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Are you preparing for doomsday? aka the next great bear?

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  • #31





    Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table. 
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    This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
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    Completely agree.  From what I remember hatton never held much cash and continuously invested capital in the market regardless of conditions, so this advice is coming from someone who "walked the walk", has lived through many bad markets, and now has significant net worth as a result.

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    • #32





      Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table. 
      Click to expand…


      This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
      Click to expand...


      BOOM.

      Most physicians who follow WCI principles can get to 5 million in portfolio. Now imagine that last year. 20% on that. 1 million. Incredible. Stay in the market.

      Comment


      • #33







        Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table.
        Click to expand…


        This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
        Click to expand...


        When my brother-in-law tells me that he is buying the 3x long S&P 500 fund ETFs (Ticker: UPRO), that will be the universal sell signal. He rings the bell (over-rings it, actually) at the top. Every. Single. Time.

        (Right now he is building out a surgery center, so I am virtually certain that business model is about to take a nose dive.)

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        • #34





          Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table. 
          Click to expand…


          This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.
          Click to expand...


          I agree - in the later 90's companies were valued based on what other companies were valued at, for example if CMGI has a market cap of x then a similar company must have the same market cap even though neither actually had any earnings.  That was a time any internet IPO exploded in price regardless of whether it made money.  If a brick-and-mortar company announced they were starting a website their stock would immediately go up.

          On the original question of market timing, I remember when Trump was elected I was bummed since I didn't have much money on the sidelines to invest after the inevitable crash everyone said was coming.  Of course the crash never came and so far I'm pretty happy I had money in the market.

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          • #35




            A lot of physicians are in a unique situation to buy cheap during the bear since they have excess cash.  It might not be sitting in the bank ready to go, but the earning power remains there and can be redirected into the market nevertheless.  This might be an extra $50k or a few hundred grand per year.    A bear and the subsequent early bull might last a few years in which a physician may be able to throw an extra million dollars into the market to “buy cheap,” on top of his or her regular 401k etc contributions.

            This is a stark contrast to most earners who typically can’t afford to fill a 401k in a good year.  It’s a great time to buy but there’s simply no extra resources.  While physicians can definitely be downsized, demand for healthcare is more or less a constant.

            Even though a physician might not lose income during a bear market, it’s as good an excuse as any to tighten the purse strings, delay large purchases and find ways to funnel more money into investment.
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            This is a great point. Physicians (and other high income professionals) who generally have income well above living expenses throughout their careers, have the ability to invest an above average amount into the stock market and could even open up the spigot a bit more. Of course, that's market timing. There is also the issue of the physician career being shorter than many others, and getting a late start and having a short career makes you more likely subject to the market cycles, of which you have little control.

            Actually, the demand for healthcare, by all accounts, continues to grow, especially with an aging population. Of course, it is certainly not a given that physician incomes will grow along with this demand.

            Comment


            • #36










              Today, we have the great bull market that everyone despises and no one trusts. If this were 1999, you would not be taking chips off the table, you would be looking under the sofa cushions and under every stone for more chips to throw onto the table.
              Click to expand…


              This does not feel like 1999 except for people into bitcoin.  In 1999 no one cared about PE ratios and the cape index was not yet invented.  Companies were going pubic based on an idea without earnings.  Reminds me of Bitcoin believers.  In the end earnings do matter and they have turned upward.  Economic data is good so do not go to cash…….yet.  Eventually we will get a correction but it is impossible to predict when.  I would figure out your asset allocation and shovel in the money.  If you are young forget keeping your powder dry.  Just invest now and quit trying to be perfect.
              Click to expand…


              When my brother-in-law tells me that he is buying the 3x long S&P 500 fund ETFs (Ticker: UPRO), that will be the universal sell signal. He rings the bell (over-rings it, actually) at the top. Every. Single. Time.

              (Right now he is building out a surgery center, so I am virtually certain that business model is about to take a nose dive.)
              Click to expand...


              Hilarious.

              Comment


              • #37
                @spotty_dog I wasn't talking about Tax Loss Harvesting my retirement accounts -- I have 150K in retirement accounts and 40K in a taxable account. I am trying to figure out how and when to do that for the taxable account when the market drops.

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                • #38
                  Phew, you scared me!  :lol:

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                  • #39




                    @spotty_dog I wasn’t talking about Tax Loss Harvesting my retirement accounts — I have 150K in retirement accounts and 40K in a taxable account. I am trying to figure out how and when to do that for the taxable account when the market drops.
                    Click to expand...


                    Well, there is a market timing element to it, for sure, but there is limited downside to messing up the timing. When you have shares in which cost basis is more than the current price, and you have held them for at least 30 days, you sell them and can buy something very similar (but not exactly the same). I might sell the VTI shares at a loss and buy the VOO. I might sell the VEA and buy the VEU. (Check the tickers and you will get the idea, similar and overlapping but not identical holdings and very similar performance, but different indices tracked.) You cannot buy again the same shares that you sold (the VTI or the VEA, in this example) until 30 days passes. If the market continues to fall, in 30+ days you can reverse the trades (sell VOO, buy VTI, etc.).

                    Comment


                    • #40
                      Got it, so you can do this every 30 days?

                      How long should you wait when the market is dropping to do it the first time?

                      Comment


                      • #41




                        Got it, so you can do this every 30 days?

                        How long should you wait when the market is dropping to do it the first time?
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                        Just set a threshold of losses (when basis exceeds value), at which point you'll pull the trigger.  Could be $10, $100, $1000, etc.  I keep an eye on the cost basis section of my taxable account whenever the market starts to fall.
                        I sometimes have trouble reading private messages on the forum. I can also be contacted at [email protected]

                        Comment


                        • #42
                          In the middle of a significant bear market, fear of doom rises.  From a psychological perspective, it is not easy to invest when things simply seem to be falling apart.  The fear of doom is often extreme as the paper value of your investments disintegrates before your very eyes.  For many investors, it is quite difficult to even stay fully invested, much less to be buying.  Hostoric inflows and outflows bear this out.

                          That is why you should have a written investment plan.  And why you should consider your risk tolerance carefully.  It is easy to say you have a high risk tolerance when the market has been rising for years.  But not so easy when the market is tanking.

                          When investors are running for the exits, a good written investment plan helps you control your emotions and rebalance as appropriate.  I am so thankful to have stayed fully invested through the bear markets of the past.  Easier said than done.

                          You youngsters on here should be writing those investment plans now.  In a bad bear market you can lose over 50% of the value of your holdings, and in a bad bear market it can take many years to get back to even from the prior peak.

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                          • #43


                            You youngsters on here should be writing those investment plans now.  In a bad bear market you can lose over 50% of the value of your holdings, and in a bad bear market it can take many years to get back to even from the prior peak.
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                            All you young docs WhiteBeardDoc is giving good advice here.  This doom and gloom does not mean dont invest it means after you invest you stick with your plan.  If this is making you nervous then you do not need 90-100% equities.  I have survived 2 bear markets with >1million declines each time.  You invest for the long haul.  You can reach financial independence but it takes some type of plan and patience.  If you want to get rich quick go buy some bitcoin and a few powerball tickets.

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                            • #44
                              In my IPS, there's Retirement Planning; and there's investment-speculation-wild catting.

                              The former is a straight plot line of savings, rebalancing, TLH, and adjustment with the continued goal of retirement spending based of goals and risk tolerances.  These funds are set 'do not raid'  'do not sell' mode that really should be set regardless of a bull/bear market.  Easy to talk in 8 years bull market, but a lot harder to walk that line in year 2-3 of a recession (say 2009-2010) when things were just painful in seeing the balance shrink despite concentrated savings.  Dollar Cost averaging still wins over time---keep saving in same index during that bear.

                              The latter for the next bear market is what I'm interested in folk how they are prepared to take advantage and in what --- this is the speculation pot in my mind and separate from the above base +/- 20% savings/investing retirement goal.   Does one move a little cash into a 'save for future bet' fund while keeping that exact dollars out of the current bull market (aka timing the market).   Does one secure additional loans or use margin (borrowing) for these speculations?    As pointed out, if an extreme housing decline, HELOCs maybe constrained, but that has largely been eliminated with the closing of poor lending practices -- our opportunity bucket remains our HELOC ready to strike on an time sensitive speculation.     With steady earning income flow (beyond above retirement savings) still ready to backfill that investment opportunity

                              That said -- we hit the Bull Market Speculation eject button last 4/2017 and emptied the individual stocks gains from the last bear market and made a very nice profit.  Some of that is spec'd for the Tesla splurge, but a bunch went into the retirement pot and will not be touched again until retirement (moved the needle that much earlier!)

                               

                              Comment


                              • #45




                                In my IPS, there’s Retirement Planning; and there’s investment-speculation-wild catting.

                                The former is a straight plot line of savings, rebalancing, TLH, and adjustment with the continued goal of retirement spending based of goals and risk tolerances.  These funds are set ‘do not raid’  ‘do not sell’ mode that really should be set regardless of a bull/bear market.  Easy to talk in 8 years bull market, but a lot harder to walk that line in year 2-3 of a recession (say 2009-2010) when things were just painful in seeing the balance shrink despite concentrated savings.  Dollar Cost averaging still wins over time—keep saving in same index during that bear.

                                The latter for the next bear market is what I’m interested in folk how they are prepared to take advantage and in what — this is the speculation pot in my mind and separate from the above base +/- 20% savings/investing retirement goal.   Does one move a little cash into a ‘save for future bet’ fund while keeping that exact dollars out of the current bull market (aka timing the market).   Does one secure additional loans or use margin (borrowing) for these speculations?    As pointed out, if an extreme housing decline, HELOCs maybe constrained, but that has largely been eliminated with the closing of poor lending practices — our opportunity bucket remains our HELOC ready to strike on an time sensitive speculation.     With steady earning income flow (beyond above retirement savings) still ready to backfill that investment opportunity

                                That said — we hit the Bull Market Speculation eject button last 4/2017 and emptied the individual stocks gains from the last bear market and made a very nice profit.  Some of that is spec’d for the Tesla splurge, but a bunch went into the retirement pot and will not be touched again until retirement (moved the needle that much earlier!)

                                 
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                                My method for taking advantage of the next bear market doesn’t involve hoarding cash now or using margin. My equity position of 70% will have declined in my portfolio. My bond position will have increased relative to equities. I will sell bonds and buy equities so my asset allocation is back to plan.
                                My Youtube channel: https://www.youtube.com/channel/UCFF...MwBiAAKd5N8qPg

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