Lets take about the adjustment

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TheQuestionGuy
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Lets take about the adjustment

Post by TheQuestionGuy » Mon Oct 30, 2017 8:39 pm

Other than the usual "what goes up must come down" and "its an adjustment" or for others "when it crashes", what signs currently exist?

Granted no one can predict, but it seems like afterward all the signs were there and it was fairly obvious.

Whether its a bubble somewhere or something else, what indicators are you watching for the next adjustment?
Is there even anything on the horizon?

I was about to readjust and get into bonds, but really enjoying this wave.
Other than the big crash in 29, the longest period to recoup from a crash was probably 5 years, after that maybe 2 years.

Right now it seems like I could weather a crash no problem but I am still wondering, what currently is out there that is getting close to the edge and could potentially start the down slide?

Johm221122
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Re: Lets take about the adjustment

Post by Johm221122 » Mon Oct 30, 2017 8:47 pm

You should probably revisit your IPS
/wiki/Investm ... _statement
Your asset allocation should let you not worry about market crashes,there just a rebalancing opportunity

itstoomuch
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Re: Lets take about the adjustment

Post by itstoomuch » Mon Oct 30, 2017 11:39 pm

Hit my goal for 2017 in the Discretionary Acct.
IPS says that I should be looking for quick exits and future investments.
YMMV
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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TD2626
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Re: Lets take about the adjustment

Post by TD2626 » Tue Oct 31, 2017 12:37 am

-Japan hasn't recovered from it's bubble that peaked in 1989. Crashes can be as short as a flash crash (lasting seconds to hours) to as long as the depression, or even longer. There's no rule that says recovery has to come after 1 to 2 years.

-The Boglehead philosophy says to stay the course and not focus on short term noise. If the the efficient market hypothesis is correct, one knows anything about where the markets are headed. Literally anything is possible. The next 10 years could see a bubble that sees enormous gains in markets. Or there could be a massive depression with 70-90% losses (Nuclear war could occur with 100% losses). Markets could see modest gains. Or modest losses. Maybe the market drifts sideways for years. No one knows what will happen with any reasonable degree of certainty. I feel that market timing is so fraught with risk that it is imprudent to try to time the markets.

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HomerJ
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Re: Lets take about the adjustment

Post by HomerJ » Tue Oct 31, 2017 12:44 am

TheQuestionGuy wrote:
Mon Oct 30, 2017 8:39 pm
Granted no one can predict, but it seems like afterward all the signs were there and it was fairly obvious.
It's never obvious. All the signs have been there for the past 4 years for a crash for example. Greek debt crisis, government shut down threats, Brexit, the election, stock valuations, etc.

If a crash had happened, everyone would have pointed to one of those things, and said "See, it was obvious!"

Every year, there is something obvious, and one of these years, sooner or later, a crash will happen, and people will point to that LAST obvious thing, and say "See, it's easy to predict crashes... we should have known!"

But we never know. No one knows enough to predict the next crash.
Other than the big crash in 29, the longest period to recoup from a crash was probably 5 years, after that maybe 2 years.

Right now it seems like I could weather a crash no problem but I am still wondering, what currently is out there that is getting close to the edge and could potentially start the down slide?
The important thing to know is that you could weather a fairly long (5 years or so) crash...

The trick is to pick an Asset Allocation that could withstand the market crashing tomorrow and staying down for 5 years. Because it could. If you're young enough, that might still mean 100% stocks, because you've got 10,15,20,30 years for the market to recover.

If you're closer to retirement, you should probably be more conservative.

This way, you don't have to predict anything. You don't have to worry if the risk of a crash is higher today than it was last week. You're already ready for the next crash.
Last edited by HomerJ on Tue Oct 31, 2017 2:57 pm, edited 1 time in total.

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CaliJim
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Re: Lets take about the adjustment

Post by CaliJim » Tue Oct 31, 2017 1:27 am

A wise man, not me, said that most people should keep their Asset Allocation between 75/25, and 25/75.

The efficient frontier can move all over the place, and is unpredictable.:

Image

We don't know how risk will be rewarded in the coming decades. Just develop a personal Asset Allocation glide path plan. Write your IPS. Stick with it, and stay away from making predictions.

IMHO, a meaningful amount of dry powder (cash, cds, bonds, fixed income) for rebalancing and as a supplement to your emergency fund (s*** happens) can be helpful, especially if you have dependents. If it is just you... take whatever risk you want... but... if you have a spouse, kids, parents who may need your help. Think of them. If it IS just you, please don't ever become disabled and broke and a ward of the state. Guys like that, who took unnecessary risks and then became a burden on the rest of us... well... they stretch my capacity for compassion.
-calijim- | | For more info, click this

TheQuestionGuy
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Re: Lets take about the adjustment

Post by TheQuestionGuy » Tue Oct 31, 2017 4:20 pm

Good replies.
I guess "wishing i stayed in" is a much better position than "wishing I got out".

munemaker
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Re: Lets take about the adjustment

Post by munemaker » Tue Oct 31, 2017 5:02 pm

It is not prudent to adjust your asset allocation based on perceived market strength or weakness.

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nisiprius
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Re: Lets take about the adjustment

Post by nisiprius » Tue Oct 31, 2017 5:16 pm

TheQuestionGuy wrote:
Mon Oct 30, 2017 8:39 pm
...Granted no one can predict,...
Stop right there.
...but it seems like afterward all the signs were there and it was fairly obvious.
The key word there is "seems."

"20/20 hindsight" is deadly. I certainly succumb to it if I let down my guard.
Whether its a bubble somewhere or something else, what indicators are you watching for the next adjustment,
I'm not seriously looking. I honestly think that if you are watching for indicators or, worse yet, taking action on them, it means your stock allocation is too high. You have to keep it at some level, suitable for you, at which you can just let it ride, not tinker, and say "easy come, easy go." I expect to be invested in the stock market during bubbles; I expect to see my brokerage totals rise, and then I expect to just stay there like a dummy and ride the crash right down.

To believe in being able to get out before a crash is to believe that the stock market is risky for everybody else, but not for you. I doubt this. I think that if I want the risk premium, I have to actually take the risk.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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blueblock
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Re: Lets take about the adjustment

Post by blueblock » Tue Oct 31, 2017 5:25 pm

TheQuestionGuy wrote:
Mon Oct 30, 2017 8:39 pm
what indicators are you watching for the next adjustment?
I like the Economist's Global Forecasting Service free monthly summary report for a "view from 35,000 feet." http://gfs.eiu.com

I also like this graph:

Image

munemaker
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Re: Lets take about the adjustment

Post by munemaker » Tue Oct 31, 2017 5:27 pm

TheQuestionGuy wrote:
Tue Oct 31, 2017 4:20 pm
Good replies.
I guess "wishing i stayed in" is a much better position than "wishing I got out".
Nope, not at all. Stay in and ride through the dips and peaks. Otherwise you are market timing, which is not the way to go.

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TD2626
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Re: Lets take about the adjustment

Post by TD2626 » Tue Oct 31, 2017 5:28 pm

nisiprius wrote:
Tue Oct 31, 2017 5:16 pm
TheQuestionGuy wrote:
Mon Oct 30, 2017 8:39 pm
...Granted no one can predict,...
Stop right there.
Yes. If you have already granted that no one can reliably predict a crash, why try?
nisiprius wrote:
Tue Oct 31, 2017 5:16 pm
To believe in being able to get out before a crash is to believe that the stock market is risky for everybody else, but not for you. I doubt this. I think that if I want the risk premium, I have to actually take the risk.
I feel that Nisiprius's statement that you have to bear stock market-level risks to get the possibility of stock market-level returns in stocks -- and that there's no known clever tricks to pull a rabbit out of a hat and magically get the return without the risk -- is a good framework.

All this doesn't mean that there's a need to avoid stocks. It simply means that (as is consistent with the Boglehead philosophy) an investor should pick a long-term equity allocation consistent with their ability, willingness, and need to bear risk and buy and hold, tuning out short-term market noise. For many investors, particularly those with high risk tolerances and/or long term time horizons, this leads them to a conclusion that it is best to hold equities over the long term with full knowledge of the risks. There are significant risks in investing. It is through thoughtful, rational, long-term approaches to risk that one can invest while sleeping well at night. Never invest in anything you do not understand.

Woodshark
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Re: Lets take about the adjustment

Post by Woodshark » Tue Oct 31, 2017 5:37 pm

TheQuestionGuy wrote:
Mon Oct 30, 2017 8:39 pm


Granted no one can predict, but it seems like afterward all the signs were there and it was fairly obvious.

Whether its a bubble somewhere or something else, what indicators are you watching for the next adjustment?
Is there even anything on the horizon?
It's funny you should ask as I was thinking along the same lines today. The weather turned great overnight so I went out for a long walk. Somewhere along the way the same line of thought popped into my head. When things are about to turn south why don't we see the clues. The ones that seem so obvious after a crash. Sadly I have no answers. But you're not alone in thinking about it.

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David Jay
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Re: Lets take about the adjustment

Post by David Jay » Tue Oct 31, 2017 6:02 pm

nisiprius wrote:
Tue Oct 31, 2017 5:16 pm
To believe in being able to get out before a crash is to believe that the stock market is risky for everybody else, but not for you. I doubt this. I think that if I want the risk premium, I have to actually take the risk.
Yes! (see my signature line below)

[edit] William Bernstein on market timing (from the pamphlet "Deep Risk"):
...mistiming the market is probably the most frequent and severe form of permanent capital loss.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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