Baby Billy said:

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YouBet said:

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jamey said:

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OldArmyCT said:

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The Stable Value fund in your 401-K is the worst possible option unless your goal at retirement is to retire with the same amount of money as you contributed. One of the best things that ever happened to my 401-K was the 2008-09 meltdown, I reallocated and upped my % of contributions, never looking back. It's dang near impossible to time the market but it's fairly easy to take advantage of a falling market.

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I'm talking about a financial crisis, to protect capital, not a 10 year investment

You don't even move 10% out or anything, just ride it down and back up?

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You can always hedge and do something like this. Add depends on your personal risk comfort. I'm currently heavy in cash and not reinvesting some of my dividends. But I'm also probably older than you and further along with my financial plan.

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I can't ever remember seeing a good financial plan that included being heavy in cash and not reinvesting dividends. Unless you're trying to build up a cash reserve so you can afford to be heavier in equities throughout your retirement or if you're currently retired and using those dividends for income.

There's no absence of risk with investing, it's just what risk you're willing to accept. There's probably more risk in your retirement years in being too conservative than there is in holding majority equities. The risk in being too conservative is that cost of living increases slowly erode your purchasing power during your retirement and your 'fixed' income can't keep up. You either run out of money and live on your kids couch, or you just steal from their inheritance because you can't handle temporary declines in your portfolio value.

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Heavy in cash for me is two years of living which it looks like you recommend anyway. I say heavy because most times you see six months in the literature. That just isn't enough IMO.

And my dividend reinvestments are more because I'm building up for a drop in the market. Keep in mind we are already above and beyond where we thought we would be at 50. I could retire now if I wanted to and live off the rest of assets outside of this cash I've hoarded.

It's logically unfathomable that we don't crash or take a massive dump in the market in my lifetime. The math says we have to. But will we? Who the hell knows. We are already in uncharted territory as a country and maybe they will band-aid our death for many years to come.

It's all about aligning your investments with your risk tolerance. Early in my career I was 100% in aggressive growth funds and didn't think a thing about it. I'll retire in about four years and I'm 60% cash and 40% bonds. A significant part of my income has been equity compensation so I've benefitted from the market even though not directly invested in it. Cash in a Roth earning 5.25% is essentially an 8% return pre-tax which isn't bad. My goal has been to live comfortably off the dividends/interest of my portfolio and not touch the principal. I'm on track. Would be foolish to risk it now for even more gains when I don't need the extra juice.

If the market falls precipitously and most people want out of stocks, then I'll step in and pick up some good bargains. Until then, steady as she goes.

Totally understand and support those with an appetite for more risk and return. Good luck.

Of course the market will crash. It happens all the time and the end result is always the same. Full recovery and then new highs.

Heineken-Ashi said:

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Baby Billy said:

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Of course the market will crash. It happens all the time and the end result is always the same. Full recovery and then new highs.

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Why is that always the end result?

These kinds of posts are dangerous as they assume that the economic backdrop going forward will be the same as looking back. And it won't.

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Not dangerous at all actually. I said the end result is always the same, which is factually correct. I made no assumptions about the economic backdrop because it doesn't matter.

Since the end of WWII, we've gone into a recession about once every 6 years. I count 12 "official" recessions since then, each one of them for different reasons and circumstances. 87% of those months we've been in economic expansion, 13% in recessions. Over that time frame the S&P has gone from 17 at the end of 1945 to 5,300 today. These are facts.

Baby Billy said:

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Heineken-Ashi said:

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Baby Billy said:

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Of course the market will crash. It happens all the time and the end result is always the same. Full recovery and then new highs.

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Why is that always the end result?

These kinds of posts are dangerous as they assume that the economic backdrop going forward will be the same as looking back. And it won't.

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Not dangerous at all actually. I said the end result is always the same, which is factually correct. I made no assumptions about the economic backdrop because it doesn't matter.

Since the end of WWII, we've gone into a recession about once every 6 years. I count 12 "official" recessions since then, each one of them for different reasons and circumstances. 87% of those months we've been in economic expansion, 13% in recessions. Over that time frame the S&P has gone from 17 at the end of 1945 to 5,300 today. These are facts.

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Bolded part 1 - how does it not matter? Please explain in detail

Bolded part 2 - "Since the end of WWII". You mean the last time we had debt to GDP at levels we are today, that was caused FROM war spending and ended because of the boom that ensued with America leading a new world order, and leading the charge of world gold standard (which led to the rise of the MMT and fractional central banking and the petrodollar becoming the world reserve currency)? And we are at the same debt levels, adding $1T every 100 days, with record deficits that require new treasuries to be issued merely to pay the interest on the existing debt?

When I say the economic backdrop will not be the same going forward as it was in the past, this is exactly what I'm referring to. It will not be the same for the next 2-3 decades as it was the 2-3 decades that led to this. Because our government has to go exponentially more in debt just to pay interest on existing debt. No dent can ever possibly be made in the balance on the debt. No dent can really even be made in the deficit. The FED has a massive balance sheet that THEY DIDNT HAVE DURING ANY OTHER RECESSION OR STOCK MARKET DROP. This means that in previous drops, the treasury could issue loads of new treasuries, the FED would buy ALL OF THEM, and the FED would then loan 10x that amount of money to banks who would then loan 10x of THAT amount to the economy. This is how they "printed money".

Treasury issues $1,000. FED buys it all (demand all from one source pushing rates down). FED has to keep 10% of every dollar loaned as reserves. So that $1,000 is the reserve. They can now loan $10,000 to the banks. Banks have to keep 10% of every dollar loaned in reserves. So they can now loan $100,000. And we aren't even getting to the derivative portion of new money creation. So for every $1,000 in treasuries issued, the money supply grows by at least $100,000.

That WAS how they did it. Until Dodd Frank and 2008 (for our own good remember). Where instead of the treasury simply issuing new treasuries for the FED to buy, the FED forced the banks to GIVE THEM THEIR DEPOSITS (your money in the bank). They then went through the same process as the above, except the money wasn't from newly minted treasuries, IT WAS THE TAXPAYERS MONEY. AND IT WILL NEVER BE PAID BACK (go back to paragraph 1 to see why).

And today, the FED has a MASSIVE balance sheet, whereas before, they didn't. Times before.. they had the capacity to add treasuries to their balance sheet. If they tried today, even at lower rates of interest payback, they would BALLOON their interest payments which already account for more than the defense budget.

So what WILL happen? No matter if they try the old method or not, there is no situation that doesn't end in catastrophe. Even without the FED doing QE and adding treasuries to their balance sheet, the interest on the debt is going to continue to require new treasuries to be issued merely to pay for the interest. The secondary market (foreign governments, central banks, global businesses, you, and me) can not keep buying an ever increasing amount of treasuries and getting chump change rates of return. If they are going to have to buy more, they will start to demand a better return. This will push market interest rates up higher and higher.

The FED doesn't ever act against what the market is doing. Go look it up. The market goes up? The FED follows. Rates drop? The FED follows. Rates going up means FED rates will follow. Governments, businesses, everyone will have to refinance balances secured at lower rates into these higher rates. The only outcome of this is a STRENGTHENING dollar (its called a deleveraging), and every single thing remotely tied to debt declining in relation to it. If a stock is at $100 today with a P/E of $10 with 10yr yields at 4.4%, that same PE will be at a lower stock price with rates at 6.5%. And very likely.. the P/E itself will be lower as interest takes up a MUCH larger chunk.

How can you say the economic backdrop doesn't matter? The only way it doesn't matter is if you live in fairy tale land and think the FED can wave a magic wand. Or if you just don't understand money, banking, economics, or history and think that if you just close your eyes and keep telling yourself that "it's never happened in my lifetime" that it won't ever happen again. You are in for a rude awakening.

jamey said:

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Is the stable value fund in our 401Ks safer than all.the other options?

Like bond funds or just leaving in the S&P fund...etc

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Quote:

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I'm talking about a financial crisis, to protect capital, not a 10 year investment

You don't even move 10% out or anything, just ride it down and back up?

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Looks like we've strayed pretty far afield of the initial poster's question. My thoughts:

- Trying to time the market is usually a loser's game, and you can do yourself a huge disservice by swapping in and out of the market repeatedly, as you invariably will mistime the tops and bottoms of the market trend. Probably the worst thing that could happen is that you time it pretty well on your first effort, which then causes you to erroneously believe you have talent at this, and inevitably are proven wrong through repeated efforts.

- Instead of taking 10% out of the market and putting it in stable value, consider taking 1% and buying well out of the money (10-20%) put options on your most worrisome index dated 3-6 months out. If you still feel nervous upon options expiration 3-6 months later, buy some more. This can assuage your discomfort from market risk, and while it won't perfectly insulate your portfolio, it serves as some basic "insurance" and will give you a measure of peace of mind toward market risk. If a crash happens, you make money, and if not, you are probably better off than earning stable value returns during that time. It also keeps the rest of your money working in the market, which is time-proven to be the best method of building portfolio value.

NOTE: I'm not recommending this for you specifically, jamey, but for someone who has options approval and has traded options in the past.

Baby Billy said:

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Heineken-Ashi said:

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Baby Billy said:

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Of course the market will crash. It happens all the time and the end result is always the same. Full recovery and then new highs.

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Why is that always the end result?

These kinds of posts are dangerous as they assume that the economic backdrop going forward will be the same as looking back. And it won't.

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Not dangerous at all actually. I said the end result is always the same, which is factually correct. I made no assumptions about the economic backdrop because it doesn't matter.

Since the end of WWII, we've gone into a recession about once every 6 years. I count 12 "official" recessions since then, each one of them for different reasons and circumstances. 87% of those months we've been in economic expansion, 13% in recessions. Over that time frame the S&P has gone from 17 at the end of 1945 to 5,300 today. These are facts.

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Those are facts from a rear-looking view, yes. Assuming the future will be a mirror image of it can be mistaken. Could be better, could be worse.

Look at Japan. Their Nikkei crashed in 1989 and it took 34 years to recover. Doesn't mean it will happen here, or won't.

One thing I've taken note of from some scholars is the past 40 years or so have been exceptional for US stocks. During that period interest rates were on a steady decline and so were tax rates. That contributed to robust S&P earnings, and low interest rates also supported a higher PE multiple because of a lack of alternatives.

Given the backdrop of our national debt and unfunded liabilities like SS and Medicare, where do we think interest rates and taxes are headed in the future? Hmmm, more likely up than flat or down. Will that impact S&P earnings and the PE multiple over time? Remains to be seen. If you're young and have plenty of time to recover from a sharp falloff, probably not much to worry about. If you're older and about to draw on those investments, you might want to dial down the risk exposure. But that's just me... to each their own. Good luck.

I understand what you're saying, but it's very much an extrapolating. At the rate we're going it's reasonable to assume it will become an issue at some point. Nobody knows when that point is, however. People have been screaming the national debt issue for years and most would probably tell you were on the edge of collapse trillions and trillions of dollars ago. It's the mother of all unknowns. It's hard for people trying to make rational investment decisions in 2024 to base those decisions on something that may or may not happen, and even if it does happen nobody has any clue when.

Yes, certainly rear-looking. But history is the only guide we have. You can't form a long-term investment policy based on current events. Nobody can consistently forecast the economy or markets, but you can look at history and see that no matter the varying causes of past recessions/downturns, the businesses that turn the wheels for our economy have evolved, adapted, or innovated in whatever way was needed to continue growing.

I'll continue to base my investment decisions on that.

Baby Billy said:

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I understand what you're saying, but it's very much an extrapolating. At the rate we're going it's reasonable to assume it will become an issue at some point. Nobody knows when that point is, however. People have been screaming the national debt issue for years and most would probably tell you were on the edge of collapse trillions and trillions of dollars ago. It's the mother of all unknowns. It's hard for people trying to make rational investment decisions in 2024 to base those decisions on something that may or may not happen, and even if it does happen nobody has any clue when.

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The risk far outweighs the reward, especially when you get 5% extremely easy. From here, the S&P has to hit 5575 by year end just to march the return you can get from a 6 month CD.

And yall can keep saying you can't time the market. It's mostly true. But you can pivot to risk management when warning signs are blaring. If I lose 10% of my account value from prudent risk management during a downturn, I only need 11.1% once it bottoms and reverses to recover. That can happen in a year. I've mostly maintained my place. If I lose 25%, I need a 33% return just to get back what I lose. That doesn't happen in a year. And if I lose 50%, I need the market to double upon bottom and recovery to get back what I had before the drop.

Baby Billy said:

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Yes, certainly rear-looking. But history is the only guide we have. You can't form a long-term investment policy based on current events. Nobody can consistently forecast the economy or markets, but you can look at history and see that no matter the varying causes of past recessions/downturns, the businesses that turn the wheels for our economy have evolved, adapted, or innovated in whatever way was needed to continue growing.

I'll continue to base my investment decisions on that.

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What you call history just so happens to be what YOU and maybe your father have experienced. And it just so happens to be the most massively leveraged period of growth in our history. Expecting that history to continue is actually ignoring history of what happens to economies that devalue their currencies and attempt to stack leverage on leverage the way we have. You aren't getting the point and I am trying to bust your head with a lead pipe to hammer it home. History moving forward WILL NOT BE THE SAME AS IT WAS BEFORE.

Heineken-Ashi said:

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What you call history just so happens to be what YOU and maybe your father have experienced. And it just so happens to be the most massively leveraged period of growth in our history. Expecting that history to continue is actually ignoring history of what happens to economies that devalue their currencies and attempt to stack leverage on leverage the way we have. You aren't getting the point and I am trying to bust your head with a lead pipe to hammer it home. History moving forward WILL NOT BE THE SAME AS IT WAS BEFORE.

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I tend to agree with you on your last thought. And, I will reserve the right to use it when you next choose to promote the Elliott Wave or chartist predictions.

I can't find where I said history will be the exact same as before. I've actually said a couple different times that it won't be and never has, but that it historically hasn't mattered what the circumstances were. You can go back and find the apocalypse du jour from any time period you want, and like I said earlier the end result has been the same.

You speak with a lot of absolutes and I'd imagine you've had these same thoughts for years. You've been wrong every time so far. Maybe one day you'll be right but the odds aren't in your favor.

Baby Billy said:

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Heineken-Ashi said:

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Baby Billy said:

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I understand what you're saying, but it's very much an extrapolating. At the rate we're going it's reasonable to assume it will become an issue at some point. Nobody knows when that point is, however. People have been screaming the national debt issue for years and most would probably tell you were on the edge of collapse trillions and trillions of dollars ago. It's the mother of all unknowns. It's hard for people trying to make rational investment decisions in 2024 to base those decisions on something that may or may not happen, and even if it does happen nobody has any clue when.

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The risk far outweighs the reward, especially when you get 5% extremely easy. From here, the S&P has to hit 5575 by year end just to march the return you can get from a 6 month CD.

And yall can keep saying you can't time the market. It's mostly true. But you can pivot to risk management when warning signs are blaring. If I lose 10% of my account value from prudent risk management during a downturn, I only need 11.1% once it bottoms and reverses to recover. That can happen in a year. I've mostly maintained my place. If I lose 25%, I need a 33% return just to get back what I lose. That doesn't happen in a year. And if I lose 50%, I need the market to double upon bottom and recovery to get back what I had before the drop.

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Really showing your ignorance here. The S&P is up 11.56% YTD and your 6mo 5% CD is not paying you 5% once it matures.

Heard of reinvestment risk? If your plan to make your money last is cash, CD's, and fixed income then you're in for a rude awakening down the road.


Anyways....we don't agree and that's okay

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Notice the first bolded part, then check out your bolded part. Then re-assess your post. This time, don't ignore the part about risk management "from this point forward"

I said on this same page that at the path we're on it's reasonable to assume that we'd run into problems eventually.

But like you said, nobody can predict or time when that's going to be, so I won't sit around with all my money in cash and CD's hoping that I'm right.

The "this time is different" crowd is always out there. Maybe y'all are right and the entire system comes crashing down around us, I'm just not willing to bet my family's financial future on it

If it all comes crashing down tomorrow, think I'll just go fishing.