What Event, If Any, Would Make You Sell?

[Incandenza]

Most people around here are sturdily allegiant to historical precedent, firmly anti-market timing, and extremely unlikely to sell based on daily events.  This is all well and good.   

But recent news had made me consider the possibility that we may experience a major event in our lifetime that does not have historical precedent.  So here's the question: is there any event that is currently within the realm of possibility that would make you cash out your stache? 

I know "realm of possibility" is a little squishy, so I'll start with one example.

In the event of a nuclear attack on American territory by North Korea, would you sell (either all or some of your stache), or happily ride out the inevitable market collapse and keep buying?     

To be clear, I'm not advocating for selling in this context or any other.  I'd like to think that I wouldn't sell in this scenario, although my emotions may get the better of me.  I'm simply curious what, if anything, would test our firmly held principles. 

[ixtap]

What makes you think the markets would even be open in the event of a nuclear attack?

People consistently ask how to financially prepare for doomsday. You can't. You can stockpile, build an ark, dig a bunker, but the only possible financial preparation is to be sure you have large sticks of food, water and shelter, as well as the means and the will to protect them.

[Cycling Stache]

is there any event that is currently within the realm of possibility that would make you cash out your stache?   

Yes.  If I need the money for something.  Otherwise, no.

You have to make decisions based on the available information.  So far, one of the key consistencies in the market is that, in fact, no time in history has been different.  Nothing has been so uniquely bad as to destroy the market long term.  And if it's something worse than what's happened in the last 100 years, the size of your portfolio probably isn't the most important factor at that point.

P.S.  If you're still investing, you ALWAYS want the market to go down.  You want it to go down and down and down until you actually need to sell.  That way you're always buying at a cheaper price.  It's counterintuitive, but every time you cheer when the market goes up before you put money in (or while you're in the accrual stage), you're actually being an idiot.  Of course, I do it all the time, which is why I have all my investments automated.

[Caoineag]

The super volcano in Yellowstone blowing, World War III, release of a super plague with a 90% kill rate, aka anything that could/would destroy civilization or at least the US. I would then immediately turn that cash into supplies since cash would be of no value either.

Basically, any event that would make US dollars worthless, would warrant selling and converting into supplies. But as long as US dollars are a valid currency, I will only sell as I need money.

[Stimpy]

If some "Yuge" moron got elected president.... Oh wait...

Guess that mean I won't sell for that.   

In truth, anything that would make me sell, would drop the market to zero and in that case well were all fucked anyway so it doesn't really matter. 

If your looking to preserve wealth in a doomsday event, you should invest in the 4 basics.   Food, Water, Shelter(with lots and lots of open space) and friends(You're going to need an army to protect that stuff so...).  Good luck for anyone doing that.

[Incandenza]

And if it's something worse than what's happened in the last 100 years, the size of your portfolio probably isn't the most important factor at that point.

I generally agree, but my example was something worse than what's happened in the last 100 years.  We've never experienced a nuclear attack on US territory.  When we are so reliant on historical precedent, what analysis do we use when confronted with major events without any precedent? 

To be fair, you answer this by saying that "nothing has been so uniquely bad as to destroy the market long term."  And that's certainly been true for other major events like 9/11.  Uniquely bad things happen all the time, and the market has cheerfully ignored them all in the long run. 

I suppose my question is simply whether there are any conceivable events of such magnitude that we might doubt this principle, and whether a nuclear attack might be one of them.     

[joonifloofeefloo]

No event would. This is because until I figure out a way to make the money more useful -like solving multiple people's housing or food-access issues- I view the invested amount as near useless. I'd need something to sell it for, and am working on that. In the meantime, in relation to my current knowledge I view Canadian dollars in my HCOLA as a stack of Guarani. If an event reduced the value, it would still be a stack of Guarani.

[JAYSLOL]

The super volcano in Yellowstone blowing, World War III, release of a super plague with a 90% kill rate, aka anything that could/would destroy civilization or at least the US. I would then immediately turn that cash into supplies since cash would be of no value either.

Basically, any event that would make US dollars worthless, would warrant selling and converting into supplies. But as long as US dollars are a valid currency, I will only sell as I need money.

+1 for the super volcano and super plague.  If WWIII was like I and II (almost exclusively in Europe, Africa and Asia), I don't think I'd sell, if it's as bad in North America as is was for Europe last time then yes, I'd probably sell.

[Cycling Stache]

And if it's something worse than what's happened in the last 100 years, the size of your portfolio probably isn't the most important factor at that point.

I generally agree, but my example was something worse than what's happened in the last 100 years.  We've never experienced a nuclear attack on US territory.  When we are so reliant on historical precedent, what analysis do we use when confronted with major events without any precedent? 

To be fair, you answer this by saying that "nothing has been so uniquely bad as to destroy the market long term."  And that's certainly been true for other major events like 9/11.  Uniquely bad things happen all the time, and the market has cheerfully ignored them all in the long run. 

I suppose my question is simply whether there are any conceivable events of such magnitude that we might doubt this principle, and whether a nuclear attack might be one of them.   

You're not thinking big enough.  9/11 was a tragedy, but it killed 3,000 people.  World War II--along with the concentration camps and Stalin's own purging--killed somewhere between 60 million and 100 million people.

How'd the market do after that?

Again, the question I think you're asking is to imagine a catastrophic event, and what I'm suggesting is that for an event or episode to be materially worse than anything that's happened in the last 100 years, it's hard to image how the money you have invested versus in cash versus whatever is going to be an important question.

Someone posted a good timeline of all the events that have happened every year in the last 100 years while the market has--over the long-term--steadily marched upwards.  You should try to find it because it's a nice graphic example of the point.

[JAYSLOL]

The super volcano in Yellowstone blowing, World War III, release of a super plague with a 90% kill rate, aka anything that could/would destroy civilization or at least the US. I would then immediately turn that cash into supplies since cash would be of no value either.

Basically, any event that would make US dollars worthless, would warrant selling and converting into supplies. But as long as US dollars are a valid currency, I will only sell as I need money.

+1 for the super volcano and super plague.  If WWIII was like I and II (almost exclusively in Europe, Africa and Asia), I don't think I'd sell, if it's as bad in North America as is was for Europe last time then yes, I'd probably sell.

Also, add alien invasion to my list

[Space Pickle]

Hitting my FI number.

[Incandenza]

what I'm suggesting is that for an event or episode to be materially worse than anything that's happened in the last 100 years, it's hard to image how the money you have invested versus in cash versus whatever is going to be an important question.

Yup, I've seen that graphic and think this is well stated.  Still, if the nuclear fire rains down or a good-size chunk of the pacific north-west  is swallowed into the ocean, you may need to cycle over to my local bar and give me a quick pep-talk. 

   

[talltexan]

And if it's something worse than what's happened in the last 100 years, the size of your portfolio probably isn't the most important factor at that point.

I generally agree, but my example was something worse than what's happened in the last 100 years.  We've never experienced a nuclear attack on US territory.  When we are so reliant on historical precedent, what analysis do we use when confronted with major events without any precedent? 

To be fair, you answer this by saying that "nothing has been so uniquely bad as to destroy the market long term."  And that's certainly been true for other major events like 9/11.  Uniquely bad things happen all the time, and the market has cheerfully ignored them all in the long run. 

I suppose my question is simply whether there are any conceivable events of such magnitude that we might doubt this principle, and whether a nuclear attack might be one of them.   

You're not thinking big enough.  9/11 was a tragedy, but it killed 3,000 people.  World War II--along with the concentration camps and Stalin's own purging--killed somewhere between 60 million and 100 million people.

How'd the market do after that?

Again, the question I think you're asking is to imagine a catastrophic event, and what I'm suggesting is that for an event or episode to be materially worse than anything that's happened in the last 100 years, it's hard to image how the money you have invested versus in cash versus whatever is going to be an important question.

Someone posted a good timeline of all the events that have happened every year in the last 100 years while the market has--over the long-term--steadily marched upwards.  You should try to find it because it's a nice graphic example of the point.

Some have argued that the substantial public investment in the US motivated by the War effort was what set off the long economic boom in the quarter-century that followed.

[YoungInvestor]

There isn't a single situation which would:
1) Make me sell out.
2) Result in a market still being there at roughly the current levels.

[fattest_foot]

I generally agree, but my example was something worse than what's happened in the last 100 years.  We've never experienced a nuclear attack on US territory.  When we are so reliant on historical precedent, what analysis do we use when confronted with major events without any precedent? 

To be fair, you answer this by saying that "nothing has been so uniquely bad as to destroy the market long term."  And that's certainly been true for other major events like 9/11.  Uniquely bad things happen all the time, and the market has cheerfully ignored them all in the long run. 

I suppose my question is simply whether there are any conceivable events of such magnitude that we might doubt this principle, and whether a nuclear attack might be one of them.   

That's because a secondary effect of the market being destroyed is the dollar being destroyed along with it. I guess that's the scenario I can't think of. There's no scenario that I can imagine that is so bad that all public companies in the United States are evaporated where anyone gives a crap about dollar bills.

Similarly, there's no scenario where all public companies in the United States are evaporated that doesn't take the entire world economy down with it. So being internationally diversified doesn't do much for you either.

[Spitfire]

Nothing. IMO anything that can crash the market to zero and keep it there would also render the dollar worthless, so even if I sold it wouldn't be worth anything.

[talltexan]

Wouldn't a weaker form of the question be more interesting: what kind of event would it take to decrease your stock allocation by 25% (i.e. cut it from 75% stocks to 50% stocks)?

[GuitarStv]

And if it's something worse than what's happened in the last 100 years, the size of your portfolio probably isn't the most important factor at that point.

I generally agree, but my example was something worse than what's happened in the last 100 years.  We've never experienced a nuclear attack on US territory.  When we are so reliant on historical precedent, what analysis do we use when confronted with major events without any precedent? 

To be fair, you answer this by saying that "nothing has been so uniquely bad as to destroy the market long term."  And that's certainly been true for other major events like 9/11.  Uniquely bad things happen all the time, and the market has cheerfully ignored them all in the long run. 

I suppose my question is simply whether there are any conceivable events of such magnitude that we might doubt this principle, and whether a nuclear attack might be one of them.   

You're not thinking big enough.  9/11 was a tragedy, but it killed 3,000 people.  World War II--along with the concentration camps and Stalin's own purging--killed somewhere between 60 million and 100 million people.

How'd the market do after that?

The US market benefited tremendously from WWII.

[BTDretire]

If a nuclear bomb exploded on US soil,
Would we take weeks to analyze the situation to verify who did it?
Or would we take out Iran and North Korea and what ever parts of ISIS we could find,
and then try to figure it out?

[bobechs]

If a nuclear bomb exploded on US soil,
Would we take weeks to analyze the situation to verify who did it?
Or would we take out Iran and North Korea and what ever parts of ISIS we could find,
and then try to figure it out?

You left out Great Britain, France, India, Pakistan and Israel, I can't imagine why; we have enough ordnance for them and more.  Maybe add Taiwan, Japan, Germany, Poland and South Africa for additional (homeland) security.

[GuitarStv]

If a nuclear bomb exploded on US soil,
Would we take weeks to analyze the situation to verify who did it?
Or would we take out Iran and North Korea and what ever parts of ISIS we could find,
and then try to figure it out?

You left out Great Britain, France, India, Pakistan and Israel, I can't imagine why; we have enough ordnance for them and more.  Maybe add Taiwan, Japan, Germany, Poland and South Africa for additional (homeland) security.

+1

Based on past actions (Iraq / 9/11 for example) and current leadership I figure that the US would start nuking immediately without any idea what they're doing or why.

[tooqk4u22]

So here's the question: is there any event that is currently within the realm of possibility that would make you cash out your tache? 
.
.
.
In the event of a nuclear attack on American territory by North Korea, would you sell (either all or some of your stache), or happily ride out the inevitable market collapse and keep buying?     

If there is an event that causes you to sell, by that point it is too late and probably the worse time to sell.

If there was a nuclear attack on US then all markets would be shut down....and it doesn't even matter bc there was nuclear attack and we are all pretty much screwed - except for those crazy ass preppers (buy stock in them)

[SimpleSpartan]

Pigs flying on a snowy day during a July summer in Seattle.

[Dicey]

None of the above.

[2Birds1Stone]

If I find a good deal on a Lamborghini Huracan

[human]

If some drastic event took place it would be too late to sell. Some people spend all their money on "preps", if that floats your boat maybe you should check out the survivalist boards. I admit I've always thought I should have at least a month's worth of food on hand, but I'm just not good at rotating so it would probably go to waste and I hate freeze dried stuff.

I think a balance is probably a good idea although I will most likely never get there. Why not start some raised beds if you have the space in your yard? If a nuke hits you though not much help, if not have some tarp to cover the soil. There's tons of stuff you could do. Personally I'd rather have funds for retirement than work forever and prep at the same time.

[maizefolk]

As several others have said, it's hard to imagine that markets would be open in these most extreme scenarios or that, if they were, anyone would be buying stocks. So the decision would pretty much be made for you. If some event caused the stock market to drop 99% and I didn't need the money, I'm not sure I'd sell. At that point it would seem like either the market was going to bounce back and I'd make a killing, or civilization was going to collapse and none of it would matter.

So really, maybe your question is you knew X was going to happen tomorrow, but you could still sell your stocks today at pre-X prices, would you? And yes, with perfect foreknowledge that wasn't shared by everyone else buying and selling stocks there a lots of events that would make me get out of stocks temporarily.

[human]

I remember seeing a blog from someone who fled katrina. What was quite interesting was setting up your life in another location. I thought the document checklist was a great chapter. Of course I'm lazy and haven't done any of this:

http://theplacewithnoname.com/blogs/klessons/index.html

[triangle]

After an extreme event there will surely be sellers, but IMO it will be too late to profit so I do not even think about it. I have wondered about strategies espoused by people like Nassim Taleb ("The Black Swan" author). I believe he uses a very conservative investing strategy with 95+% of his money invested in treasuries and other safe investments and a few % invested in very low probability events with huge payoffs. Where he does not expect to make money in most years but capture outsized gains when the unexpected event happens.

[talltexan]

A less extreme version of Taleb's "Barbell" that you describe is Larry Swedroe's recommended portfolio, which is 70% fixed income, but allocates the 30% stock portion to small cap value stocks, which imply higher risk and return than the VTSAX approach.

[VoteCthulu]

In order of descending likelyhood:
1) Some type of brain trama, like a stroke or lobotomy.
2) Needing it for survival, like a zombie apocalypse or being hunted by the mafia.
3) A massive windfall, like winning a billion dollar lottery.
4) Someone convinces me that some other investment is better (gold, t-bills, betting it all on red, etc.).

[theolympians]

Sell when you are FI. Until then continue to dollar-cost average. If there is a crash due to some catastrophe, continue to dollar-cost average. You will be buyingshares at a discount.

An assumption in the original post is that there will be something so out of the norm that "everything will change". There are many events that periodically shock the world. Pearl Harbor for one. The world always returns to stability, though it may take time.

A nuclear event would be an issue, but it would not be world ending......

[arebelspy]

Someone posted a good timeline of all the events that have happened every year in the last 100 years while the market has--over the long-term--steadily marched upwards.  You should try to find it because it's a nice graphic example of the point.

Bumping an old thread, but does anyone have this chart handy? A good reminder for people with the Coronavirus drop going on.

Cheers!

[Insect Overlord]

This one??

[arebelspy]

No, it was more like a chart that listed
1980 - bad event
1981 - bad event
1982 - bad event

etc.

Basically giving a reason every year why you wouldn't invest.

Sort of like this:
https://www.thebalance.com/u-s-gdp-growth-3306008

But more heavy emphasis on the event part, and no GDP.

[ChpBstrd]

1) Getting cancer or some other devastating illness that allows the U.S. medical/drug/insurance industries to extort me in exchange for my survival.
2) Becoming addicted to something. This seems to be a common pitfall no one sees coming.
3) A mental illness with symptoms such as delusions of grandeur that make me think I can time the markets or follow some guru's "system".
4) Joining a religion and drinking all the kool aid. Becoming convinced that giving my money to the leader will buy me magical favors or an afterlife.
5) I'm thinking about buying an apartment complex.

[Monerexia]

Someone posted a good timeline of all the events that have happened every year in the last 100 years while the market has--over the long-term--steadily marched upwards.  You should try to find it because it's a nice graphic example of the point.

Bumping an old thread, but does anyone have this chart handy? A good reminder for people with the Coronavirus drop going on.

Cheers!

https://www.businessinsider.com/how-stocks-react-geopolitical-events-2014-3

[arebelspy]

Not quite, but similar vein.

It listed one event for every year, IIRC, in what looked like a chart made in excel--it was a grid, if I recall correctly.

Anyone remember this?

It was pretty similar to this:
https://acmwealth.com/article-video/reasons-not-to-stay-invested/

Though in a grid visually.

And that will serve close enough, I guess, if no one has it. It went back a lot further (maybe back to 1900? Or at least the Great Depression) though.

[mrmoonymartian]

It went back a lot further (maybe back to 1900? Or at least the Great Depression) though.

Like this one?

https://ei.marketwatch.com/Multimedia/2017/03/23/Photos/NS/MW-FI823_DowCor_20170323160402_NS.png?uuid=dc21ed9a-1003-11e7-9078-001cc448aede

[talltexan]

I think many people have too low an allocation to bonds. Those people may have a chance to figure out who they are with the drops that have been going on over the past week.

I was in the "lump sum or DCA" situation with my health savings account. Rather than keep it out of the market, I opted to put about 40% of it back in immediately. a 40-60 allocation seems like it ought to get me through this corona virus period.

[FireLane]

Not quite, but similar vein.

It listed one event for every year, IIRC, in what looked like a chart made in excel--it was a grid, if I recall correctly.

Is this the one you meant, @arebelspy?

https://www.ci.com/orderform/pdf/general_marketing/idontwant_flyer_e.pdf

[talltexan]

Update: market has been doing amazingly well, I've missed opportunities to increase that 40% risky to something that better reflects my age, but I haven't. Now I'm caught in the trap of waiting for that double dip (which may never come).

[DalioGold10]

Update: market has been doing amazingly well, I've missed opportunities to increase that 40% risky to something that better reflects my age, but I haven't. Now I'm caught in the trap of waiting for that double dip (which may never come).

The double dip may never come.
If it comes, then all the "smart" money sitting sideways expecting the next crash will definitely jump back in at the first sign of crash/correction hence tempering the downfall.

[Buffaloski Boris]

Well, what sort of scenario are you talking about?  Something along the lines of world war?  We already have data for countries that went through one. Overall, they do fine in the long run.  Credit Suisse tracks earnings over time.  Even the losing countries did OK, such as Germany and Japan.  The countries that don't do so well are the ones that become communist. A country on the verge of going communist is probably a very good "sell" signal.

Overall I think the best strategy is to diversify across assets and countries in any case. 

You can download the CS global returns summary here.  Scroll down:
https://www.credit-suisse.com/about-us-news/en/articles/news-and-expertise/esg-investing-a-trend-that-is-constantly-evolving-202002.html
   

[waltworks]

A massive RE crash might. If I had access to piles of $50k properties that rent for $1500/mo like happened briefly during the housing crisis, and simultaneously my stock investments were doing great, I'd liquidate at least half of my stocks and put the money in RE.

Same with any other asset class, I guess. If for some bizarre reason stocks were totally decoupled from other available assets and I could get those other assets super cheap, I'd do it.

I can't see a massive housing crash happening with a near-record high stock market, but you never know.

-W

[JAYSLOL]

A massive RE crash might. If I had access to piles of $50k properties that rent for $1500/mo like happened briefly during the housing crisis, and simultaneously my stock investments were doing great, I'd liquidate at least half of my stocks and put the money in RE.

Same with any other asset class, I guess. If for some bizarre reason stocks were totally decoupled from other available assets and I could get those other assets super cheap, I'd do it.

I can't see a massive housing crash happening with a near-record high stock market, but you never know.

-W

+1. Count me in if I can buy up good rentable properties sub-100k (meaning an 80%+ drop in my area), I’d sell the heck out of stocks if they were at all-time highs and houses were in the dumpster.  I also doubt that’s likely to happen. 

[mrmoonymartian]

A massive RE crash might. If I had access to piles of $50k properties that rent for $1500/mo like happened briefly during the housing crisis, and simultaneously my stock investments were doing great, I'd liquidate at least half of my stocks and put the money in RE.

Same with any other asset class, I guess. If for some bizarre reason stocks were totally decoupled from other available assets and I could get those other assets super cheap, I'd do it.

I can't see a massive housing crash happening with a near-record high stock market, but you never know.

-W

+1. Count me in if I can buy up good rentable properties sub-100k (meaning an 80%+ drop in my area), I’d sell the heck out of stocks if they were at all-time highs and houses were in the dumpster.  I also doubt that’s likely to happen.

Because there are too many people who will do exactly what you are proposing - hence the coupling.

[SwordGuy]

There are only a few reasons I would sell our stock/bond portfolio.

1) We need the cash for expenses.   For example, we needed a down payment and that required cash.

2) We wanted to invest in some rental property because we found a great deal.

3) We wanted to get out of the US market because the government was taken over by fascists; we're fleeing the country; and we don't want the US government to be able to get its hands on our wealth when we do.  This would not have been on my list of reasons 5 years ago.

[ChpBstrd]

A massive RE crash might. If I had access to piles of $50k properties that rent for $1500/mo like happened briefly during the housing crisis, and simultaneously my stock investments were doing great, I'd liquidate at least half of my stocks and put the money in RE.

Same with any other asset class, I guess. If for some bizarre reason stocks were totally decoupled from other available assets and I could get those other assets super cheap, I'd do it.

I can't see a massive housing crash happening with a near-record high stock market, but you never know.

-W

+1. Count me in if I can buy up good rentable properties sub-100k (meaning an 80%+ drop in my area), I’d sell the heck out of stocks if they were at all-time highs and houses were in the dumpster.  I also doubt that’s likely to happen.

You should be selling far-OTM puts on NLY or AGNC. Earn a double digit yield until you basically get a bunch of foreclosures when the housing crisis hits.

[MustacheAndaHalf]

For those wondering why there hasn't already been a housing crisis, most states I checked have halted foreclosures.