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The market is insane, and I'm pulling a Bill Bernstein

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  • The market is insane, and I'm pulling a Bill Bernstein

    The NASDAQ has rallied about 60% in four months, to record after record, despite clearly grievous economic damage; the entire fate of the US market is dependent on about five tech stocks; the growth/value dichotomy is at near historic highs.

    Bernstein says when you've won the game, stop playing. I'm at 72% stocks now and planning to move to 60% this week. Most of what I rebalance will be TSM, into bonds and to a lesser extent international, value, and small.

    This is all monopoly money anyway. No way to justify these insane valuations.

    JMO.

  • #2
    I actually moved to 100% equities. Granted, I was only at 95%/5% before but I think it depends what your goals are. We're going to save a lot more for retirement than we'll ever need or spend so at this point I'm planning on investing for multiple generations. I reserve the right to change my mind if my children/grandchildren end up being knuckleheads, though.

    As an aside I don't think I would necessarily call all the current market valuations 'insane'.
    Last edited by CordMcNally; 09-02-2020, 02:19 PM.

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    • #3
      I would separate "insane valuations" and "pulling a Bill Bernstein" as two distinct issues.

      Congrats on winning the game.

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      • #4
        I rebalanced....
        That's as close as market timing as I get...

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        • #5
          Where does the money come from to pump up these stocks?

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          • #6
            I'd do what WCI suggests and wait 90 days before making a permanent AA change.

            It sounds like you're most concerned about the FAANG stocks being overvalued, rather than the stock market as a whole. To me, that's a better argument for staying in stocks minus the 5 tech companies than moving money from stocks to bonds.

            You can create your own ETF of up to 30 ticker symbols at motif.com. Just leave the 5 tech stocks out of it.

            Are you doing any of this in a taxable account?

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            • #7
              Originally posted by burritos View Post
              Where does the money come from to pump up these stocks?
              You mean you haven't had patients/plumbers/Starbucks baristas trying to give you stock tips yet?

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              • #8
                My own version of market timing, which I call rebalancing...just shifted my Roth to 100% total stock international in order to address two imbalances. First, I have been meaning to shift my Roth out of target retirement funds to eliminate the bond position. Second, I actually want my stock allocation to be 60:30 US to international but my taxable accounts have become overweight US. So, it really is a rebalance but an additional factor is that the performance of international stocks has been lagging, so I think it is a better near term value.

                As regards taking money off the table, I suppose I have done that too, but only in the sense I have described here before. The two 457 accounts are largely total bond market to provide safe harbor for when I retire in a few years because I will spend that money as a bridge to SS.

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                • #9
                  I rebalanced in April (not planned but due to the market at the time) from 90/10 to 95/5. I’ve been strongly considering rebalancing back to 90/10 given the latest run up. But I only update my sheets quarterly to see the balances and AA so I have another month to go before deciding. Fingers crossed we don’t collapse by then but if we do, ah well I guess we have two sales this year instead of one
                  Last edited by JBME; 09-02-2020, 06:44 PM.

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                  • #10
                    Originally posted by Lithium View Post
                    I'd do what WCI suggests and wait 90 days before making a permanent AA change.

                    It sounds like you're most concerned about the FAANG stocks being overvalued, rather than the stock market as a whole. To me, that's a better argument for staying in stocks minus the 5 tech companies than moving money from stocks to bonds.

                    You can create your own ETF of up to 30 ticker symbols at motif.com. Just leave the 5 tech stocks out of it.
                    Motif went out of business and shut down earlier this year.

                    https://riabiz.com/a/2020/4/22/after...etail-accounts

                    And, OP, do NOT take Bill Bernstein's name in vain!

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                    • #11
                      Right, I know, don't fight the Fed. I'm usually right about these things, but also usually way too early. Doesn't matter: right now my fear > greed.

                      mostly in pretax and Roth accounts, but I might be able to TLC, say, value for international, and buy back value in my Roth or 403b.

                      I'm moving my equity allocation from 65%, now at 72% due to market gains as well as rebalancing into stocks done in mid March, to 60% stocks. I'm mid late 40s, FI, college is paid for, working for the fun of it, so taking unnecessary risk seems unwise. I hate that bonds are paying diddly, but I feel no greed at all right now. Just terror.

                      another option is some kind of long term puts on the QQQs but I don't do options and given their volatility I'm assuming the puts are expensive. Not really my game.

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                      • #12
                        Originally posted by FIREshrink View Post
                        Right, I know, don't fight the Fed. I'm usually right about these things, but also usually way too early. Doesn't matter: right now my fear > greed.

                        mostly in pretax and Roth accounts, but I might be able to TLC, say, value for international, and buy back value in my Roth or 403b.

                        I'm moving my equity allocation from 65%, now at 72% due to market gains as well as rebalancing into stocks done in mid March, to 60% stocks. I'm mid late 40s, FI, college is paid for, working for the fun of it, so taking unnecessary risk seems unwise. I hate that bonds are paying diddly, but I feel no greed at all right now. Just terror.
                        umm have you seen the YTD spread on total bond vs total intl.....

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                        • #13
                          I would not call it "insane"; euphoric might be a better word.

                          I wanted to teach my son an investing lesson. He works for LULU and is a fan and expressed interest to buy the stock earlier this year. Of course, the stock had run up significantly, and the P/E was in the stratosphere. I figured this would be an opportunity to teach him the lesson about diversification, slow and steady wins the race, etc. WRONG!

                          His $1000 investment in LULU is up 70%, and he wants to know why I did not buy it myself or let him invest more of his money in it.

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                          • #14
                            Yes, the market is insane and I may be one of those crazy people propping it up. Over half of my net worth are concentrated in 6 tech stocks. I'm in the early phase of my career so I'm not too worried even if I lose it all. Furthermore, I took out a large advancement from my HELOC account last month with the original intent to purchase a rental property. After going through the whole nine yards with creating a real estate LLC, meeting with a CPA, etc., I was outbidded several times and became discouraged, putting all of those money into more stocks instead. So far, that decision has been a blessing in disguise.

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                            • #15
                              Originally posted by VagabondMD View Post

                              Motif went out of business and shut down earlier this year.

                              https://riabiz.com/a/2020/4/22/after...etail-accounts

                              And, OP, do NOT take Bill Bernstein's name in vain!
                              interesting. I only invested in them briefly to collect a $200 bonus a long time ago.
                              I like the idea of customizing an ETF; thought about doing this to minimize dividends in taxable like Phil Demuth advocates but never pulled the trigger. Also seems like it should appeal to socially conscious investors.
                              Looks like there are similar services out there - from M1 Finance among others.

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