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Thread: OT - Selling My Equities

  1. #1

    OT - Selling My Equities

    These are interesting times in the capital markets. Over the past month in my 401k / IRA I have reduced my equity exposure from 80% to 20%, making the last big move today. Here are the main reasons why:
    - Market sentiment is incredibly bullish
    - Margin (borrowing to buy stocks) is around the highest levels ever
    - Shorts on Treasuries are at incredibly high levels
    - Valuations are at higher levels than any period except the dot-com bubble
    - The rising dollar will hurt US exporters
    - The rising dollar is wreaking havoc in some foreign countries, particularly China
    - The US consumer will be hurt by the rise in interest rates (car purchases, home purchases, credit card purchases)
    - Last but most importantly, the Fed is raising rates and reducing liquidity

    I'm pretty confident in the move but I'm less confident in the timing. The market could continue to rise and my move into bonds could continue to hurt me (particularly with China selling US Treasuries in order to try to stop the decrease of the yuan) for many months. But I think over the next 6 months the market will have a sharp reversal and move back into safe bonds. Now I am positioned to profit off that move - if or when it happens.

    One last note - my portfolio change in my taxable, non-retirement account is less dramatic because I don't want to trigger capital gains. I'm about 50/50 there.

  2. #2
    Moving into Bonds? Hopefully not of long duration or you are going to get hammered.

  3. #3
    I've been moving cash to some leveraged CA muni bond funds in the past few months and they have continued to get hammered. Doing some TLH and probably won't dive back in just yet with the proceeds.

  4. #4
    Quote Originally Posted by dajo9 View Post
    These are interesting times in the capital markets. Over the past month in my 401k / IRA I have reduced my equity exposure from 80% to 20%, making the last big move today. Here are the main reasons why:
    - Market sentiment is incredibly bullish
    - Margin (borrowing to buy stocks) is around the highest levels ever
    - Shorts on Treasuries are at incredibly high levels
    - Valuations are at higher levels than any period except the dot-com bubble
    - The rising dollar will hurt US exporters
    - The rising dollar is wreaking havoc in some foreign countries, particularly China
    - The US consumer will be hurt by the rise in interest rates (car purchases, home purchases, credit card purchases)
    - Last but most importantly, the Fed is raising rates and reducing liquidity

    I'm pretty confident in the move but I'm less confident in the timing. The market could continue to rise and my move into bonds could continue to hurt me (particularly with China selling US Treasuries in order to try to stop the decrease of the yuan) for many months. But I think over the next 6 months the market will have a sharp reversal and move back into safe bonds. Now I am positioned to profit off that move - if or when it happens.

    One last note - my portfolio change in my taxable, non-retirement account is less dramatic because I don't want to trigger capital gains. I'm about 50/50 there.
    You should sign up on the boglehead site and post this there. There are some very smart people on that site who can explain why you are wrong in this move. Not that it won't work out just that this type of in/out of the market doesn't normally lead to long term gains over buy, hold, rebalance.

  5. #5
    Good stuff Dajo, We are now 60% cash equivalents and bonds, and more gradually moving towards less equity. But made a lot of money this year on the post-election market zeal. Don't think it will last unless corporate profits start climbing.

  6. #6
    Golden Bear Cal89's Avatar
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    Across various accounts, about 60% long in stocks / ETFs. The other 40% - cash. I don't think I'll liquidate any further...

    The average bull run is about 4 years, the longest 13. We are now at 7+ years into this one, the second longest in our history... I monitor about a dozen or so "macro" indicators to help me decide to what degree I remain long. The average bear mkt last about a year as I recall. Just checked, 14 months. With that, I have found it prudent to remain net long, never fully invested, and never fully out. My long positions generate income too, another reason to hang-on...

    Having cash available is super important, because opportunities arise. Brexit was my last good shopping day. The Trump win did not afford the same type of opportunity, as many surmised, but I was ready though...

    Given my use of "long", I also play the downside, only with options, sometimes even with futures. So much easier to stay long when the market is getting hammered with put options on the SPY or QQQ. I also sell calls against my long positions to generate income as well. Actually, selling calls on AAPL today, which I do every quarter. I use these like a sell limit order at a desired target sell price. Might as well get paid to sell at a price you want, even if doesn't reach that price by expiration...

    I will secure some puts on the market by the end of this month or January. An insurance policy is some respects, a cost I'm willing to pay to keep me long and rest easier at night. I often can fund these downward positions from the income generated from selling calls against my long positions. When the market finally corrects, when I think it's a good time to go long (plenty of charting involved), I close the put positions and use the profits to enter long positions. Should the market present more buying opportunities (go lower still), the cash parked in the sidelines starts getting used. Of course, puts can be used again...

    I've come to embrace down markets, in some ways more than the up ones, because they don't last as long and can move quite bit faster than up markets.
    The University of California - One of the finest universities in the world, is the oldest public university in our great state with origins dating back to 1855, and university status granted in 1868. Go Bears!

  7. #7
    Quote Originally Posted by Goobear View Post
    Moving into Bonds? Hopefully not of long duration or you are going to get hammered.
    Yours is the consensus view

  8. #8
    Quote Originally Posted by dajo9 View Post
    Yours is the consensus view
    What does that mean? You don't subscribe to that? Look at the last 4 months returns on the long bond...

    Agree with you on taking $ of the table. Our firm has been gradually doing that the last 6 months.

  9. #9
    I've shifted the majority of my assets into Marshawn Lynch bobbleheads. Less volatility and strong long-term upside due to diminishing supply over time.

  10. #10
    Bond values per Wall Street Journal:

    Bond Rout Deepens After Fed Signals on Interest Rates
    Since Election Day, the global bond selloff has wiped out $1.45 trillion in market value, according to Bloomberg Barclays data

  11. #11
    Quote Originally Posted by Goobear View Post
    Bond values per Wall Street Journal:

    Bond Rout Deepens After Fed Signals on Interest Rates
    Since Election Day, the global bond selloff has wiped out $1.45 trillion in market value, according to Bloomberg Barclays data
    You are looking in the rearview mirror.

    Tell me, when higher interest rates and a stronger dollar curb economic growth and equities start to falter and all that margin starts getting called, driving down equities further, and people start scrambling to keep their money safe - tell me, where will they go with their money?

  12. #12
    Quote Originally Posted by dajo9 View Post
    You are looking in the rearview mirror.

    Tell me, when higher interest rates and a stronger dollar curb economic growth and equities start to falter and all that margin starts getting called, driving down equities further, and people start scrambling to keep their money safe - tell me, where will they go with their money?
    No rear view mirror. Our firm forecasted the decline and now sees constant pressure on rates for years to come. Not many places to hide is a real possibility.

    Real estate is going to have to correct as well.

    Good moves on equity Dajo but bonds may not be your friend especially when and not if inflation accelerates.

    Let's get a DC and go long on Cal!

    Go Bears!

  13. #13
    Quote Originally Posted by Goobear View Post
    No rear view mirror. Our firm forecasted the decline and now sees constant pressure on rates for years to come. Not many places to hide is a real possibility.

    Real estate is going to have to correct as well.

    Good moves on equity Dajo but bonds may not be your friend especially when and not if inflation accelerates.

    Let's get a DC and go long on Cal!

    Go Bears!
    It sounds like you're not advocating equity or bonds. Does that mean cash is the preferred alternative? I ask because I'm getting very leery of the stock market, but the experts keep saying that you can't time the market. thanks

  14. #14
    Quote Originally Posted by Goobear View Post
    No rear view mirror. Our firm forecasted the decline and now sees constant pressure on rates for years to come. Not many places to hide is a real possibility.

    Real estate is going to have to correct as well.

    Good moves on equity Dajo but bonds may not be your friend especially when and not if inflation accelerates.

    Let's get a DC and go long on Cal!

    Go Bears!
    I don't see anything on the horizon that would trigger inflation. I see lots of deflationary activity though.

    Go Bears!

  15. #15
    Inflation has been much higher for selected portions of our population, but ignored by politicians unwilling to treat all Americans equitably. I'm coming up to the fifth anniversary of my retirement. My retirement has been held steady for that period, no Cost of Living adjustments; however my cost of living has seen marked increases over that period. The reason is that I went from working full time and married to retired and widowed. My car and therefore gasoline usage went down 80%. I stay at home more so my home utility bills have gone up 50-100% or more (water) as my employer no longer pays my personal comfort needs from 8-6 each day. While my health the last 5 years has been good and doctor visits are way down, my health insurance premiums are double what they were 5 years ago and continue to go up (noting to do with ACA). Vision and dental insurance benefits have been reduced each year, annual eye exams at my local ophthalmologist are no longer free. Bills for dental services have doubled. But I shouldn't complain. my vet gave me an estimate for teeth cleaning of my 5 year old shelter dog, $1200; she eats dry food everyday and her teeth are not noticeably dirty, this was just their basic fee for a 14 pound canine. Point is: my monthly cost of living has increased 5-10% annually for the last five years; and I'm probably not alone in being hammered by unrecognized inflation for seniors (a frequent AARP subject). Trouble is for retirees who are not in upper income brackets, bonds, and especially municipal bonds provide a steadier income for seniors than stocks where income is mostly from capital gains and seldom quarterly dividends.

    Trump and the Republicans pledge to increase retirement benefits for the military and government employees who carry guns; to be revenue neutral, benefits for other retirees will have to be reduced.


    Quote Originally Posted by Goobear View Post
    No rear view mirror. Our firm forecasted the decline and now sees constant pressure on rates for years to come. Not many places to hide is a real possibility.

    Real estate is going to have to correct as well.

    Good moves on equity Dajo but bonds may not be your friend especially when and not if inflation accelerates.

    Let's get a DC and go long on Cal!

    Go Bears!




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