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Tempted to sell the news

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  • TheGipper
    replied
    Though “pseudotiming”, I often do my annual rebalancing a few days to weeks early or late if there is a big event.

    I think the stock market had already priced in a 70% chance of tax bill passing (see betting markets for best info). After McCain voiced support chances up to 90% and market popped.

    BUT.....until 2/3 of Collins/Corker/Flake are a yes with something the house freedom caucus can vote for this could still go down in flames.

    As I see a >10% chance bill still fails or is significantly watered down, coupled with a long stretch of US outperformance over international stocks, I chose today to rebalance from US to international.

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  • FIREshrink
    replied
    Dramatic decline in the cumulative advance decline line in the late 90s was an unambiguous sign of an impending bear market. Warren Buffett observed, "the entire global economy is now dependent on the US stock market, which is dependent on 50 stocks."

    Since I no longer subscribe to Barron's or the WSJ, it's hard to find Nasdaq or NYSE a/d data.

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  • Donnie
    replied
    I think selling the news is a reasonable strategy when paired with simultaneous buying of the news.

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  • djohnflatfeecfp
    replied
    One thing that has caught my eye is as of the middle of the month 21 stocks were responsible for half of the growth in the SP500 this year.  That is a rather low percentage.

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  • FIREshrink
    replied
    I agree, nothing imminent. And 60/40 has done quite well thank you very much.

    Yield curve is pretty flat though.

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  • djohnflatfeecfp
    replied
    Yield curve is less than 10% for recession 12 months from now.

     

    A recession indicator I keep an eye on is low.

     

    What did Morgan Housel tweet recently?  Something about a 60/40 portfolio has averaged over 12% for the last 8 years of the "new normal."  I believe he said "forecasting is hard."

     

    I just remind myself the market doesn't care what any of us think.  Or, as said by Epictetus - "We don't control the world around us. We control only how we respond."

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  • Zaphod
    replied




    I think the next ten years will have very modest returns. Quite possibly negative around the five year mark.

    I don’t see the economic imbalances that existed in 2000 or 2007 – that is, the misallocation of capital to dot bombs and real estate respectively – but valuations are quite obscene. Trying to think of what the economic catalyst could be is hard. Perhaps absurd credit card, auto loan, and student loan debt burdens will initiate the unwinding. While mortgage debt is lower than in 2007, auto, credit card, and student loan debts are at record highs. I’m not reassured.
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    Were still a ways away and consumers are getting confident finally, which is showing which is showing up in real retail sales, home prices, etc...that is not recessionary. This isnt to say the market isnt hot, it is, but that recession isnt imminent. This tax bill would add to strain though.

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  • Zaphod
    replied
    This is simply a melt up due to market makers and certain systematic hedge funds being very short SPX gamma. Honestly not a lot of downside to selling the news. Vol bid up in event anticpation, and if it fails, will increase dramatically and if passes the air will let out of the bid and a vol crush. Have a small straddle for that right now.

    Actually got mostly out on Tuesday, rest out yesterday morning as all these crazy drivers are a bit disconnected and would rather it settle first.

    Reminds me of Brexit from a risk/reward standpoint though different mechanism than whats happening today.

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  • FIREshrink
    replied
    I think the next ten years will have very modest returns. Quite possibly negative around the five year mark.

    I don't see the economic imbalances that existed in 2000 or 2007 - that is, the misallocation of capital to dot bombs and real estate respectively - but valuations are quite obscene. Trying to think of what the economic catalyst could be is hard. Perhaps absurd credit card, auto loan, and student loan debt burdens will initiate the unwinding. While mortgage debt is lower than in 2007, auto, credit card, and student loan debts are at record highs. I'm not reassured.

    Leave a comment:


  • The White Coat Investor
    replied
    If you have little need for risk, make a permanent asset allocation change. But I wouldn't do it response to economic news. That sounds like a recipe for failure.

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  • FIREshrink
    started a topic Tempted to sell the news

    Tempted to sell the news

    Tax bill is basically a done deal now. Tempted to sell the news. Maybe my opportunity to sell 1/3 of US stocks, which is all I can do without tax consequences anyway. Guess that would move me to 75% international stocks, up from 60% now. Or make me 53/47 stocks and bonds if I bought bonds, down from 61% stocks now.

    The bull market and other factors make me have very little need for risk.
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