Author Topic: About to sell everything. Talk me off the ledge (or push me off) please!  (Read 37602 times)

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #50 on: January 22, 2016, 07:00:26 PM »
I didn't sell, FWIW.

However, I want to debate a few things that sounded a bit (don't hate me...) "herdish" on this thread.
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If you sell now, you're only locking in your losses. Stocks are on sale, you should be buying, not selling.

There is a few interesting things here:
1. equities always go up: While this is true over the short history of the stock market, it hasn't been true over the last 15 years. We are pretty just over flat. Many folks completely dismissed the CAPE valuation of the market as historically insignificant. Well, you can't look at the market's history and think that "stocks always go up" while simultaneously dismissing the historical tendencies of the market to return to a lower valuation when high or higher valuation when low.

I do agree that over time, market's will likely trend upward with dividends, growth, and some inflation. However, in a high-debt, low-growth, low-inflation environment, that upward trend could be extremely minimal. Just look at the last 15 years. What ground-breaking inventions are going to kick global-growth into high gear? The freakin' internet, smartphones, renewable energy advances, and globalization have barely made a blip!

Let's just imagine that valuation does account for something (we're 47% above median right now). If we assume global growth of 2%, inflation of 1%, dividends of 2%, it could take us 9 years of zero equity gains just to get back to the median valuation. And that assumes no major recessions.

What if there are additional major recessions and we get occasional growth propped up only by low interest rates/debt? Can we really rely on equities to ignore the last 15 years and return to their old ways?

2. the market is down, so stocks are on sale: Are they? Compared to yesterday, stocks are lower in price, but are they truly a sale? Have you ever gone in to Macy's to find a $40 shirt that was 50% off and think, "hmmmm...  that's a good deal because it was once $80. I should buy it." - then a month later, you see the same shirt at Costco for $20 not even on sale? Overpriced shirts on sale aren't necessarily worth their previous marked-up price. The only price that matters is what people are willing to buy and sell an equity for (today's price). No more, no less.

BFGirl

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #51 on: January 22, 2016, 08:13:08 PM »
I'm probably 35% equities and rest bonds/cash. ... I'm 5 years to retirement...

Yes, it is conservative, but I will have a pension in 5 years and I'm more concerned about hedging inflation than in significantly growing my assets.
That's perhaps slightly more conservative than conventional advice for where you should be 5 years prior to retirement, but not far off that mark. Of course it is very conservative for the conventional advice for someone who still has at least a third of their working years ahead of them (which 5 years could easily be in a FIRE plan).

sol

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #52 on: January 22, 2016, 08:19:56 PM »
While this is true over the short history of the stock market, it hasn't been true over the last 15 years.

What?  How does your math work on that?

Today's S&P500 close was ~1907, a value that it last crossed in October of 2014.  No one would ever claim the market always goes up over periods of 15 MONTHS, which is the period over which it was currently declined, thanks to the recent mini-crash.  15 years ago it was definitely lower.  Also 2 years ago, 5 years ago, 10 years ago, and 20 years ago.  And that's without even accounting for dividends, just looking at raw index price. 

You're struggling with volatility, I get that.  But if you can't handle a single 15 month period over which stocks are net negative before dividends, you shouldn't be investing in stocks.  That kind of drop happens with alarming regularity on the way to that 9% CAGR.  Get used to it.

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you can't look at the market's history and think that "stocks always go up"

Watch me!  I'm going to look at this chart which visualizes that 9% CAGR, and then I'm going to think to myself "man, stocks always go up!"



There, I did it.  I said it to myself, and it felt goooood.

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What ground-breaking inventions are going to kick global-growth into high gear? The freakin' internet, smartphones, renewable energy advances, and globalization have barely made a blip!

Do you think those things will have no further effect on corporate earnings in the future?  All possible future value has already been extracted from them? 

You seriously can't think of any possible future technologies or developments which could contribute to future economic growth?  I can list like five before blinking.  Let's start with the fact that 85% of the world's population is still living in pre-1925 America and has a glorious century of prosperity coming their way.

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Let's just imagine that valuation does account for something (we're 47% above median right now).

You're looking at long term median, including periods over which PE10 was much lower than it has been for the past 30 years.  If you look at the past three decades, instead of the post WWI era, you'll get a very different picture.

And for an even rosier view?  Try looking at forward looking PE instead of backwards looking PE.  Suddenly things aren't so bleak after all.

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2. the market is down, so stocks are on sale: Are they?

Yes, they are.  Don't think of stocks as a shirt you buy once and then consume.  Think of them like what they are, fractional ownership of a profit-generating business.  Stop speculating on future price fluctuations and instead remember that what you're really buying is a portion of the profits those companies will generate, or in the case of an index, a portion of GDP that will flow into your personal bank account.  When you can buy that cash flux for less than you could yesterday then it is on sale because you're effectively getting a higher return on your investment (more of GDP flowing to you) than you were willing to get yesterday for the same price.  Rejoice!

Interest Compound

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #53 on: January 22, 2016, 10:13:57 PM »


You still don't get it. I'd recommend heeding Sol's advice, seriously...you have no business investing in stocks right now. Not until you change your mindset and realize you don't have the knowledge you think you do. This is a ticking timebomb waiting to happen.

Here's another fun post from Bogleheads:

---------------------------------

With all the bearish posts recently I thought that it was time to update and repost this list that I have posted before to put the current situation into perspective

Selected world events.

1900's San Francisco Earthquake, Russian revolution and rise of communism, multiple regional wars, President McKinley Assassinated

1910's World war one, influenza epidemic, Armenian Genocide, Daylight Saving Time Introduced, The Chinese Revolution, KKK reemerges with over 4 million members, Titanic

1920's Stock market crash, prohibition and gangsters, Teapot Dome Scandal, Scopes (Monkey) Trial, Hoover Appointed FBI Director

1930's Spanish Civil War, Hitler rises to power, Depression, Dust Bowl, Bonnie and Clyde,

1940's World War two, birth of the Bomb, Pearl Harbor, Hiroshima and Nagasaki, Gandhi Assassinated, Joseph Stalin, the Holocaust, Japanese American internment camps, Berlin Airlift

1950's The Cold War and Korea, McCarthy, Civil rights movement unrest, Credit Card Introduced, apartheid, London Smog of 1952 kills 12,000, Rosa Parks, Sputnik starts space race, Great Leap Forward

1960's Vietnam, assignations, riots in the streets, rise of drugs, Bay of Pigs, Cuban Missile Crisis, Berlin Wall, Northeast Blackout, Cultural Revolution, Chappaquiddick, Charles Manson

1970's More Vietnam, Stagflation, double digit inflation, Gas lines, Nixon, Three Mile Island. Pol Pot, Kent State, U.S. Drops gold standard, Lebanon, Jonestown Massacre, Iran Hostages

1980's S&L crash/scandal, Black Monday stock crash (Oct 87), Iran Hostages, more inflation, emergence of AIDS, Falkland Islands, Moonies, Bhopal India, New Coke, Iran-Contra Scandal, Exxon Valdez

1990's Kuwait war, Rodney King L.A. Riots, Yugoslavia, Bosnia, Clinton scandal/impeachment, Waco Texas, Rwandan Genocide, Lorena Bobbit, Mad Cow Disease, Columbine High School

2000's Dot Com Crash, 9/11, Iraq, Hurricanes, Oil price spike, Afghanistan, financial bailouts, severe recession, housing bubble.

2010's Gulf oil spill, Unemployment

It is easy to lose sight that the current problems stand a pretty good chance of being like all the past problems in that the most likely outcome is that while some people are terribly hurt, the rest of the world continues on even though it may change.

I guess since then you could add the Euro/Greece Crises, fallout from the Arab Spring, and the Japanese Earthquake/Tsunami but it might take a bit more time to see how important they turn out to be.

---------------------------------

Stock market performance during this time:


PhysicianOnFIRE

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #54 on: January 22, 2016, 10:32:20 PM »
15 years ago, the S&P 500 was at 1160.  It has increased 73%.  That's not great for 15 years, BUT

20 years ago, the S&P 500 was at 645.  It has increased ~300% since then, AND

25 years ago, the S&P 500 was at 375.  It has increased ~ 500% since then. 

We've had 2 of the 3 biggest drops in modern history in the last 15 years.  Is that the new norm?  Time will tell, I guess.

In the meantime, I will stay the course.

-PoF

faramund

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #55 on: January 22, 2016, 10:49:05 PM »
Down here in Australia, shares are on a low PE and high dividend, so its very much the reverse of the US.

When shares inevitably go crazy and PEs go up and dividends go down, I won't buy any more shares, and will put money into paying off my mortgage and investment loans, until the market crashes - and then I'll buy in again. This has been my basic strategy for the last 10 years or so.

But I won't sell off when the market does go crazy/booms, the market can be 'wrong' for a very long time, and who am I to say the market is wrong, and I know better. Profits might increase to make up the difference, and there will certainly be dividends along the way. If I did sell off, I'd also be liable for capital gains tax.

Many would call this market timing, but so be it.

In contrast, what you did was buy with a high CAPE, and presumably you had your reasons for thinking that was a good idea, but to now drop all those reasons because prices have dropped, seems inconsistent. If anything, as you thought buying with a high CAPE was appropriate, now with a lower CAPE, it should seems even more appropriate. There are always reasons for and against buying shares - many of those haven't changed over the last few months, but presumably your weighting of those reasons has changed (and not necessarily for logical reasons).

Studies seem to indicate, that if you buy stocks at the wrong time, and they then drop, if the shares are held, and not sold, the end result is still very good. Selling out after a fall, is usually very bad.

So in summary, I don't think its wise to buy stocks when they are expensive/booming, but I think its even worse to sell out after a drop. In contrast, usually after a drop, 'when there's blood in the street' is often one of the best times to buy.

CanuckExpat

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #56 on: January 23, 2016, 12:15:39 AM »
Threads like this remind me, make a plan to hold reasonable proportions of all three (whatever that may mean for you), stick to your plan

Hope you don't encounter "this time is different" for real :)

Stagleton

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #57 on: January 23, 2016, 04:04:54 AM »
MMM had a good twitter post:

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Stock market is DROPPING! Probably a good time to SELL! (your car, so you can replace with a bike and use proceeds to buy more index funds)

Another Reader

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #58 on: January 23, 2016, 05:23:44 AM »
Another thing to consider is how much money or assets you would need to have if you were invested in something other than a portfolio of stocks and bonds.  What would your safe withdrawal rate be if you were invested in FDIC-insured CD's spread around a group of banks?  How much would you need in real estate and of which type to generate the same income as the 4 percent withdrawal rate of a $1MM paper asset portfolio?

People accept the risk and volatility of a paper asset portfolio because over time it seems to allow you to use a higher percentage of your total portfolio every year compared to cash in the bank or treasury paper.  Such a portfolio, over time, has held up to inflation better than cash - it provides growth and income.  It does not require the knowledge, skill, time, or risks of a real estate portfolio.

However, in your shoes, with the desire to retire a short time after investing, I would not have taken on the volatility risk you did.  Yes, the sequence of returns worked out well for folks that took the plunge over the last few years.  Those that retired in 2009-2013 with $1MM portfolios are now in general sitting on significantly larger portfolios. They won the sequence of returns lottery and can easily withstand a 20 or 30 percent drop in portfolio value. 

For someone with a short time horizon, the sequence of returns risk is too high for my comfort level to invest as you did.  I would step back now and evaluate my risk tolerance.  You may find it more advantageous to hold a different portfolio than a 25 year-old with a 20 year accumulation window.  As you go forward, you may want to think more like an older person and invest more conservatively and aim for a higher number. 

Retire-Canada

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #59 on: January 23, 2016, 07:13:30 AM »
For someone with a short time horizon, the sequence of returns risk is too high for my comfort level to invest as you did.

The OP would like to FIRE at 36 given how long their retirement will be they've still got a long investment time horizon to deal with and they'll need strong growth from their portfolio for it to survive 50yrs+.
« Last Edit: January 23, 2016, 04:56:30 PM by Retire-Canada »

Rubic

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #60 on: January 23, 2016, 08:14:54 AM »
World war one, influenza epidemic, Armenian Genocide, Daylight Saving Time Introduced, The Chinese Revolution, KKK reemerges with over 4 million members, Titanic

If DST didn't kill off the US stock market, then it's virtually indestructible.  ;-)

Interest Compound

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #61 on: January 23, 2016, 08:46:52 AM »
World war one, influenza epidemic, Armenian Genocide, Daylight Saving Time Introduced, The Chinese Revolution, KKK reemerges with over 4 million members, Titanic

If DST didn't kill off the US stock market, then it's virtually indestructible.  ;-)

Haha, yes some of these are quite silly. But so is the idea that you can time the market and move to all cash, because the issues of today are unprecedented. I hope the list gets that point across :)

Another Reader

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #62 on: January 23, 2016, 09:05:20 AM »
The OP has a short time to structure her portfolio before retirement.  Once she is retired, she has 50 years to make adjustments.  Since $1MM is the minimum she needs, i.e. no major downturn in the first couple of years, she needs to have a lower volatility, more stable portfolio at the outset.  Once she is a few years into retirement and the portfolio growth has increased her margin of safety, then she can afford to take on volatility.

If she is down 15 percent immediately after retiring, the chance of failure are higher.  For example, if the portfolio drops to $850,000 the day after she retires, her first year withdrawal is $40,000/$850,000, or 4.7 percent.  If the market goes nowhere for a year, her second year withdrawal is $40,000 (no inflation included)/$810,000, or 4.9 percent.  A third year of a bear market with no growth requires $40,000/$770,000, or 5.2 percent.  If the bear market ends after three years, she has $730,000 left and needs $270,000 or a 37 percent gain just to get back to her starting point.  I'm personally not willing to absorb that risk.  Volatility in my opinion is for those that have a higher margin of safety.

The folks that were shooting for $1MM and won the sequence of returns lottery are sitting at numbers 30 percent or more above their initial target.  They can afford that 15 percent drop followed by a flat market and not risk failure.  The OP cannot. 

Mr. Green

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #63 on: January 23, 2016, 11:23:15 AM »
The OP has a short time to structure her portfolio before retirement.  Once she is retired, she has 50 years to make adjustments.  Since $1MM is the minimum she needs, i.e. no major downturn in the first couple of years, she needs to have a lower volatility, more stable portfolio at the outset.  Once she is a few years into retirement and the portfolio growth has increased her margin of safety, then she can afford to take on volatility.

If she is down 15 percent immediately after retiring, the chance of failure are higher.  For example, if the portfolio drops to $850,000 the day after she retires, her first year withdrawal is $40,000/$850,000, or 4.7 percent.  If the market goes nowhere for a year, her second year withdrawal is $40,000 (no inflation included)/$810,000, or 4.9 percent.  A third year of a bear market with no growth requires $40,000/$770,000, or 5.2 percent.  If the bear market ends after three years, she has $730,000 left and needs $270,000 or a 37 percent gain just to get back to her starting point.  I'm personally not willing to absorb that risk.  Volatility in my opinion is for those that have a higher margin of safety.

The folks that were shooting for $1MM and won the sequence of returns lottery are sitting at numbers 30 percent or more above their initial target.  They can afford that 15 percent drop followed by a flat market and not risk failure.  The OP cannot.
So pick up a part-time job to help stem the loss the first year or couple years. I really hope no one here is planning to hit their target amount and then retire with the intention of blindly withdrawing 4% of that amount for the rest of their lives. I want to FIRE in the middle of the year. I'm very cognizant of what the market is doing right now because I know that negative returns the first few years are the biggest risk to a stash not going the distance. But I'm burnt out. The chances of me keeping my career another couple years to make up the loses are zero. One of the things I love about mustachianism is the resiliency based on the fact that, because we have our financial ducks in order, we don't require a high income. I could go work at Lowe's part time for a year or two to help reduce the mount I have to pull from my stash. I'm a fair handy guy so the idea of working in a home improvement store will be a novelty for me for at least 6 months. I'll learn about all kinds of tools and things I haven't bothered to spent time on because I'm busy. The OP could absolutely do something similar if she desired.

Rubic

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #64 on: January 23, 2016, 12:08:29 PM »
I'm a fair handy guy so the idea of working in a home improvement store will be a novelty for me for at least 6 months. I'll learn about all kinds of tools and things I haven't bothered to spent time on because I'm busy.

Another possibility would be some part-time work as a handyman.  Depending on where you live, people might pay you $50/hr for incredibly simple home repair tasks.  This could even be combined with working part-time at a hardware store.

Source:  I worked in a big box hardware store during my high school years.


Interest Compound

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #65 on: January 24, 2016, 07:07:11 AM »
I'm a fair handy guy so the idea of working in a home improvement store will be a novelty for me for at least 6 months. I'll learn about all kinds of tools and things I haven't bothered to spent time on because I'm busy.

Another possibility would be some part-time work as a handyman.  Depending on where you live, people might pay you $50/hr for incredibly simple home repair tasks.  This could even be combined with working part-time at a hardware store.

Source:  I worked in a big box hardware store during my high school years.

This is a great option. I know a few people who decided to get into photography as a hobby. Within a month they were booking paid gigs. Just two paid gigs a month, as a beginner doing something they love, would drop someone who FIRE'd on a million dollars, down from a 4% withdrawal rate to 3%.

Retire-Canada

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #66 on: January 24, 2016, 07:22:32 AM »
I really hope no one here is planning to hit their target amount and then retire with the intention of blindly withdrawing 4% of that amount for the rest of their lives.

I see less flexibility in a lot of people's plans than I would want. When you look at how much less you have to work/save/invest/worry with a few adjustments in your FIRE plan it seems crazy to me more people don't have that as part of their tool kit.

Doing something you enjoy for $20K/yr if and when needed....which may only be 6-18 months during a crash that happens during those vulnerable early FIRE years.......is like saving and investing an extra $500K. That would take me so long it would be a silly trade of time to try and pad my FIRE account with that sort of buffer and then blindly take a %WR out vs. having a few options should market conditions warrant.

If you hate your current line or work and you are talking about a small amount of replacement income there are lots of options that are low stress and can be aligned with your interests.
« Last Edit: January 24, 2016, 08:27:26 AM by Retire-Canada »

Heckler

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #67 on: January 24, 2016, 08:31:46 AM »
I'm always amazed how a significant number of investors see "the market" as S&P500. 

This is "The Market"

http://www.assante.com/advisors/pmoore/documents/AndexWallCANENG.pdf

« Last Edit: January 24, 2016, 08:33:29 AM by Heckler »

Interest Compound

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #68 on: January 24, 2016, 12:31:18 PM »
Another relevant post on stock market performance over the last 15 years from over at Bogleheads:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=182894

--------------------------------------

I don't think you've done the math. You're saying that on a gut feeling.

Almost every cent you put into the market over the past 15 years is worth a lot more today.

The money you invested in Jan 2001 - has made 5% a year
The money you invested in Jan 2002 - has made 7% a year
The money you invested in Jan 2003 - has made 9% a year
The money you invested in Jan 2004 - has made 7% a year
The money you invested in Jan 2005 - has made 7% a year
The money you invested in Jan 2006 - has made 6% a year
The money you invested in Jan 2007 - has made 6% a year
The money you invested in Jan 2008 - has made 7% a year
The money you invested in Jan 2009 - has made 15% a year
The money you invested in Jan 2010 - has made 12% a year
The money you invested in Jan 2011 - has made 10% a year
The money you invested in Jan 2012 - has made 11% a year
The money you invested in Jan 2013 - has made 9% a year
The money you invested in Jan 2014 - has made 2% a year
The money you invested in Jan 2015 - has lost 7% this year

I'm not sure what you're expecting out of the stock market. Those are some pretty good numbers.
« Last Edit: January 24, 2016, 01:21:59 PM by Interest Compound »

HBFIRE

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #69 on: January 25, 2016, 01:50:08 PM »

1. equities always go up: While this is true over the short history of the stock market, it hasn't been true over the last 15 years.

What data are you looking at?  I think you're a wee bit off.

faramund

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #70 on: January 25, 2016, 02:52:39 PM »

1. equities always go up: While this is true over the short history of the stock market, it hasn't been true over the last 15 years.

What data are you looking at?  I think you're a wee bit off.
What data are you looking at?  I think you're a wee bit off (are you including dividends)

Stache-O-Lantern

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #71 on: January 25, 2016, 05:01:05 PM »
You seem worried about the CAPE too.  Although it is historically high, there is academic debate about the reliability of the CAPE.  Another famous economist, Jeremy Siegel, has criticized the CAPE before due to accounting changes in the 1990's that may have substantially affected how earnings are calculated.  I haven't read about it in depth, but i think the gist of it is that when the changes happened, companies had to count as expenses things that weren't before, meaning that earnings comparisons (and hence CAPE) before and after that accounting change are not apples to apples.  If you google "shiller siegel CAPE" you'll get a bunch of links about this debate.

The CAPE has only been below it's median one time in the last 20+ years (around late 2008-early2009).  It's interesting, but it's not really a tradeable indicator.  Not that you should be trading on indicators!  The markets done great in the last 20+ years.  Don't try to time the CAPE or the market.

If you sell your equities now, it is not likely you will be able to time it right getting back in.  And you sound like you already believe down deep that stocks are a good bet in the long term.  If a correction of this magnitude makes you want to sell, it's unlikely that a bigger drop like 2008-09 would put you in the mood to buy.  Do oil prices right now make you want to go all in on oil?  If not, why would you feel any different about equities in that situation?

2Birds1Stone

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #72 on: January 25, 2016, 05:29:53 PM »
This is 2016, the market keeps on dropping.

Past performance is not an indicator of future performance.

Cougar

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #73 on: January 26, 2016, 07:29:37 AM »

a plan comes together, i have two words for you; preserve capital.

almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy. DYK that nearly 95% of the time the market is trying to make up what it has lost and only 5% of the time it is making new highs.

now, all these guys are going to tell you i'm trying to time the mkt and that doesnt work; but neither does continuing to hold when we are heading into a recession and look at any data and it will tell you this.

-baltic dry index at record lows.
-retails sales declining
-companies laying off staff in all industries
-store closings
-avg person having less disposable income

i could go on and on but what tells you things are improving economically ?

now, china at the beginning of the year was something no one could have foreseen but every attempt to rally back from the low as failed and been weaker than professional money mgrs have expected. now, we are extremely oversold; so a rally to 1950  s and p should happen and maybe even 2000 but i doubt it; there is too much weakness.

personally, i have been in a lot of cash and bonds since last may and will increase that on any rally. the mkt high was 2130 s and p and we have been making lower lows ever since, the trend is down and there is no news anywhere that i see that's going to send it back up. there is nothing sending oil back up unless a war in the middle east starts and wages arent increasing which would encourage people to spend more or did you not see the story that 50% of the country is now making 30k per year ?

i could go on and on here, but i'm generally disregarded; so i'm going to go back to working and leave this thread be.

but you should pursue the knowledge to see if you think a recession is coming and if so, stocks are going to continue to lose and see what you think the drop will be (i think at least 25% and we're already down over 10; so that's probably optimistic) and decide how many years you want to work to replace it.

i have a couple of good free resources to help if you want to expand your knowledge on managing into a recession, you can pm me and i will send them.

FIRE47

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #74 on: January 26, 2016, 09:12:38 AM »

a plan comes together, i have two words for you; preserve capital.

almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy. DYK that nearly 95% of the time the market is trying to make up what it has lost and only 5% of the time it is making new highs.

now, all these guys are going to tell you i'm trying to time the mkt and that doesnt work; but neither does continuing to hold when we are heading into a recession and look at any data and it will tell you this.

-baltic dry index at record lows.
-retails sales declining
-companies laying off staff in all industries
-store closings
-avg person having less disposable income

i could go on and on but what tells you things are improving economically ?

now, china at the beginning of the year was something no one could have foreseen but every attempt to rally back from the low as failed and been weaker than professional money mgrs have expected. now, we are extremely oversold; so a rally to 1950  s and p should happen and maybe even 2000 but i doubt it; there is too much weakness.

personally, i have been in a lot of cash and bonds since last may and will increase that on any rally. the mkt high was 2130 s and p and we have been making lower lows ever since, the trend is down and there is no news anywhere that i see that's going to send it back up. there is nothing sending oil back up unless a war in the middle east starts and wages arent increasing which would encourage people to spend more or did you not see the story that 50% of the country is now making 30k per year ?

i could go on and on here, but i'm generally disregarded; so i'm going to go back to working and leave this thread be.

but you should pursue the knowledge to see if you think a recession is coming and if so, stocks are going to continue to lose and see what you think the drop will be (i think at least 25% and we're already down over 10; so that's probably optimistic) and decide how many years you want to work to replace it.

i have a couple of good free resources to help if you want to expand your knowledge on managing into a recession, you can pm me and i will send them.

Could be right, could be wrong - the thing is the pessimistic case always sounds smarter than the optimistic one for most things especially the markets. There's always a wall of worry to contend with, when in the last 10 years has there not been a laundry list of doom and gloom headlines and various indicators at all times?

When will you get back in? Of course anyone could trump a buy and hold investor if they knew how to time things perfectly - therein lies the problem.

WerKater

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #75 on: January 26, 2016, 10:07:31 AM »

almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.
Please back this up with historical data.

Kaspian

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #76 on: January 26, 2016, 10:16:11 AM »
This is 2016, the market keeps on dropping.

Past performance is not an indicator of future performance.

I'll trust history over prediction, thanks.

I'm not sure what you're expecting out of the stock market. Those are some pretty good numbers.

Agreed!!

Bracken_Joy

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #77 on: January 26, 2016, 10:19:24 AM »
Following, as I'm enjoying the discussion quite a bit.

IMO, finance types come up will all sorts of indexes and metrics just to obfuscate the field. It's like law- it can't be simple or the experts wouldn't make any money. And PS- I did get a minor in accounting. It taught me about A- the magic of compounding interest and B- academic/professional elitism. Don't let someone panic you just because they're trying to make themselves relevant in a field which increasingly does not need them.

Rubic

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #78 on: January 26, 2016, 10:54:18 AM »
i have a couple of good free resources to help if you want to expand your knowledge on managing into a recession, you can pm me and i will send them.

Here is the list of the last four recessions I've snoozed through since investing in US equities:
  • July 1981 - Nov 1982:  16 months
  • July 1990 - Mar 1991:  8 months
  • March 2001 - Nov 2001:  8 months
  • Dec 2007 - June 2009:  18 months
Source: https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

It's not quite true that I entirely snoozed through the last one, as prices got so cheap that I went on a bit of a buying spree in 2009, but otherwise I just sat on my ass.  I also avoided paying capital gains tax.  If I live long enough, I fully expect to sit through 3-4 more recessions.

partgypsy

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #79 on: January 26, 2016, 12:01:21 PM »
I think you are in a good position. So you are totally burned out in your job. You are young, I'm assuming relatively healthy. Quit and take a month off. Get a job being a runner in a restaurant. Just live your life for a year and set your asset allocation, fund on automatic and take a break looking at them.
I don't know how you accrued so much at your age, and while when you entered the market is not ideal, you have a lot to work with.

Seems like others have been more successful than I have been. I started investing in retirement around 2000. Between what I (and my employer) invested and my current balance, my return has been what, 2, 3%? First Vanguard, and now in TSP, with a 60/40 or 65/35 stock/bond split. But as I don't really have another alternative so will continue to invest in stocks. In my case historic returns, still waiting to see them. And no I did not get out during the recession. 

Eric

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #80 on: January 26, 2016, 03:00:24 PM »
almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.

Huh?  Is this a serious statement?

Mr. Green

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #81 on: January 26, 2016, 03:16:09 PM »
almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.

Huh?  Is this a serious statement?
People don't know what they don't know. It's the only thing I can think of. Troll, maybe?

sol

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #82 on: January 26, 2016, 03:37:18 PM »
almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.

Huh?  Is this a serious statement?

Serious?  Yes, I think so.

Factual?  No, definitely not.

But it takes all kinds, I suppose.  If everyone believed that the market always goes up, there would rarely be any sellers for this B&H investor to profit from.  Idiots and doomsayers play a vital role in our markets.

faramund

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #83 on: January 26, 2016, 04:55:16 PM »
almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.

Huh?  Is this a serious statement?

Serious?  Yes, I think so.

Factual?  No, definitely not.

But it takes all kinds, I suppose.  If everyone believed that the market always goes up, there would rarely be any sellers for this B&H investor to profit from.  Idiots and doomsayers play a vital role in our markets.
I sortof understand the sentiment. I follow economic news fairly closely, and last year, I thought with China showing signs of slowing down, and the Fed intending to raise, it looked like the future was a bit poor for shares. But given, if I sold out, I'd have to pay capital gains costs, transaction costs, miss out on any dividends, and ... I've often had similar thoughts in the past and nothing really happened... I just kept doing what I always do, kept adding to my share holdings.

The statement that was first made doesn't really mean much. Many people can get lucky once, unless an overall pattern of behavior can be shown, its not very significant.

For example, I could say that, in 2014 and 2015, I bought shares in SENETAS corporation, and since then its quadrupled in value, aren't I a GOD OF INVESTING!!!!

Whereas in reality, I own shares in about 50 companies, and SENETAS is my best performing holding. In contrast, my worst has lost around 90% of its value, and on average, all the shares have grown at about 7% a year, over the last two years. Its easy to cherry pick results - but they don't mean anything!

cloudsail

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #84 on: January 26, 2016, 04:59:36 PM »
almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.

Huh?  Is this a serious statement?
People don't know what they don't know. It's the only thing I can think of. Troll, maybe?

Hard to believe but I think the majority of the population actually think this way.

CATman

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #85 on: January 26, 2016, 10:03:39 PM »
Based on your expenses what's stopping you from hitting your retirement goal of this year, quitting a job you hate and going to do something part time or even full time that pays less, but you wouldn't dread every day. Maybe something a bit more fun and engaging. It sounds to me like you have significant enough savings to ride out the current dip in the market and supplement with part time work.

As the hitchiker's guide to the galaxy puts it, DON'T PANIC

Woody Viet

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #86 on: January 27, 2016, 08:37:37 AM »
As others have said you are having a very strong emotional response to the current panic. It's natural, many people are feeling the same way as you.

While stocks are down heavily you still have your dividend income. Nominal dividends almost never decrease. So that income stream is safe. You have nothing to worry about there. In our current low inflation environment that probably means your real dividends will remain stable as well. So that gives you, what, 20k a year of guaranteed post retirement income? Can you make up the shortfall with a part time job? Without considering dividend income can you over all of your expenses by moving to a less irksome job? Will your post retirement spending be lower than your current expenditures? All things to consider.

I'm in a similair situation to you. I have lots of dividends but I came late to the party (only been in the market since 2011, and none of it was in the USA). So now after almost 4 years I'm almost flat, only dividends have kept me up. It feels rough but you have to believe that the world isn't going to end. In the long run that huge diversified pool of businesses you own is going to do very well indeed. The odds on that happening are a near certainty. You just need some patience and emotional strength

Kaspian

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #87 on: January 27, 2016, 08:47:07 AM »
Really good article today for those interested in (i.e., who've never been through) a bear market:

http://www.reuters.com/article/us-global-markets-bears-idUSKCN0V51QW

Quote
Dominic Wallington, chief investment officer at RBC Global Asset Management (UK) said financial markets are human constructs subject to human frailties and that bear markets bring out the behavioral traits of 'cognitive dissonance' in investors.

That is the unease an individual feels holding two or more contradictory ideas at the same time, doing something that goes against one or more of those beliefs, or when faced with new information that conflicts with these already-held views.

"They can do silly things," Wallington said. "What creates bear markets differs, but the process that investors go through is the same. You'll get denial because people think that the old paradigm holds."

Retire-Canada

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #88 on: January 27, 2016, 08:55:08 AM »
Really good article today for those interested in (i.e., who've never been through) a bear market:

http://www.reuters.com/article/us-global-markets-bears-idUSKCN0V51QW

Quote
Dominic Wallington, chief investment officer at RBC Global Asset Management (UK) said financial markets are human constructs subject to human frailties and that bear markets bring out the behavioral traits of 'cognitive dissonance' in investors.

That is the unease an individual feels holding two or more contradictory ideas at the same time, doing something that goes against one or more of those beliefs, or when faced with new information that conflicts with these already-held views.

"They can do silly things," Wallington said. "What creates bear markets differs, but the process that investors go through is the same. You'll get denial because people think that the old paradigm holds."

"Lacking sufficient information to make an informed decision, I only suggest you don't make wild unsubstantiated guesses with your portfolios."

^^ from the link. Good advice.

Rubic

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #89 on: January 27, 2016, 09:16:48 AM »
Quote
"Lacking sufficient information to make an informed decision, I only suggest you don't make wild unsubstantiated guesses with your portfolios."

I used to say:  In bear markets, money returns to its rightful owners.  ;-)

Kaspian

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #90 on: January 27, 2016, 09:28:26 AM »
Quote
"Lacking sufficient information to make an informed decision, I only suggest you don't make wild unsubstantiated guesses with your portfolios."

I used to say:  In bear markets, money returns to its rightful owners.  ;-)

Nice--I like that!!  I try to keep in mind that for every sell I make there's somebody on the other end buying it.   And do I really think I'm smarter than them?  Probably not.  That Mexican standoff usually keeps my finger off the trigger.

Stagleton

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #91 on: January 27, 2016, 12:22:46 PM »
Recently I got the idea to look at how many units of something you have rather than the market value of them. If you are in a mindset to accumulate wealth, I think it makes sense to look at how many units of VTSAX you have rather than the price. If you can buy more than yesterday, the item went on sale and now you can afford more. Just keep buying, IMO.

Maybe owning a house or apartment is similar; if you accumulate a house, stop worrying about it's market value after the acquisition  (if it's something you bought to own vs. flip). As long as you enjoy it and it works for you, you shouldn't be worried with the everyday market value.

Of course, maybe I'm wrong, but if you tell someone to stay inside so he or she won't get hit by a car, are you giving good advice? I.E. being safe isn't always a safe or good choice.

Ambergris

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #92 on: January 27, 2016, 12:48:12 PM »
almost every post in this thread is a buy and holder. unfortunately for them, that's a horrible strategy.

Oh, absolutely. It's an appalling strategy. It guarantees your money goes down whenever the market goes down, all the way.

It also guarantees your money goes up whenever the market goes up, all the way.

In other words, "buy and hold" is like Democracy: to paraphrase Winston Churchill, it is "the worst possible strategy except for all the others".


MidWestLove

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #93 on: January 27, 2016, 01:54:53 PM »
As others told you - the absolute dumbest thing you can do right now is sell. turn off any financial "news", calm the expletive down , and turn on the intelligence I am sure you have turning off emotional baggage that is currently hounding you.

I, as you, considering 'retiring' this year due to combination of very high job stress (for high pay job) and layoff that is incoming. I also struggle with 'paper loss' that is 40% more than yours in dollar terms. A lot of people may panic, it is acting on that panic that is dangerous.  Instead I accelerated 401k withholding (to max it out prior to layoff) and now considering funding IRAs for this year (crazy I know, at the time I am expected to preserve every cent of cash as I am preparing to have no income). I also do not want to go through song and dance of another recruiting procedure and spend few more years in the grind so future will come

from another member of 'retire  in 2016' club...
« Last Edit: January 27, 2016, 02:00:13 PM by MidWestLove »

Kaspian

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #94 on: January 27, 2016, 01:56:38 PM »
Recently I got the idea to look at how many units of something you have rather than the market value of them. If you are in a mindset to accumulate wealth, I think it makes sense to look at how many units of VTSAX you have rather than the price.

That's a really good way to look at it.  I've mostly stopped noticing current market value as well and focus in primarily on my saving rate.  That's the number I have real control of.  I see my portfolio balance more like I would a screwy clock--on any given day it could be anything!  So why bother?  (But trust me--I'll very much notice when the FIRE date comes stumbling along.) 


aspiringnomad

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #95 on: January 27, 2016, 05:14:13 PM »
Concerning the current state of the business cycle, here's an excellent analysis arguing that the most useful leading indicator, residential investment, has some room to run. Many of you probably know the blog and its focus on the real estate market, but I find his occasional analyses of broader macroeconomic conditions to be as consistently measured, and as fact-based as anything I've seen anywhere, and I have access to Wall Street bank and broker newsletters through work. Anyway, tl;dr version of the post: The business cycle has likely not reached its peak if residential investment holds as a leading indicator of recessions.

http://www.calculatedriskblog.com/2016/01/private-investment-and-business-cycle.html

I post this to reassure the OP and as info for others who might be interested, but regardless of what indicators say, I'm firmly in the buy and hold camp with most everyone else here.

merula

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #96 on: January 28, 2016, 11:14:48 AM »
Will everyone please stop reassuring all the prophets of doom, destruction and "This time is different!"?

I need to have someone on the other side of my buy transactions.

zephyr911

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #97 on: January 28, 2016, 12:50:53 PM »
Concerning the current state of the business cycle, here's an excellent analysis arguing that the most useful leading indicator, residential investment, has some room to run. Many of you probably know the blog and its focus on the real estate market, but I find his occasional analyses of broader macroeconomic conditions to be as consistently measured, and as fact-based as anything I've seen anywhere, and I have access to Wall Street bank and broker newsletters through work. Anyway, tl;dr version of the post: The business cycle has likely not reached its peak if residential investment holds as a leading indicator of recessions.

http://www.calculatedriskblog.com/2016/01/private-investment-and-business-cycle.html

I post this to reassure the OP and as info for others who might be interested, but regardless of what indicators say, I'm firmly in the buy and hold camp with most everyone else here.
My current area of interest bears this out. It hasn't really come off the bottom much (we lag dem big spendalicious coastal cities) but job growth is pushing inventory down and signs of a runup are growing.

Will everyone please stop reassuring all the prophets of doom, destruction and "This time is different!"?

I need to have someone on the other side of my buy transactions.
Ever read that book? It's on my wish list.

Geekenstein

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #98 on: January 28, 2016, 05:49:06 PM »
Will everyone please stop reassuring all the prophets of doom, destruction and "This time is different!"?

I need to have someone on the other side of my buy transactions.

The evil side of me supports this sentiment.

Hopefully the OP now has a better handle on their risk tolerance and time horizon, and when the market rises can adjust accordingly.  This is the expensive and frustrating way to learn these things.

dinkhelpneeded

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Re: About to sell everything. Talk me off the ledge (or push me off) please!
« Reply #99 on: January 29, 2016, 04:55:07 AM »
For people with such poor risk appetites - I recommend real estate/rental property that is in a reasonably good area.

You don't "see" the markets fluctuate much, only if its severe enough. If the rental throws off the 30K you need to retire post vacancy calculations, then you should never have to sell it.

You need to diversify.