Unit2Sucks;842825801 said:

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If Trump were to be impeached it would take at least 1 year to accomplish and I would expect a grinding halt to the republican legislative agenda. I don't think an impeachment means Pence becomes president quickly and we are on our merry way. He becomes a lame duck president and we are at a standstill until 2021.

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Yup. Impeachment means nothing else gets done while Trump is forced out and the Republicans have zero mandate from the public.

That's why they don't want to do it.

Big C_Cal;842824790 said:

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Back in November, a semi-wise man on this board predicted that the GOP would tweak a few things on Obama Care, rebrand it as their own and get it passed through Congress very soon after January 20th, as an symbol/example of how effective they are.

The GOP's political savvy was overestimated, in this case. They are more effective when they're the minority party (where they are devastatingly effective).

How many days until they let Trump be impeached (and then later blame it on the Democrats)? 150? 200? 250? Should we start a pool? What counts as "the day": Impeached by Congress? Tried by the Senate?

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So from no healthcare legislation to impeachment- not sure if I follow the logic?

clipman;842825926 said:

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So from no healthcare legislation to impeachment- not sure if I follow the logic?

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The idea is that this process has shown that Trump is useless as a salesman on Capitol Hill, and with the swirling Russia scandals the GOP may now find him more trouble than he's worth.

I don't think they're there yet, but that's the argument.

dajo9;842778620 said:

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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.

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Today is the 6 month marker from when I started this thread. Obviously, the stock market has not had a pullback so it was a bad decision to sell my equities at the time I did. So am I buying back? Not quite.

For one thing, I purchased long term Treasuries with most of the cash from the equity sales. Those investments have done well over the past 6 months (10 Year rate is at 2.16% now compared to about 2.30% at purchase and a peak of 2.63%, I think in March, so I have gained in capital and interest income). The activity in the bond market leads me to believe my overall view on the economy is correct in that we are looking at asset inflation driven by wealth inequality which will continue to generate low growth.
- The hard data continues to show a lot of economic weakness (weak new loans, retail sales, consumer inflation, wage growth)
- Trumpflation was always a misinformed reaction in my view and the data seems to be bearing that out. A substantial rise in interest rates is the one thing that could cause me real harm and I don't see that happening with all the demand out there for investment assets. The capital markets are driving rates down.
- The Fed continues to raise short term rates and pull out liquidity (which is a policy mistake in my view and is harming the economy). The yield curve continues to flatten which is a negative indicator for economic growth.

I am content to stay put as I don't see the economy allowing for much of a further increase in stocks (currently at record levels and valuations only surpassed by the dot-com bubble). If a recession does form stocks should go down and my bonds should go up. If a recession does not form we likely stay at low growth without much stock advance and just wait for some external shock to the market - which will probably be bad for stocks.

Goobear;842778634 said:

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

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Reconsidering your view?

dajo9;842846583 said:

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Today is the 6 month marker from when I started this thread. Obviously, the stock market has not had a pullback so it was a bad decision to sell my equities at the time I did. So am I buying back? Not quite.

For one thing, I purchased long term Treasuries with most of the cash from the equity sales. Those investments have done well over the past 6 months (10 Year rate is at 2.16% now compared to about 2.30% at purchase and a peak of 2.63%, I think in March, so I have gained in capital and interest income). The activity in the bond market leads me to believe my overall view on the economy is correct in that we are looking at asset inflation driven by wealth inequality which will continue to generate low growth.
- The hard data continues to show a lot of economic weakness (weak new loans, retail sales, consumer inflation, wage growth)
- Trumpflation was always a misinformed reaction in my view and the data seems to be bearing that out. A substantial rise in interest rates is the one thing that could cause me real harm and I don't see that happening with all the demand out there for investment assets. The capital markets are driving rates down.
- The Fed continues to raise short term rates and pull out liquidity (which is a policy mistake in my view and is harming the economy). The yield curve continues to flatten which is a negative indicator for economic growth.

I am content to stay put as I don't see the economy allowing for much of a further increase in stocks (currently at record levels and valuations only surpassed by the dot-com bubble). If a recession does form stocks should go down and my bonds should go up. If a recession does not form we likely stay at low growth without much stock advance and just wait for some external shock to the market - which will probably be bad for stocks.

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I think Buffett said for people like me, I'm better off in low cost index funds. Unfortunately, I fall prey to trying to outsmarting the market(via rebalancing). Plus I like handing my money(not physically, but on the computer). But I think my tweaks here and there have not proven to have helped, in fact, I suspect it has contributed to a little bit of a drag in overall returns.

burritos;842846614 said:

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I think Buffett said for people like me, I'm better off in low cost index funds. Unfortunately, I fall prey to trying to outsmarting the market(via rebalancing). Plus I like handing my money(not physically, but on the computer). But I think my tweaks here and there have not proven to have helped, in fact, I suspect it has contributed to a little bit of a drag in overall returns.

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There is nothing wrong with rebalancing so long as you stay persistent in your investment strategy (I rebalance every quarter to keep allotments from going crazy). Up over 7% so far this year.

82gradDLSdad;842778647 said:

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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.

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Yep. May be a good time to adjust holdings within the %s, but drastically changing % between equities, bonds and other holdings is generally not a good idea unless one's life situation has changed.

burritos;842846614 said:

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I think Buffett said for people like me, I'm better off in low cost index funds. Unfortunately, I fall prey to trying to outsmarting the market(via rebalancing). Plus I like handing my money(not physically, but on the computer). But I think my tweaks here and there have not proven to have helped, in fact, I suspect it has contributed to a little bit of a drag in overall returns.

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Why not just invest in a target-date fund? Vanguard, T. Rowe, Fidelity, etc. have low cost target-date funds that will rebalance for you. I do that for my 401(k) and deferred incentive plan. If you really want to customize the rebalancing, you can hire a financial planner who can do it for you at a low cost.

Uthaithani;842846616 said:

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Yep. May be a good time to adjust holdings within the %s, but drastically changing % between equities, bonds and other holdings is generally not a good idea unless one's life situation has changed.

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I think that is right.

I would also add that there isn't a fixed percentage of asset allocation for any specific age that works for everyone. It all depends on risk-tolerance, what the consequences of being wrong are, what the requirements are, etc. Depending on the situation, different risk assumption may be required, with the general understanding that higher risk investments have potential higher return and potential higher loss. No one is going to pay more return for someone to take less risk. If you really want no risk investment that protects purchase power, just invest in TIPS. For most people starting out, they will not be able to save enough to pay for their retirement investing in investment grade bonds.

And people who claim to be able to time the market are usually lying unless they are billionaires who have proven their ability. If they can really time the market, they wouldn't be anything less than billionaires. That is why just following the market or investing in companies based on fundamental values I believe are the safest way to go. The actual billionaires who made the money investing did so because there are amateurs who think they have that ability.

Even at a young age, if you have millions that you need to protect and the consequences of being wrong are tragic, then you would focus on protecting capital and getting just enough return to sustain the capital while providing income. I suspect most people are not in that situation and that not taking enough risk and not having enough retirement funds are actually riskier. As they get older, they may have sufficient capital they need to protect (losing that capital is riskier than not having enough), then it would make sense to rebalance. Furthermore, if they already have enough liquid assets, they can afford to invest in more illiquid assets like real estate to generate rental income and grow capital.

Anyone who claims to have the right investment strategy for everyone, including me, would seem to be wrong every time.

calbear93;842846618 said:

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Why not just invest in a target-date fund? Vanguard, T. Rowe, Fidelity, etc. have low cost target-date funds that will rebalance for you. I do that for my 401(k) and deferred incentive plan. If you really want to customize the rebalancing, you can hire a financial planner who can do it for you at a low cost.

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Are all the different investments in your target funds very, very low cost?

(I just read Bogle's 2006 book about going with the lowest cost index -- or index-type -- funds. Very compelling. Okay, the fact that I'm just reading it now shows that I'm not really up on my finances, but still.)

Big C_Cal;842846694 said:

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Are all the different investments in your target funds very, very low cost?

(I just read Bogle's 2006 book about going with the lowest cost index -- or index-type -- funds. Very compelling. Okay, the fact that I'm just reading it now shows that I'm not really up on my finances, but still.)

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Honestly, I don't know. I know the target funds in my 401(k) and deferred incentive plan (other than the company contribution to the deferred plan which are invested in phantom stock) invest in the funds of the same fiduciary. For example, Fidelity's expense ratio is .11%, with management fee of .1%, but it invests in other Fidelity funds that may have their own expense ratio. All in all, much less than the hedge funds that may perform better but have higher management cost and profit participation fee. Of course, there are certain types of investments that these large mutual funds may not be able to participate in by their charter that hedge funds can. The financial adviser also charges a small percentage but also gets some compensation from the load fees on some of the investments he recommends. Management of real estate also requires payment of high management fee, but it also requires more personalized work with smaller asset base. If all I wanted to do was rebalance my porfolio to meet my time to retirement and set percentages of each asset class, I would just invest in a time-based fund. Still the cheapest if you go with Vanguard, Fidelity or T Rowe Price.

Strykur;842846615 said:

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There is nothing wrong with rebalancing so long as you stay persistent in your investment strategy (I rebalance every quarter to keep allotments from going crazy). Up over 7% so far this year.

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I just rebalance with my quarterly contributions.

The expense ratios for the target date funds is all in so there are no additional expenses. The vanguard target date funds are typically 0.16% so it's a cost-efficient approach. If I had it to do all over again, I would simplify into something like a target date fund or perhaps a 3 or 4 fund portfolio with some tax efficiency work to differentiate by account (taxable vs roth IRA/401(k)) but I haven't done so. What I have done is directed just about 100% of my deployments of capital in the last 3 years into VTI (Vanguard's total market fund) and a few other funds. I still maintain a healthy (read: excess) cash position which is part safety net part market timing and that hasn't proven thus far to be an efficient choice for me. On the other hand, like dajo I expect the bottom to fall out of the market at some point at which time I have the means to become greedy.

calbear93;842846618 said:

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Why not just invest in a target-date fund? Vanguard, T. Rowe, Fidelity, etc. have low cost target-date funds that will rebalance for you. I do that for my 401(k) and deferred incentive plan. If you really want to customize the rebalancing, you can hire a financial planner who can do it for you at a low cost.

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I like to tinker with my stuff. Ironically, my wife asked me to do her stuff too. So with the options her company had, I just put all her investment into the Vanguard target 2060 as a control vs my stuff. She is absolutely demolishing me.

Unit2Sucks;842846727 said:

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The expense ratios for the target date funds is all in so there are no additional expenses. The vanguard target date funds are typically 0.16% so it's a cost-efficient approach. If I had it to do all over again, I would simplify into something like a target date fund or perhaps a 3 or 4 fund portfolio with some tax efficiency work to differentiate by account (taxable vs roth IRA/401(k)) but I haven't done so. What I have done is directed just about 100% of my deployments of capital in the last 3 years into VTI (Vanguard's total market fund) and a few other funds. I still maintain a healthy (read: excess) cash position which is part safety net part market timing and that hasn't proven thus far to be an efficient choice for me. On the other hand, like dajo I expect the bottom to fall out of the market at some point at which time I have the means to become greedy.

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Right, but they own funds that have their own expenses and management fees and, as such, you are paying for those as well indirectly.

As far as timing, when do you know when to get out and when to get back in? I know people who got out couple of years ago who have been saying it is too expensive and have not gotten back in. They have missed out on most of the gains. The best way is to have your own philosophy and process and stick to those and not go with just a gut feeling. Have it be process driven with set metrics. Once you let things like greed, fear, etc. enter the calculus, you are screwed.

calbear93;842846618 said:

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If you really want to customize the rebalancing, you can hire a financial planner who can do it for you at a low cost.

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Are you talking about a financial person who charges .5-1% of your portfolio a year depending on how much you have?

burritos;842846731 said:

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Are you talking about a financial person who charges .5-1% of your portfolio a year depending on how much you have?

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Yup. Better than some who will say they do it for free but get you in high load funds where they get compensated by the funds.

dajo9;842846583 said:

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- The Fed continues to raise short term rates and pull out liquidity (which is a policy mistake in my view and is harming the economy). The yield curve continues to flatten which is a negative indicator for economic growth..

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My guess is the FED actually thought that it was going to have to put the brakes on rampant money supply growth from a huge tax cut and infrastructure plan. The particularly of the tax cut and the infrastructure plan were not as generous as described, and neither seem to be making headway in Congress (everyone else can debate the reasons), or will ever be implemented. Given that, I'm not understanding the FED's actions, and concur wholeheartedly with the comment above.

calbear93;842846730 said:

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Right, but they own funds that have their own expenses and management fees and, as such, you are paying for those as well indirectly.

As far as timing, when do you know when to get out and when to get back in? I know people who got out couple of years ago who have been saying it is too expensive and have not gotten back in. They have missed out on most of the gains. The best way is to have your own philosophy and process and stick to those and not go with just a gut feeling. Have it be process driven with set metrics. Once you let things like greed, fear, etc. enter the calculus, you are screwed.

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The 0.16% expense ratio is inclusive of the ERs of the underlying funds.

As to the second question, I would argue that I'm not screwed I just have a more conservative allocation. I'm doing it with intuition and I am sure that over time that a more disciplined approach would have performed better. I otherwise don't disagree with what you are saying and wouldn't recommend my approach because it's not supportable. My cash position gives me flexibility in case I need to exercise my stock options at an inopportune time or pay down my mortgage due to rising interest rates but I am giving up the benefit of market returns. The bigger mental issue for me is that since I build up cash positions by not regularly deploying capital, the psychological penalty for doing so at the wrong time is even larger.

Unit2Sucks;842846750 said:

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The 0.16% expense ratio is inclusive of the ERs of the underlying funds.

As to the second question, I would argue that I'm not screwed I just have a more conservative allocation. I'm doing it with intuition and I am sure that over time that a more disciplined approach would have performed better. I otherwise don't disagree with what you are saying and wouldn't recommend my approach because it's not supportable. My cash position gives me flexibility in case I need to exercise my stock options at an inopportune time or pay down my mortgage due to rising interest rates but I am giving up the benefit of market returns. The bigger mental issue for me is that since I build up cash positions by not regularly deploying capital, the psychological penalty for doing so at the wrong time is even larger.

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I did not know that the expense ratio was all inclusive of the underlying funds as well. Even better.

I didn't mean to imply that you are screwed. I only meant that people who are not disciplined but get too greedy, arrogant (guessing right once leading to thinking they are brilliant), or scared get butchered by the professionals.

Yes absolutely. People who jump in and out of the market are at risk of significant underperformance and it could be meaningful relative to their financial goals.

Personally that's not really the issue since I'm not really a seller. I tend to buy and hold for a long time so the only question is when to buy.

calbear93;842846733 said:

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Yup. Better than some who will say they do it for free but get you in high load funds where they get compensated by the funds.

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Just from an argumentative point of view let's say you pay 1% per year for 35 years. That's 35% right? Sure 1% of the first year isn't much, but compounded over 35 years, that could be a lot. And in the later years, there isn't much compounding potential taken away, but the 1% amounts are larger no? Wouldn't a target fund be better?

The gardening /mulch thread was more exciting than this one.

NYCGOBEARS;842846804 said:

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The gardening /mulch thread was more exciting than this one.

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Waiting for another death watch hottie thread are we?

wifeisafurd;842846853 said:

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Waiting for another death watch hottie thread are we?

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Great idea! We should do one for Esquer.

NYCGOBEARS;842846804 said:

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The gardening /mulch thread was more exciting than this one.

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In the woodchip mulch, my kale, chard, tomato, blueberries and honey crisp apple tree are taking off. My cherry tree is dead. Hoping use the 1 year warranty with home depot to get another one.

NYCGOBEARS;842846869 said:

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Great idea! We should do one for Esquer.

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Given the perception of Cal I/A's financial death spiral, why stop at Esquer?

Unit2Sucks;842846766 said:

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Yes absolutely. People who jump in and out of the market are at risk of significant underperformance and it could be meaningful relative to their financial goals.

Personally that's not really the issue since I'm not really a seller. I tend to buy and hold for a long time so the only question is when to buy.

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I am generally a buy and hold investor as well, however I hope buy and hold investors also realize they aren't getting the advertised return they think they are getting. For example, let's say an investment has an average 8% return. Over 3 years you expect your $100 investment to be $126. Except in the stock market what you get is volatility. Let's say that 8% annual return is 8%, -8%, 24%, which averages to an 8% return. Now, after 3 years your investment return is $123 (7.2% annualized) instead of $126. The more the volatility the more you have a shortfall between reality and your average expected return.

So, I'm not saying trying to time the market is a good idea because it's likely a fool's errand. I am saying what I'm trying to do is take a large macro-economic approach to risk. If I see a highly valued market I'm going to try to de-risk my portfolio. Last time I did this was 2007 (admittedly with very small dollars in my account). I'm doing that now as well. All the time in between I was a buy and hold investor. The idea is to minimize the loss on that -8% year in the example above to protect your capital. It's a goal, admittedly easier said than done.

I give a lot of credit to Lance Roberts at the website below for hashing out my thinking on this. The other authors at the website I'm not a fan of.
https://realinvestmentadvice.com/

burritos;842846884 said:

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In the woodchip mulch, my kale, chard, tomato, blueberries and honey crisp apple tree are taking off. My cherry tree is dead. Hoping use the 1 year warranty with home depot to get another one.

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Update, my kale and apple tree is getting absolutely nuked by aphids. Bought some ladybugs and dumped them on the plants. Might as well have just lit $10 on fire. Oh well. Easy come easy go. Blueberries and tomates still a-ok.

dajo9;842851474 said:

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I am generally a buy and hold investor as well, however I hope buy and hold investors also realize they aren't getting the advertised return they think they are getting. For example, let's say an investment has an average 8% return. Over 3 years you expect your $100 investment to be $126. Except in the stock market what you get is volatility. Let's say that 8% annual return is 8%, -8%, 24%, which averages to an 8% return. Now, after 3 years your investment return is $123 (7.2% annualized) instead of $126. The more the volatility the more you have a shortfall between reality and your average expected return.

So, I'm not saying trying to time the market is a good idea because it's likely a fool's errand. I am saying what I'm trying to do is take a large macro-economic approach to risk. If I see a highly valued market I'm going to try to de-risk my portfolio. Last time I did this was 2007 (admittedly with very small dollars in my account). I'm doing that now as well. All the time in between I was a buy and hold investor. The idea is to minimize the loss on that -8% year in the example above to protect your capital. It's a goal, admittedly easier said than done.

I give a lot of credit to Lance Roberts at the website below for hashing out my thinking on this. The other authors at the website I'm not a fan of.
https://realinvestmentadvice.com/

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Could not agree more dajo (surprise, surprise). Another good read which I got from this website is Paul Merriman (paulmerriman.com), a 73 year old retired RIA who is giving back in the way of free education. Very good points made through charts, videos, podcasts, showing financial outcomes of various investment approaches and means of disbursement on retirement with some interesting twists proven out historically by charts. The interesting thing is that it allows you to pick your poison (need for growth, need for low risk, combos of both and the downsides of both as well as the upsides).

My personal approach is to be invested only in companies that I like for the next 5 years plus, and then in times like today, thin back going to an increasing cash percentage, but with those same equities in fold just at a lesser percentile of the total. With our 52 year old son, we went down from 66% in equities up through April to 50% equities at this time. Almost all the same equities only dropping a couple for non performance.

A query for no one in particular. Do you subscribe to the "Missing the best days in the market" theory?
http://www.marketwatch.com/story/how-missing-out-on-25-days-in-the-stock-market-over-45-years-costs-you-dearly-2016-01-25


Or are you a black swan person which suggests that the above is BS?
http://proactiveadvisormagazine.com/black-swan-events-10-best-days-myth-market-outliers/

burritos;842851508 said:

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A query for no one in particular. Do you subscribe to the "Missing the best days in the market" theory?
http://www.marketwatch.com/story/how-missing-out-on-25-days-in-the-stock-market-over-45-years-costs-you-dearly-2016-01-25


Or are you a black swan person which suggests that the above is BS?
http://proactiveadvisormagazine.com/black-swan-events-10-best-days-myth-market-outliers/

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I guess I'm in the best 10 camp but I phrase it as, " I don't know enough to fiddle with my investments so I just stay invested, with minimal rebalancing, through thick and thin. Almost by luck did this mindset allow me to retire 7 years after the great recession. Plowing money into retirement accounts during the recession obviously, in hindsight, was the right thing to do. Now I constantly read about "taking some off the table". It's a daily thought but I don't fret about it. Although check back with me when the market tanks 50%

burritos;842851508 said:

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A query for no one in particular. Do you subscribe to the "Missing the best days in the market" theory?
http://www.marketwatch.com/story/how-missing-out-on-25-days-in-the-stock-market-over-45-years-costs-you-dearly-2016-01-25


Or are you a black swan person which suggests that the above is BS?
http://proactiveadvisormagazine.com/black-swan-events-10-best-days-myth-market-outliers/

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What I liked in the article was the chart of missing the 25 worst days, which is much more severe. It also confirmed my thinking on this from before reading the article.

From my experience, downturns tend to happen quickly which bull markets tend to be slow and steady. That matches the idea of the 25 worst days being more severe than the 25 best days. Also, best and worst days are correlated in terms of timing (they happen around the same time). The one chart that is missing is how you do if you miss the 25 best and worst days. I imagine, pretty good. So, I don't think the 25 best days is a good argument for buy-and-hold. I think there are better arguments for buy-and-hold.

dajo9;842851686 said:

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What I liked in the article was the chart of missing the 25 worst days, which is much more severe. It also confirmed my thinking on this from before reading the article.

From my experience, downturns tend to happen quickly which bull markets tend to be slow and steady. That matches the idea of the 25 worst days being more severe than the 25 best days. Also, best and worst days are correlated in terms of timing (they happen around the same time). The one chart that is missing is how you do if you miss the 25 best and worst days. I imagine, pretty good. So, I don't think the 25 best days is a good argument for buy-and-hold. I think there are better arguments for buy-and-hold.

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There are absolutely excellent articles for buy and hold and you can do it at the level of risk vs. performance of your choosing----100/0 (bonds to equities), 90/10, 80/20, 70/30,,,,,,all the way to 0/100. Each level gives an increase of close to 0.5% increase in performance, but of course the level of risk and potential downside also increases. Pick you poison. As I posted before see paulmerriman.com for very informative tables of same.