Author Topic: How are y'all preparing for the market collapse that President Trump is creating  (Read 17515 times)

ender

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Well, Trump might precipitate a government shutdown (which he has already taken credit for) and cripple the markets and livelihoods of lots of people:

https://www.washingtonpost.com/news/morning-mix/wp/2017/08/25/trump-is-threatening-a-government-shutdown-heres-what-that-looks-like/?hpid=hp_hp-morning-mix_mm-shutdown%3Ahomepage%2Fstory&utm_term=.de1803b674fe

These are uncertain and worrisome times.

Fear mongering at its finest.

And even so, if you look at the SP500 chart over the past 5 years I challenge you to find, from that chart, when the last government shutdown happened. If this precipitates a market collapse surely the one under Obama should be obvious, no?

toganet

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Fear mongering at its finest.

And even so, if you look at the SP500 chart over the past 5 years I challenge you to find, from that chart, when the last government shutdown happened. If this precipitates a market collapse surely the one under Obama should be obvious, no?
[/quote]

I looked, and thought I saw the slightest dip in October of that year -- but it turns out I was looking at the wrong year!  During the period of the 2013 shutdown, the S&P500 stayed basically flat.  What's more interesting is looking at bond ETF's, they were falling prior to the shutdown, and then spiked upward starting at the beginning of the shutdown and continuing for a while.  Perhaps if the shutdown had lasted longer than 16 days we would have seen an impact on the equity side?  I hope we don't get to replay this scenario to find out, but I'll be watching either way.

libertarian4321

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I'm doing what I've done for the last 3,723 predicted market collapses over the 30+ years I've been investing.

I'm doing nothing.

Nothing except add money to the market on a regular basis just as I've always done.

Strangely enough, not panicking every time some jittery yahoo predicted a crash has made me a multimillionaire.

I'm pretty sure I'll still be a multimillionaire using the same strategy when is done.

Laserjet3051

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Well, Trump might precipitate a government shutdown (which he has already taken credit for) and cripple the markets and livelihoods of lots of people:

https://www.washingtonpost.com/news/morning-mix/wp/2017/08/25/trump-is-threatening-a-government-shutdown-heres-what-that-looks-like/?hpid=hp_hp-morning-mix_mm-shutdown%3Ahomepage%2Fstory&utm_term=.de1803b674fe

These are uncertain and worrisome times.

ROTFLMAO!

ChpBstrd

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Especially with today's valuations, Trump could cause a major correction with any of the following policy moves:

1) Institute tariffs with Mexico, China, etc. The result would be the first major uptick in inflation in many years. The corresponding rise in interest rates would impact the stock market. (As you know, stock valuation is a factor of the risk free rate).

2) Start a shooting war with Iran, North Korea, etc. that would harm consumer or investor confidence.

3) Interfere with the functioning of the Federal Reserve or the mortgage system. This could wipe out investor confidence.

4) Do/tweet things that start a period of serious racial/political riots, insurgency, and unrest that would damage consumer confidence and decrease the value of real estate in cities.

5) Fail to produce a budget for long enough that the US defaults on debt payments and loses its credit rating.

These risks are new and unique because never before has an actual sitting president been foolish enough to endorse such policies. They are mitigated somewhat by his conflicts with his own party in Congress and his tendancy to spend a big chunk of his time golfing and firing syncophants. It is hard to predict which, if any, of these disasters will hit, but there is a good chance that one of them will within the next 7 years of Trump's presidency (yes, count on two terms). So no, I don't think it's market timing or news-driven investing. These are actual, long-term risks that could end many a FIRE dream.

What I'm doing:

1) Staying 100% invested. I've lost more on "sidelines cash" over the years than I did in 2008!

2) Learning about options strategies such as collars and protective puts that I may employ at a relatively low cost that would partially or completely hedge my portfolio. Slowly moving entire stock allocation to SPY for the improved options market compared to Vanguard ETFs.

3) Investing time/energy into my home so it could sell, if necessary. In truth, I need to eventually do this anyway because I think I want to downsize in order to accellerate FIRE. If it becomes a truly SHTF situation, I'll need the extra liquidity and the option to walk away from a smaller amount of home equity - ideally 20% of not much instead of 30-40%  of a lot.

4) Pursuing education and certifications. This may be what keeps one employed after SHTF and it also helps if one decides to emigrate somewhere in the event the US becomes a Turkey or Venezuela like basket case situation. (Note that democratic republics routinely descend into dictatorship or chaos.)

5) Developing a plan to increase my portfolio risk during a transient crash like 2008/2009. When pessimism gets bad, I want to change from my hedged SPY portfolio to a leveraged bullish portfolio - if I can muster the guts to do it this time! I might do so through buying highly leveraged companies, distressed bonds, LEAP call options on SPY, or simply the companies likely to recover the most (leisure and entertainment, tech, highly leveraged firms, takeover targets).

6) Get physically fit. The near future may involve harder physical labor, more walking/biking, an increased importance of being disease resistant, and threats of violence. You don't go into such a scenario flabby, dependent on sugar/caffeine, dependent on meds for preventable conditions, diabetic, addicted to luxury, etc.

7) Renew my passport.

IMO, most ideas espoused by MMM with optimism also make sense in the pessimistic scenario. Throw in some protective moves (like options and high home leverage) and you have a robust survival and FIRE position.

wienerdog

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If you want the media to control your portfolio, then you'd be in line with some people who decided to sell everything after Trump was elected - which has proven to be a poor decision so far. Avoid knee jerks reactions. They don't pan out.

If I remember right all the media polls had Hillary winning.  Seems like they can't get anything right.

GuitarStv

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If you want the media to control your portfolio, then you'd be in line with some people who decided to sell everything after Trump was elected - which has proven to be a poor decision so far. Avoid knee jerks reactions. They don't pan out.

If I remember right all the media polls had Hillary winning.  Seems like they can't get anything right.

Well . . . she did win the vote.  (Just not the presidency.)

sol

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If you want the media to control your portfolio, then you'd be in line with some people who decided to sell everything after Trump was elected - which has proven to be a poor decision so far. Avoid knee jerks reactions. They don't pan out.

If I remember right all the media polls had Hillary winning.  Seems like they can't get anything right.

Well . . . she did win the vote.  (Just not the presidency.)

It's an oft-overlooked point among Trump supporters.  The polls were actually pretty spot on, in terms of the national total.  They just had some of the distributions wrong.

Also of note, while we're belly-aching, is that Trump got basically the same number of votes that Romney and McCain got.  He didn't expand the base.  He didn't bring out any new voters.  He just very effectively suppressed the Democratic vote in a few key electoral college swing states.  That's enough to win in our system, though, even when you get 3 million fewer votes.

en58

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This is why I don't like posts like this its because it becomes more political instead of money talk.

1. Trump Won. Weather you agree with it or not. He won by the rules fair and square.
2. Its a misleading statement as you assume the market will collapse because of Trump. It hasn't, its done the opposite.
3. Its political
4. Hillary lost let it go.
5. The presidency is won based on electoral collage votes not most popular vote (that's like wining 3 out of a 7 game series in baseball and wanting the trophy because you scored more runs).

Mac_MacGyver

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This is why I don't like posts like this its because it becomes more political instead of money talk.

There sure have been a lot of people in this wide-ranging thread who feel free to complain about the content here.  Here's a tip for you all:  if you don't like it, stop reading!


The points he made were valid, I think he was referencing the folks who seem to not know how the election is scored. The poster seems more interested in facts than feels.

GenXbiker

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This is why I don't like posts like this its because it becomes more political instead of money talk.

1. Trump Won. Weather you agree with it or not. He won by the rules fair and square.
2. Its a misleading statement as you assume the market will collapse because of Trump. It hasn't, its done the opposite.
3. Its political
4. Hillary lost let it go.
5. The presidency is won based on electoral collage votes not most popular vote (that's like wining 3 out of a 7 game series in baseball and wanting the trophy because you scored more runs).

Exactly!  Well said.

Mr. Green

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50%? Lol. 2008 was a 50% drop and we're nowhere near that kind of trouble.

kenaces

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Will you just stay the course?

I'm FI but haven't RE'd yet but a 50% correction would guarantee more days / years at the office.  Are you liquidating shares while you can?

Even if his administrations policies don't cause collapse, the media is sounding the alarm 24/7 which causes people to be irrational.

- NO ONE knows the future

- don't let political bias ever drive investment decisions

I was listening to investing podcast last week where they were talking about a study that showed Dems were overly optimistic when they had president in office and overly pessimistic when they didn't hold the white house.  And the converse was was also true of course.

theolympians

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Thank you en58!

 I never worry too much about the news. It seems mostly to be click bait. For the media the sky is always falling.



MaaS

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Your political bias is causing you to act financially irrational.

It might be time to read JLCollins' stock series again, or perhaps turn off the news.

+1


Mighty-Dollar

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How are y'all preparing for the market collapse that President Trump is creating
Is this Marc Cuban? Don Lemon? The little boy who cried wolf?

sol

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How are y'all preparing for the market collapse that President Trump is creating
Is this Marc Cuban? Don Lemon? The little boy who cried wolf?

How many of those people believe that the US President has the power to create anything market-related?  Jitters, maybe.  But probably not a massive asset bubble that would precipitate a "collapse".

Congress, sure.  The Fed, probably.  But the President?  His power over the economy has always been pretty limited.

talltexan

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How are y'all preparing for the market collapse that President Trump is creating
Is this Marc Cuban? Don Lemon? The little boy who cried wolf?

How many of those people believe that the US President has the power to create anything market-related?  Jitters, maybe.  But probably not a massive asset bubble that would precipitate a "collapse".

Congress, sure.  The Fed, probably.  But the President?  His power over the economy has always been pretty limited.

Janet Yellen's term as Fed Chair ends this January. Trump has a chance to significantly alter the Fed based on whom he selects to be her replacement. It could be a Tillerson-type appointment (unconventional, but qualified), a Gorsuch-type appointment (meant to please one particular stakeholder group, perhaps Wall Street), or a Perry-type appointment (Frankly, I think Perry is more qualified for his boss's job than his boss is, but nuclear energy expert he ain't).

PDXTabs

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Congress, sure.  The Fed, probably.  But the President?  His power over the economy has always been pretty limited.

In addition to what talltexan wrote, the President also has authority to unilateral impose tariffs. It just hasn't happened in a long time. http://money.cnn.com/2017/01/23/news/economy/trump-tariff-power/index.html

Drifterrider

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5) Fail to produce a budget for long enough that the US defaults on debt payments and loses its credit rating.

Presidents don't produce budgets:  the Congress does.  The president only submits his budget request to the congress for their consideration.

PDXTabs

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5) Fail to produce a budget for long enough that the US defaults on debt payments and loses its credit rating.

Presidents don't produce budgets:  the Congress does.  The president only submits his budget request to the congress for their consideration.

You are entirely correct. Of course, the president does have veto power for budgets.

http://www.foxnews.com/politics/2017/08/23/trump-says-hell-close-down-federal-government-to-get-border-wall-money-from-congress.html

Radagast

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Are you feeling an emotion? Are you making an investing decision because of it? Bad choice.

mjr

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Trump Derangement Syndrome is rampant even here in Australia.  Even some Murdoch publications exhibit symptoms, while Fairfax and the Guardian have a terminal case.  I can only imagine how bad it must be in the US.

GenXbiker

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I can only imagine how bad it must be in the US.

It's not bad at all.  I'm staying invested and riding the Trump stock market climb to prosperity.

I'm a red panda

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5) Fail to produce a budget for long enough that the US defaults on debt payments and loses its credit rating.

Presidents don't produce budgets:  the Congress does.  The president only submits his budget request to the congress for their consideration.

You are entirely correct. Of course, the president does have veto power for budgets.

http://www.foxnews.com/politics/2017/08/23/trump-says-hell-close-down-federal-government-to-get-border-wall-money-from-congress.html

And Congress has a power to override a veto. 

DarkandStormy

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I can only imagine how bad it must be in the US.

It's not bad at all.  I'm staying invested and riding the Trump stock market climb to prosperity.

Since March 1st (~6 months), here are how the major U.S. indexes have fared:

S&P500 - 2.02%
DJIA - 3.27%
NASDAQ - 6.42%
Russell 3000 - 1.54%
Russell 2000 - (2.22%)
Russell 1000 - 1.85%

Unless you are heavily weighted in tech stocks/NASDAQ, the "Trump Bump" has been over for awhile.

Trump has passed little to no legislation impacting the economy.  The supposed tax reform/tax cuts are now being pushed off until 2018 with the impending debt ceiling crisis coming in about a month and Congress is still in recess.

talltexan

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About overriding the Presidential veto: it would be an interesting choice for Democrats.

Imagine Congress has passed a debt ceiling increase, with defunding Planned Parenthood attached to it. POTUS vetoes it because it doesn't fund the wall.

Would Democrats step in to over-ride that veto, obliterating the wall as well as PP?

ChpBstrd

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About overriding the Presidential veto: it would be an interesting choice for Democrats.

Imagine Congress has passed a debt ceiling increase, with defunding Planned Parenthood attached to it. POTUS vetoes it because it doesn't fund the wall.

Would Democrats step in to over-ride that veto, obliterating the wall as well as PP?

Doubt it. They would point out that Republicans control all 3 branches of the federal government, let the debt default happen by scattering their votes, and repeat again and again that the Republican party cannot govern and causes economic meltdowns. All most voters know is so-and-so got elected and then I lost my job. It would be cynical but it would work. In today's poisonous partisan environment, no one would be eager to rescue the other party from a mistake.

Eric

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Are you feeling an emotion? Are you making an investing decision because of it? Bad choice.

Very well put.

jim555

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Bull markets climb a wall of worry, I guess we go to the moon!

wienerdog

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HeHillary just very effectively suppressed the Democratic vote in a few key electoral college swing states.  That's enough to win in our system, though, even when you get 3 million fewer votes.

#FixedIt  Many Bernie voters voted for Trump because of what the DNC and Hillary did.  I wouldn't give Trump that much credit.  Run a worse jackass against a jackass and the jackass always wins.

talltexan

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What companies would have higher market Caps with President Sanders? Please be as specific as you can.

sol

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What companies would have higher market Caps with President Sanders? Please be as specific as you can.

I'm not so sure about higher, but Trump Enterprises would definitely be lower.

ChpBstrd

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I think I and few people who said "nothing" are the only people who answered the OP's question about investments. Any other answers besides "nothing"?

Update: My hedging strategy is on hold. In the past few semi-volatile days the cost of SPY put options has skyrocketed. For 6% a year, you can be guaranteed to lose no more than 6% a year! Had I been more decisive instead of slowly averaging in, my hedge would be sitting on significant paper profits of around 20% now, even as the SPY has zig zagged back to where we started. Oh well. Hopefully I didn't miss the boat. I'll wait for better pricing.

WhiteTrashCash

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My typical pattern is to wait for Trump to say something stupid, then buy when the market temporarily dips before it becomes clear that Trump isn't going to get what he wants. Lately, though, the market hasn't even been responding at all to some things that I was sure would make a difference. For example, North Korea shot a missile over Japan and the markets responded by increasing in value. Wait, what?

I would guess that there are so many of us buying and holding that the market isn't as volatile as it used to be.

wienerdog

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What companies would have higher market Caps with President Sanders? Please be as specific as you can.

Universities and healthcare.

trollwithamustache

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I would guess that there are so many of us buying and holding that the market isn't as volatile as it used to be.

thank you sir for savings us from the political dredging. Why has market volatility fundamentally changed? Or is it just (mis?)priced differently at least as the VIX tells us.  The overall ownerships of stocks is still vastly held by professional managers and not individuals. So, when a stock price changes, your passive index fund may have to rebalance to add or subtract that stock and that can start driving volume and volatility even though you are buying and holding your financial instrument.

This can be a day trading strategy for stocks in some sectors where the etf volumes traded are much higher than the volumes in the underlying or at least some of the underlying.

We could also stick a toe back into political waters and ask if low interest rates discourage cash savings and are encouraging risk taking  in the market, thereby artificially lowering VIX.
 
Volatility as its currently priced is at historical lows, so its very likely it will not go to even more historic lows but go back up. FWIW I contemplated but have not bought long dated VIX options.

talltexan

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What companies would have higher market Caps with President Sanders? Please be as specific as you can.

Universities and healthcare.

Do you mean For-Profit universities?

Health Care is reasonable, as it seems as though Trump is trying to seem erratic about making Health Insurers whole for their losses in the Health.Gov exchanges.

NoStacheOhio

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So, when a stock price changes, your passive index fund may have to rebalance to add or subtract that stock and that can start driving volume and volatility even though you are buying and holding your financial instrument.

This isn't how index funds work

OurTown

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And, to pull the thread back to the topic, the market will keep right on truckin after Trump is escorted from the White House.  I'm not sure how the market will do after we nuke Pyongyang, but life is full of little uncertainties.   

WhiteTrashCash

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And, to pull the thread back to the topic, the market will keep right on truckin after Trump is escorted from the White House.  I'm not sure how the market will do after we nuke Pyongyang, but life is full of little uncertainties.

I think a lot of people are just ignoring the news entirely at the moment when it comes to their investments, because -- let's face it -- we don't have any power over any of that stuff. Just what we do with our money. For the second time in sixteen years, the person who got fewer votes from the American people in the Presidential election won anyway. The Party that got fewer votes controls both houses of Congress and the Supreme Court. A few corporations control all the media and are now expanding their influence to controlling who can even use the internet. Meanwhile, other corporations are taking advantage of corrupt foreign governments and sweetheart trade deals to get cheap labor and raw materials/finished products without having to worry about pesky human rights legislation or environmental controls that will protect people from being poisoned to death. None of us can do a damn thing about any of this.

I've pretty much thrown my hands up at this point and I'm out. I'm going to stick to my own business and do what's necessary to be successful under these circumstances. I'm just going to keep pouring money into my investments and ignore all the idiocy. Keep on stachin' with your Vanguard funds, my friends, and to Hell with everything.

trollwithamustache

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This isn't how index funds work
[/quote]

This isn't investors rebalancing their portfolios between stocks and bonds, this is about what is going on "under the hood" at various EFTs or mutual funds. Your S&P 500 ETF and vanguard total market that likely hold the bulk of this forum's wealth do not rebalance. However a lot of funds to rebalance in various ways.

http://www.etf.com/sections/blog/rebalancing-smart-beta-etfs-often-overlooked?nopaging=1


PDXTabs

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What companies would have higher market Caps with President Sanders? Please be as specific as you can.

If he had managed to increase wages for the working and middle class? Most of them.

Between 1946-1980 income for the bottom 20% increased 109%. Between 1980-2014 it decreased 25%.
http://gabriel-zucman.eu/files/PSZ2017.pdf

NoStacheOhio

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This isn't investors rebalancing their portfolios between stocks and bonds, this is about what is going on "under the hood" at various EFTs or mutual funds. Your S&P 500 ETF and vanguard total market that likely hold the bulk of this forum's wealth do not rebalance. However a lot of funds to rebalance in various ways.

http://www.etf.com/sections/blog/rebalancing-smart-beta-etfs-often-overlooked?nopaging=1

So in response to my statement that you misunderstand how index funds work, you link to an article about active funds.

I understood you the first time. That's still not how index funds work. VTSAX has 4% turnover.

talltexan

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And, to pull the thread back to the topic, the market will keep right on truckin after Trump is escorted from the White House.  I'm not sure how the market will do after we nuke Pyongyang, but life is full of little uncertainties.

If Trump leaves office in a Watergate-style scandal, let's look at how the market did in 1974 (badly).

The market has done badly in plenty of other years, too, so it wasn't necessarily Watergate that was the problem.

trollwithamustache

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This isn't investors rebalancing their portfolios between stocks and bonds, this is about what is going on "under the hood" at various EFTs or mutual funds. Your S&P 500 ETF and vanguard total market that likely hold the bulk of this forum's wealth do not rebalance. However a lot of funds to rebalance in various ways.

http://www.etf.com/sections/blog/rebalancing-smart-beta-etfs-often-overlooked?nopaging=1

So in response to my statement that you misunderstand how index funds work, you link to an article about active funds.

I understood you the first time. That's still not how index funds work. VTSAX has 4% turnover.

There is a lot of money in things called indexes that work in different ways, often by dollar values. And those ways can drive volatility far more than the 4% VTSAX has to do for regular inflow/outflow and corporate actions rebalancing.  There is a lot of money in sector indexes that rebalance in ways one may think qualifies as Active. Don't worry, their paperwork with the SEC is all in order...

A combination of automatic rebalancing and trend following algorithms are how several flash crashes have been driven.

To be clear this is meant to discuss volatility, not to question the investment strategy of VTSAX set it and forget it.

shotgunwilly

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Additionally, if you think this a just a big nothingburger, why would
  • Trump[1]
  • Sessions[2]
  • Ivanka[3]
  • Jared[4]
  • Donald Jr[5]
  • Pence[6]
  • Trumps lawyer[7]
  • Trumps former campaign manager[8]
ALL hire private outside legal counsel regarding the Russia investigation? I'm sure I've missed some as well.

Just wanted to give you the heads up as to soften the blow to your ego and your world view. Trump and his administration are in deep shit.

Umm... because that's what you do when allegations against you rear their head.