Business Cycle: At least one recession every 10 years

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KlangFool
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Business Cycle: At least one recession every 10 years

Post by KlangFool »

Folks,

https://en.wikipedia.org/wiki/List_of_r ... ted_States

I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years. And, folks argued with me that there is no basis to my statement.

Guess what? We are in a recession. It is about 10 years 9 months from the last recession. The economy oscillates. It would go in cycles. Your investment strategy needs to account for that. Keep your AA between 70/30 to 30/70 with a good-sized emergency fund. Balance and diversification is the key to survive and succeed.

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Re: Business Cycle: At least one recession every 10 years

Post by jebmke »

I agree that one's strategy needs to be able to survive a recession periodically (every 10 years is good an assumption as any). Whether one needs to stay in the 30/30-70/30 range or needs to have an emergency fund depends on a lot of factors.
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arcticpineapplecorp.
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Re: Business Cycle: At least one recession every 10 years

Post by arcticpineapplecorp. »

KlangFool wrote: Sat Apr 04, 2020 9:59 am Folks,

https://en.wikipedia.org/wiki/List_of_r ... ted_States

I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years. And, folks argued with me that there is no basis to my statement.

Guess what? We are in a recession. It is about 10 years 9 months from the last recession. The economy oscillates. It would go in cycles. Your investment strategy needs to account for that. Keep your AA between 70/30 to 30/70 with a good-sized emergency fund. Balance and diversification is the key to survive and succeed.

KlangFool
few points:
1. just because we were "overdue" doesn't mean one was imminent. Take Australia for instance. They went for 28 years without a recession (the last one was 1991). source: https://www.google.com/search?client=fi ... +recession

So just because we know there will be one, we don't know when. How can you act based on speculation? If you were in australia, you were "sure" there was one coming around 2001...and yet they kept going until now (though not sure if they're experiencing a downturn, I haven't followed Australia that closely).

2. We don't know if we're in a recession just yet. You or anyone can roll your eyes at that comment because you're absolutely sure we will have two consecutive quarters of negative GDP. Thing is, we haven't had that yet. We might. We might not. We don't know. You can act sure without data. I prefer to wait for the data. So until the Bureau of Labor and Statistics calls what we're going through a recession (because it meets the technical definition of two consecutive quarters of negative GDP)...and they won't likely do that for a year or longer from now, then just because wikipedia lists the "Global Downturn of 2020" as a recession, doesn't make it so. The internet is full of stuff, some of it which jumps the gun.

3. I agree with the need for emergency fund, diversification, etc. but this isn't just because of recessions. Lots of employees at Toys R Us lost their jobs and we weren't in a recession. People lose jobs all the time, even when times are good.
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

arcticpineapplecorp. wrote: Sat Apr 04, 2020 10:13 am
KlangFool wrote: Sat Apr 04, 2020 9:59 am Folks,

https://en.wikipedia.org/wiki/List_of_r ... ted_States

I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years. And, folks argued with me that there is no basis to my statement.

Guess what? We are in a recession. It is about 10 years 9 months from the last recession. The economy oscillates. It would go in cycles. Your investment strategy needs to account for that. Keep your AA between 70/30 to 30/70 with a good-sized emergency fund. Balance and diversification is the key to survive and succeed.

KlangFool
few points:
1. just because we were "overdue" doesn't mean one was imminent. Take Australia for instance. They went for 28 years without a recession (the last one was 1991). source: https://www.google.com/search?client=fi ... +recession
arcticpineapplecorp,

My statement is specific to the USA.

KlangFool
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Sandtrap
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Re: Business Cycle: At least one recession every 10 years

Post by Sandtrap »

KlangFool wrote: Sat Apr 04, 2020 9:59 am Folks,

https://en.wikipedia.org/wiki/List_of_r ... ted_States

I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years. And, folks argued with me that there is no basis to my statement.

Guess what? We are in a recession. It is about 10 years 9 months from the last recession. The economy oscillates. It would go in cycles. Your investment strategy needs to account for that. Keep your AA between 70/30 to 30/70 with a good-sized emergency fund. Balance and diversification is the key to survive and succeed.

KlangFool
OTOH, this "might be" a shorter correction then recovery before a recession. . . ?

Good link.
Good points.
Thanks for posting.
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retiredjg
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Re: Business Cycle: At least one recession every 10 years

Post by retiredjg »

It sounds to me like you are talking about a market downturn or an extended bear market. That is not the same thing as a recession.

While a bad market and a recession often occur at the same time or one following the other, one can and sometimes does happen without the other. They are different things.

Since the last bear market happened along with what has been named "the great recession" we may be permanently saddled people not knowing the the difference.

I believe we probably are in a what will be deemed a recession, but as stated above, that will not be known for many months.

I agree that one must invest as if bad times could show up any minute.
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Re: Business Cycle: At least one recession every 10 years

Post by Ocean77 »

KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market.
The economy does not work that way. A recession does not occur just because we are "overdue" for one. It was clear to everybody that there would be a recession at some point. Nobody ever argued that recessions were now a thing of the past and would never occur again. When it occurs is always unknowable ahead of time. Looking at the clock ("it has been this long since last one") has no value.
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Re: Business Cycle: At least one recession every 10 years

Post by abracadabra11 »

It seems that you're using an anomalous and completely unexpected and unprecedented event and somehow attributing that to the idea of a 10-year business/recession cycle. That's just as silly as pointing to the inversion of the yield curve that occurred about a year ago and stating that it was somehow predictive of COVID-19 and its attendant economic impacts. This should strike you as a pretty clear instance of confirmation bias.
Rat_Race
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Re: Business Cycle: At least one recession every 10 years

Post by Rat_Race »

The prospect and system design/dependence on infinite growth on a finite planet is a bad idea. Personally, I don't understand the desire, from a long term planning perspective, for more people, more pollution, more noise, more stress, depletion of natural resources and the inevitable wars that result, and all of the other things that reduce our quality of life and endanger the health of the planet and all of it's dependent species of animals, sea life and plants. We are literally designing in and championing our own demise due to greed. Recessions are necessary and the only way to try to rebalance this kind of system.
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

retiredjg wrote: Sat Apr 04, 2020 11:16 am
It sounds to me like you are talking about a market downturn or an extended bear market. That is not the same thing as a recession.
retiredjg,

No, I am talking about a recession.

KlangFool
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

abracadabra11 wrote: Sat Apr 04, 2020 11:55 am
It seems that you're using an anomalous and completely unexpected and unprecedented event and somehow attributing that to the idea of a 10-year business/recession cycle. That's just as silly as pointing to the inversion of the yield curve that occurred about a year ago and stating that it was somehow predictive of COVID-19 and its attendant economic impacts. This should strike you as a pretty clear instance of confirmation bias.
abracadabra11,

1) Are you claiming that recession is an unprecedented event? The answer is obviously no.

2) Then, are you claiming that Coronavirus is an unprecedented event? The answer is obviously no too. Pandemic happened every now and then. It may be different in size and scale.

3) In summary, both (1) and (2) are only unexpected for those choose to ignore history.

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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

Ocean77 wrote: Sat Apr 04, 2020 11:49 am
KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market.
The economy does not work that way. A recession does not occur just because we are "overdue" for one. It was clear to everybody that there would be a recession at some point. Nobody ever argued that recessions were now a thing of the past and would never occur again. When it occurs is always unknowable ahead of time. Looking at the clock ("it has been this long since last one") has no value.
Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
Ocean77
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Re: Business Cycle: At least one recession every 10 years

Post by Ocean77 »

KlangFool wrote: Sat Apr 04, 2020 12:16 pm
Ocean77 wrote: Sat Apr 04, 2020 11:49 am
KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market.
The economy does not work that way. A recession does not occur just because we are "overdue" for one. It was clear to everybody that there would be a recession at some point. Nobody ever argued that recessions were now a thing of the past and would never occur again. When it occurs is always unknowable ahead of time. Looking at the clock ("it has been this long since last one") has no value.
Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
We know that based on experience. The economy has been around for hundreds of years. History has shown that recessions occur randomly and not based on fixed schedule.
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Re: Business Cycle: At least one recession every 10 years

Post by junior »

If you have a good size emergency fund a 30% bond allocation may be unnecessary.

A high bond allocation may reduce risk, but for a young person it can also increase the chance of not making enough money to retire when you want. There are tradeoffs to any strategy.
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

Ocean77 wrote: Sat Apr 04, 2020 12:22 pm
KlangFool wrote: Sat Apr 04, 2020 12:16 pm
Ocean77 wrote: Sat Apr 04, 2020 11:49 am
KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market.
The economy does not work that way. A recession does not occur just because we are "overdue" for one. It was clear to everybody that there would be a recession at some point. Nobody ever argued that recessions were now a thing of the past and would never occur again. When it occurs is always unknowable ahead of time. Looking at the clock ("it has been this long since last one") has no value.
Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
We know that based on experience. The economy has been around for hundreds of years. History has shown that recessions occur randomly and not based on fixed schedule.
Ocean77,

And, the USA recession history shows that it is not random. And, the biggest gap between the recession since 1836 had been 11 years. Don't argue with the data.

KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by carminered2019 »

junior wrote: Sat Apr 04, 2020 12:23 pm If you have a good size emergency fund a 30% bond allocation may be unnecessary.

A high bond allocation may reduce risk, but for a young person it can also increase the chance of not making enough money to retire when you want. There are tradeoffs to any strategy.
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Re: Business Cycle: At least one recession every 10 years

Post by SimpleGift »

KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years.
It's worth pointing out the frequency of recessions has declined dramatically in the U.S. since the 1800s (chart below):
  • Image
Many attribute this to the success of modern monetary policies in the 20th century to modulate the extremes of economic expansions and contractions, to alleviate financial crises, and to manage inflation and unemployment (chart below):
  • Image
The irony is, as the Federal Reserve has gotten better at its job of alleviating the impacts of financial crises, the end result may be that it encourages more risk taking. In other words, if the central bank successfully implements a financial rescue every time the market crashes, investors may be willing to take on more risk, knowing they'll be rescued by monetary policy.

As a result, recessions may be getting less frequent, but some speculate that they may be getting more severe.
Last edited by SimpleGift on Sat Apr 04, 2020 12:53 pm, edited 1 time in total.
Topic Author
KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

junior wrote: Sat Apr 04, 2020 12:23 pm If you have a good size emergency fund a 30% bond allocation may be unnecessary.

A high bond allocation may reduce risk, but for a young person it can also increase the chance of not making enough money to retire when you want. There are tradeoffs to any strategy.
junior,

You are simply wrong. Your base assumption is that bond is only mattered as an extended emergency fund. The bond is an uncorrelated asset class to the stock too.

<<A high bond allocation may reduce risk, but for a young person it can also increase the chance of not making enough money to retire when you want.>>

This statement is simply wrong too. The average return between 100/0 and 70/30 is only 1% per year. It is not big enough to make a difference whether someone can retire. You can do the calculation and show that this to be true.

https://personal.vanguard.com/us/insigh ... llocations

The bigger problem is the 100/0 young person may not survive financially over the current recession. You have to survive in order to succeed.

KlangFool
Ocean77
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Re: Business Cycle: At least one recession every 10 years

Post by Ocean77 »

KlangFool wrote: Sat Apr 04, 2020 12:32 pm
Ocean77 wrote: Sat Apr 04, 2020 12:22 pm
KlangFool wrote: Sat Apr 04, 2020 12:16 pm
Ocean77 wrote: Sat Apr 04, 2020 11:49 am
KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market.
The economy does not work that way. A recession does not occur just because we are "overdue" for one. It was clear to everybody that there would be a recession at some point. Nobody ever argued that recessions were now a thing of the past and would never occur again. When it occurs is always unknowable ahead of time. Looking at the clock ("it has been this long since last one") has no value.
Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
We know that based on experience. The economy has been around for hundreds of years. History has shown that recessions occur randomly and not based on fixed schedule.
Ocean77,

And, the USA recession history shows that it is not random. And, the biggest gap between the recession since 1836 had been 11 years. Don't argue with the data.

KlangFool
It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.

Would you seriously think that the current Corona virus crisis has been more likely to occur this year, because it was "overdue", than, say, in 2013 when it was only 5 years since the last recession hit.
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

Ocean77 wrote: Sat Apr 04, 2020 1:29 pm
KlangFool wrote: Sat Apr 04, 2020 12:32 pm
Ocean77 wrote: Sat Apr 04, 2020 12:22 pm
KlangFool wrote: Sat Apr 04, 2020 12:16 pm
Ocean77 wrote: Sat Apr 04, 2020 11:49 am

The economy does not work that way. A recession does not occur just because we are "overdue" for one. It was clear to everybody that there would be a recession at some point. Nobody ever argued that recessions were now a thing of the past and would never occur again. When it occurs is always unknowable ahead of time. Looking at the clock ("it has been this long since last one") has no value.
Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
We know that based on experience. The economy has been around for hundreds of years. History has shown that recessions occur randomly and not based on fixed schedule.
Ocean77,

And, the USA recession history shows that it is not random. And, the biggest gap between the recession since 1836 had been 11 years. Don't argue with the data.

KlangFool
It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.

Would you seriously think that the current Corona virus crisis has been more likely to occur this year, because it was "overdue", than, say, in 2013 when it was only 5 years since the last recession hit.
Ocean77,

To me, it won't matter whether the Coronavirus occurred. We are overdue for a recession. The Coronavirus is just the shotgun that blow the bubble.

<<It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.>>

You are confusing yourself between an independent random variable without memory versus a complex system with a memory.

KlangFool
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

SimpleGift wrote: Sat Apr 04, 2020 12:36 pm
KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years.
It's worth pointing out the frequency of recessions has declined dramatically in the U.S. since the 1800s (chart below):
  • Image
Many attribute this to the success of modern monetary policies in the 20th century to modulate the extremes of economic expansions and contractions, to alleviate financial crises, and to manage inflation and unemployment (chart below):
  • Image
The irony is, as the Federal Reserve has gotten better at its job of alleviating the impacts of financial crises, the end result may be that it encourages more risk taking. In other words, if the central bank successfully implements a financial rescue every time the market crashes, investors may be willing to take on more risk, knowing they'll be rescued by monetary policy.

As a result, recessions may be getting less frequent, but some speculate that they may be getting more severe.
SimpleGift,

In summary, it is a complex system with a memory. It has a dependency on past history. The memory in this system is the amount of accumulated debt that we incurred from the past recessions.

KlangFool
Ocean77
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Re: Business Cycle: At least one recession every 10 years

Post by Ocean77 »

KlangFool wrote: Sat Apr 04, 2020 1:34 pm
Ocean77 wrote: Sat Apr 04, 2020 1:29 pm
KlangFool wrote: Sat Apr 04, 2020 12:32 pm
Ocean77 wrote: Sat Apr 04, 2020 12:22 pm
KlangFool wrote: Sat Apr 04, 2020 12:16 pm

Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
We know that based on experience. The economy has been around for hundreds of years. History has shown that recessions occur randomly and not based on fixed schedule.
Ocean77,

And, the USA recession history shows that it is not random. And, the biggest gap between the recession since 1836 had been 11 years. Don't argue with the data.

KlangFool
It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.

Would you seriously think that the current Corona virus crisis has been more likely to occur this year, because it was "overdue", than, say, in 2013 when it was only 5 years since the last recession hit.
Ocean77,

To me, it won't matter whether the Coronavirus occurred. We are overdue for a recession. The Coronavirus is just the shotgun that blow the bubble.

<<It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.>>

You are confusing yourself between an independent random variable without memory versus a complex system with a memory.

KlangFool
Ah, now we're getting to the bottom of you misconception. You see, there is always some "shotgun" that blows the bubble. It just happens to be a virus this time. Economies don't fall into recession from old age. There is usually some event that triggers it. And when that occurs is largely random.

Your post implies that the virus would not have caused a recession if we didn't have that "bubble" to begin with. Think again.
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Re: Business Cycle: At least one recession every 10 years

Post by keelerjr12 »

KlangFool wrote: Sat Apr 04, 2020 1:34 pm
Ocean77 wrote: Sat Apr 04, 2020 1:29 pm
KlangFool wrote: Sat Apr 04, 2020 12:32 pm
Ocean77 wrote: Sat Apr 04, 2020 12:22 pm
KlangFool wrote: Sat Apr 04, 2020 12:16 pm

Ocean77,

<<The economy does not work that way. >>

How do you know this to be true? It is a complex system. It cannot grow forever. For any complex system, as it grows, it will hit some limits eventually. It is just a matter of time. Then, it will stop the growth and adjust.

KlangFool
We know that based on experience. The economy has been around for hundreds of years. History has shown that recessions occur randomly and not based on fixed schedule.
Ocean77,

And, the USA recession history shows that it is not random. And, the biggest gap between the recession since 1836 had been 11 years. Don't argue with the data.

KlangFool
It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.

Would you seriously think that the current Corona virus crisis has been more likely to occur this year, because it was "overdue", than, say, in 2013 when it was only 5 years since the last recession hit.
Ocean77,

To me, it won't matter whether the Coronavirus occurred. We are overdue for a recession. The Coronavirus is just the shotgun that blow the bubble.

<<It is human nature to think, if I didn't throw a 6 ten times in a row, it's overdue with my next throw. But it does not work this way.>>

You are confusing yourself between an independent random variable without memory versus a complex system with a memory.

KlangFool
Exactly. It amazes me how many people don’t understand probability and statistics. To them, everything is an independent, random event.
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Re: Business Cycle: At least one recession every 10 years

Post by Triple digit golfer »

Regardless of the last recession's timing and severity, whenever this pandemic hit it would have caused a recession. This is not cyclical. Tens of millions of people are out of work as a result of it. Regardless of whether you feel we were in a bubble or not, this pandemic would have burst it and caused massive unemployment, shrinking GDP, and depressed stock prices as a result.

If we're talking strictly stock valuations, I agree that perhaps they would have come down soon whether we had this pandemic or not. But the shrinking GDP and unemployment? That was all COVID-19.
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Re: Business Cycle: At least one recession every 10 years

Post by keelerjr12 »

Triple digit golfer wrote: Sat Apr 04, 2020 1:58 pm Regardless of the last recession's timing and severity, whenever this pandemic hit it would have caused a recession. This is not cyclical. Tens of millions of people are out of work as a result of it. Regardless of whether you feel we were in a bubble or not, this pandemic would have burst it and caused massive unemployment, shrinking GDP, and depressed stock prices as a result.

If we're talking strictly stock valuations, I agree that perhaps they would have come down soon whether we had this pandemic or not. But the shrinking GDP and unemployment? That was all COVID-19.
I think the point is, is that if it wasn’t this, it would’ve been something else. If you were already in a recession (ie at the bottom), the drop is a lot lower than if you were already at a high.
Triple digit golfer
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Re: Business Cycle: At least one recession every 10 years

Post by Triple digit golfer »

keelerjr12 wrote: Sat Apr 04, 2020 2:01 pm
Triple digit golfer wrote: Sat Apr 04, 2020 1:58 pm Regardless of the last recession's timing and severity, whenever this pandemic hit it would have caused a recession. This is not cyclical. Tens of millions of people are out of work as a result of it. Regardless of whether you feel we were in a bubble or not, this pandemic would have burst it and caused massive unemployment, shrinking GDP, and depressed stock prices as a result.

If we're talking strictly stock valuations, I agree that perhaps they would have come down soon whether we had this pandemic or not. But the shrinking GDP and unemployment? That was all COVID-19.
I think the point is, is that if it wasn’t this, it would’ve been something else. If you were already in a recession (ie at the bottom), the drop is a lot lower than if you were already at a high.
What else would cause 30 million Americans to be out of work?

Why do you think the "something else" would happen now?

If you're saying there's always things that will screw things up, sure, I agree. But that's my point. They're not on a schedule.
keelerjr12
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Re: Business Cycle: At least one recession every 10 years

Post by keelerjr12 »

Triple digit golfer wrote: Sat Apr 04, 2020 2:06 pm
keelerjr12 wrote: Sat Apr 04, 2020 2:01 pm
Triple digit golfer wrote: Sat Apr 04, 2020 1:58 pm Regardless of the last recession's timing and severity, whenever this pandemic hit it would have caused a recession. This is not cyclical. Tens of millions of people are out of work as a result of it. Regardless of whether you feel we were in a bubble or not, this pandemic would have burst it and caused massive unemployment, shrinking GDP, and depressed stock prices as a result.

If we're talking strictly stock valuations, I agree that perhaps they would have come down soon whether we had this pandemic or not. But the shrinking GDP and unemployment? That was all COVID-19.
I think the point is, is that if it wasn’t this, it would’ve been something else. If you were already in a recession (ie at the bottom), the drop is a lot lower than if you were already at a high.
What else would cause 30 million Americans to be out of work?

Why do you think the "something else" would happen now?

If you're saying there's always things that will screw things up, sure, I agree. But that's my point. They're not on a schedule.
I think you're getting bogged down in the details and focusing solely on this single event. I agree with you. For an event to cause this bubble to burst and push us into a recession, this is the motherload. However, this stuff is cyclical. This is why we have bull and bear markets. This is why we have periods of extreme growth and recessions.

If it didn't happen now, but call it 1 year, 2 years, or 5 years from now; you'd still be sitting there saying "why now?". Do you see the problem with your question? You are correct in saying that we cannot predict when this stuff will happen. What we do know is that IT WILL HAPPEN. And the higher the valuations, the greater the probability of poor future returns.

What do you mean unemployment increasing and GDP decreasing? What do you think happened in 2007-2008? In the 80s? During the Depression? I'm very confused if you're implying that only the stock market takes a hit during a recession.
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patrick013
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Re: Business Cycle: At least one recession every 10 years

Post by patrick013 »

KlangFool wrote: Sat Apr 04, 2020 1:37 pm
SimpleGift wrote: Sat Apr 04, 2020 12:36 pm
KlangFool wrote: Sat Apr 04, 2020 9:59 am I had been saying that we are overdue for a recession after 10+ years of the bull market. Historically, since 1836, there had been one recession every 10 years.
It's worth pointing out the frequency of recessions has declined dramatically in the U.S. since the 1800s (chart below):
  • Image
Many attribute this to the success of modern monetary policies in the 20th century to modulate the extremes of economic expansions and contractions, to alleviate financial crises, and to manage inflation and unemployment (chart below):
  • Image
The irony is, as the Federal Reserve has gotten better at its job of alleviating the impacts of financial crises, the end result may be that it encourages more risk taking. In other words, if the central bank successfully implements a financial rescue every time the market crashes, investors may be willing to take on more risk, knowing they'll be rescued by monetary policy.

As a result, recessions may be getting less frequent, but some speculate that they may be getting more severe.
SimpleGift,

In summary, it is a complex system with a memory. It has a dependency on past history. The memory in this system is the amount of accumulated debt that we incurred from the past recessions.

KlangFool
If you go back even further into the 1700's one author stated
you could almost set your watch to it. Business activity
shifting in a cycle and markets routinely crashing every 10-11
years. No set rule of course but as economies change and
demand fluctuates and modern monetarism replaces mercantilism
it's not a bad number to use. An oil crisis, bank failures,
or just overproduction the cycle will downturn at some average
number of years. Can't have perpetual growth. But a COVID
crises ? I'm sure plenty of stories will appear explaining the
effect on the economy apart from the usual economic reasons
and the expected cyclical corrections.
age in bonds, buy-and-hold, 10 year business cycle
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JoeRetire
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Re: Business Cycle: At least one recession every 10 years

Post by JoeRetire »

KlangFool wrote: Sat Apr 04, 2020 9:59 am https://en.wikipedia.org/wiki/List_of_r ... ted_States

Historically, since 1836, there had been one recession every 10 years. And, folks argued with me that there is no basis to my statement.
Do you feel that the article you linked actually shows "one recession every 10 years"?
Guess what? We are in a recession. It is about 10 years 9 months from the last recession.
So more than 10 years?
It would go in cycles.
Unpredictable, uneven "cycles", yes.

"Overdue" isn't meaningful...
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Re: Business Cycle: At least one recession every 10 years

Post by junior »

KlangFool wrote: Sat Apr 04, 2020 12:39 pm
This statement is simply wrong too. The average return between 100/0 and 70/30 is only 1% per year. It is not big enough to make a difference whether someone can retire. You can do the calculation and show that this to be true.
I went to portfolio visualizer and tried plugging in some numbers for how a bond vs no bond portfolio did rebalanced annually. The test included a $700 dollar a month investment for 10 years- I agree there was no significant ending difference between 100% stocks and 70% stocks. I then when back 30 years and tried it again with a $700 dollar a month contribution and I agree there was no significant difference in portfolio returns between 100% stock and 70% stock.

That said given there was no real difference your advice to have at least 30% bonds doesn't really have much support in my little backtesting experiment.

Vanguard's target retirement 2040 fund has 17.60% percent bonds at the moment.
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

JoeRetire wrote: Sat Apr 04, 2020 3:04 pm
KlangFool wrote: Sat Apr 04, 2020 9:59 am https://en.wikipedia.org/wiki/List_of_r ... ted_States

Historically, since 1836, there had been one recession every 10 years. And, folks argued with me that there is no basis to my statement.
Do you feel that the article you linked actually shows "one recession every 10 years"?
Guess what? We are in a recession. It is about 10 years 9 months from the last recession.
So more than 10 years?
It would go in cycles.
Unpredictable, uneven "cycles", yes.

"Overdue" isn't meaningful...
JoeRetire,

<<"Overdue" isn't meaningful...>>

I disagreed. It warns people not to expect the economy can expand forever without a recession every now and then. It is cyclic.

KlangFool
Triple digit golfer
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Re: Business Cycle: At least one recession every 10 years

Post by Triple digit golfer »

keelerjr12 wrote: Sat Apr 04, 2020 2:21 pm
Triple digit golfer wrote: Sat Apr 04, 2020 2:06 pm
keelerjr12 wrote: Sat Apr 04, 2020 2:01 pm
Triple digit golfer wrote: Sat Apr 04, 2020 1:58 pm Regardless of the last recession's timing and severity, whenever this pandemic hit it would have caused a recession. This is not cyclical. Tens of millions of people are out of work as a result of it. Regardless of whether you feel we were in a bubble or not, this pandemic would have burst it and caused massive unemployment, shrinking GDP, and depressed stock prices as a result.

If we're talking strictly stock valuations, I agree that perhaps they would have come down soon whether we had this pandemic or not. But the shrinking GDP and unemployment? That was all COVID-19.
I think the point is, is that if it wasn’t this, it would’ve been something else. If you were already in a recession (ie at the bottom), the drop is a lot lower than if you were already at a high.
What else would cause 30 million Americans to be out of work?

Why do you think the "something else" would happen now?

If you're saying there's always things that will screw things up, sure, I agree. But that's my point. They're not on a schedule.
I think you're getting bogged down in the details and focusing solely on this single event. I agree with you. For an event to cause this bubble to burst and push us into a recession, this is the motherload. However, this stuff is cyclical. This is why we have bull and bear markets. This is why we have periods of extreme growth and recessions.

If it didn't happen now, but call it 1 year, 2 years, or 5 years from now; you'd still be sitting there saying "why now?". Do you see the problem with your question? You are correct in saying that we cannot predict when this stuff will happen. What we do know is that IT WILL HAPPEN. And the higher the valuations, the greater the probability of poor future returns.

What do you mean unemployment increasing and GDP decreasing? What do you think happened in 2007-2008? In the 80s? During the Depression? I'm very confused if you're implying that only the stock market takes a hit during a recession.
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
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KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
Triple digit golfer
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Re: Business Cycle: At least one recession every 10 years

Post by Triple digit golfer »

KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
Yes, but it happened now and with the severity that it did because of the pandemic. Nothing about these massive records in unemployment claims is cyclical.
Topic Author
KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

Triple digit golfer wrote: Sat Apr 04, 2020 3:39 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
Yes, but it happened now and with the severity that it did because of the pandemic. Nothing about these massive records in unemployment claims is cyclical.
Triple digit golfer,

Unfortunately, I do not believe that is our biggest problem in the economy. Even if we solve our unemployment problems due to the pandemic, we still have problems with our economy.

KlangFool
smitcat
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Re: Business Cycle: At least one recession every 10 years

Post by smitcat »

KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
keelerjr12
Posts: 128
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Re: Business Cycle: At least one recession every 10 years

Post by keelerjr12 »

smitcat wrote: Sat Apr 04, 2020 4:13 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
And that's what I did!
smitcat
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Re: Business Cycle: At least one recession every 10 years

Post by smitcat »

keelerjr12 wrote: Sat Apr 04, 2020 4:36 pm
smitcat wrote: Sat Apr 04, 2020 4:13 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
And that's what I did!
That is wonderful!!! Have you gone back in?
If not when will you?
keelerjr12
Posts: 128
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Re: Business Cycle: At least one recession every 10 years

Post by keelerjr12 »

smitcat wrote: Sat Apr 04, 2020 4:39 pm
keelerjr12 wrote: Sat Apr 04, 2020 4:36 pm
smitcat wrote: Sat Apr 04, 2020 4:13 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
And that's what I did!
That is wonderful!!! Have you gone back in?
If not when will you?
I've been DCAing back in over the last 2-3 weeks. Still some cash left.
smitcat
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Re: Business Cycle: At least one recession every 10 years

Post by smitcat »

keelerjr12 wrote: Sat Apr 04, 2020 4:43 pm
smitcat wrote: Sat Apr 04, 2020 4:39 pm
keelerjr12 wrote: Sat Apr 04, 2020 4:36 pm
smitcat wrote: Sat Apr 04, 2020 4:13 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm

Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
And that's what I did!
That is wonderful!!! Have you gone back in?
If not when will you?
I've been DCAing back in over the last 2-3 weeks. Still some cash left.
Great - I hope it works out well for you. We still have a large amount to put in.
Topic Author
KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

smitcat wrote: Sat Apr 04, 2020 4:13 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
smitcat,

I have a fixed AA of 60/40. As the stock is going up, I have to buy the bond and rebalance by selling the stock and buying the bond. Two weeks ago, I had to rebalance by selling the bond to buy the stock since it triggered my 5/25 rebalancing.

No market timing is required. This is part and parcel of keeping a fixed AA of 60/40.

KlangFool
smitcat
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Re: Business Cycle: At least one recession every 10 years

Post by smitcat »

KlangFool wrote: Sat Apr 04, 2020 4:47 pm
smitcat wrote: Sat Apr 04, 2020 4:13 pm
KlangFool wrote: Sat Apr 04, 2020 3:35 pm
Triple digit golfer wrote: Sat Apr 04, 2020 3:28 pm
The discussion is about recessions, not stock market crashes. Why are you talking about future stock returns? Don't confuse and mix the two. The pandemic caused this recession. That is what I'm saying. I'm not implying anything about the stock market. I'm talking recessions.
Triple digit golfer,

And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic.

KlangFool
"And, that is the difference of opinion. In my opinion, we are overdue for a recession because of the business cycle. It will happen with or without the pandemic."
If that were accurate you would also have rotated out of stocks until after the recession has hit.
smitcat,

I have a fixed AA of 60/40. As the stock is going up, I have to buy the bond and rebalance by selling the stock and buying the bond. Two weeks ago, I had to rebalance by selling the bond to buy the stock since it triggered my 5/25 rebalancing.

No market timing is required. This is part and parcel of keeping a fixed AA of 60/40.

KlangFool
"No market timing is required. This is part and parcel of keeping a fixed AA of 60/40."
That makes perfect sense if you are expecting the market to cycle and you are not able to time the cycle.
But … it is entirely incompatible with any rational action if you really knew the recession was overdue.
If you really knew it was overdue and did nothing it makes no sense at all.
Topic Author
KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

smitcat wrote: Sat Apr 04, 2020 4:50 pm
"No market timing is required. This is part and parcel of keeping a fixed AA of 60/40."
That makes perfect sense if you are expecting the market to cycle and you are not able to time the cycle.
But … it is entirely incompatible with any rational action if you really knew the recession was overdue.
If you really knew it was overdue and did nothing it makes no sense at all.
smitcat,

I know it is overdue but I do not know when it will happen.

KlangFool
smitcat
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Re: Business Cycle: At least one recession every 10 years

Post by smitcat »

KlangFool wrote: Sat Apr 04, 2020 4:53 pm
smitcat wrote: Sat Apr 04, 2020 4:50 pm
"No market timing is required. This is part and parcel of keeping a fixed AA of 60/40."
That makes perfect sense if you are expecting the market to cycle and you are not able to time the cycle.
But … it is entirely incompatible with any rational action if you really knew the recession was overdue.
If you really knew it was overdue and did nothing it makes no sense at all.
smitcat,

I know it is overdue but I do not know when it will happen.

KlangFool
Semantics I think - I now know we will be ready for a recovery but I will never say that I know it is "overdue".
So you knew it was possible and probable and would eventually come along but not overdue.
For if anyone knows it is truly overdue they rotate out ….
Topic Author
KlangFool
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Re: Business Cycle: At least one recession every 10 years

Post by KlangFool »

smitcat wrote: Sat Apr 04, 2020 4:57 pm
KlangFool wrote: Sat Apr 04, 2020 4:53 pm
smitcat wrote: Sat Apr 04, 2020 4:50 pm
"No market timing is required. This is part and parcel of keeping a fixed AA of 60/40."
That makes perfect sense if you are expecting the market to cycle and you are not able to time the cycle.
But … it is entirely incompatible with any rational action if you really knew the recession was overdue.
If you really knew it was overdue and did nothing it makes no sense at all.
smitcat,

I know it is overdue but I do not know when it will happen.

KlangFool
Semantics I think - I now know we will be ready for a recovery but I will never say that I know it is "overdue".
So you knew it was possible and probable and would eventually come along but not overdue.
For if anyone knows it is truly overdue they rotate out ….
smitcat,

You need to make two right decisions in order for market timing to work.

A) When to get out.

B) When to get back in.

Meanwhile, if you keep a fixed AA of 60/40, you do not need to know any of this. You will "buy low and sell high". It will not be perfect timing but it will be good enough.

KlangFool
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ClevrChico
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Re: Business Cycle: At least one recession every 10 years

Post by ClevrChico »

I agree 100%! Proper asset allocation and an emergency fund are essential. I don't see this trend stopping.

This has been the reality of my working life.

- 2000/2001 - .com crash and 9/11
- 2008 - Global financial crisis
- 2020 - Pandemic

All have brought temporary financial haircuts and various degrees of life changes.
MathIsMyWayr
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Location: CA

Re: Business Cycle: At least one recession every 10 years

Post by MathIsMyWayr »

California is long overdue for a BIG one. A really big one. We haven't had a really big earthquake for a long time. Are you suggesting that I should pack and head to Georgia? Or keep a 26' trailer in my driveway?
carminered2019
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Re: Business Cycle: At least one recession every 10 years

Post by carminered2019 »

MathIsMyWayr wrote: Sat Apr 04, 2020 8:45 pm California is long overdue for a BIG one. A really big one. We haven't had a really big earthquake for a long time. Are you suggesting that I should pack and head to Georgia? Or keep a 26' trailer in my driveway?
We had one in Socal yesterday, a 4.2 :D
keelerjr12
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Re: Business Cycle: At least one recession every 10 years

Post by keelerjr12 »

Lot of old balls on this board. I guess if you’re not going to use the data, why track it? Seems odd that data mining and machine learning are 2 of the fastest growing fields right now. Guess there’s absolutely no point 🙄
Triple digit golfer
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Re: Business Cycle: At least one recession every 10 years

Post by Triple digit golfer »

keelerjr12 wrote: Sat Apr 04, 2020 9:00 pm Lot of old balls on this board. I guess if you’re not going to use the data, why track it? Seems odd that data mining and machine learning are 2 of the fastest growing fields right now. Guess there’s absolutely no point 🙄
If you flip a coin heads 10 times in a row, what is the odds of flipping heads on the 11th flip?
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