Author Topic: How concerned are you about the Everything Bubble?  (Read 7186 times)

maizeman

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Re: How concerned are you about the Everything Bubble?
« Reply #50 on: May 05, 2019, 07:31:47 AM »
Huh, that's a fascinating way of putting it, @ChpBstrd

The growth of the money supply without any really growth in the price of consumer goods and services is something I've heard a lot of discussion about. Another explanation (or perhaps another way of saying the same thing) is a lot of the newly created dollars have flowed out of the US and are sitting in the reserves of foreign governments and the savings of private individuals in countries where their own currencies are less reliable.

This would potentially also contribute to an asset/everything bubble. The same people who'd want to hold US dollars as a more secure form of capital than their local currencies might also turn around and use some of those dollars to purchase US bonds/stocks/real estate as also more secure investments than their local equivalents. At least in real estate in some of the major coastal cities, it appears to be that a lot of the growth at the high end of the market is being driven by purchasers from China, Russia, and the Middle East.

vand

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Re: How concerned are you about the Everything Bubble?
« Reply #51 on: May 05, 2019, 11:08:40 AM »
Btw I donít agree with the broad statement that ďeverythingĒ is over-inflated. For sure, I think western Bond, Equity and real estate markets are, but there are always some sectors that are beaten down and cheap.. you just have to cast your net wide enough and look beyond the mainstream markets. Today, those depressed  markets are commodities and emerging markets, which have both been heavily battered due to a strong USD, but may have bottomed.

frugledoc

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Re: How concerned are you about the Everything Bubble?
« Reply #52 on: May 05, 2019, 03:38:30 PM »
Btw I donít agree with the broad statement that ďeverythingĒ is over-inflated. For sure, I think western Bond, Equity and real estate markets are, but there are always some sectors that are beaten down and cheap.. you just have to cast your net wide enough and look beyond the mainstream markets. Today, those depressed  markets are commodities and emerging markets, which have both been heavily battered due to a strong USD, but may have bottomed.

Arenít many stocks on the SP500 currently still beaten down to bear market levels?

Not that it matters, everything looks cheapish to me.

effigy98

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Re: How concerned are you about the Everything Bubble?
« Reply #53 on: May 06, 2019, 10:15:37 PM »
Concerned especially if I look at the news (which I usually try to avoid). I have diversified in uncorrelated asset classes across the globe, paid off house, and have multiple income streams. The thing that keeps me going is freedom and knowing that very few (if any) of my peers are doing the same. Most have new cars, 100% S&P with their 6% 401k match, and still pay PMI on their 1m+ mortgages. Investing gives me a sense of control in my life.

Classical_Liberal

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Re: How concerned are you about the Everything Bubble?
« Reply #54 on: May 06, 2019, 10:58:40 PM »
Actually, there has been a rapid increase in the amount of money competing in investments...

Excellent, succinct description of whats going on, IMO.

Add the that, one of the main reasons money has moved into investment capital vs good/services (how we measure velocity), is because the new money which has been created has mostly ended up in the hands of the wealthiest.  These are the folks/institutions that buy "assets" as opposed to goods/services.  The inflation predicted with QE was born out in the price (lower yield) of assets.

The ramifications of this can play out in many differing ways, with many second order effects an armchair economist like me can't even imagine (unknown, unknowns).  I'm guessing the net effect will bear out in reduced real yield over time.  This could play out in a myriad of ways, depending on ongoing macro policy.

The bottom line is that it doesn't spell disaster, it just means the future will play out different than the past.  And we already knew that. 

vand

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Re: How concerned are you about the Everything Bubble?
« Reply #55 on: May 07, 2019, 01:24:25 AM »
Btw I donít agree with the broad statement that ďeverythingĒ is over-inflated. For sure, I think western Bond, Equity and real estate markets are, but there are always some sectors that are beaten down and cheap.. you just have to cast your net wide enough and look beyond the mainstream markets. Today, those depressed  markets are commodities and emerging markets, which have both been heavily battered due to a strong USD, but may have bottomed.

Arenít many stocks on the SP500 currently still beaten down to bear market levels?

Not that it matters, everything looks cheapish to me.

Do you consider it cheap because its down from recent highs? Or do you consider them cheap based on fundamental factors?

25% off a recent high is nothing in the world of stocks.

Cyclical stocks can easily lose 80-90% through a downturn.. and then gain it back again.

Yes, its true that many stocks are down from recent highs, and the indexes do not paint a full picture. the broader RUT index is nowhere near to recapturing the old highs, and other developed markets are not close to their ATHs. This suggests that the rally is pretty narrow and underpinned by a few big stocks.

Warren Buffett is usually a pretty good barometer on things, and he's been using his massive cash position to buy back stock recently because he can't find anything worth buying... something that he has avoided doing in the past because he was always confident that he could generate better returns by buying companies.
https://www.bloomberg.com/news/articles/2019-05-04/berkshire-buys-back-more-stock-as-cash-pile-continues-to-grow
« Last Edit: May 07, 2019, 01:27:18 AM by vand »

frugledoc

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Re: How concerned are you about the Everything Bubble?
« Reply #56 on: May 07, 2019, 03:11:41 AM »
Btw I donít agree with the broad statement that ďeverythingĒ is over-inflated. For sure, I think western Bond, Equity and real estate markets are, but there are always some sectors that are beaten down and cheap.. you just have to cast your net wide enough and look beyond the mainstream markets. Today, those depressed  markets are commodities and emerging markets, which have both been heavily battered due to a strong USD, but may have bottomed.

Arenít many stocks on the SP500 currently still beaten down to bear market levels?

Not that it matters, everything looks cheapish to me.

Do you consider it cheap because its down from recent highs? Or do you consider them cheap based on fundamental factors?

25% off a recent high is nothing in the world of stocks.

Cyclical stocks can easily lose 80-90% through a downturn.. and then gain it back again.

Yes, its true that many stocks are down from recent highs, and the indexes do not paint a full picture. the broader RUT index is nowhere near to recapturing the old highs, and other developed markets are not close to their ATHs. This suggests that the rally is pretty narrow and underpinned by a few big stocks.

Warren Buffett is usually a pretty good barometer on things, and he's been using his massive cash position to buy back stock recently because he can't find anything worth buying... something that he has avoided doing in the past because he was always confident that he could generate better returns by buying companies.
https://www.bloomberg.com/news/articles/2019-05-04/berkshire-buys-back-more-stock-as-cash-pile-continues-to-grow

I consider them cheap compared to what I think they will be worth in 50 years or more when my children will have inherited my assets

vand

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Re: How concerned are you about the Everything Bubble?
« Reply #57 on: May 07, 2019, 03:13:40 AM »
Btw I donít agree with the broad statement that ďeverythingĒ is over-inflated. For sure, I think western Bond, Equity and real estate markets are, but there are always some sectors that are beaten down and cheap.. you just have to cast your net wide enough and look beyond the mainstream markets. Today, those depressed  markets are commodities and emerging markets, which have both been heavily battered due to a strong USD, but may have bottomed.

Arenít many stocks on the SP500 currently still beaten down to bear market levels?

Not that it matters, everything looks cheapish to me.

Do you consider it cheap because its down from recent highs? Or do you consider them cheap based on fundamental factors?

25% off a recent high is nothing in the world of stocks.

Cyclical stocks can easily lose 80-90% through a downturn.. and then gain it back again.

Yes, its true that many stocks are down from recent highs, and the indexes do not paint a full picture. the broader RUT index is nowhere near to recapturing the old highs, and other developed markets are not close to their ATHs. This suggests that the rally is pretty narrow and underpinned by a few big stocks.

Warren Buffett is usually a pretty good barometer on things, and he's been using his massive cash position to buy back stock recently because he can't find anything worth buying... something that he has avoided doing in the past because he was always confident that he could generate better returns by buying companies.
https://www.bloomberg.com/news/articles/2019-05-04/berkshire-buys-back-more-stock-as-cash-pile-continues-to-grow

I consider them cheap compared to what I think they will be worth in 50 years or more when my children will have inherited my assets

Ah yes, the old "I'm buying for the long term" arugment.
Stocks are either cheap or they are expensive. The investment horizon does not change that. An overpriced BMW is still an overpriced BMW regardless if you sell it on after a year or run it into the ground over 20.

The erntswhile Mr Buffett's famously favourite holding period is "forever" and even he is sitting on oodles of cash.
« Last Edit: May 07, 2019, 03:18:20 AM by vand »

frugledoc

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Re: How concerned are you about the Everything Bubble?
« Reply #58 on: May 07, 2019, 07:17:03 AM »
Btw I donít agree with the broad statement that ďeverythingĒ is over-inflated. For sure, I think western Bond, Equity and real estate markets are, but there are always some sectors that are beaten down and cheap.. you just have to cast your net wide enough and look beyond the mainstream markets. Today, those depressed  markets are commodities and emerging markets, which have both been heavily battered due to a strong USD, but may have bottomed.

Arenít many stocks on the SP500 currently still beaten down to bear market levels?

Not that it matters, everything looks cheapish to me.

Do you consider it cheap because its down from recent highs? Or do you consider them cheap based on fundamental factors?

25% off a recent high is nothing in the world of stocks.

Cyclical stocks can easily lose 80-90% through a downturn.. and then gain it back again.

Yes, its true that many stocks are down from recent highs, and the indexes do not paint a full picture. the broader RUT index is nowhere near to recapturing the old highs, and other developed markets are not close to their ATHs. This suggests that the rally is pretty narrow and underpinned by a few big stocks.

Warren Buffett is usually a pretty good barometer on things, and he's been using his massive cash position to buy back stock recently because he can't find anything worth buying... something that he has avoided doing in the past because he was always confident that he could generate better returns by buying companies.
https://www.bloomberg.com/news/articles/2019-05-04/berkshire-buys-back-more-stock-as-cash-pile-continues-to-grow

I consider them cheap compared to what I think they will be worth in 50 years or more when my children will have inherited my assets

Ah yes, the old "I'm buying for the long term" arugment.
Stocks are either cheap or they are expensive. The investment horizon does not change that. An overpriced BMW is still an overpriced BMW regardless if you sell it on after a year or run it into the ground over 20.

The erntswhile Mr Buffett's famously favourite holding period is "forever" and even he is sitting on oodles of cash.

Iím 100% equities so I donít have to spend any time thinking about that.  I used to spend a lot of time agonising over market valuations and timing before I realised that being intelligent and logical doesnít help so I just want to participate in the global economy.


talltexan

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Re: How concerned are you about the Everything Bubble?
« Reply #59 on: May 07, 2019, 07:24:26 AM »
I put my 401K 20% into bonds in the Fall of 2018. It sure gave me some piece of mind when things dropped during December. Going through the cycle tells you how you'll do emotionally, and I do not think I can handle those kind of drops at 100% stock.

I do have some other asset classes in there: REIT's, Small Cap, Int'l, as well as the SP500.

maizeman

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Re: How concerned are you about the Everything Bubble?
« Reply #60 on: May 07, 2019, 07:29:09 AM »
Ah yes, the old "I'm buying for the long term" arugment.
Stocks are either cheap or they are expensive. The investment horizon does not change that. An overpriced BMW is still an overpriced BMW regardless if you sell it on after a year or run it into the ground over 20.

That's the great thing about equities (and how they are different from consumer goods like your new BMW, or commodities like oil or copper).

If equities are average priced right now, $1000 invested today might grow to $13,000 in 30 years* If, with the benefit of hindsight, equities are priced at twice what they "should" be and crash back down in the future, perhaps $1,000 invested today might only grow to $6,500 in 30 years. Either way I'll be a lot better off having invested than not invested.

The same cannot be said of buying a new car (lose money as soon as you drive it off the lot regardless of what you paid)) or a warehouse full of copper (might go up, might go down, but no matter how long you hold, it may still turn out you over paid originally, and meanwhile you're paying rent on the warehouse either directly or indirectly though things like premiums in options contracts).

*In nominal terms with dividends reinvested. Normally I like to use real returns, but since if I choose not to invest my money its value really will be eroded by inflation every year so nominal seems like the correct benchmark for comparison.

vand

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Re: How concerned are you about the Everything Bubble?
« Reply #61 on: May 07, 2019, 03:41:13 PM »
Ah yes, the old "I'm buying for the long term" arugment.
Stocks are either cheap or they are expensive. The investment horizon does not change that. An overpriced BMW is still an overpriced BMW regardless if you sell it on after a year or run it into the ground over 20.

That's the great thing about equities (and how they are different from consumer goods like your new BMW, or commodities like oil or copper).

If equities are average priced right now, $1000 invested today might grow to $13,000 in 30 years* If, with the benefit of hindsight, equities are priced at twice what they "should" be and crash back down in the future, perhaps $1,000 invested today might only grow to $6,500 in 30 years. Either way I'll be a lot better off having invested than not invested.

The same cannot be said of buying a new car (lose money as soon as you drive it off the lot regardless of what you paid)) or a warehouse full of copper (might go up, might go down, but no matter how long you hold, it may still turn out you over paid originally, and meanwhile you're paying rent on the warehouse either directly or indirectly though things like premiums in options contracts).

*In nominal terms with dividends reinvested. Normally I like to use real returns, but since if I choose not to invest my money its value really will be eroded by inflation every year so nominal seems like the correct benchmark for comparison.

I personally don't know why I bother having these circular discussions with perma-bulls. Your argument goes something like this.. prices don't matter because investments pay for themselves over enough time.

Each to their own.

Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.


sol

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Re: How concerned are you about the Everything Bubble?
« Reply #62 on: May 07, 2019, 03:47:04 PM »
Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

Why would I ever liquidate my net worth at the bottom of a bear market?  That would be counterproductive.  Sounds like something a market timer might try.

As for "steadily deploying my capital" I do that all the time.  Tuesdays and Thursdays, in fact, year in and year out. 
« Last Edit: May 07, 2019, 04:02:04 PM by sol »

frugledoc

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Re: How concerned are you about the Everything Bubble?
« Reply #63 on: May 07, 2019, 03:51:28 PM »
Ah yes, the old "I'm buying for the long term" arugment.
Stocks are either cheap or they are expensive. The investment horizon does not change that. An overpriced BMW is still an overpriced BMW regardless if you sell it on after a year or run it into the ground over 20.

That's the great thing about equities (and how they are different from consumer goods like your new BMW, or commodities like oil or copper).

If equities are average priced right now, $1000 invested today might grow to $13,000 in 30 years* If, with the benefit of hindsight, equities are priced at twice what they "should" be and crash back down in the future, perhaps $1,000 invested today might only grow to $6,500 in 30 years. Either way I'll be a lot better off having invested than not invested.

The same cannot be said of buying a new car (lose money as soon as you drive it off the lot regardless of what you paid)) or a warehouse full of copper (might go up, might go down, but no matter how long you hold, it may still turn out you over paid originally, and meanwhile you're paying rent on the warehouse either directly or indirectly though things like premiums in options contracts).

*In nominal terms with dividends reinvested. Normally I like to use real returns, but since if I choose not to invest my money its value really will be eroded by inflation every year so nominal seems like the correct benchmark for comparison.

I personally don't know why I bother having these circular discussions with perma-bulls. Your argument goes something like this.. prices don't matter because investments pay for themselves over enough time.

Each to their own.

Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

We were a whisker away from a bear market in December, did you time it perfectly and go all in, and then take your easy 20% profit a few months later?  If not, why did you not buy at the recent market bottom?

maizeman

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Re: How concerned are you about the Everything Bubble?
« Reply #64 on: May 07, 2019, 05:17:47 PM »
Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

It's a lot easier to win arguments when you can just make up what the other side thinks or how they will act, isn't it?

Personally, I find it particularly satisfying though. Like winning the game using cheat codes to get invincibility and unlimited ammo.

vand

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Re: How concerned are you about the Everything Bubble?
« Reply #65 on: May 08, 2019, 05:34:58 AM »
Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

Why would I ever liquidate my net worth at the bottom of a bear market?  That would be counterproductive.  Sounds like something a market timer might try.


Because you may not have a choice. That's why it's called liquidation.

Bear markets are usually accompanied with recessions, which mean higher unemployment, and all sort of other things that happen in life. What if you lose your job and have no household income? What happens if you then develop a health problem related to stress about that?

It's a inconvenient truth that most investors suck at investing because they buy when its easy to do so when times are good and then sell to release some cash when times are hard. It is much harder to do the opposite, not only because of psychology, but by running with the herd you may be putting yourself in the position of not having the wherewithal to do so.

Malkynn

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Re: How concerned are you about the Everything Bubble?
« Reply #66 on: May 08, 2019, 05:45:22 AM »
Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

Why would I ever liquidate my net worth at the bottom of a bear market?  That would be counterproductive.  Sounds like something a market timer might try.


Because you may not have a choice. That's why it's called liquidation.

Bear markets are usually accompanied with recessions, which mean higher unemployment, and all sort of other things that happen in life. What if you lose your job and have no household income? What happens if you then develop a health problem related to stress about that?

It's a inconvenient truth that most investors suck at investing because they buy when its easy to do so when times are good and then sell to release some cash when times are hard. It is much harder to do the opposite, not only because of psychology, but by running with the herd you may be putting yourself in the position of not having the wherewithal to do so.

Mustachians don't run with the herd.

habaneroNorway

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Re: How concerned are you about the Everything Bubble?
« Reply #67 on: May 08, 2019, 06:21:45 AM »

Because you may not have a choice. That's why it's called liquidation.

The key is to manage the stash in such a way that one actually has a choice - or at least maximize the probability of having a choice. That, preferably, means not having to sell when one doesn't want to or just have to sell a little. Or have different sources of wealth / income so more options on what to liquidate.

The strategy depends on situation, but I have enough cash to live happily off for quite some time, I would receive unemployment benefits generous enough to live off for 3 years if I lost my job. If still stuck downsizing housing an option. Forced selling of equities is quite far down the list of options. Not that it could never happen, but very, very unlikely.
« Last Edit: May 08, 2019, 06:25:46 AM by habaneroNorway »

frugledoc

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Re: How concerned are you about the Everything Bubble?
« Reply #68 on: May 08, 2019, 06:58:41 AM »
Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

Why would I ever liquidate my net worth at the bottom of a bear market?  That would be counterproductive.  Sounds like something a market timer might try.


Because you may not have a choice. That's why it's called liquidation.

Bear markets are usually accompanied with recessions, which mean higher unemployment, and all sort of other things that happen in life. What if you lose your job and have no household income? What happens if you then develop a health problem related to stress about that?

It's a inconvenient truth that most investors suck at investing because they buy when its easy to do so when times are good and then sell to release some cash when times are hard. It is much harder to do the opposite, not only because of psychology, but by running with the herd you may be putting yourself in the position of not having the wherewithal to do so.

Personally, I find it hard to buy when the markets are up and easy when they are going down. Itís not easy to buy now, you are evidence of that because you are scared of a crash. Lots of amateur investors are currently fearful.

What you need to do is chose an asset allocation which matches your low risk tolerance. Something like 60:40 would do. Once you decide, then itís best to lump sum, but given you are nervous dollar cost averaging may feel more comfortable.


mjones1234

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Re: How concerned are you about the Everything Bubble?
« Reply #69 on: May 08, 2019, 07:07:09 AM »
I'm concerned for older family members heavily invested in equities. There is no doubt that stocks are currently priced for perfection. Personally, I'm in cash, PM's and paid off real estate, so not concerned. But, like any smart investor, looking to deploy cash if equities go on sale.

DadJokes

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Re: How concerned are you about the Everything Bubble?
« Reply #70 on: May 08, 2019, 07:31:22 AM »
For those who are sitting on cash, how far does the market drop before you buy? Obviously, the drop in December would have been a good time to buy, but how many people thought it would come back the next day as opposed to being a longer downturn?

thd7t

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Re: How concerned are you about the Everything Bubble?
« Reply #71 on: May 08, 2019, 07:43:47 AM »
For those who are sitting on cash, how far does the market drop before you buy? Obviously, the drop in December would have been a good time to buy, but how many people thought it would come back the next day as opposed to being a longer downturn?
This is another reason it's silly to sit on cash.  If you knew there would be a 20% drop, but not how long it would last, why wouldn't you buy at 20% down?  It shouldn't matter how long the downturn lasts if you know the bottom or have some trigger to buy.  The thing that this thread points out again and again is that market timers rarely really time the market.  They just stay ready to time the market and then lose out.


frugledoc

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Re: How concerned are you about the Everything Bubble?
« Reply #72 on: May 08, 2019, 07:54:12 AM »
For those who are sitting on cash, how far does the market drop before you buy? Obviously, the drop in December would have been a good time to buy, but how many people thought it would come back the next day as opposed to being a longer downturn?
This is another reason it's silly to sit on cash.  If you knew there would be a 20% drop, but not how long it would last, why wouldn't you buy at 20% down?  It shouldn't matter how long the downturn lasts if you know the bottom or have some trigger to buy.  The thing that this thread points out again and again is that market timers rarely really time the market.  They just stay ready to time the market and then lose out.

And then berate level headed buy and hold indexers despite the fact that they have been wrong.

The higher the market goes, the more wrong we are lol

sol

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Re: How concerned are you about the Everything Bubble?
« Reply #73 on: May 08, 2019, 08:10:20 AM »
What if you lose your job and have no household income? What happens if you then develop a health problem related to stress about that?

Your argument made a lot more sense a decade ago than it does today.  Today, I've already won the game using a buy and hold strategy, and I no longer care about market fluctuations.

Like basically every mustachian who started saving 60% or more of their income during the great recession, I have long since passed the 25x expenses threshold.  I FIRED by buying every month even while people like you told me to wait, and now my investments can provide my income even in the face of another great recession.

Every single early retiree like me is proof positive that the mustachian investing mindset works.  Hundreds of forum members have used it to reach FIRE.  By ignoring the doubters and the naysayers, we have made ourselves financially invulnerable to market moves.  So the entire premise of "well, what if prices go down" no longer concerns us.  We're not trying to time the market now, and we got to that place of guaranteed security by not trying to time the market over the past decade.

So I am not worried about losing my job.  I already gave it away, and it was one of the best things I have ever done.  I am also not worried about the stress of having no job, because it turns out that being retired and financially independent is about the least stressful thing you can do with your life.  You too could be early retired right along with me, if only you had started saving the majority of your paycheck in 2008, every week, instead of holding cash waiting for your dry powder moment.
« Last Edit: May 08, 2019, 09:59:16 AM by sol »

waltworks

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Re: How concerned are you about the Everything Bubble?
« Reply #74 on: May 08, 2019, 08:24:55 AM »
The thing is, if you invest almost completely incompetently wrt prices/timing, but optimistically (put in money when you have it) you're virtually guaranteed to do well.

If you hoard cash and wait, you have some vanishingly small chance of doing well but a much better chance of doing very, very poorly.

Being cynical and negative is unavoidable for some people. I get that. But it's not a good thing when it comes to investing.

-W

Malkynn

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Re: How concerned are you about the Everything Bubble?
« Reply #75 on: May 08, 2019, 08:28:01 AM »
The thing is, if you invest almost completely incompetently wrt prices/timing, but optimistically (put in money when you have it) you're virtually guaranteed to do well.

If you hoard cash and wait, you have some vanishingly small chance of doing well but a much better chance of doing very, very poorly.

Being cynical and negative is unavoidable for some people. I get that. But it's not a good thing when it comes to investing.

-W

There are also much more lucrative ways to bet against the market.

The potential gains of market timing just don't ever seem to be worth the risk of losing out. I don't get it.

kenmoremmm

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Re: How concerned are you about the Everything Bubble?
« Reply #76 on: May 08, 2019, 10:32:25 AM »
The thing is, if you invest almost completely incompetently wrt prices/timing, but optimistically (put in money when you have it) you're virtually guaranteed to do well.

If you hoard cash and wait, you have some vanishingly small chance of doing well but a much better chance of doing very, very poorly.

Being cynical and negative is unavoidable for some people. I get that. But it's not a good thing when it comes to investing.

-W

didn't you just sell your rentals because you thought the market had peaked???

PDXTabs

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Re: How concerned are you about the Everything Bubble?
« Reply #77 on: May 08, 2019, 10:59:02 AM »
Like basically every mustachian who started saving 60% or more of their income during the great recession, I have long since passed the 25x expenses threshold.  I FIRED by buying every month even while people like you told me to wait, and now my investments can provide my income even in the face of another great recession.

I was not in a position to invest 60% through the great recession, but this comment still resonates with me. I purchased some broad based index funds with every single paycheck. I only regret not buying more (bought a house right before the crash, and I purchased some bond funds too).

To put it another way, for those of us still working, always being all in is a really simple/easy/foolproof way to always win. Specifically, if the market goes up you win. If the market goes down and you are still working, you get to buy more for less, and you still win. Not to mention the lack of pressure, because trading my (currently) six figure portfolio would significantly distract from the life that I want to live. It's way easier to just buy more every two weeks and know that I'm still collecting dividends.

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Re: How concerned are you about the Everything Bubble?
« Reply #78 on: May 08, 2019, 11:03:15 AM »
I havenít got a clue if everything is in a bubble or even if that is possible. Iím afraid I canít really contribute much intellectually to this conversation at all. I donít have advanced economics skills and my maths is fairly basic. I donít know if interest rates are too high or too low or how things get valued. The only thing I know about cape is that Batman looks cool in one. I couldnít tell you if it was a good time to buy or if it was the worst ever. I donít know what all the lines on the graphs mean. I suppose itís good I at least have awareness of my limitations.

Having found these forums I have got a firm grasp of expenses and I choose to buy a cheap global tracker every month as well as a cheap government bond index fund. I would hope if I was really talented at all of the above I would still do the same.

It appears to be going very well.

Regardless of how well my investments do (will my window of buying be favourable or not long term?) lowering my expenses to a level where I could do any minimum wage job and still be able to save money is the biggest single thing I have gained here. I donít have to compete with the top 20% for jobs if I donít want to or simply donít have the ability to. That is so freeing. It is incredibly freeing not to be trapped by consumerism. Knowing pre-FIRE I could take any job if I had to and be ok, and knowing that this path will ultimately lead me to FIRE, means I couldnít be happier to be in the Mustachian Freedom Bubble. This is the only bubble Iím going to spend any time concentrating on.

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Re: How concerned are you about the Everything Bubble?
« Reply #79 on: May 08, 2019, 12:31:54 PM »
Bear markets are usually accompanied with recessions, which mean higher unemployment, and all sort of other things that happen in life. What if you lose your job and have no household income? What happens if you then develop a health problem related to stress about that?


What if the same thing happens to you and you have to spend your cash?   

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Re: How concerned are you about the Everything Bubble?
« Reply #80 on: May 08, 2019, 01:01:11 PM »
didn't you just sell your rentals because you thought the market had peaked???

Yes, but local RE markets are (relatively speaking) easy to time. You can have all sorts of (local information, personal contacts, etc) advantages over supercomputers on Wall Street. I've done it twice now.

All RE is local. It's a cliche but it's a true one.

Stock market, not so much. 

-W

Dabnasty

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Re: How concerned are you about the Everything Bubble?
« Reply #81 on: May 08, 2019, 01:07:10 PM »
Just remember when you are liquidating your positions at the bottom of the bear market that I'll be the one steadily deploying my capital.

Why would I ever liquidate my net worth at the bottom of a bear market?  That would be counterproductive.  Sounds like something a market timer might try.


Because you may not have a choice. That's why it's called liquidation.


What? It's called liquidation because your turning less than liquid assets into liquid assets. The necessity of doing so is irrelevant.

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How concerned are you about the Everything Bubble?
« Reply #82 on: May 08, 2019, 01:33:10 PM »
Even if shit hit the fan and you ran through several layers of emergency planning (emergency fund, lowered savings rate, lower expenses, spend some bonds) and you had to start selling stocks at a low to live on, you would only liquidate the very small amount you need to live on for a month or two while you seek other employment or otherwise find a solution. The only reason you would liquidate the entire portfolio is if you were scared/foolish and made a massive mistake.
« Last Edit: May 08, 2019, 01:54:47 PM by ysette9 »

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Re: How concerned are you about the Everything Bubble?
« Reply #83 on: May 08, 2019, 03:17:09 PM »
What if you lose your job and have no household income? What happens if you then develop a health problem related to stress about that?

Your argument made a lot more sense a decade ago than it does today.  Today, I've already won the game using a buy and hold strategy, and I no longer care about market fluctuations.

Like basically every mustachian who started saving 60% or more of their income during the great recession, I have long since passed the 25x expenses threshold.  I FIRED by buying every month even while people like you told me to wait, and now my investments can provide my income even in the face of another great recession.

Every single early retiree like me is proof positive that the mustachian investing mindset works.  Hundreds of forum members have used it to reach FIRE.  By ignoring the doubters and the naysayers, we have made ourselves financially invulnerable to market moves.  So the entire premise of "well, what if prices go down" no longer concerns us.  We're not trying to time the market now, and we got to that place of guaranteed security by not trying to time the market over the past decade.

So I am not worried about losing my job.  I already gave it away, and it was one of the best things I have ever done.  I am also not worried about the stress of having no job, because it turns out that being retired and financially independent is about the least stressful thing you can do with your life.  You too could be early retired right along with me, if only you had started saving the majority of your paycheck in 2008, every week, instead of holding cash waiting for your dry powder moment.


sol, you forgot the mike drop .gif after this post. 

I'd like to +1 this post as I just FIREd doing almost exactly what you described, but there's no way I could have written it as well as you did. 

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Re: How concerned are you about the Everything Bubble?
« Reply #84 on: May 08, 2019, 03:30:21 PM »
didn't you just sell your rentals because you thought the market had peaked???

Yes, but local RE markets are (relatively speaking) easy to time. You can have all sorts of (local information, personal contacts, etc) advantages over supercomputers on Wall Street. I've done it twice now.

All RE is local. It's a cliche but it's a true one.

Stock market, not so much. 

-W

And I'd venture to guess that waltworks didn't sell his RE and then sit on the cash. A change in investment mix, not a run for the sidelines.

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Re: How concerned are you about the Everything Bubble?
« Reply #85 on: May 08, 2019, 04:03:03 PM »
Even if shit hit the fan and you ran through several layers of emergency planning (emergency fund, lowered savings rate, lower expenses, spend some bonds) and you had to start selling stocks at a low to live on, you would only liquidate the very small amount you need to live on for a month or two while you seek other employment or otherwise find a solution. The only reason you would liquidate the entire portfolio is if you were scared/foolish and made a massive mistake.

I realize that at the moment, employment in the USA is relatively strong, though this will vary depending on ones location, skills, etc. However it is wrong to assume that job loss would only take 1 or 2 months at most to recover from. Many of us during the Great Recession in the USA took a lot longer than that. Despite having a PhD, years of experience, etc etc, it still took me 1.25 years of agressive networking and applications to land something. Couple that (no income for 15 months) with the fact that tens of millions of people live in HCOL locations, and your advice is a recipe for disaster should unfortunate circumstances transpire. True, for some folks, 2 months will be enough time, today perhaps. But unless you have walked in the shoes I describe, you cannot write off the real risk that such a dramatic recession imposes on some families, in particular, for those whose careers are in sectors of the economy that severely contract. In these situations, one could potentially burn through a lot of equity investments just to put food on the table.

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Re: How concerned are you about the Everything Bubble?
« Reply #86 on: May 08, 2019, 04:25:02 PM »
Even if shit hit the fan and you ran through several layers of emergency planning (emergency fund, lowered savings rate, lower expenses, spend some bonds) and you had to start selling stocks at a low to live on, you would only liquidate the very small amount you need to live on for a month or two while you seek other employment or otherwise find a solution. The only reason you would liquidate the entire portfolio is if you were scared/foolish and made a massive mistake.

I realize that at the moment, employment in the USA is relatively strong, though this will vary depending on ones location, skills, etc. However it is wrong to assume that job loss would only take 1 or 2 months at most to recover from. Many of us during the Great Recession in the USA took a lot longer than that. Despite having a PhD, years of experience, etc etc, it still took me 1.25 years of agressive networking and applications to land something. Couple that (no income for 15 months) with the fact that tens of millions of people live in HCOL locations, and your advice is a recipe for disaster should unfortunate circumstances transpire. True, for some folks, 2 months will be enough time, today perhaps. But unless you have walked in the shoes I describe, you cannot write off the real risk that such a dramatic recession imposes on some families, in particular, for those whose careers are in sectors of the economy that severely contract. In these situations, one could potentially burn through a lot of equity investments just to put food on the table.

You highlighted the wrong part of ysette9's post.  She was not arguing for only needing to have 2 months of money available to get through a downturn.  The following fully addresses your concern:

"if shit hit the fan and you ran through several layers of emergency planning (emergency fund, lowered savings rate, lower expenses, spend some bonds)"

Of course someone in a HCOL area in a field that is impacted by economic downturns and a family to take care of should have a very substantial emergency fund that is not in VTSAX!  No one here is suggesting that no one should have an emergency fund that's appropriate to their situation.  That's not at all the same thing as holding dry powder in anticipation of a downturn.  I think her point was that you wouldn't liquidate *everything* if a downturn occurred, but would rather do it one ore two months at a time as needed - after getting through your emergency fund.

ysette9

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How concerned are you about the Everything Bubble?
« Reply #87 on: May 08, 2019, 04:29:47 PM »
Even if shit hit the fan and you ran through several layers of emergency planning (emergency fund, lowered savings rate, lower expenses, spend some bonds) and you had to start selling stocks at a low to live on, you would only liquidate the very small amount you need to live on for a month or two while you seek other employment or otherwise find a solution. The only reason you would liquidate the entire portfolio is if you were scared/foolish and made a massive mistake.

I realize that at the moment, employment in the USA is relatively strong, though this will vary depending on ones location, skills, etc. However it is wrong to assume that job loss would only take 1 or 2 months at most to recover from. Many of us during the Great Recession in the USA took a lot longer than that. Despite having a PhD, years of experience, etc etc, it still took me 1.25 years of agressive networking and applications to land something. Couple that (no income for 15 months) with the fact that tens of millions of people live in HCOL locations, and your advice is a recipe for disaster should unfortunate circumstances transpire. True, for some folks, 2 months will be enough time, today perhaps. But unless you have walked in the shoes I describe, you cannot write off the real risk that such a dramatic recession imposes on some families, in particular, for those whose careers are in sectors of the economy that severely contract. In these situations, one could potentially burn through a lot of equity investments just to put food on the table.
I think you have some good points. It is understood that people with more education, more specialized jobs, and earning more will likely take longer to find a new job in the case of a job loss. That is why an emergency fund should be tailored to a specific situation. I can see your emergency fund size should be determined based on factors including:
Overall savings rate
Single or dual income household
How much do you earn and how specialized are you
Stability of your job and industry
How big is your stash and how close are you to FI
What other levers can you tap (HELOC, CCs, family support


I think in some ways we are talking about different scenarios. One is where you hit hard times and have to tap your investments to keep food on the table. You do what you have to in that situation. The other scenario is a big market drop makes people scared and they foolishly liquidate their investments and hang tight in cash or gold bars or bills under the mattress. This situation is avoidable and can have devastating consequences for overall portfolio performance. I was thinking more the latter and I believe you are talking about the former.
« Last Edit: May 08, 2019, 04:31:29 PM by ysette9 »

kenmoremmm

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Re: How concerned are you about the Everything Bubble?
« Reply #88 on: May 08, 2019, 04:41:34 PM »
And I'd venture to guess that waltworks didn't sell his RE and then sit on the cash. A change in investment mix, not a run for the sidelines.

i'd love to hear where WW moved these liquidated assets to.

Telecaster

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Re: How concerned are you about the Everything Bubble?
« Reply #89 on: May 08, 2019, 07:00:41 PM »
Even if shit hit the fan and you ran through several layers of emergency planning (emergency fund, lowered savings rate, lower expenses, spend some bonds) and you had to start selling stocks at a low to live on, you would only liquidate the very small amount you need to live on for a month or two while you seek other employment or otherwise find a solution. The only reason you would liquidate the entire portfolio is if you were scared/foolish and made a massive mistake.

I realize that at the moment, employment in the USA is relatively strong, though this will vary depending on ones location, skills, etc. However it is wrong to assume that job loss would only take 1 or 2 months at most to recover from. Many of us during the Great Recession in the USA took a lot longer than that. Despite having a PhD, years of experience, etc etc, it still took me 1.25 years of agressive networking and applications to land something. Couple that (no income for 15 months) with the fact that tens of millions of people live in HCOL locations, and your advice is a recipe for disaster should unfortunate circumstances transpire. True, for some folks, 2 months will be enough time, today perhaps. But unless you have walked in the shoes I describe, you cannot write off the real risk that such a dramatic recession imposes on some families, in particular, for those whose careers are in sectors of the economy that severely contract. In these situations, one could potentially burn through a lot of equity investments just to put food on the table.

That's true, and in some ways having an advanced degree like a PhD is a liability because you're in a small niche, and if there's nothing happening in that niche then you got nothing.

But remember, the question was being in cash vs. being in equities right now.  And the situation was presented that the person in equities suffers a job loss, but the person in cash doesn't and is able to deploy all that cash at attractive prices.  Which, quite frankly, is a pretty silly comparison.  If the comparison is equal, both people would lose their jobs and be forced to burn through assets.  Or both people would keep their jobs, in which case the index investor would be vastly wealthier. 

Now, if you are early in your investing career, it is prudent to maintain a cash cushion.  But as your stache grows, that cash cushion becomes less and less important.  And in fact becomes more and more of a liability because you are giving up market gains for a false sense of security. 

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Re: How concerned are you about the Everything Bubble?
« Reply #90 on: May 08, 2019, 08:08:42 PM »
And I'd venture to guess that waltworks didn't sell his RE and then sit on the cash. A change in investment mix, not a run for the sidelines.

i'd love to hear where WW moved these liquidated assets to.

In reverse order of magnitude: Solar panels, building a basement apartment, VTSAX, and some deleveraging (paid off mortgage on primary).

That combination of things rendered us FIRE. The rentals did not bring in anything like enough to accomplish that, but their values had skyrocketed beyond all reason so we put the money where it would work harder for us.
 
-W

aspiringnomad

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Re: How concerned are you about the Everything Bubble?
« Reply #91 on: May 08, 2019, 08:14:38 PM »
...
Ah yes, the old "I'm buying for the long term" arugment.
Stocks are either cheap or they are expensive. The investment horizon does not change that. An overpriced BMW is still an overpriced BMW regardless if you sell it on after a year or run it into the ground over 20.

The erntswhile Mr Buffett's famously favourite holding period is "forever" and even he is sitting on oodles of cash.

Iím 100% equities so I donít have to spend any time thinking about that.  I used to spend a lot of time agonising over market valuations and timing before I realised that being intelligent and logical doesnít help so I just want to participate in the global economy.

frugaldoc's response is such a wise one that I had to acknowledge it.

I'll also add that Warren Buffett is not playing the same game us FIRE aspirees. Much like sol, Warren is already financially independent. In fact, he has been for 63 years since he was 26 years old. He's playing a completely different game, and to him it truly is a game. He's in the business of buying (hopefully) undervalued companies in a fundamentally different way than retail stock investors, which often necessitates sitting on oodles of cash in preparation for the right opportunity. He likely views it as a necessary evil to do what he does. For most people seeking early retirement, beyond the necessary evil of an emergency fund, cash is just a drag.
« Last Edit: May 08, 2019, 08:18:19 PM by aspiringnomad »

aspiringnomad

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Re: How concerned are you about the Everything Bubble?
« Reply #92 on: May 08, 2019, 09:10:57 PM »
But if you have cats then you should definitely be very concerned about your Everything Bubble.






ILikeDividends

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Re: How concerned are you about the Everything Bubble?
« Reply #93 on: May 08, 2019, 09:55:16 PM »
But if you have cats then you should definitely be very concerned about your Everything Bubble.

I'd be more concerned about how long ago the kitten had to use the kitty litter box, before re-chewing that gum.

;)

CrankAddict

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Re: How concerned are you about the Everything Bubble?
« Reply #94 on: May 08, 2019, 10:10:48 PM »
Instead of starting a new, loosely related thread, I figured I'd jump in here and ask...  if market conditions are not to the point of making most of you concerned, are they at least meriting the idea of an AA revision?  My current AA is 85% total market, 15% total bond.  I'm 44 now but in the last 2 years I contributed 3x as much annually to my 401k as the previous 20 annually, and from this year forward it'll be more like 7x.  I'm really trying to make up for lost time, without a ton of time to do so.  Reading Buffet and others predict the next decade likely to be very flat or even negative for "currently over-valued" stocks it has me a bit concerned. 

Any hopes of FIRE'ing require some non-trivial return rate over the next 5-7 years.  What I really need is historically more the realm of stocks, but all of this has me wondering if I need to play it safer and lean more towards bonds.  I know the "stick to the plan" mantra is well-loved around here, but that seems to presume I started with a reasonable plan.  In some sense I'm 45, investing like I'm 25, hoping to retire when I'm 50, none of which probably makes much sense.  So do I switch towards more bonds now, and if so, is that more because of my age than the current market or does the current outlook argue for making that move sooner?  I know that sounds a bit "market timey" but I'll ask it anyway.

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Re: How concerned are you about the Everything Bubble?
« Reply #95 on: May 08, 2019, 11:04:19 PM »
Instead of starting a new, loosely related thread, I figured I'd jump in here and ask...  if market conditions are not to the point of making most of you concerned, are they at least meriting the idea of an AA revision?

The whole point of an AA is that you don't revise it.  If current market conditions make you want to buy more bonds, then you chose the wrong AA for your risk tolerance to begin with.

Quote
I know that sounds a bit "market timey"

Yes.  Yes it does.

vand

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Re: How concerned are you about the Everything Bubble?
« Reply #96 on: May 09, 2019, 02:52:26 AM »
The thing is, if you invest almost completely incompetently wrt prices/timing, but optimistically (put in money when you have it) you're virtually guaranteed to do well.

If you hoard cash and wait, you have some vanishingly small chance of doing well but a much better chance of doing very, very poorly.

Being cynical and negative is unavoidable for some people. I get that. But it's not a good thing when it comes to investing.

-W

There is a medium to be struck.

I don't believe that you should ever be fully invested, and I also don't believe that you should ever be fully out of the market. I do buy equities every month, but I also hold and build my cash reserve. Cash is an asset and should be considered a part of a sensible asset allocation strategy. As of this month this bull market has just become the longest running bull market in the history. Complacency is rife, and people have long forgotten what a bear market fells like. The next downturn is going to be a painful realisation for people who think that investing is as easy as throwing money at the market, or even worse throwing borrowed money at the market, which is, frankly, the level of analysis that I commonly see.

Laserjet3051's post is an excellent one. The reason everyone's bullish about their own prospects right now is the same reason why stocks are richly priced; employment is high, income is growing, they have spare cash to be buying stocks, and they see things getting better for them in the next few years. Conversely, in a downturn everything works in reverse.  The stock market, economy, and peoples' individual circumstances are not separate things. People tend to sell low because they have little choice.. they become forced sellers. When you have no income, or much reduced income, losing sleep because you're worried about being foreclosed, this creates FEAR. Buying cheap stocks is probably the last thing on your mind.


« Last Edit: May 09, 2019, 03:05:19 AM by vand »

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Re: How concerned are you about the Everything Bubble?
« Reply #97 on: May 09, 2019, 06:45:44 AM »
Instead of starting a new, loosely related thread, I figured I'd jump in here and ask...  if market conditions are not to the point of making most of you concerned, are they at least meriting the idea of an AA revision?

The whole point of an AA is that you don't revise it.  If current market conditions make you want to buy more bonds, then you chose the wrong AA for your risk tolerance to begin with.

Quote
I know that sounds a bit "market timey"

Yes.  Yes it does.
I don't like to disagree with Sol, because I generally don't, but I'd like to put a little spin on his comment: The whole point of an AA is that you don't revise it based on market conditions.  I could see revising my AA based on moving to a new Real Estate market and becoming comfortable holding rentals or based on trying to change how my FIRE income was structured (Sol has a thread on this).  None of these involve what the market at large is doing, though.

CrankAddict

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Re: How concerned are you about the Everything Bubble?
« Reply #98 on: May 09, 2019, 07:26:37 AM »
Instead of starting a new, loosely related thread, I figured I'd jump in here and ask...  if market conditions are not to the point of making most of you concerned, are they at least meriting the idea of an AA revision?

The whole point of an AA is that you don't revise it.  If current market conditions make you want to buy more bonds, then you chose the wrong AA for your risk tolerance to begin with.

Quote
I know that sounds a bit "market timey"

Yes.  Yes it does.
I don't like to disagree with Sol, because I generally don't, but I'd like to put a little spin on his comment: The whole point of an AA is that you don't revise it based on market conditions.

Yes, that sounds more reasonable.  Everybody revises, or should at least, their AA over time.  I am coming into this question basically asking, am I already too aggressive given my age and early retirement hopes, and as a further nudge towards shifting the AA, does it seem highly unlikely that the next decade of stocks will provide massive growth?  The market already seems bitcoinish to me, but do most of you believe a 50k+ Dow is really where we'll be in a decade? 

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Re: How concerned are you about the Everything Bubble?
« Reply #99 on: May 09, 2019, 09:16:12 AM »
Laserjet3051's post is an excellent one. The reason everyone's bullish about their own prospects right now is the same reason why stocks are richly priced; employment is high, income is growing, they have spare cash to be buying stocks, and they see things getting better for them in the next few years. Conversely, in a downturn everything works in reverse.  The stock market, economy, and peoples' individual circumstances are not separate things. People tend to sell low because they have little choice.. they become forced sellers. When you have no income, or much reduced income, losing sleep because you're worried about being foreclosed, this creates FEAR. Buying cheap stocks is probably the last thing on your mind.

I don't think "everyone's bullish" right now because the good times are rolling, we've forgotten the past, or we think things are "getting better" (financially, I assume you mean).  I fully expect a major market pullback soon - like 30% plus.  However, I expected that in 2018, with CAPE moving well into the 30s.  And 2017 with the threat of nuclear war, Mueller getting started, and one of the longest bull markets on record.  And 2016 with Trump being elected, the Brexit vote, etc.  And 2015...
However, because I stuck to my IPS and just kept buying, I am now at a point where even if the markets drop 50% I'll still never need to work again.  Ok, if they drop 70% I'll be properly freaked out.  But 50%?  meh. 

The point is, I've learned I'm spectacularly bad at predicting what the markets are going to do and if I'd listened to my fears I wouldn't be FIREd right now because I'd still be waiting to buy the dip.  It's absolutely true that someone is going to come to these boards with excellent reasons why we should all get out now and start hoarding cash, and everything is going to crash right after they say that.  That's a 100% guarantee.  Just like it's a guarantee that someone's going to pick the Powerball numbers in an upcoming drawing.  In both cases we KNOW that's coming, we just have no idea which of the doomsday prophets will be correct or when it will happen. 

So yes, when the next crash comes I might have to sell some of my VTSAX when it's down - way down.  But because I didn't freak out when I started investing in the early 2000s when the tech bubble burst and I didn't change anything when my investments plummeted in 2008-2009, I'm now in a position where I DGAF what the markets do next.  I know I can't predict it.  But I also know I have enough that even if there's a major crash I can still live on the savings I built up ignoring all the people who said there was a bubble - even when they were right.