challenging time.


https://www.mauldineconomics.com/frontl ... ad#fb-root
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Apr 15, 2019 9:37 am

marcopolo wrote:
Mon Apr 15, 2019 8:25 am

While our belief in how actionable are current valuations may be different, it seems to me we are splitting hairs when it comes to actual implementation.

You use "age in bonds", so at ~age 70, you have 30% equities. So, despite your worries about current valuations, you don't seem to have let that actually affect your glide path (that does seem curious given how strongly you seem to feel about valuations). I am in my early 50s, and am maintaining a 60/40 AA, so not that far off from what age in bonds would dictate. While I can see the argument that high valuations probably means lower expected returns going forward, I don't see how i can use that in any actionable way to time the market, other than to plan on lower growth of my portfolio, which I am doing anyway.
Yes, there is a degree of inconsistency between my "theory and praxis" as Karl Marx would say. Our implementation isn't that different. However, I think looking at valuation is a smarter way to invest than the way I did it. Nobody was talking about that when I set on my path many years ago. I would do things differently knowing what I know now. Saying this seems odd, because I would have less money today had I followed my present advice. However, over time I have developed a very negative view of Wall Street and the mutual fund industry. (Vanguard in the exception.) Their business model is built almost entirely on hiding tail risk from average investors like myself. The most obvious example of this is getting people to invest in stocks at much higher allocations than they should. Honestly, I think folks at my age (and yours) were very lucky to have been investing in the era we did.

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market timer
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Re: That's enough for me in 2019

Post by market timer » Mon Apr 15, 2019 9:46 am

gmaynardkrebs wrote:
Mon Apr 15, 2019 6:02 am
Naked short?
Yes. At 20%, it is not a huge position. I don't anticipate going much higher than that.

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