It's getting "stupid"

[FD1000]

Most bond funds are crashing. As expected, BL do better, but be careful, BL are HY and when HY go down they sometimes take BL with them.
Chart one includes VWALX(HY muni),VWIUX(ST Muni),DODIX(higher rates),RSIVX(special),FFRHX(BL).  You can see that even RSIVX/RSIIX momo is coming down.

B & H and get crushed? You are brave.  That includes VWINX+VWELX with their higher-rated corp.

Attachments:

[Chahta]

There is a book called "Invest With The FED" link that has research showing that a rising Fed Rate is bad for stocks. I listened to a podcast with the author from 2015. He would say this is bad news for stocks.

Yes I am mostly B&H but I also have a lot of cash. At some point it will turn around as it always has. For those living off of their portfolio taking cash out with nothing to replace it (yield or growth) can be scary. But losing is scary to many too. It doesn't scare me as much as piss me off, that imbeciles put us in this situation.

I am looking forward to Congress raising the RMD age again. It will push it to 73 for me.

[FD1000]

Chanta,
Most good answers are:
1) It depends on...
2) Stocks fluctuate and have cycles.  You can't expect stocks to do great every year, especially after the huge run since 2009.
3) Many times, "experts" predict things that never happen because most/all indicators/experts/opinions can't predict stocks movement in the next several weeks-months and sometimes years (CAPE=PE10, see my (link).
4) Sometimes, it's extremely clear what will happen because the correlation is high between rates to bonds.  The Fed have been telling us what they will do for months, so why investors don't believe them? The Fed is one of the most important factor, if not the most in investing
5) imbeciles are all over
6) As usual, you can B&H and do nothing.  That was great for me until I hit my number, I care a lot more about the downside than upside because I have enough. BTW, I'm back to 99+% cash again.  YTD positive all the time, except 2-3 days, with low volatility and exactly how I like it.

[Mustang]

Apr 7, 2022 3:59:26 GMT FD1000 said:

Most bond funds are crashing. As expected, BL do better, but be careful, BL are HY and when HY go down they sometimes take BL with them.
Chart one includes VWALX(HY muni),VWIUX(ST Muni),DODIX(higher rates),RSIVX(special),FFRHX(BL).  You can see that even RSIVX/RSIIX momo is coming down.

B & H and get crushed? You are brave.  That includes VWINX+VWELX with their higher-rated corp.

Crushed?  Yes Wellington and Wellesley have been hit but crushed is a panic word.  I think its going to get worse before it gets better.  YTD Wellington is down 7.1% and Wellesley is down 4.3%.  Not ideal but nothing to panic over either.  We have been here lots of times.  The market jumps all over the place.  My portfolio (without annuity) is down 5.0%.  It was down more than that earlier this year and last week it was down 4.0%.  When I say its going to get worse I do not think there will be a recovery this year and I think we will be lucky if there is not a recession next year.

Since I'm still in the accumulation phase I'm using dollar-cost-averaging to buy a little of both funds every month.  If people panic and run to cash that means I will be getting more shares per dollar with every purchase.  When I transition to the withdrawal phase I plan to keep two years of withdrawals in cash for situations like this so that we are not forced to sell in a down market.  Cash means that overall returns will be lower but you don't lock in losses unless you sell.  Wellington and Wellesley have been through this type of market before.  There has been only one time in history where both funds had annual losses two years in a row (1973 & 1974).  It could be different this time but I can't see the future.

Even if we needed the money to live on and were forced to sell in a situation like this, the sale would be taken from Wellesley giving Wellington a chance to recover.

Hopefully, those who are withdrawing have a plan for situations like this.

[Chahta]

Mustang said: “Hopefully, those who are withdrawing have a plan for situations like this.”

The plan should be to have cash or cash-like holding to tide one over. But many people say they are 100% cash so all is well. 😉

[Norbert]

I'm surprised that the stock market has held up as well as it has, considering the coming rate increases, the wind-down of QE, the pop in commodity prices, the Chinese Covid lockdowns, and our little Russia problem. Am not a buyer here.

[steelpony10]

       This is run of the mill stuff in my experience and there will be something else as always after this. I am not surprised most seem to not have a plan for the inevitable which will occur over and over. Flash crashes, tech bubbles, 9/11, bank crises, Mid East wars, inflation, a**holes etc. Why is everyone surprised and still unprepared? 

        As far as going to more cash or all cash, compounding outpaces economic growth and your personal inflation rate over time. Midde school stuff. You have to at least auto DCA to pick up the sales. Of course switching around, market timing and diversification doesn’t protect you when all your income comes from stocks and conventional bonds only. You’re trapped yet again. Thousands are flying out the window while you wait. You’ll eventually read why the rich got richer again. Someone’s managing money using some common sense.

[Deleted]

Hi Norbert - good to see you posting. The stock market is holding up, I think, because there is strong consumer demand which is driving earnings. Repricing is still going on and will continue. I don't see anything has changed from a year and half ago - pent up demand, flush consumer, economic boom, moderate inflation - with 3 exceptions. 1) The transitory inflation narrative took hold because people didn't look/ believe at/in the effect of M2 growth direct to the consumer - lot of time and effort wasted there; 2) the invasion of a sovereign NATO-bordering country by a world strategic resource economic player; and 3) resurgent variants which delayed reopening.

Basically - what you said.

As far as being a buyer - bonds - of course not. That has been known for some time and the bond bull market is dead. With TINA and no imminent recession, money should keep coming into equities. That is the only asset I know of where you can still find some value - just not in broad indexes. Holding cash and waiting - lots of smart experienced folks here doing that. I am sure they will get back in and I am sure there will be opportunities to do so. Panic - as Mustang points out - is the real enemy, This too shall pass. I still think there is an excellent chance the market will not return 8% average going forward. The next 20? No idea, but would think it might be closer to the long run average for that time period. That's my assumption anyways - right or wrong. I think active management is a good way to go therefore. Finally international - it has been very volatile and not for the fainthearted. I have my allocation. I have my plan. I like dividend income and that will cover my situation. I wanted to test my strategy in a bear market and a recession before I retire. I might be able to do that next year.

"Not a buyer here" - survey says earnings will get revised down. I would think there will be some decent options if that happens. I am reinvesting most dividends and pretty much where I want to be allocation wise - 17% cash/G fund; 83% equities. 5% of cash/G fund will be used for a correction.

Steelpony - Absolutely agree.

[Chahta]

Extremely stupid. It does no good to complain but I consider the bond rout and 10 year rate to be an over reaction. But it is what it is.

@steelepony, the plan is available cash if one needs it to live.

[FD1000]

Apr 8, 2022 10:33:12 GMT steelpony10 said:

       This is run of the mill stuff in my experience and there will be something else as always after this. I am not surprised most seem to not have a plan for the inevitable which will occur over and over. Flash crashes, tech bubbles, 9/11, bank crises, Mid East wars, inflation, a**holes etc. Why is everyone surprised and still unprepared? 

        As far as going to more cash or all cash, compounding outpaces economic growth and your personal inflation rate over time. Midde school stuff. You have to at least auto DCA to pick up the sales. Of course switching around, market timing and diversification doesn’t protect you when all your income comes from stocks and conventional bonds only. You’re trapped yet again. Thousands are flying out the window while you wait. You’ll eventually read why the rich got richer again. Someone’s managing money using some common sense.

Lots of good stuff, FOR MOST.
Someone who holds VWINX,VWELX,PRWCX or just wide stock indexes (just to name several options) don't need something else. 
Cash?  Cash is king sometimes, like YTD. The questions, as always, what are your goals, age and risk tolerance?  There are retirees who hold 5-7 years in cash for 30 years using the bucket system.

Diversification proved to be one of the worse enemy of investing since 2000, where you made less money with higher volatility. There are people that never want to discuss volatility, but it's an extremely important issue for most retirees. I can name so many of them. No need to go far and see that US LC growth was the best risk-adjusted category since 2009, and that's 13 years.

===============

Sara: just not in broad indexes.

FD: You can use broad base indexes and do pretty well, such as VOO(SP500),VTV(value),VUG(growth) and of course you can own managed funds and let the managers do their job but that's not your style, you want to own single stocks.

==============

Treasuries had the worst three months since at least 1926(link). All high-rated bonds, including Munis lost a lot since YTD. Many lost 6-8%.

[uncleharley]

I did recently add to my UTG position, but I am not sure it was a smart thing to do. This morning I am leaning towards shorting the S&P using the ETF SH. The magnitude and velocity of the sell-off in the transports has me rather nervous about equities in general. Investopedia says that the transports are a confirming index while other sources claim it is a leading indicator for the broader market. Whichever it is, the BofA has reduced their earnings estimate for UPS this a m and is suggesting there will be further reduction warnings for additional shippers such as FEDX, etc. The deadcat bounce that the transport index had yesterday is interesting. If it can sustain a recovery today I will probably pass on the shorting idea, however if the transports continue their plunge, I intend to go with the flow and put about 30% of my liquid assets into a short on the S&P. OBTW, trading volume for SH has recently reached historical highs.

[Deleted]

Financial news (celebrity endorsements) is a driver of stock buying, Recent examples are Musk and Buffett. There is a lot of money looking for buying ideas in an over-bought market. The FED speak, on the other hand, is driving bond sales.

[FD1000]

UH, I posted 1-2 days ago about my first sign of trouble. The 3 line break signaled(link) a sell on March 6th. I now see another signal that verifies it, and this one is a smoother, longer one.

Attachments:

[Fearchar]

Monterey policy needs to be normalized.  The FED has made it clear that is their goal and nobody blames them.

So, it seems obvious that at a minimum 5 year TIPs must return to somewhere near or just over 0% yield.
The markets are arbitraged, but it takes time for the FED to act and the arbitragers to do their jobs.




5 year TIPs yields were -0.58% yesterday.
So, progress is being made.

It's possible that 5 year TIP yields may stabilize in the 0 to 0.25% range.
But then again, maybe they will need to go higher.

[steelpony10]

Directly lifted from Archer on armchairinvesting. I was around for all but the first 3. Investing since around the Iranian hostage crisis at about DOW 750. It’s not that hard to be rich given time. Discipline to add new money on a regular basis as long as possible and dividend reinvestment with whatever you don’t need. Little oversight required. The list only gets longer.

· 1929 Market Crash
· Germany invades France
· Pearl harbor
· Korean war
· Suez Canal Crisis
· Sputnik
· Cuban Missile Crisis
· JFK Assassinated
· Martin Luther King Assassinated
· U.S. Bombs Cambodia
· Kent State Shootings
· Arab Oil Embargo
· Nixon Resigns
· Iranian Hostage Crisis
· U.S.S.R. Invades Afghanistan
· Hunt Silver Crash
· Falkland Islands war
· Invasion of Panama
· Iraq Invades Kuwait
· Gulf war
· Gorbachev Coup
· First World Trade Center Bombing
· Oklahoma City Bombing
· Asian Stock Market Crisis
· U.S. Embassy Bombings in Africa
· U.S.S. Cole Yemen Bombing
· 9/11 – WTC and Pentagon Terrorist Attacks
· War in Afghanistan
· Lehman Collapse
· U.S. banking Crisis
· Israel Invades Gaza
· Boston Marathon Bombing
· Russia Invades Crimea
· Chinese Market Turmoil
· Brexit
· Covid-19

[FD1000]

Pony, all great in accumulation phase, we are also talking about retirees who have enough and care about volatility. If you don't care then 100% stocks is the only answer.

[Deleted]

FD - I think you have to realize that not all retirees "care" about volatility. They plan for it. They use allocation decisions to deal with acceptable risk levels and the volatility they can stomach. What works for you, works well. But I'm not worrying about volatility now or when I retire. It's going to happen. I will plan for it.

Steelpony has it correct for me - things beyond our control happen all the time. If it is a "sea" change in the overall environment - which it currently is - inflation - bond bust - end of a decade of QE and now raising rates - a reallocation decision can be in order. And then you sail onward on the new sea. Otherwise one is going to always try to be guessing and reacting.

[steelpony10]

         I’m still using DCA with excess income every month plus dividend reinvestment as a retiree. I suppose my point is market timing in and out based on what one thinks given that list seems fruitless given this much simpler and easier route to a secure retirement with not much effort. We just had to decide where the auto invests went for 40+ years and then as retirees adjust those after we secured our monthly cash flow.

[Chahta]

Apr 8, 2022 15:34:09 GMT steelpony10 said:

         I’m still using DCA with excess income every month plus dividend reinvestment as a retiree. I suppose my point is market timing in and out based on what one thinks given that list seems fruitless given this much simpler and easier route to a secure retirement with not much effort. We just had to decide where the auto invests went for 40+ years and then as retirees adjust those after we secured our monthly cash flow.

Market timing by most investors has been shown to be a bad method. I am reinvesting divs and anxiously awaiting recovery. I’m lucky I do not need major income from my IRAs so all is Ok.

[FD1000]

Apr 8, 2022 15:34:09 GMT steelpony10 said:

         I’m still using DCA with excess income every month plus dividend reinvestment as a retiree. I suppose my point is market timing in and out based on what one thinks given that list seems fruitless given this much simpler and easier route to a secure retirement with not much effort. We just had to decide where the auto invests went for 40+ years and then as retirees adjust those after we secured our monthly cash flow.

The problem is that you are not using "simple".  KISS means in most cases, stocks+bonds(not CEFs) and hardly any trades.  You have your "simple" and meet your goals.  I have my "simple",  I have been doing it over 20 years.  I started going to cash after I met a certain number several years ago, befor that I was in the market 100%. Since retirement, I also have a goal for max loss. I understand these are not your goals but they are mine and why my portfolio haven't gone down from any last top more than 1%.
Many think that high yield/income is a must, I think it's not.

Basically, many investors here do not have "simple" approach and style.

Lastly, if your portfolio is big enough, and you spend responsibly, you can go from 20/80 to 80/20.

[FD1000]

Apr 8, 2022 15:14:45 GMT @slooow said:

FD - I think you have to realize that not all retirees "care" about volatility. They plan for it. They use allocation decisions to deal with acceptable risk levels and the volatility they can stomach. What works for you, works well. But I'm not worrying about volatility now or when I retire. It's going to happen. I will plan for it.

Steelpony has it correct for me - things beyond our control happen all the time. If it is a "sea" change in the overall environment - which it currently is - inflation - bond bust - end of a decade of QE and now raising rates - a reallocation decision can be in order. And then you sail onward on the new sea. Otherwise one is going to always try to be guessing and reacting.

You can't plan for your portfolio to lose less than 10-20% and be in 60-80% stocks and simple portfolio. You and several others here don't care about volatility. A very high % of  retirees without a pension +SS that cover most of their living expense, care about volatility. 

Inflation+the rest are not a problem for the next 30 years for KISS investing. Sure, it doesn't work for you or me or many others, but a typical retiree with a mix of bonds+stocks can hold and hardly do nothing with 2-5 indexes + allocation funds. I posted many times about a relative of mine(link) and what my wife is going to do (link). Some people use mostly 50/50 Wellesley/Wellington. 

[galeno]

We're sticking with our 2 fund 52/43/5 B&H port. 4% AWR.

We're down 6.6% YTD vs our 2 fund 53/42/5 B&H benchmark port down 6.2% YTD.

[bf22]

The mythical typical retiree - I saw one yesterday pulling into the Chick-fil-A drive-thru in his Camry... 

[alvinthechipmunk]

Apr 8, 2022 22:43:50 GMT bf22 said:

The mythical typical retiree - I saw one yesterday pulling into the Chick-fil-A drive-thru in his Camry... 

Funny, you. I know what you mean... Everyone's circumstances are different.
Some things never change, though: I buy, the stock price falls. (Except recently, for TRAMX.)

www.morningstar.com/stocks/XASE/BHB/quote

www.morningstar.com/funds/XNAS/TRAMX/quote

[Deleted]

New makes a good point. We are the retirees or near-retirees we are dealing with.

Alvin - right there with you - buy - fall. But I assume you are using value to determine what to buy, so it will hopefully come around!

I pick an allocation - right now I can go 90-10. I work. I have a nice lifestyle - not buying wine at Aldi's, but not at Harrod's either. I have social security. I have a relatively small pension. Frankly if I lost everything, I would somehow make reasonably do. That's a gift from the mother who raised me and from her generation. I can always provide. Through consistent work and blessings I get a lot better. As do most US citizens compared to the rest of the world. Volatility - life is volatile. I have been handed good and bad. How I have played those hands, is what mattered. I know what the mathematical properties say about holding a diversified portfolio - yes I think diversification of risk is imperative and have seen it in action. I had my clocked clean with KMI and it has had no impact on the overall portfolio. How diversification is utilized or defined is unique. Non-systemic risk can be mitigated by diversification. Systemic risk - another kettle of fish and kind of what most of us are dealing with right now. That is handled via allocation decisions, different asset classes. You don't get to diversify away system risk - you just batten the hatches and trust the system - i.e. don't panic. So typical retiree who had 60-40 before - I would advise to get comfortable with 70-30 at a minimum with the sea change with bonds and mean reversion. 75-25 if it can meet finances and sleep well at night criteria. If you can't - might need to keep working. We all know stats, we all know probabilities - it's a number and comfort game. Frankly I think active management would have an edge going forward as we exit the yellow brick road.

[FD1000]

Apr 9, 2022 0:33:16 GMT @slooow said:

New makes a good point. We are the retirees or near-retirees we are dealing with.

Alvin - right there with you - buy - fall. But I assume you are using value to determine what to buy, so it will hopefully come around!

I pick an allocation - right now I can go 90-10. I work. I have a nice lifestyle - not buying wine at Aldi's, but not at Harrod's either. I have social security. I have a relatively small pension. Frankly if I lost everything, I would somehow make reasonably do. That's a gift from the mother who raised me and from her generation. I can always provide. Through consistent work and blessings I get a lot better. As do most US citizens compared to the rest of the world. Volatility - life is volatile. I have been handed good and bad. How I have played those hands, is what mattered. I know what the mathematical properties say about holding a diversified portfolio - yes I think diversification of risk is imperative and have seen it in action. I had my clocked clean with KMI and it has had no impact on the overall portfolio. How diversification is utilized or defined is unique. Non-systemic risk can be mitigated by diversification. Systemic risk - another kettle of fish and kind of what most of us are dealing with right now. That is handled via allocation decisions, different asset classes. You don't get to diversify away system risk - you just batten the hatches and trust the system - i.e. don't panic. So typical retiree who had 60-40 before - I would advise to get comfortable with 70-30 at a minimum with the sea change with bonds and mean reversion. 75-25 if it can meet finances and sleep well at night criteria. If you can't - might need to keep working. We all know stats, we all know probabilities - it's a number and comfort game. Frankly I think active management would have an edge going forward as we exit the yellow brick road.

Sounds great for you, good luck.
The above is terrible for me and for millions of retirees.  I can also be in 80/20 but I don't need it. You don't need to mention your upbringing. I can assure you it's much harder most times to immigrate to this country with nothing + a family at age 34 and start all over. I started investing at age 38 I retired just after 23 years, mainly by not losing and being in the right categories, never diversifying.  Life could be volatile, stock market could be too.  I no longer need it because we have enough.
Aldi is exactly the type of store I like, very cheap, good quality for certain things and very fast.

Let's repeat it again, you can't avoid a 20% loss in your portfolio with 75% in equity, no matter how many flips in the air you can do. I did extremely well with 10/90 since retirement and beat my goals by a lot and many portfolios with 40-50% in stocks, it’s all documented at my site.
Diversification will not help you, we can check it really fast. I made money every week in March 2020. What % of your total portfolio did you lose from peak to trough at that time?

The usual, active management work for some investors, most don't do well. Again, read my system how I did. I was never diversified and never will be. There are plenty of research that shows that B&H of KISS portfolio mainly of indexes beat most experts and that definitely include armatures.

I hope you multiply your portfolio every 5 years, I got out of the rate race years ago.

I really hope you do well with your investment. Furthermore, I left the rate race years ago. This is what most retirees do in my situation.

[FD1000]

Bond market 'carnage is epic' and there's virtually nowhere to hide (FD: including stocks), says Jim Bianco(video).
I don't think it will happen, but interesting.

[Capital]

Apr 9, 2022 4:07:11 GMT FD1000 said:

Bond market 'carnage is epic' and there's virtually nowhere to hide (FD: including stocks), says Jim Bianco(video).
I don't think it will happen, but interesting.

FD1000 , thanks for the link and hope you are right that it does not happen. Very sobering discussion indeed.  I know you have a trading technique for bonds; however, I do not. I am looking forward to the day when I do not see huge risk in owning bonds. For some time I have seen greater risk in holding bonds than in owning stocks. Right now I see high risk in owning both but still more in bonds. Currently still holding core positions but not reinvesting any cash. I have been placing certain funds that I will need in the near future (less that 6 years) in 3-month Brokerage CDs. My thinking is that the cash I am now holding/building may end up in a re-established position in bonds. Time will tell....

[Capital]

Interesting information on slide 9 here. Makes sense that bond returns in rising yields is negative; however, this chart looks at bond returns 3+ years after rate increases began. Looks promising for 2025+.

[FD1000]

Apr 9, 2022 10:54:25 GMT Capital said:

Apr 9, 2022 4:07:11 GMT FD1000 said:

Bond market 'carnage is epic' and there's virtually nowhere to hide (FD: including stocks), says Jim Bianco(video).
I don't think it will happen, but interesting.

FD1000 , thanks for the link and hope you are right that it does not happen. Very sobering discussion indeed.  I know you have a trading technique for bonds; however, I do not. I am looking forward to the day when I do not see huge risk in owning bonds. For some time I have seen greater risk in holding bonds than in owning stocks. Right now I see high risk in owning both but still more in bonds. Currently still holding core positions but not reinvesting any cash. I have been placing certain funds that I will need in the near future (less that 6 years) in 3-month Brokerage CDs. My thinking is that the cash I am now holding/building may end up in a re-established position in bonds. Time will tell....

Looks good to me. Most can do really well with B&H but I have noticed markets are different and being in the right place can make you more/same money with lower risk/volatility.  More % in stocks isn't the right answer for many retirees. You are correct about bonds, it's started already last year. The answer in 2021 was HY munis, for 2022 it's cash/CD and maybe bank loans. I also posted about VALUE stocks + commodities 2-3 months ago. Investing in 15-20 funds isn't better than the right 2-5 funds.
Bonds are going to shine again.