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      11-28-2017, 04:43 PM   #1
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The Market is Crashing - What's Your Plan?

OK, OK, so the market is not crashing (yet) but eventually it will. This rally will not go on forever. At some point, a major correction is coming. Is it a month from now, a year from now, or 10 years from now? I don't know. But history tells us that what goes up must eventually come back down.

I know we have a ton of savvy investors on this forum and I'd love to hear their thoughts on what they feel the key, early, indicators of looming trouble are and where the safe havens are thought to be in riding out a significant downturn.

Is anyone already starting to shift their positions in anticipation? Move out of equities and into gold, cash, treasuries, other?
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      11-28-2017, 04:55 PM   #2
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      11-28-2017, 04:57 PM   #3
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I moved my 401k money into bonds during the very first stages of the last crash. I did okay., so I'll do that again.

As far as the IRA, I'll move a lot to gold.
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      11-28-2017, 05:01 PM   #4
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      11-28-2017, 05:10 PM   #5
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Quote:
Originally Posted by someguywithanm3 View Post
I moved my 401k money into bonds during the very first stages of the last crash. I did okay., so I'll do that again.
That's exactly what I did in Feb of this year when the Dow hit 21k. That was the top and it was downhill from there, I thought. Doh! Now in reality, before that move I was really unbalanced in my portfolio having about 90% in equities and 10% in bonds. Moving 100% of my 401K's existing money into a bond fund balanced me out to about 80% equities and 20% bonds so I dont feel too bad about missing out on the growth that's happened since Feb. The bond fund has crept along but it's not making the gains that my other investments are.

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As far as the IRA, I'll move a lot to gold.
I really want to love gold but I don't feel it's the safe haven than many folks feel it is. Gold prices are declining on their own after the frenzy that lead up to 2011. I'm not sure I see them shooting back up in the face of the next recession. But then again, I could be totally wrong (and usually am!).
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      11-28-2017, 05:15 PM   #6
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Originally Posted by DETRoadster View Post
history tells us that what goes up must eventually come back down.
Not on a large enough scale - I like low fee, long term index funds. (and real estate, but thats beyond the scope)

Market timing is a bad idea. For every hero who tells how he timed the market, there are many more who quietly got burned. Just ride it out.

When the market goes down, stock are on sale, buy more. Selling only locks in your losses.
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      11-28-2017, 05:22 PM   #7
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well i am saving maximum cash so that when a dump happens... i will buy everything
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      11-28-2017, 05:24 PM   #8
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That's still market timing - betting that the low point of the dump will be lower than the high point today. Who knows how much growth will happen between then and now that a drop in the market may or may not draw back?
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      11-28-2017, 05:24 PM   #9
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Quote:
Originally Posted by Deep_Blue View Post
Not on a large enough scale - I like low fee, long term index funds. (and real estate, but thats beyond the scope)

Market timing is a bad idea. For every hero who tells how he timed the market, there are many more who quietly got burned. Just ride it out.

When the market goes down, stock are on sale, buy more. Selling only locks in your losses.
Why do you say real estate is beyond the scope?

I definitely agree with you on the rest. Timing the market is problematic at best. My situation is that I'm 43 and still hanging onto a risk profile that I had when I was in my 20s. I rode out the last crash, exactly as you suggest, and have now amassed a pretty significant nest egg. I guess I'm approaching this from the perspective of re-balancing to "lock in" some of those wins and ratchet the risk profile down a notch. Certainly I have time to ride out one or two more crashes during my career but I do feel the pressure of father time creeping in as I consider how long it took to rebuild wealth after 2008.
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      11-28-2017, 05:24 PM   #10
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      11-28-2017, 05:27 PM   #11
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Quote:
Originally Posted by ASAP View Post
well i am saving maximum cash so that when a dump happens... i will buy everything
If you are talking buying toys like speed boats and classic Porsches, then yes! Those things are the first to go in a downturn and if you've been quietly saving cash for a toy, that's the time to buy for sure.
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      11-28-2017, 05:29 PM   #12
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Quote:
Originally Posted by DETRoadster View Post
Quote:
Originally Posted by ASAP View Post
well i am saving maximum cash so that when a dump happens... i will buy everything
If you are talking buying toys like speed boats and classic Porsches, then yes! Those things are the first to go in a downturn and if you've been quietly saving cash for a toy, that's the time to buy for sure.
probably real estate... household debt is at a maximum and int rates about to rise... no chance housing will not take a hit
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      11-28-2017, 05:32 PM   #13
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Quote:
Originally Posted by DETRoadster View Post
Why do you say real estate is beyond the scope?

I definitely agree with you on the rest. Timing the market is problematic at best. My situation is that I'm 43 and still hanging onto a risk profile that I had when I was in my 20s. I rode out the last crash, exactly as you suggest, and have now amassed a pretty significant nest egg. I guess I'm approaching this from the perspective of re-balancing to "lock in" some of those wins and ratchet the risk profile down a notch. Certainly I have time to ride out one or two more crashes during my career but I do feel the pressure of father time creeping in as I consider how long it took to rebuild wealth after 2008.
Thats more of an asset allocation question than a timing question. Going into different types of investments with a lower risk/return profile makes sense there. My view is that even in the worst crash in recent history the market recovered its pre-crash high in about 5 years.

On real estate, i was assuming the "market" is stock market. I just did my first rental property, so I'm learning the ropes there, but the annual cash flow (after paying the mortgage, taxes, and insurance but excluding mortgage equity, tax advantages, and property appreciation) is a ~15% ROI - and thats before I do my cash out refinance.
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      11-28-2017, 05:37 PM   #14
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Quote:
Originally Posted by DETRoadster View Post
If you are talking buying toys like speed boats and classic Porsches, then yes! Those things are the first to go in a downturn and if you've been quietly saving cash for a toy, that's the time to buy for sure.
Speed Boats - yes (normally highly leveraged, depreciating assets)

Classic Porsches - no (sometimes leveraged, appreciating assets)

If you look at Hagerty's data, Classic 911s were flat through the recent recession. They just didn't trade much.
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      11-28-2017, 05:41 PM   #15
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I am 100% cash (money market) since mid year. Waiting for a nice pull back/correction, before I invest again.
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      11-28-2017, 05:44 PM   #16
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Quote:
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well i am saving maximum cash so that when a dump happens... i will buy everything
This x100.

This is what I did in the last recession. I bought my used M3 with 8K miles on it for $46k and my wife bought the house we live in.

My M3 is worth $26k today and the house has doubled in value.

We did okay.
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      11-28-2017, 05:47 PM   #17
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I'm hesitant to go all cash though. Everyone's investment horizon is different. Mine is 25 more years, I'll be more nervous for the cycle after this current one bc that'll line up with my retirement.

Since my horizon is so long and since I'm not good at market timing, I'd rather ride it out. It's all paper losses and gains anyways until you're actually ready to cash out.
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      11-28-2017, 05:51 PM   #18
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Quote:
Originally Posted by Deep_Blue View Post
Not on a large enough scale - I like low fee, long term index funds. (and real estate, but thats beyond the scope)

Market timing is a bad idea. For every hero who tells how he timed the market, there are many more who quietly got burned. Just ride it out.

When the market goes down, stock are on sale, buy more. Selling only locks in your losses.
Interestingly, if you run the data on the FTSE all share index in the UK, the above well made point is vindicated. Investors that move their money in and out of the market fare worse than those that stay invested.

I'd be interested to know if the same holds true in the US.

I've invested in income generating stocks for some time. UK centric and globally. If you look to companies with strong balance sheets, robust business model and progressive dividend policy, you'll be shielded from the worst of the market turbulence. If the income continues to rise, the capital value of the stock will follow.
Typically UK stocks like Unilever, Legal and General and Lloyd's bank fit the above brief
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      11-28-2017, 05:52 PM   #19
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Quote:
Originally Posted by DETRoadster View Post
Why do you say real estate is beyond the scope?

I definitely agree with you on the rest. Timing the market is problematic at best. My situation is that I'm 43 and still hanging onto a risk profile that I had when I was in my 20s. I rode out the last crash, exactly as you suggest, and have now amassed a pretty significant nest egg. I guess I'm approaching this from the perspective of re-balancing to "lock in" some of those wins and ratchet the risk profile down a notch. Certainly I have time to ride out one or two more crashes during my career but I do feel the pressure of father time creeping in as I consider how long it took to rebuild wealth after 2008.
Haha, you're in no man's land in investments. My opinion is, you should start getting less directly correlated to the stock market at this point and start looking for passive income sources. Possibly real estate rental and businesses in consumer non-discretionary area that throws out positive cash flow and distributions.

Unfortunately, both of these are still overvalued even today. But I've already started at least rotating some of my stocks into dividend paying stocks already just to anticipate the next recession so at least I can collect some passive income and average down my cost basis.

Also, if you're an accredited investor consider private label REITs or natural resource trusts with preferred liquidity positions. This way you can ride out recession with passive income and if it blows up you get first liquidity rights.

I have access to a private REIT related to my work, but I passed on it bc I then would have massive positive correlation to my employer's well being. (50% household income and 20% of assets tied up with my employer).

Last edited by Flying Ace; 11-28-2017 at 06:13 PM.
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      11-28-2017, 05:55 PM   #20
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Quote:
Originally Posted by Deep_Blue View Post
Speed Boats - yes (normally highly leveraged, depreciating assets)

Classic Porsches - no (sometimes leveraged, appreciating assets)

If you look at Hagerty's data, Classic 911s were flat through the recent recession. They just didn't trade much.
Stop bursting my P Car bubble! I need process to tank so I can justify the purchase.

Good for you on the rental property. I REALLY wish I had pounced on that 5 years ago when the Seattle market was just heating up. It's now at insanity level 10. Crappy 1 bedroom tear downs that are condemned are going for $500k+. Many of the millennials in my office are paying significantly more in rent for a 1 bedroom apartment than I do on my 3 bedroom 2 bath home mortgage.
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      11-28-2017, 05:58 PM   #21
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Quote:
Originally Posted by Flying Ace View Post
Haha, you're in no man's land in investments. My opinion is, you should start getting less directly correlated to the stock market at this point and start looking for passive income sources. Possibly real estate rental and business in consumer non-discretionary area that throws out positive cash flow and distributions.
Exactly! Mid 40s at what may be the tail end of a huge economic run up and plans to retire by 60 is a strange and unsettling place to be!

Quote:
Originally Posted by Flying Ace View Post
But I've already started at least rotating some of my stocks into dividend paying stocks already just to anticipate the next recession so at least I can collect some passive income and average down my cost basis.
Yes! I started that about 5 years ago.

Quote:
Originally Posted by Flying Ace View Post
Also, if you're an accredited investor consider private label REITs or natural resource trusts with preferred liquidity positions. This way you can ride out recession with passive income and if it blows up you get first liquidity rights.
Interesting. I know zero about this. Thanks for the tip. I'll investigate.
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      11-28-2017, 06:02 PM   #22
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Originally Posted by DETRoadster View Post
Stop bursting my P Car bubble! I need process to tank so I can justify the purchase.
Hey I'm with you on the P-Car. 71t I picked up this summer. Comp (72t) just went for $20k more than i paid and another (71t) just listed for $60K more than i paid (i hope they get it).

Classic cars are really more speculating than investing. They dont throw off any cash flows so its all about appreciation.

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