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Learning, Sharing, and Teaching => Investor Alley => Topic started by: FIRE47 on December 20, 2018, 12:16:41 PM

Title: So we're basically on track for a bear market by tomorrow?
Post by: FIRE47 on December 20, 2018, 12:16:41 PM
Many indexes already there.

Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Frankies Girl on December 20, 2018, 12:31:08 PM
Quote
Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.

Welcome to the stock market: where the rules are made up and the reasons don't matter!



Technically, we're already there. Heading for full crash territory within the next week of the trend continues.

Sad face at the numbers being lower in my fabulously high number accounts.

Only thing that I'm concerned about is the tiny bit of dry powder I accidentally ended up with due to not paying attention to timing of the divident/LTCGs this month. Got stuff that distracted and didn't allocate as usual and now I'm faced with the idea of trying to wait for the bottom - as if I'd recognize it. Oh, the worry about whether to market time and hold out for a lower low tomorrow or next week...or just dump it in today? Market time is hard to resist sometimes even when you KNOW it's marketing timing.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: bwall on December 20, 2018, 12:33:03 PM
LOOK OUT BELOW!!!

Markets are indeed falling across the board. The stock market tends to be a leading indicator, not a lagging indicator, like employment or a current indicator like GDP. Some people even say that the stock market can project as far as 6 months from now, as opposed to how it is doing now.

Powell's speech yesterday is what is crashing this market. I think there is more pain still to come.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: OurTown on December 20, 2018, 12:49:25 PM
Maybe, maybe not.  We'll see.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: harvestbook on December 20, 2018, 01:35:40 PM
I've been telling people the recession's already started and we just don't feel it yet. The guy up in the Titanic's crow's nest hasn't yet seen the iceberg, but it's there. Yet even after it hits the ice, everyone will just go about their business.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: marty998 on December 20, 2018, 01:37:10 PM
Many indexes already there.

Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.

Probably worth considering the market should never have gotten as high as it did in the first place.... and is maybe returning to more reasonable valuation levels? (Bit like the Sydney housing market I guess).

Also worth noting the stockmarket is generally a leading indicator of economic conditions. By the time you are in recession, stocks starts to bottom out and start rising again, looking forward to improved earnings in future years.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: caracarn on December 20, 2018, 01:41:20 PM
It could be a leading indicator if any actual economic data was leaning in that direction.  Is a recession coming at some point?  Sure.  Are we likely in one right now.  Probably not.  Is thinking in this direction market timing?  You betcha.  Just stick to the plan.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: fattest_foot on December 20, 2018, 02:16:59 PM
I was actually just looking to see what the percentage drop is so far, and we're at just about 16% on the nose. We've still got a ways to go for a bear market (about 2350 in the S&P 500).

That said, if the trend of the last week continues, we'd hit it before the end of the year easily.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: soccerluvof4 on December 20, 2018, 02:28:16 PM
Definitely not as fun when the numbers are dropping but we all knew it was going to happen sometime. Agree stick with the plan
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: OzzieandHarriet on December 20, 2018, 02:33:10 PM
Kinda scary though, when DH just retired.

Our stash is down by about $275k since last month.

Most of this is money we aren't going to touch for at least another year and a half so that mitigates somewhat.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 20, 2018, 05:35:57 PM
How long are bear markets?
"The average Bull Market period lasted 9.1 years with an average cumulative total return of 480%. The average Bear Market period lasted 1.4 years with an average cumulative loss of -41%."

" The Year After a Bear Market Is a Boom

In the 80 years from 1934 Ė 2014, as measured by the calendar year, the S&P 500 stock index has suffered total return losses of at least 20% in four different years, the most recent was 2008ís 37.0% decline. In the year after the three previous 20%+ tumbles, the index gained an average of +32%. You have to be willing to stay invested in the market during the down times to participate in the recovery."

Both of the above are from different web sites.

OK - So you lose -41% in a matter of a few weeks and you gain back +32% maybe next year.  Or you wait another few years and get it all back.

Folks, you people are very smart.  Do you see any reason history will not repeat itself and the Dow Jones will be back up to maybe 25,000 next year?

I've put money in the 401K for many years, but essentially ignored it until recently.  Recently, I made the "great" decision to be a super-saver and dump lots in the market.  It has not give me great happiness.

At least gas is cheap right now - $42 / barrel

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: OzzieandHarriet on December 20, 2018, 05:39:05 PM
Imagine whatíll happen tomorrow after todayís Mattis announcement.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: effigy98 on December 20, 2018, 05:49:08 PM
ShillerPE 27.48 starting to look more reasonable which makes the Safe Withdraw rate at 3.64%
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: bwall on December 20, 2018, 05:51:34 PM
Imagine whatíll happen tomorrow after todayís Mattis announcement.
I prefer not to let my imagination run wild..... OTOH, the next few weeks will be a great time to put some money to work. If I'm reading my crystal ball correctly, the DOW will fall under 20,000. At which time it's good to start slowly buying. Lots of good stock on sale and getting cheaper.

If Pecunia is right, the DOW might drop below 18,000. Time will tell. 
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 20, 2018, 06:06:18 PM
well, at least my wife and I haven't contributed to our SEP's and HSA's yet.  Good time to now do so.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 20, 2018, 07:07:51 PM
Definitely not as fun when the numbers are dropping but we all knew it was going to happen sometime. Agree stick with the plan

My view as well.

If nothing else, depending on how bad this gets this may quiet the "I bet everyone will panic sell once the next recession comes" voices for a couple of years.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Mighty-Dollar on December 20, 2018, 07:10:05 PM
The end of this decline is very near. How do we know for certain? Ken Moraif made his sell signal on December 14th. He has a knack for selling low and buying back in higher. He has done this 3 times since 2010.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 20, 2018, 08:04:25 PM

- SNIP -

If Pecunia is right, the DOW might drop below 18,000. Time will tell. 

I don't want to be right.  I put my spare cash in while it was going up.  I've learned my lesson.  If (when) it goes back up, that money is going into bonds to "smooth the ride."  I really would like to know if you folks see something in this economy that is obvious after the fact causing the dip.

There's been a big tax cut.  Is this somehow the aftermath of that?  Too much debt.

It's not like the 1990s with the dot com boom where they built a lot of communications infrastructure.  It's not like years past where oil has given the economy a punch.  I don't think the housing bubble is back.  I don't hear too much about flipping houses.  Could it be a simple case of overproduction and over-speculation like 1929?

It only took 25 years for stocks to return to the post great depression levels.

I ask it again - Does this appear to be just a normal business cycle thing?  We've got good employment, low oil prices and peace may be on the way.  Wages are rather stagnant not causing inflation.  Seems like good times for the stock market.

The United States has the world's largest trade deficit. It's been that way since 1975.   It seems like it could be a good thing that Mr. Trump is attempting to alleviate this.  Why does that scare Wall Street?  I would think that would be little more than a stock price blip.

Am I asking too much since you guys have told me again and again, "You can't time the market."

Yeh - But not I'm beginning to see that you can't time it, but if you sit with cash like some of you, your time will arrive.  Opportunities will knock.



Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: SwordGuy on December 20, 2018, 08:09:23 PM
Kinda scary though, when DH just retired.

Our stash is down by about $275k since last month.

Most of this is money we aren't going to touch for at least another year and a half so that mitigates somewhat.

Then you've got a hell of a big stash and that means you should be ok, if you watch your spending. :)
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 20, 2018, 08:19:34 PM
It only took 25 years for stocks to return to the post great depression levels.

pecunia, it is all going to be okay. This is not the next great depression. If you've realized you need a bigger percentage of your net worth in bonds that's also perfectly okay.

Stocks go up and sometimes they come down. It doesn't have to mean that is actively bad thing happened, sometimes it can just mean that the stock market was previously TOO optimistic about something or other.

In this case, we have a government shutdown happening soon, which will reduce economic activity a bit. We've got a trade war that's continuing to mount, which is bad for economic growth. Remember that a lot of the S&P 500's earnings come from overseas operations so we're hurt both both higher import costs AND higher tariffs on American exports.

Our nation and our economy can survive all of those things. It may not be fun for a few weeks, or a few months, or a few years. But you, and all of us, are going to be okay.

The Fed is raising interest rates bonds are becoming more appealing than they were in the past, so a bunch of money that flowed from bonds into the stock market in search of yield since 2008 may now flow back to bonds. But remember that the Fed raising interest rates now means they've got more room to CUT interest rates to get us out of the next recession if that is indeed what we're in for.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: MrThatsDifferent on December 20, 2018, 08:31:04 PM
My question is what should we noviceís do? I know we shouldnít panic and sell, but should we, keep DCA, like nothing is different, or put our money in a HISA until things get better?  Iím pretty sure the prevailing advice is, keep DCA, but nice to hear from anyone who says, donít invest, just hold for now. (And please no roasting, some of us just donít get this stuff as well as the rest of you, so we need the baby steps plan)
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Radagast on December 20, 2018, 08:45:35 PM
I ask it again - Does this appear to be just a normal business cycle thing?  We've got good employment, low oil prices and peace may be on the way.  Wages are rather stagnant not causing inflation.  Seems like good times for the stock market.

The United States has the world's largest trade deficit. It's been that way since 1975.   It seems like it could be a good thing that Mr. Trump is attempting to alleviate this.  Why does that scare Wall Street?  I would think that would be little more than a stock price blip.

Am I asking too much since you guys have told me again and again, "You can't time the market."

Yeh - But not I'm beginning to see that you can't time it, but if you sit with cash like some of you, your time will arrive.  Opportunities will knock.
I guess I am simply not feeling the same things you are. I haven't been investing for that long, but this is not nearly as bad as things were in 2016. Apparently one of my emerging markets fund lost 35% or something then but I didn't notice because I was playing computer games that month because there was no "top is in" thread to keep me entertained yet. What economic news caused the 2015-2016 drop? I can't recall any even with hindsight. Apparently there was a "nearly a minirecession" or something. So far this is stock market noise. Even if it is not noise, I will keep putting money in when it becomes available. I don't know when the market will be up or down, but I do know that in ten years I will look back and regardless of what its current level is the purchases at lower prices will show themselves to be better earners than those at higher prices. That, coupled with the fact that I am probably a genuine contrarian, means I am actually pretty excited to see it go down. But either way I can't control where the market goes, I can just have a plan and then follow it.

Diversification is nice. Emerging markets finished the day 0.75% higher or so (about 25% or my "portfolio"). Gold miners were up nearly 5% (5% of my invested money). Bonds were flattish (I have 5% there, and just committed another 5% to a bank signup bonus that is sorta similar to a bond, maybe). There are limits and limitations to "slice and dice", all of those are down for the year and many by more than the S&P500. Over the long term I expect them to be reasonably independent and day to day they show a mix of red and green nearly every day. A three fund portfolio with 45% US stocks, 30% international stocks, 25% bonds is a pretty good starting point. Or 25/25/25 plus 25% in rental properties, one of which I also have.
(https://ecee.colorado.edu/~liue/teaching/comm_standards/2015S_IEEE_802.11n/Webpages/pictures/cartoon.jpg)
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 20, 2018, 08:55:35 PM
My question is what should we noviceís do? I know we shouldnít panic and sell, but should we, keep DCA, like nothing is different, or put our money in a HISA until things get better?  Iím pretty sure the prevailing advice is, keep DCA, but nice to hear from anyone who says, donít invest, just hold for now. (And please no roasting, some of us just donít get this stuff as well as the rest of you, so we need the baby steps plan)

No roasting, but yes, my advice would be to keep making your scheduled investments on your scheduled dates. In the 2008 or 2001 declines you'd end up with a bunch more money if you continue investing than if you had held off until you were sure the stock market was definitely recovering before you put any new money in.

But please do be careful about asking questions in the form "I know the answer is probably X, but it'd be nice to hear anyone who says the answer is Y." The risk is that people may give you exactly what you ask for.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Radagast on December 20, 2018, 09:06:32 PM
My question is what should we noviceís do? I know we shouldnít panic and sell, but should we, keep DCA, like nothing is different, or put our money in a HISA until things get better?  Iím pretty sure the prevailing advice is, keep DCA, but nice to hear from anyone who says, donít invest, just hold for now. (And please no roasting, some of us just donít get this stuff as well as the rest of you, so we need the baby steps plan)
First it'd be best to start by looking through history to see what has already happened. Know that this little dip is barely a tiny fraction of as bad as things have gotten in the past and at some point will get again in the future. Knowing that, you need to plan in advance for what will happen. Keeping 25% in bonds +/-15% is a good starting point. Diversify overseas in case there is a multi-year period where US stocks don't go anywhere but international stocks do.

DCA is a powerful investing tool. Somebody who invested $1,000 per month onto Vanguard Total Stock Market Index beginning in January 2000 (two months before the market peak) earned 9.31% return on their money as of the start of December 2018. That compares with a market return of 5.72%. The DCA person beat the market return by 3.6% annualized! And they didn't do it inspite of two 50% market corrections, they did it because of two 50% market corrections. Source:https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=1&endYear=2018&lastMonth=12&calendarAligned=true&endDate=12%2F20%2F2018&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100

Note I am not recommending DCA if you have a lump sum to invest. Technically that person would have done better investing on an ongoing monthly period since 2000, but not by a large margin. Play around with portfolio visualizer a bit and you will see that it is pretty common for a person who decided to DCA instead of lump sum to have a higher "return on money" over the period and yet also end with less money. The historical odds favor investing if you can. But be diversified and have a plan once you have enough money to matter.

Also a note on people who don't invest "because the market is going down and I'm scared" versus people who don't invest "because the market is overpriced and I'm scared". I mean really, pick an excuse and stick with it. Those are totally opposite excuses.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: sol on December 20, 2018, 09:13:57 PM
I really would like to know if you folks see something in this economy that is obvious after the fact causing the dip.

Nope.  I see political turmoil, but not economic turmoil.  I think people are just skittish.

As a friendly reminder, the stock market is not the economy.  The stock market is the price rich people are willing to pay today for a slice of future profits from the economy, which is not totally uncorrelated, but also is not the same thing.  The economy hums along on its own regardless of what the stock market is doing.  The stock market argues its way up and down with only minimal regard for how the economy is doing.  Try to remember that they are separate.

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It only took 25 years for stocks to return to the post great depression levels.

That's not entirely fair.  The market was paying roughly 10% dividends for a bunch of those years when the post 1929 crash depression was in full effect.  At yields like that, who needs price appreciation?

Quote
I ask it again - Does this appear to be just a normal business cycle thing?

I'm not even convinced it's related to the business cycle at all.  I think it's just fearful speculation because of the trade war, the budget breakdown, irresponsible leadership, and tax policies that increase wealth disparities.  So far, corporate earnings are looking just fine.

Quote
The United States has the world's largest trade deficit.

Also the most valuable economy and the highest standard of living.  It's a mixed bag, which has so far worked out pretty well for us.

Quote
But not I'm beginning to see that you can't time it, but if you sit with cash like some of you, your time will arrive.  Opportunities will knock.

Please tell me that you already see the obvious flaw in this logic.  If not, I'll spell it out for you: if you've been sitting in cash for any significant of time, you have missed out on incredible recent stock price appreciation.  Yes, you could now buy in at lower prices, but you've also already failed to buy at lower prices, from a year or two ago.  The past several years have been a relentless march upwards, with little to no pullbacks.  Anyone who was waiting for that knock of opportunity since this "end is nigh" mania started in about 2013 now NEEDS a 50% correction to just break even compared to those of us who just bought in all along, and rode the rocket ship up.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: sol on December 20, 2018, 09:18:14 PM
My question is what should we noviceís do?

You should continue to make your regular investments into the asset allocation that allows you to sleep soundly at night without worrying about whether or not you should change anything.

Some people here are 100% stocks.  They see crazy ups and downs, and as long as they do nothing and wait long enough, they always come out ahead.  Some people here are 10% or even 50% bonds, which means they see smaller gains but also smaller losses.  They have traded away some of their upside in exchange for that damped response, because the damped response is what they need in order to not change anything.  What do you need in order to not change anything?

If you're seriously considering market timing today, you haven't yet internalized the message that makes long term investors rich.  Stick to your plan.  Ride the waves.  Try not to stress about it.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Roland of Gilead on December 20, 2018, 09:19:42 PM
I am actually enjoying this market.   It is interesting and fun to trade.

You can buy 1000 shares of something in the morning, sell it for a $3000 gain an hour later, then buy it back again cheaper in the afternoon and do the same thing the next day.

As long as we don't get a super sharp drop, like 2000 points in an hour, I can make money in this market easier than I can in a slowly rising market.

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: ILikeDividends on December 20, 2018, 09:39:41 PM
I really would like to know if you folks see something in this economy that is obvious after the fact causing the dip.
Nope.  I see political turmoil, but not economic turmoil.  I think people are just skittish.
I don't usually put a lot of credence in commentators on CNBC.  Today a spokesman from (I think) the economic policy advisors suggested that with ~$4T still on the fed's balance sheet, we are still in a historically unprecedented state of QE; notwithstanding that we are now in the process of QT.

He suggested that we are still in an unprecedented easy money stance, and that if the fed had a "normal" balance sheet, that long term rates would be 100 bips higher, and that the yield curve wouldn't be anywhere near inverting right now.

His point was that a flattening of the yield curve today is a distortion resulting from so many years of QE, and that it doesn't mean today what it has typically meant in the past, and that it won't mean what it used to mean until the fed normalizes the balance sheet; in other words, he is suggesting that the yield curve could very well be flashing a false signal right now which the markets are misinterpreting as an indicator of a looming recession.

Knowing whether he is right or not is above my pay grade, but I have to admit, it's an interesting hypothesis.

In terms of the last 10 years of the fed's experiment and the flattish yield curve, perhaps this time it really is different, in the sense that there is no historical guide.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: MaaS on December 20, 2018, 10:38:46 PM
On a positive note... most Vanguard funds are distributing dividends in a few days.  From that perspective, the drop is pretty timely.

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 20, 2018, 10:40:31 PM
I'm a bit surprised by some of the fear in this thread.  We're in an average correction, which you're going to see very frequently possibly a couple dozen more times in your life.  This is a very small bump in the road.  If you're freaking out at all, you need to very seriously reconsider your asset allocation.  It's easy to prothlesize 100% stocks in a long bull market. Very few investors who have 20+ years of experience are 100% stocks.  Extremely few.  Like Buffet says "we'll see who's swimming naked when the tide goes out."  If this mild correction makes you nervous, how will you feel when the market drops 40+%?  Because that's going to happen a handful of times in your life.  This is only part of the reason you should hold a portion of bonds.  If you do simulations, you'll see that a small portion of bonds hardly changes your forecast but smoothes the ride to make it more comfortable.  As for me, I'm using up every bit of extra cash I can to buy right now.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: MrThatsDifferent on December 20, 2018, 11:05:18 PM
Because Iím not very smart with this and I wanted it as easy as possible, I have the most aggressive Vanguard lifestrategy fund. I think itís a mix of everything. Iíll just keep plopping in the money. I donít intend to access it for at least 10 years anyways. Thanks all.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 20, 2018, 11:13:46 PM
Because Iím not very smart with this and I wanted it as easy as possible, I have the most aggressive Vanguard lifestrategy fund. I think itís a mix of everything. Iíll just keep plopping in the money. I donít intend to access it for at least 10 years anyways. Thanks all.

Do yourself a favor and read JL Collins stock series.  It's required reading.

https://jlcollinsnh.com/stock-series/

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Radagast on December 20, 2018, 11:14:50 PM
Because Iím not very smart with this and I wanted it as easy as possible, I have the most aggressive Vanguard lifestrategy fund. I think itís a mix of everything. Iíll just keep plopping in the money. I donít intend to access it for at least 10 years anyways. Thanks all.
Vanguard LifeStrategy Growth is a great allocation for thick or thin, and I have no hesitation in recommending it, perhaps the only single fund I can say that about without any qualifications.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 20, 2018, 11:15:32 PM
Because Iím not very smart with this and I wanted it as easy as possible, I have the most aggressive Vanguard lifestrategy fund. I think itís a mix of everything. Iíll just keep plopping in the money. I donít intend to access it for at least 10 years anyways. Thanks all.

Is that VASGX? 80/20 stock bond split with decent international diversification. Solid strategy and well within the range of what even the folks here who think about this stuff in great detail would recommend.

If you get worried again in the future, don't hesitate to post again. No roasting, just some friendly voices to talk you back down if you need them.  Anyway, good for you staying the course for now.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 20, 2018, 11:25:25 PM
Was 2011 about the last time we saw a correction this size?  Probably a good read during times like this:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Radagast on December 20, 2018, 11:29:29 PM
Was 2011 about the last time we saw a correction this size?  Probably a good read during times like this:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939
Nope. 2016.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 20, 2018, 11:32:18 PM
Was 2011 about the last time we saw a correction this size?  Probably a good read during times like this:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939
Nope. 2016.

Really, 16% drop?
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Radagast on December 20, 2018, 11:56:52 PM
Was 2011 about the last time we saw a correction this size?  Probably a good read during times like this:

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939
Nope. 2016.

Really, 16% drop?
Huh you are right. That was only -13% for the S&P500. VTI dropped 15% by 2016, whereas right now it is down 16.6%. So I guess 2011 was the last time it was worse. Was it just everything else that dropped so much in 2016? I see "extended market" lost 22%.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: marty998 on December 21, 2018, 12:10:37 AM

Note I am not recommending DCA if you have a lump sum to invest. Technically that person would have done better investing on an ongoing monthly period since 2000, but not by a large margin. Play around with portfolio visualizer a bit and you will see that it is pretty common for a person who decided to DCA instead of lump sum to have a higher "return on money" over the period and yet also end with less money. The historical odds favor investing if you can. But be diversified and have a plan once you have enough money to matter.

This is strikingly profound.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Radagast on December 21, 2018, 12:27:46 AM

Note I am not recommending DCA if you have a lump sum to invest. Technically that person would have done better investing on an ongoing monthly period since 2000, but not by a large margin. Play around with portfolio visualizer a bit and you will see that it is pretty common for a person who decided to DCA instead of lump sum to have a higher "return on money" over the period and yet also end with less money. The historical odds favor investing if you can. But be diversified and have a plan once you have enough money to matter.

This is strikingly profound.
I had to check since I just said something incorrect. Investing $1k per month since January 1998 (239 monthly investments), including inflation adjustment, ended in 8.77% monthly return on your money and $832,859.

If you had invested $239k all at once in January 1998 it would have returned 7.30% on money, but you would end with $1,043,818. So, yes.

Yay. I'm not crazy. I'm tired so the profundity is lost on me now.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1998&firstMonth=1&endYear=2018&lastMonth=12&calendarAligned=true&endDate=12%2F20%2F2018&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=0&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1998&firstMonth=1&endYear=2018&lastMonth=12&calendarAligned=true&endDate=12%2F20%2F2018&initialAmount=239000&annualOperation=0&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=0&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: marty998 on December 21, 2018, 01:05:25 AM

Note I am not recommending DCA if you have a lump sum to invest. Technically that person would have done better investing on an ongoing monthly period since 2000, but not by a large margin. Play around with portfolio visualizer a bit and you will see that it is pretty common for a person who decided to DCA instead of lump sum to have a higher "return on money" over the period and yet also end with less money. The historical odds favor investing if you can. But be diversified and have a plan once you have enough money to matter.

This is strikingly profound.
I had to check since I just said something incorrect. Investing $1k per month since January 1998 (239 monthly investments), including inflation adjustment, ended in 8.77% monthly return on your money and $832,859.

If you had invested $239k all at once in January 1998 it would have returned 7.30% on money, but you would end with $1,043,818. So, yes.

Yay. I'm not crazy. I'm tired so the profundity is lost on me now.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1998&firstMonth=1&endYear=2018&lastMonth=12&calendarAligned=true&endDate=12%2F20%2F2018&initialAmount=1000&annualOperation=1&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=0&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1998&firstMonth=1&endYear=2018&lastMonth=12&calendarAligned=true&endDate=12%2F20%2F2018&initialAmount=239000&annualOperation=0&annualAdjustment=1000&inflationAdjusted=true&annualPercentage=0.0&frequency=2&rebalanceType=0&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&symbol1=VTSMX&allocation1_1=100

I like it. If I can give a more basic example to illustrate...

If you invest $150 for three years at a rate of return of 7% p.a. your balance will be $183.76.

If instead you invested $50 at the start of year one, $50 at the start of year 2 and $50 at the start of year three, and your return in each of those 3 years was 9% p.a. then your ending balance is only going to be $178.66

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Maenad on December 21, 2018, 06:08:00 AM
My question is what should we noviceís do? I know we shouldnít panic and sell, but should we, keep DCA, like nothing is different, or put our money in a HISA until things get better?  Iím pretty sure the prevailing advice is, keep DCA, but nice to hear from anyone who says, donít invest, just hold for now. (And please no roasting, some of us just donít get this stuff as well as the rest of you, so we need the baby steps plan)

I'd also advise to take a step back and look at the long term. I'll give myself as an example. I'm 44 years old; let's look back at 1974 - years of stagflation, "the death of equities", etc. Look at the S&P then versus now.

Now move forward. The money you put in today will be sitting there for 30-50 years. Sure, the S&P may go down another 20%, but then look at where it's likely to be 30 years from now. Keep your eyes on that horizon, don't panic about the boat moving on the swells under you.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Blueberries on December 21, 2018, 06:35:21 AM
The stock market is a leading indicator, typically indicating impending issues, which is why you often have rosy information when the market drops significantly (bear or recession) and gloomy information when the market resumes an uptrend (new bull). 

I'm a bit surprised by some of the fear in this thread.  We're in an average correction, which you're going to see very frequently possibly a couple dozen more times in your life.  This is a very small bump in the road.  If you're freaking out at all, you need to very seriously reconsider your asset allocation.  It's easy to prothlesize 100% stocks in a long bull market. Very few investors who have 20+ years of experience are 100% stocks.  Extremely few.  Like Buffet says "we'll see who's swimming naked when the tide goes out."  If this mild correction makes you nervous, how will you feel when the market drops 40+%?  Because that's going to happen a handful of times in your life.  This is only part of the reason you should hold a portion of bonds.  If you do simulations, you'll see that a small portion of bonds hardly changes your forecast but smoothes the ride to make it more comfortable.  As for me, I'm using up every bit of extra cash I can to buy right now.

Institutional investors?  Retail? If retail, I'm curious what you're basing that opinion on. 
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 21, 2018, 06:44:02 AM
I really would like to know if you folks see something in this economy that is obvious after the fact causing the dip.

Nope.  I see political turmoil, but not economic turmoil.  I think people are just skittish.

As a friendly reminder, the stock market is not the economy.  The stock market is the price rich people are willing to pay today for a slice of future profits from the economy, which is not totally uncorrelated, but also is not the same thing.  The economy hums along on its own regardless of what the stock market is doing.  The stock market argues its way up and down with only minimal regard for how the economy is doing.  Try to remember that they are separate.

Quote
It only took 25 years for stocks to return to the post great depression levels.

That's not entirely fair.  The market was paying roughly 10% dividends for a bunch of those years when the post 1929 crash depression was in full effect.  At yields like that, who needs price appreciation?

Quote
I ask it again - Does this appear to be just a normal business cycle thing?

I'm not even convinced it's related to the business cycle at all.  I think it's just fearful speculation because of the trade war, the budget breakdown, irresponsible leadership, and tax policies that increase wealth disparities.  So far, corporate earnings are looking just fine.

Quote
The United States has the world's largest trade deficit.

Also the most valuable economy and the highest standard of living.  It's a mixed bag, which has so far worked out pretty well for us.

Quote
But not I'm beginning to see that you can't time it, but if you sit with cash like some of you, your time will arrive.  Opportunities will knock.

Please tell me that you already see the obvious flaw in this logic.  If not, I'll spell it out for you: if you've been sitting in cash for any significant of time, you have missed out on incredible recent stock price appreciation.  Yes, you could now buy in at lower prices, but you've also already failed to buy at lower prices, from a year or two ago.  The past several years have been a relentless march upwards, with little to no pullbacks.  Anyone who was waiting for that knock of opportunity since this "end is nigh" mania started in about 2013 now NEEDS a 50% correction to just break even compared to those of us who just bought in all along, and rode the rocket ship up.

Good Answers.  I have been putting money into the 401 K for years.  Sad to say, I've pretty well ignored it and it has done quite well.  It is only now when I am at the cusp of using that money that I have paid attention to this whole thing.  It is now when I wish to turn the "paper" money into "real" money, that I become distressed.  I'm still working.  I'm not sick.  The sun still rises and sets.  I still have a bundle in there that I haven't frittered away.

The trade war, budget breakdown, irresponsible leadership and maybe even the tax policies can be considered relatively temporary.  Per your words and others, I expect it will be bouncing back in a few months, but it may be a long time before we see 26,000 again.

They say it's best to quit work at the end of a bear market when your money will grow again so this may work out just dandy after all. 
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: dogboyslim on December 21, 2018, 08:44:08 AM
The United States has the world's largest trade deficit. It's been that way since 1975.   It seems like it could be a good thing that Mr. Trump is attempting to alleviate this.  Why does that scare Wall Street?  I would think that would be little more than a stock price blip.

Think about it from a company perspective.  Over the years, regulations made it expensive to produce in the US, so companies invested billions of capital into offshore production facilities.  That took years, and the rules changed a bit around the edges, but mostly stayed the same.  Trumps trade practices threaten to reset the clock all at once.  Companies cannot move capital very quickly or efficiently, so in the short term costs will go up significantly.  This will result in either higher prices, or lower returns or both.  Investors are seeing likely lower returns over the next couple of years, which reduces the value of the stock valuations.  So even if you feel his trade practices are wise (I'm not particularly a fan), it is easy to see why the market would be spooked by the proposal of this type of change.

I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

<Edit: corrected capitalization of sol's name>
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: dude on December 21, 2018, 12:09:38 PM
My question is what should we noviceís do?

You should continue to make your regular investments into the asset allocation that allows you to sleep soundly at night without worrying about whether or not you should change anything.

Some people here are 100% stocks.  They see crazy ups and downs, and as long as they do nothing and wait long enough, they always come out ahead.  Some people here are 10% or even 50% bonds, which means they see smaller gains but also smaller losses.  They have traded away some of their upside in exchange for that damped response, because the damped response is what they need in order to not change anything.  What do you need in order to not change anything?

If you're seriously considering market timing today, you haven't yet internalized the message that makes long term investors rich.  Stick to your plan.  Ride the waves.  Try not to stress about it.

I would just add to this to re-allocate at the end of this year to get back to your target allocation; the big drop in recent weeks has likely skewed your portfolio to a more bond heavy allocation (assuming you aren't 100% equities, which if you're young and just starting out on the road to amassing wealth, you should absolutely be).
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: WhiteTrashCash on December 21, 2018, 12:33:21 PM
My biggest frustration right now is that I rebalanced my portfolio with Vanguard and now I can't buy again until January 9th. Dammit. Everything is so cheap right now. I could be cleaning up.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: wenchsenior on December 21, 2018, 12:39:43 PM
My biggest frustration right now is that I rebalanced my portfolio with Vanguard and now I can't buy again until January 9th. Dammit. Everything is so cheap right now. I could be cleaning up.

Mine is that if there is a gov't shutdown, it means DH's TSP contributions and matches are suspended along with his paycheck, which means we won't max this year's and I'll have to go in and change contribution allocations for next year.  So tiresome in general, and esp so when stocks are relatively cheaper.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: dogboyslim on December 21, 2018, 01:25:28 PM
My biggest frustration right now is that I rebalanced my portfolio with Vanguard and now I can't buy again until January 9th. Dammit. Everything is so cheap right now. I could be cleaning up.
Set up a recurring transaction.  It bypasses the no-trade rule.  Then edit the recurring transaction.  I assume if you abuse this you will get busted, but I have not yet had this happen to me.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 21, 2018, 02:22:44 PM
Many indexes already there.

Now that tomorrow is today:
-VTI down 18.7% from the peak (still a correction)
-S&P 500 down 17.8% (still a correction)
-Nasdaq is down 22.1% (bear market)
-Russell 2000 down 25.8% (yikes)

Dow intentionally omitted because it's a stupid index based on bad weighting that only made sense in the pre-computer era.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: MissNancyPryor on December 21, 2018, 02:59:46 PM
If I was still in the major accumulation stage I would be very pleased at getting bargains.  If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.  The Big Ugly Event has always been possible and this one is trying to break a few mirrors and turn those who eyeball it into stone. 

It is only now that I am within just a few short months of being RE that I am getting the jitters about going on the planned date.  Who quits a high paying job in the face of a market headwind like this?  I feel I would be a fool to jump out during an active slide.  So I am piling up cash in a higher yield money market and with rising interest rates this is a good alternative to bonds to set up my retirement allocation.

It is a bummer to anticipate a near-retirement that might be delayed.  It was hard enough to follow through with that goal date for all the usual psychological reasons but now this is making me wobbly.  I know chickens are on sale and I should be buying and I will again once I get more cash on the pile.  This is a real time exercise in adjusting my attitude and thinking through what I would do in the future.             
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Slow&Steady on December 21, 2018, 03:04:54 PM
Payroll contribution made today... I feel like I just found the coolest ____ on the clearance rack!

Yeah, maybe my new ___ will get marked down more tomorrow but then I would have wait until tomorrow to own it. Or maybe my new ___ will not be marked down any further and this is the last mark down before the "store" takes it off the shelf. Or what if the store decides that there was enough interest in my new __ at a higher price point and they re-shelf them all at the new price.  I will buy my new ___, that I was going to buy anyways, and celebrate that the store was having a sale so I was able to buy more!  Maybe the next time I go to the store they will still be on sale or there with be a whole new sale!!
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: sol on December 21, 2018, 03:07:15 PM
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.
[/qutote]

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: FIRE47 on December 21, 2018, 03:52:56 PM
Almost there now folks buckle up.

The inability to hold early gains and the violent action that keeps happening at the end of the day would point to the fact that we still have a few days of this left - a technical forum I was looking at predicted a high 90% chance of the S&P 500 hitting a technical bear before recovering - although that isnt saying much in a random walk we are 2% from a bear and 18% from a recovery.

Then again not sure how the holidays will affect this kind of a drop in progress.

Once you cross 20% you may start to see some panic sellers getting shaken from the tree and well be on a real downward trend then.





Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Mr. Green on December 21, 2018, 04:43:43 PM
If we see a bear market it means we're likely to see the bottom by the end of next year. Since most bear market hit bottom in 12-18 months after the 20% drop trigger, 2020 could be a bang up year for returns!
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: fuzzy math on December 21, 2018, 04:46:19 PM
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

Thanks for this. I had always considered the option you listed above as a risk mitigator but now I see how that isn't true... (not that I'm anywhere near being able to utilize it).
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 21, 2018, 05:32:04 PM
Almost there now folks buckle up.

The inability to hold early gains and the violent action that keeps happening at the end of the day would point to the fact that we still have a few days of this left - a technical forum I was looking at predicted a high 90% chance of the S&P 500 hitting a technical bear before recovering - although that isnt saying much in a random walk we are 2% from a bear and 18% from a recovery.

Then again not sure how the holidays will affect this kind of a drop in progress.

Once you cross 20% you may start to see some panic sellers getting shaken from the tree and well be on a real downward trend then.


Looks like everyone basically has to wait until after Christmas for more depressing news. (or maybe not)

https://www.kiplinger.com/article/investing/T038-C000-S001-is-the-stock-market-open-on-christmas-eve.html (https://www.kiplinger.com/article/investing/T038-C000-S001-is-the-stock-market-open-on-christmas-eve.html)

I wouldn't expect too much more gloom and doom on the 24th since it is a partial day of work for most of Wall Street.

Many of you wish to take part in this stock market dip and increase investments and wait for the recovery.  I hope there are a lot of people like yourselves out there.  The holidays may give people a time to consider this course of action.

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: MissNancyPryor on December 21, 2018, 06:11:42 PM
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

Thanks for this. I had always considered the option you listed above as a risk mitigator but now I see how that isn't true... (not that I'm anywhere near being able to utilize it).

Thanks @sol.  Good point.  I haven't figured out what my drawdown strategy will be or how frequently to replenish the "spendable money" when I push away from the dock.  I do want to be able to pick up bargains so developing some harvesting and planting techniques will be my new education for the next several months.   

On a happy note, I just saw the VWUAX cap gains to my brokerage account and see that I got a bunch of less expensive shares with the reinvestment.  I am not sure why the payout was so large and am not sure if that will be sustained annually-- I have only had this fund 15 months so I haven't seen enough to trust it (history only went back a couple years online).  As long as dividends don't get cut I can pay for most of my expenses with that and not worry about growth at all.  Feeling better.     
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: 2Birds1Stone on December 21, 2018, 06:42:46 PM
Great point Sol.

As much as I like to stir the rose colored glasses pot, you make some good points.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: stuckinmn on December 21, 2018, 06:49:01 PM
I did some inadvertent market timing that actually worked in my favor due to blind luck. 

I was consolidating my IRAs into my 401k in order to clear the deck for backdoor roths.  In the short time it took for the check to go from vanguard to fidelity the market dropped 6%. As Tom Petty once said, even the losers get lucky sometimes.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: elaine amj on December 21, 2018, 07:29:47 PM
I just dumped another $7k into the market yesterday for my kids' education funds. And have another chunk to invest that I will do next week (hopefully MOnday morning when the markets re-open if I have time).

Kinda scary though, when DH just retired.

Our stash is down by about $275k since last month.

Most of this is money we aren't going to touch for at least another year and a half so that mitigates somewhat.

I imagine you are withdrawing about 4 or so % each year? So you wouldn't be selling your entire stash at once, right? I figure even if I have to sell my stocks at a less than optimal level (i.e. when the market is low) to fund my expenses, it really is only a very small amount of the entire stash. The next time I sell, it's more likely that the market will be higher. Sort of DCA in reverse :) I can't always have the bad luck of selling at a ridiculously low price year after year after year. (I hope I'm understanding all these withdrawal strategies right)


If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

I'm going to have to think on what you said a bit more. I just FIREd last month. My thoughts were to keep a 1-2 year cash/HISA/GIC reserve on hand and keep an eye on the markets over the next 1-2 years to replenish the cash reserves when the market is good. Rinse and repeat year after year. I guess yet another form of market timing, hmm? Maybe we will keep a year of cash and just keep withdrawing annually using our asset allocation to replenish that.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: mrmoonymartian on December 21, 2018, 08:03:29 PM
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

I'm going to have to think on what you said a bit more. I just FIREd last month. My thoughts were to keep a 1-2 year cash/HISA/GIC reserve on hand and keep an eye on the markets over the next 1-2 years to replenish the cash reserves when the market is good. Rinse and repeat year after year. I guess yet another form of market timing, hmm? Maybe we will keep a year of cash and just keep withdrawing annually using our asset allocation to replenish that.
The most important thing is to stick to the emotionally neutral plan you previously made to cope with SORR - whether it includes use of a cash/bond tent or not.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: One on December 21, 2018, 11:16:04 PM
I heard something about the hedge funds forced selling into the year end to lock in less losses than their competitors. This could be a technical thing exacerbating the sell off? hopefully when the new year hits things will turn.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: LAGuy on December 22, 2018, 08:41:40 AM
If I was still in the major accumulation stage I would be very pleased at getting bargains.  If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.  The Big Ugly Event has always been possible and this one is trying to break a few mirrors and turn those who eyeball it into stone. 

It is only now that I am within just a few short months of being RE that I am getting the jitters about going on the planned date.  Who quits a high paying job in the face of a market headwind like this?  I feel I would be a fool to jump out during an active slide.  So I am piling up cash in a higher yield money market and with rising interest rates this is a good alternative to bonds to set up my retirement allocation.

It is a bummer to anticipate a near-retirement that might be delayed.  It was hard enough to follow through with that goal date for all the usual psychological reasons but now this is making me wobbly.  I know chickens are on sale and I should be buying and I will again once I get more cash on the pile.  This is a real time exercise in adjusting my attitude and thinking through what I would do in the future.             

To me, the obvious answer is you don't retire yet. I've always wondered how people come up with firm retirement dates, other than age related (i.e. I'm 65 time to go), given just how volatile market returns can be. To me, you retire when you hit your number and feel like it's time to go. As you get near your number, that could be 6 months or 10 years away. One of the things you CAN do, though, is reevaluate that number. Was it maybe too conservative? Perhaps you can consider going ahead with your retirement plans anyways if you had a very conservative plan...just consider recent events to be the purpose that you built that cushion in the first place. One of the recent worries in the stock market for investors has been, "Is the market too expensive?" Well, that worry is getting taken out real quick...especially if we get another "meh" kind of year in 2019 due to this being a true bear market. Especially so if earnings projections hold up for 2019.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: thriftyc on December 22, 2018, 09:03:53 AM
Its all just a blip in my 40+ year investing.  Stay calm and rebalance on....
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: thriftyc on December 22, 2018, 11:00:37 AM
Its all just a blip in my 40+ year investing.  Stay calm and rebalance on....
This. I've lowered my already very low expenses a bit, more cash heavy since a few months ago and will be fine. Just like I was in 2008. Now I'm waiting for the housing bubble to burst, especially the second home/vacation home market, 'cause I'm looking for some new ski digs ;-).

My newly FIREd sister (laid off and transioning to FIRE) on the other hand just got her last unemployment check the other day and is obsessively watching the markets and wondering if she should go back to work. I keep telling her to just ride it out until next year, keep her very very low expenses in check, (under $1000/month bare bones) use cash for now, and just see how it goes. She'll be eligible for a small pension at 55 and can easily bridge that gap just on cash. She moved towards more bonds when she got laid off last June as a buffer.. I think the top was in then too ;-).

Bonds are wonderful in times like these.  I maintain a lifetime allocation of 40% bonds / 60% stocks - all ultra low cost index etf's.  I usually just rebalance once a year in January.  However, I decided to rebalance this week to keep my desired allocation....
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Korrywow on December 23, 2018, 03:12:42 AM
Spartana, please let me know 3 months in advance before the real estate bubble bursts(joke!)...but seriously, l realize that all the economic indicators point to a recession but l see more upside.

Politically and economically, we are living in interesting times; and the economists and the fed are just guessing, as always. I think the p/e high of 2000 is reattainable if the Republicans win the next election.

I have a great townhouse in Reno, 45 minutes to Tahoe, that l really enjoy. (Reno is seriously underrated). Hopefully, l will sell it at the top...and then buy 2 more after the crash.


Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 23, 2018, 09:24:37 AM
Prices have remained the same there since then but sales have slowed quit a bit.

Here locally (Huntington Beach), prices have come down some, and continue to come down.  Listing prices are getting lowered quite regularly.  I'm hoping to snatch something up in the next few years, but I'll be patient.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: waltworks on December 23, 2018, 01:01:22 PM
Spartana, please let me know 3 months in advance before the real estate bubble bursts(joke!)...but seriously, l realize that all the economic indicators point to a recession but l see more upside.

I have a great townhouse in Reno, 45 minutes to Tahoe, that l really enjoy. (Reno is seriously underrated). Hopefully, l will sell it at the top...and then buy 2 more after the crash.

ďI will tell you my secret if you wish.  It is this:  I never buy at the bottom and I always sell too soon.Ē Ė Baron Rothschild

-W
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: TomTX on December 23, 2018, 08:18:58 PM
I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

The 4% SWR is more than capable of handling this downturn.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 23, 2018, 08:33:49 PM
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nationís six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretaryís tweet.

...

ďItís going to raise the question of whether Treasury and Mnuchin know something the markets donít,Ē

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 23, 2018, 09:50:12 PM
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nationís six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretaryís tweet.

...

ďItís going to raise the question of whether Treasury and Mnuchin know something the markets donít,Ē

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

From the article:

"As a result, several analysts warned that the outreach to banks could end up generating deeper anxiety. A decade ago, financial firms sharply pulled back from lending amid a financial panic, and federal officials frequently took action on Sundays as a way to try to arrest unease before Asian markets opened. But no signs have emerged that banks are facing any serious issues today."

Deeper anxiety - Well, like yeh.  Why is he telling us the banks are OK?  Didn't the banks crash in the great depression?  Well, there shouldn't be a run on the cash under my mattress.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 23, 2018, 10:17:37 PM
"Ladies and gentlemen, this is your pilot speaking. There is no reason for concern and the engines are functioning normally. That is all."

(Okay, but more seriously, this sounds more like either cluelessness on Mnuchen's part, or him trying to make it look to his boss like he's taking things seriously, rather than some sign of impending financial bad news, so I really wouldn't lose any sleep, pecunia. You've just gotta laugh at this sometimes.)
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: innkeeper77 on December 23, 2018, 11:44:06 PM
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nationís six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretaryís tweet.

...

ďItís going to raise the question of whether Treasury and Mnuchin know something the markets donít,Ē

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

From the article:

"As a result, several analysts warned that the outreach to banks could end up generating deeper anxiety. A decade ago, financial firms sharply pulled back from lending amid a financial panic, and federal officials frequently took action on Sundays as a way to try to arrest unease before Asian markets opened. But no signs have emerged that banks are facing any serious issues today."

Deeper anxiety - Well, like yeh.  Why is he telling us the banks are OK?  Didn't the banks crash in the great depression?  Well, there shouldn't be a run on the cash under my mattress.

Just as a note of interest, the biggest run on banks in US History wasn't in the great depression, it was actually in 2007- the government was simply able to handle it a LOT better in 2007 than in 1930! Banks failed left and right but customers were made whole instantly, instead of the literal shutting of doors that happened in the 30's. (I am quite sure on the comparison, but don't have sources available right now)
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: ILikeDividends on December 23, 2018, 11:47:18 PM
Will be interesting to watch the markets tomorrow. I predict they will either drop, increase, or stay about the same.

Quote
Treasury Secretary Steven Mnuchin startled financial analysts, bankers and economists on Sunday by issuing an unusual statement declaring that the nationís six largest banks had ample credit to extend to American businesses and households.

Mnuchin made the statement on Twitter after calling the leaders of the six banks, seeking to address an issue that had attracted little concern ahead of the treasury secretaryís tweet.

...

ďItís going to raise the question of whether Treasury and Mnuchin know something the markets donít,Ē

Source: https://www.washingtonpost.com/business/2018/12/23/treasury-secretary-makes-unusual-pre-christmas-call-top-bank-ceos-amid-market-mayhem/

From the article:

"As a result, several analysts warned that the outreach to banks could end up generating deeper anxiety. A decade ago, financial firms sharply pulled back from lending amid a financial panic, and federal officials frequently took action on Sundays as a way to try to arrest unease before Asian markets opened. But no signs have emerged that banks are facing any serious issues today."

Deeper anxiety - Well, like yeh.  Why is he telling us the banks are OK?  Didn't the banks crash in the great depression?  Well, there shouldn't be a run on the cash under my mattress.

Just as a note of interest, the biggest run on banks in US History wasn't in the great depression, it was actually in 2007- the government was simply able to handle it a LOT better in 2007 than in 1930! Banks failed left and right but customers were made whole instantly, instead of the literal shutting of doors that happened in the 30's. (I am quite sure on the comparison, but don't have sources available right now)
And that's because there was FDIC insurance in 2007.  FDIC was not passed into law until 1933, so the 1930 failures wiped out a lot of depositors when the bank failed.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: LAGuy on December 24, 2018, 04:12:10 AM
I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

The 4% SWR is more than capable of handling this downturn.

So, if I were to retire today should I plan a 4% rate based on the market high or what it is today?

It's kind of interesting to watch how many people were afraid to pull the trigger and retire at market highs and were planning very conservative withdrawl rates. Do they feel more comfortable retiring now in today's market? Would they still choose 3%? Or is 4% now more applicable?
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: EscapeVelocity2020 on December 24, 2018, 05:24:52 AM
So, if I were to retire today should I plan a 4% rate based on the market high or what it is today?

It's kind of interesting to watch how many people were afraid to pull the trigger and retire at market highs and were planning very conservative withdrawl rates. Do they feel more comfortable retiring now in today's market? Would they still choose 3%? Or is 4% now more applicable?

Well, there are two ways to be conservative if you never plan to earn another dime or increase expenses beyond inflation.  One is to lower your SWR to 3% since historically this gives 100% success (not too hard to do when markets are posting double digit returns and you are at 4% already, but it requires a OMY or two).  The other tact would be to ride out a bear market / recession until it puts in a bottom (you'll probably know about 6 months after the lows) then go with 4% on that amount.

This forum is more scrappy than that though - you'll hear a whole lot about side hustles, tightening the belt, and that time is more valuable than money.  You might want to spend some time on the 'Stop Worrying about the 4% Rule (https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/msg702774/#msg702774)' thread to get up to speed.

There's also a really good discussion of what 4% SWR outcomes look like depending on sequence of returns on the intro page for https://www.firecalc.com/
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: LAGuy on December 24, 2018, 08:11:01 AM
So, if I were to retire today should I plan a 4% rate based on the market high or what it is today?

It's kind of interesting to watch how many people were afraid to pull the trigger and retire at market highs and were planning very conservative withdrawl rates. Do they feel more comfortable retiring now in today's market? Would they still choose 3%? Or is 4% now more applicable?

Well, there are two ways to be conservative if you never plan to earn another dime or increase expenses beyond inflation.  One is to lower your SWR to 3% since historically this gives 100% success (not too hard to do when markets are posting double digit returns and you are at 4% already, but it requires a OMY or two).  The other tact would be to ride out a bear market / recession until it puts in a bottom (you'll probably know about 6 months after the lows) then go with 4% on that amount.

This forum is more scrappy than that though - you'll hear a whole lot about side hustles, tightening the belt, and that time is more valuable than money.  You might want to spend some time on the 'Stop Worrying about the 4% Rule (https://forum.mrmoneymustache.com/investor-alley/stop-worrying-about-the-4-rule/msg702774/#msg702774)' thread to get up to speed.

There's also a really good discussion of what 4% SWR outcomes look like depending on sequence of returns on the intro page for https://www.firecalc.com/

Oh, I've certainly read all that stuff. Just musing out loud really on how people close to retiring for good see things right now. It does kind of demonstrate though how silly the 4% rule is when you treat it like, well, a rule. I can't imagine anybody would retire in the current market and base their withdrawl rate on the market high, but the 4% rule says that should still work 95% of the time. So does that mean in a bear market a 5% withdrawl rate is safe?
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: FIRE47 on December 24, 2018, 10:37:28 AM
Here it is folks...

If the breakdown actually triggers a correction in the major us indexes look out below - were hanging on by a thread at this point a slight push and were looking at a further 5-10% plunge.

Trump is just the character likely to continue to giving the slight pushes we need to keep the downtrend going.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 24, 2018, 11:16:09 AM
Another -2.7% in the S&P at market close.

S&P 500 is 19.2 20% down from market peak.
NASDAQ down 23.9%.
Wilshire down 21%
VTI down 21.2%

I never really understood the ďitís a short trading dayĒ so nothing is gonna happen argument.

Has been fascinating to observe my own emotional reactions in real time.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: cats on December 24, 2018, 11:21:52 AM
"Ladies and gentlemen, this is your pilot speaking. There is no reason for concern and the engines are functioning normally. That is all."

(Okay, but more seriously, this sounds more like either cluelessness on Mnuchen's part, or him trying to make it look to his boss like he's taking things seriously, rather than some sign of impending financial bad news, so I really wouldn't lose any sleep, pecunia. You've just gotta laugh at this sometimes.)

I'm pretty sure Trump screamed at Mnuchin to "FIX THIS NOW!!!!" over the weekend and this is Mnuchin's frantic and poorly
 thought out result.  Or maybe Mnuchin stands to personally benefit from a stock market dip so he's happy to be spreading some jitters with the cover of "my crazy boss made me do it!".
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Bumperpuff on December 24, 2018, 11:22:19 AM
I agree with sol on what you should be doing.  For me its about prudence in my portfolio, continuing to buy and rebalance through all sorts of market conditions, and personally I'm choosing a 3% SWR target vs. 4 to give me a bit more breathing room for these types of downturns.  Good luck!

The 4% SWR is more than capable of handling this downturn.

My thinking is that if you have a mixture of stocks and bonds, you should be buying during the build up phase, and selling post RE, to maintain your desired asset allocation.  When stocks are high you'll naturally be selling more stocks, when stocks drop you sell more bonds. That's why you do an asset mix.

Right now, I'm just hoping that the market doesn't spring back before I can make my 2019 IRA contribution.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: TomTX on December 24, 2018, 11:41:54 AM
Another -2.7% in the S&P at market close.

I never really understood the ďitís a short trading dayĒ so nothing is gonna happen argument.

Has been fascinating to observe my own emotional reactions in real time.

Still a ways to go before I need to put my money where my mouth is and remortgage equity out. I'm using VTI as my benchmark - a quick look at the chart seems to be 151.31 as the peak, so a 40% drop is near enough to 91. Close today was just under 120, slightly over halfway.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: use2betrix on December 24, 2018, 02:11:46 PM
I have no problem depleting my large F U/Emergency cash fund in times like these. Just dropped an extra $10k into VTSAX today. I ďlikeĒ to have $50k for comfort due to the nature of my work, but current job security and income is high so I have no problem dropping it down to $20k for a while.

My investments are down around $40k-$50k and this is my first time experiencing a real drop. Iím actually 100% ok with it, and just praying for it to drop lower/stay lower because 2019 is going to be a HUGE savings year for me.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: WhiteTrashCash on December 24, 2018, 02:44:03 PM
On the plus side, at this rate, we'll get a most effective President in 2020. Silver linings and all.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: BicycleB on December 24, 2018, 02:51:07 PM
Good luck, @use2betrix! Also - @Bumperpuff, great description, I agree. Conceptually, at least - my implementation is a bit lax, as shown below.  ;)

As a person in thin-ish FIRE, this is sort of exciting. I was FIREd through a couple of dips before, but wasn't paying any attention due to personal matters. I literally didn't notice the 2016 dip at all, for example. 

I will acknowledge that it reassures me personally that my asset allocation has surprisingly little in stock, because about half my AA is just real estate equity (most of it used as rental property). So of 50% in financial assets, 70% is stock, or 35% of portfolio. Of that 35, maybe 25 is US stock. An S&P bear of 20% therefore means my wealth drops about 5%.

The above paragraph is about how I actually think of things - I multiply that 5% by the previous grand total, say "Oh, I'm down $20,000 since the last calculation, I must be around $480k now." I almost never actually check, but the accounts are usually within a few thousand dollars when I do.

Taking laziness to the extreme, that's my strategy!

Fwiw though, we're entering a fantastic time for US investors, I think. Jobs are plentiful and investment prices are falling. It should be a fine time for accumulating.

For personal reasons, I periodically think about returning to work. Maybe 2019 is the time...
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: justchristine on December 24, 2018, 03:03:31 PM
I'm making lemonade out of lemons today.  My accounts are down about 60k from their peak earlier this year.  So today I sold some of my loser stocks for some sweet tax loss harvesting.  This market downturn is playing well in to my plan to move my old individual stocks into index funds.  I completely sold out of three full positions.  If this slide continues into the new year, I should be able to close out a few more positions.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Mighty-Dollar on December 24, 2018, 03:31:11 PM
Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.
And the hedge fund managers are LOVING this downturn as the US economy is looking robust. When average Joe investors panic and sell low, watch for a bounce to the upside beginning any day now as the pros capitalize. Sometime between Jan 26th and the first day of trading in January the rebound will begin.
Quote
So today I sold some of my loser stocks for some sweet tax loss harvesting.
And that's part of what's driving this downward movement.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: justchristine on December 25, 2018, 01:08:19 PM
Quote
So today I sold some of my loser stocks for some sweet tax loss harvesting.
And that's part of what's driving this downward movement.

If that's the case, it'll rebound nicely in three days when my sales settle and I can buy vtsax. 😊
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: marty998 on December 25, 2018, 01:32:18 PM
Seems like a pretty violent crash for nothing really being particularly wrong, and not even in recession.
And the hedge fund managers are LOVING this downturn as the US economy is looking robust. When average Joe investors panic and sell low, watch for a bounce to the upside beginning any day now as the pros capitalize. Sometime between Jan 26th and the first day of trading in January the rebound will begin.

The hedge fund managers and the "pros" are not as bright as you give them credit for. Likely that most of their short positions in their long/short funds would have performed extremely poorly over the last few years. Hence the size of their portfolios would be much smaller than traditional long only funds would have grown to.

It's therefore easy now to show relative outperformance when you've got less to lose and your shorts *finally* come good. The problem is, bear markets are not as long as bull markets (in both size and duration), so unless you are a brilliant stock picker of both ups and downs, your traditional equal long/short portfolio (factoring in borrowing and transaction costs, as well as additional management fees) is never going to do as well as a long only fund.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 25, 2018, 06:22:24 PM
Another -2.7% in the S&P at market close.

S&P 500 is 19.2 20% down from market peak.
NASDAQ down 23.9%.
Wilshire down 21%
VTI down 21.2%

I never really understood the ďitís a short trading dayĒ so nothing is gonna happen argument.

Has been fascinating to observe my own emotional reactions in real time.

I guess reality proves that the short day before Christmas doesn't mean anything.  I assumed these guys would kick back and let things be the status quo, but I guess they had their marching orders to sell.  Live and learn.

Looks like a few of you folks are suggesting 3 percent.   The following article says that too. 

https://www.thebalance.com/how-much-can-you-withdraw-from-your-retirement-portfolio-453997 (https://www.thebalance.com/how-much-can-you-withdraw-from-your-retirement-portfolio-453997)

A lot of folks find part time jobs after they retire.  I guess that could make up the 1 per cent.

What puts the brakes on these falling stock values?  Do the big guys come in and start snatching up bargain stocks?  Does it stop when the assets of the corporations overwhelm the outstanding stock shares?
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 25, 2018, 07:22:48 PM
What puts the brakes on these falling stock values?  Do the big guys come in and start snatching up bargain stocks?  Does it stop when the assets of the corporations overwhelm the outstanding stock shares?

Lots of potential breaks on the fall. Dividend yields for the total stock market are up to about 2.4% after the latest price drop. As stock prices continue to fall (while earnings remain constant), stocks will become more and more financially appealing.

Other folks target P/E ratios or a certain % fall from the peak to start buying. Here in the thread TomTx is talking about pulling principle out of his house to invest if prices fall 40% from peak. There are a lot of people out there with a lot of money that they'll become willing to put into buying stocks at different price or P/E thresholds.

This is actually a graph from cryptocurrency, but the same principles apply in the regular stock market and this one looks nice.

(https://cdn-images-1.medium.com/max/1600/1*NjNZwgGH-jisDvbk7GvrOw.png)

The part in green show how many units (shares) people have standing orders to purchase as the price goes down. The part in orange shows how many units (shares) people already have standing orders to sell if the price goes up. The key take away here is that if I were to suddenly sell 40-50 units, I might be able to drive the price below $3880, but using up all the shares people are willing to buy at a given price gets harder and harder the further down we get from the current price.

You'll also see those vertical jumps in the green and red right at round price numbers. That's because more people will set their critical buy or sell price at round numbers (like $3850) then odd numbers (like $3852.45). This is why you'll hear people talking about "breaking through resistance" when, for example, the S&P 500 is close to crossing from 2499 to 2501. If it's going up, there are often more people willing to sell right around 2500 than at other prices. And if it's going down, there are often more people willing to buy right around 2500 than at other prices.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: bacchi on December 25, 2018, 07:54:59 PM
"Ladies and gentlemen, this is your pilot speaking. There is no reason for concern and the engines are functioning normally. That is all."

(Okay, but more seriously, this sounds more like either cluelessness on Mnuchen's part, or him trying to make it look to his boss like he's taking things seriously, rather than some sign of impending financial bad news, so I really wouldn't lose any sleep, pecunia. You've just gotta laugh at this sometimes.)

I'm pretty sure Trump screamed at Mnuchin to "FIX THIS NOW!!!!" over the weekend and this is Mnuchin's frantic and poorly
 thought out result.  Or maybe Mnuchin stands to personally benefit from a stock market dip so he's happy to be spreading some jitters with the cover of "my crazy boss made me do it!".

Yeah, I agree. Mnuchin asked "How high?" when Trump told him to jump. Unfortunately, Mnuchin didn't know enough about the delicacy of the position to just be quiet.

He may be out in the next few weeks, which could further rattle the markets. Or maybe there will be a sigh of relief.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: TomTX on December 26, 2018, 04:54:33 AM
You'll also see those vertical jumps in the green and red right at round price numbers. That's because more people will set their critical buy or sell price at round numbers (like $3850) then odd numbers (like $3852.45). This is why you'll hear people talking about "breaking through resistance" when, for example, the S&P 500 is close to crossing from 2499 to 2501. If it's going up, there are often more people willing to sell right around 2500 than at other prices. And if it's going down, there are often more people willing to buy right around 2500 than at other prices.

That's a really good point. Perhaps 39.5% off peak is a better trigger than 40% ;)
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: LAGuy on December 26, 2018, 08:34:02 AM
40% down seems awfully pessimistic to me. The economic backdrop is still good. The average downturn has been around 30%; my personal guess is we don't quite hit that, down 25 to 30 and the bottom. I think the start of earnings season in 2 weeks, will show decent earnings that continue to slightly beat expectations. I'd think things will settle down then and we'll get a bit of a rally, if not the final trough. 
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: Mighty-Dollar on December 26, 2018, 01:44:12 PM
Things just got better. Strongest holiday sales in years. Amazon reported record breaking orders.
Have you heard the phrase "Economists have predicted 10 of the last 3 recessions"?
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: aboatguy on December 26, 2018, 02:14:33 PM
Maybe, maybe not.  We'll see.

(https://vignette.wikia.nocookie.net/glitchtale/images/c/c0/Winner.jpg/revision/latest/scale-to-width-down/536?cb=20170808163446)

However, tomorrow may be a different story or it may be another good day.

Dead cat bounce, start of another rally?  "Maybe, maybe not We'll see!"
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: steveo on December 26, 2018, 02:26:25 PM
If I was already retired I would be tapping cash instead of selling stock at a loss but also remembering that the 4% rule works even in the worst of times and I would tie myself to the mast and hang on.

I just retired, and am living your nightmare.  It's not as bad you seem to think.  If the actual economy starts to show any cracks, I'll cut back on my spending a little.  So far, no change in my household. 

As a side note, if you're spending down cash/bonds instead of maintaining your asset allocation in retirement during a market crash, that is ALSO a type of market timing.  The danger is that you can exhaust your cash reserves now, and then the market can drop another 10% by next month, and then you're forced to sell even more stock at an even lower price than if you had just followed your plan and stuck to your chosen asset allocation.  The whole notion of "spend your cash first" is a risk-amplifying move, not a safety net.  You're better off selling everything in proportion, just like you were better off buying everything in proportion.

Thanks for this. I had always considered the option you listed above as a risk mitigator but now I see how that isn't true... (not that I'm anywhere near being able to utilize it).

I disagree with Sol on this point. I think having 2-5 years in defensive assets that you sell from when a bear market hits is a smart idea. McClung has a rule like only sell stocks when it is 1.2 times above your initial retirement point. If it isn't at that level sell bonds/use cash. Of course there may come a point when you have no choice but to use stocks and you can probably only fire that type of bullet once or twice.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: mjr on December 26, 2018, 02:38:30 PM
I disagree with Sol on this point. I think having 2-5 years in defensive assets that you sell from when a bear market hits is a smart idea. McClung has a rule like only sell stocks when it is 1.2 times above your initial retirement point. If it isn't at that level sell bonds/use cash. Of course there may come a point when you have no choice but to use stocks and you can probably only fire that type of bullet once or twice.

As do I.  I retired in August and due to my overly conservative nature and the fact that the market was red-hot, I kept many hundreds of thousands in cash.  I can outlast a 10 year long bear market :-)

Might I pay for this in terms of reduced returns over 30 years ?  Sure.  But my assets allocation is still 60% stocks, (or rather it was, I haven't recalculated it) and man it's worth it to be able to sleep so well during downturns like this.

I'll throw some decent amount into the market when the dust settles in the new year as well.  Looking forward to the higher returns on those sums.

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: HBFIRE on December 26, 2018, 02:55:46 PM

As do I.  I retired in August and due to my overly conservative nature and the fact that the market was red-hot, I kept many hundreds of thousands in cash.  I can outlast a 10 year long bear market :-)

Might I pay for this in terms of reduced returns over 30 years ?  Sure.  But my assets allocation is still 60% stocks, (or rather it was, I haven't recalculated it), but man it's worth it to be able to sleep so well during downturns like this.

I too keep a healthy cash reserve, but mostly because I have a large amount in my business.  I'm FI, but since my business continues to run on its own, I'm actually quite happy with keeping a large cash position in the business.  During market downturns the psychological impact of knowing I have a lot of cash reserves that can be drawn at anytime if absolutely needed is very comforting.  This has made me realize I could never be 100% exposed in stocks, it would cause me too much stress.  I'm perfectly happy with a 60-70% equity position even with a slightly less ROI.  The other nice side of this is when there is a downturn, I can inject a healthy amount of cash into the markets, which I was able to do on Christmas eve.
Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: pecunia on December 26, 2018, 04:21:29 PM
This is a nice bounce.  It jumped up about 5 percent today, nice.  I guess these are people making money on the dip. (the bounce)  Stocks are sort of a commodity just like oil or lumber.  They used to say oil was somewhat inelastic in price.  People needed oil to survive.

How elastic or inelastic are index funds?  One may not need them to survive until they retire.

I disagree with Sol on this point. I think having 2-5 years in defensive assets that you sell from when a bear market hits is a smart idea. McClung has a rule like only sell stocks when it is 1.2 times above your initial retirement point. If it isn't at that level sell bonds/use cash. Of course there may come a point when you have no choice but to use stocks and you can probably only fire that type of bullet once or twice.

As do I.  I retired in August and due to my overly conservative nature and the fact that the market was red-hot, I kept many hundreds of thousands in cash.  I can outlast a 10 year long bear market :-)

Might I pay for this in terms of reduced returns over 30 years ?  Sure.  But my assets allocation is still 60% stocks, (or rather it was, I haven't recalculated it) and man it's worth it to be able to sleep so well during downturns like this.

I'll throw some decent amount into the market when the dust settles in the new year as well.  Looking forward to the higher returns on those sums.


People on this website are certainly disciplined.  Most folks live paycheck to paycheck.

Title: Re: So we're basically on track for a bear market by tomorrow?
Post by: maizeman on December 26, 2018, 04:49:57 PM
Stocks are sort of a commodity just like oil or lumber.  They used to say oil was somewhat inelastic in price.  People needed oil to survive.

How elastic or inelastic are index funds?  One may not need them to survive until they retire.

I would argue stocks are quite different from a commodity, and (part*) of the reason is that elasticity. In a commodity, like oil, when the price goes up people buy less and when the price goes down people buy more. How big a change in purchasing you get for a given change in price is what determines the elasticity of that particular commodity.

Stocks are different in that, when the price goes up, people buy more and when the price goes down people buy less.

*A much bigger part of the difference is that the expected annual return of owning stocks is positive. Price fluctuations happen when people change their minds about HOW positive. In contrast for commodities the expected annual return is zero.