Author Topic: So we're basically on track for a bear market by tomorrow?  (Read 12658 times)

FIRE47

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So we're basically on track for a bear market by tomorrow?
« 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.


Frankies Girl

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #1 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.

bwall

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #2 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.

OurTown

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #3 on: December 20, 2018, 12:49:25 PM »
Maybe, maybe not.  We'll see.

harvestbook

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #4 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.

marty998

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #5 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.

caracarn

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #6 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.

fattest_foot

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #7 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.

soccerluvof4

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #8 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

OzzieandHarriet

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #9 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.

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #10 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


OzzieandHarriet

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #11 on: December 20, 2018, 05:39:05 PM »
Imagine whatíll happen tomorrow after todayís Mattis announcement.

effigy98

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #12 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%

bwall

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #13 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. 

HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #14 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.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #15 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.

Mighty-Dollar

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #16 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.

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #17 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.




SwordGuy

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #18 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. :)

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #19 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.

MrThatsDifferent

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #20 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)

Radagast

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #21 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.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #22 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.

Radagast

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #23 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.

sol

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #24 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.

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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.

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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.

sol

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #25 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.
« Last Edit: December 20, 2018, 09:29:17 PM by sol »

Roland of Gilead

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #26 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.

« Last Edit: December 20, 2018, 09:25:16 PM by Roland of Gilead »

ILikeDividends

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #27 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.
« Last Edit: December 20, 2018, 10:17:56 PM by ILikeDividends »

MaaS

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #28 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.


HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #29 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.
« Last Edit: December 20, 2018, 10:50:52 PM by dustinst22 »

MrThatsDifferent

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #30 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.

HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #31 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/

« Last Edit: December 20, 2018, 11:25:45 PM by dustinst22 »

Radagast

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #32 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.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #33 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.

HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #34 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

Radagast

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #35 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.

HBFIRE

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #36 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?

Radagast

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #37 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%.

marty998

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #38 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.

Radagast

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #39 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

marty998

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #40 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


Maenad

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #41 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.

Blueberries

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #42 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. 

pecunia

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #43 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.

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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?

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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.

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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.

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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. 

dogboyslim

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #44 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>
« Last Edit: December 21, 2018, 08:52:02 AM by dogboyslim »

dude

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #45 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).

WhiteTrashCash

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #46 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.

wenchsenior

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #47 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.

dogboyslim

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #48 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.

maizeman

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Re: So we're basically on track for a bear market by tomorrow?
« Reply #49 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.