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sschullo

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What a week! We have a bonafide correction and the worst week since 2008. And we don't know if it's over. 

Nobody here has said anything about it and their reactions to their portfolios and the market.

These are times that test our psychology. It takes a lot of nerve to rebalance out of bonds and into equities. But we are there yet. Wait till the market goes down 20%! Then our nerves will be tested.  

My portfolio is down about 3.5%. Equities have entered a correction which is defined as 10% down. My portfolio only has 33% equities so it makes sense that my portfolio should be down about a third of 10% or about 3.5%. 

What doesn't make sense is that my total bond market index has gone up almost 12.0% these past 12 months. I have almost a third of my portfolio in this one fund.

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Hi Steve,

Hope you are doing well. I figured we would hear from you about this so I tuned in this morning. I guess I have ESP because I've been off this site for a month.

My worry is this goes beyond  just investor   irrational induced fear . There are real companies losing real money. This could be the end of the party if this continues. I can't believe that I read that Corona beer sales are way down because of this virus  Goes to show how irrational people can get. Since so many busineses are sourced out of China  and are linked to us,  we certainly we will be feeling the effects here as supply chains get disrupted. My relatives in Italy are very scared. Schools are closed as are  many stores and churches in some areas of the country. In terms of the economy , factories are sending people home in some countries. Warren Buffett  counseled investors to see the current market crash as a buying opportunity. It’s true that stocks are cheaper now than they were a week ago. However, for retirees who need their investments to pay off today, that advice may not be what they need to hear. I don't buy that advice this time if this virus continues to spread and kill unless you are very young with many years of investing ahead of you. Folks are acting irrationally. Costco has long lines and the item that is being sold the most is toilet paper.( In Italy its pasta however LOL!.) I guess we should be investing in toilet paper companies, masks and pasta. None of which will solve the problem however.

I'm very lucky. Three weeks ago I shifted my assets to 70 Bonds 30 Stocks. Call it market timing but I had/have legitimate concern that this economic expansion has run its course. Low fees won't protect from loses.This expansion can't go on forever if you know anything about market cycles. So many younger investors have never witnessed the brutality of a market collapse like we have. Bonds have priority claim on payments above stocks, so they can keep paying interest even when earnings are tanking. This makes them safer investments than stocks during tough economic times. I won't be moving into a higher stock allocation.

I know we should promote staying the course and not acting on fear. I didn't really  market time because my shift to bonds happened before the panic hit .I feel I made a rational decision based on my investing experience. I wish the press would just shut up as they are creating panic and fear probably more so than is warranted but who knows? The truth is if you are healthy generally and taking basic precautions this virus is not going to kill you. The facts are reassuring and we do need to stay calm. If the fear gets worse, we are possibly heading for a recession.  People are staying away from other people and that means less money is exchanging hands. The Travel industry is already down 25% IN JUST FIVE DAYS. 

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I also think that we need to reevaluate our business relationships with China and start making /sourcing our medicine and food items at home or in Europe. Cost may go up but I don't trust  China's safety  standards. The fact they could cut us off from our supply is very concerning if we ever get in a conflict with them.

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45 minutes ago, tony said:

I also think that we need to reevaluate our business relationships with China and start making /sourcing our medicine and food items at home or in Europe. Cost may go up but I don't trust  China's safety  standards. The fact they could cut us off from our supply is very concerning if we ever get in a conflict with them.

Talk about China's safety standards and then there's Flint, Michigan and their terrible water which has not been cleaned up yet! 

That's why talking politics is pointless! 

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9 minutes ago, sschullo said:

Talk about China's safety standards and then there's Flint, Michigan and their terrible water which has not been cleaned up yet! 

 

Good Point. 

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 Hey Steve and Tony.  I hope you are both in fine fettle and able to stay well clear of the marauding virus.  By Friday my portfolio had dropped a little more that 7% from the peak, but we all know that declines of this sort happen periodically in markets and it has been an unusually long spell since we've seen a "bear."  So if the market drops another ten or twenty percent or even more we don't have to like it but we do have to accept it as market business as usual. As for Warren Buffett, I think you raise a good point, Tony: Buffett is advising investors, people who will hold their stocks or funds for twenty years or more.  I'm pretty sure that he would not advise anyone to put cash in the stock market that they are going to need to pull out for income in the next two or three years.  He does say that he's confident that the markets will be higher in twenty or thirty years, and history suggests that is a very good bet even in the face of frightening developments (think of all the threats Buffett has lived through--he may be too young to remember the depression, but he was certainly around for WWII, cold war nuclear brinksmanship, assassinations, various scary disease panics, 1973-4 market decline, ditto 1987, 2000, 2008...).  So I wouldn't bet against the world economy long term, though we get no guarantees.  Happy to hear about your well-timed recent shift to more bonds, Tony.

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46 minutes ago, whyme said:

 Hey Steve and Tony.  I hope you are both in fine fettle and able to stay well clear of the marauding virus.  By Friday my portfolio had dropped a little more that 7% from the peak, but we all know that declines of this sort happen periodically in markets and it has been an unusually long spell since we've seen a "bear."  So if the market drops another ten or twenty percent or even more we don't have to like it but we do have to accept it as market business as usual. As for Warren Buffett, I think you raise a good point, Tony: Buffett is advising investors, people who will hold their stocks or funds for twenty years or more.  I'm pretty sure that he would not advise anyone to put cash in the stock market that they are going to need to pull out for income in the next two or three years.  He does say that he's confident that the markets will be higher in twenty or thirty years, and history suggests that is a very good bet even in the face of frightening developments (think of all the threats Buffett has lived through--he may be too young to remember the depression, but he was certainly around for WWII, cold war nuclear brinksmanship, assassinations, various scary disease panics, 1973-4 market decline, ditto 1987, 2000, 2008...).  So I wouldn't bet against the world economy long term, though we get no guarantees.  Happy to hear about your well-timed recent shift to more bonds, Tony.

The only thing we can trust is that the world economy will grow long term. If we don't trust that, what is the point of investing in stocks and bonds? 

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14 minutes ago, sschullo said:

The only thing we can trust is that the world economy will grow long term. If we don't trust that, what is the point of investing in stocks and bonds? 

Right.   But Tony's trust seems to have been shaken by recent developments.

BTW Tony, I see that Elizabeth Warren shares your thoughts: "My plan for the virus' economic impact builds domestic manufacturing for pharmaceutical ingredients to reduce future shortages."  

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We're contributing the same amount at the same allocation. I've read too many John Bogle books to do otherwise.

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“The only thing we have to fear is fear itself.”  The fear of the unknown is what spooked the market and i didn't mean to scare anyone with my comments.  I do think the market has to start pulling back at some point and this virus might be its opportunity to do so.  Not a bad thing for long term investors. The Dow is way up today (so far) so we will see if this emotional rollercoaster will continue or not.

I agree ScottO, I would rather trust Bogle's advice for the average investor over Buffett's anyday. People have to realize what goes up doesn't keep going up forever however. My concern is some younger folks have had an easy ride up to now with a rising market. Some of us on the other hand have seen both the highs and the lows. The highs are better no doubt.

 

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2 hours ago, whyme said:

Right.   But Tony's trust seems to have been shaken by recent developments.

BTW Tony, I see that Elizabeth Warren shares your thoughts: "My plan for the virus' economic impact builds domestic manufacturing for pharmaceutical ingredients to reduce future shortages."  

Warren has great  ideas but the problem is she bites off more than the average  capitalistic raised  American can chew and digest at one time. She is hated on Wall Street too for that very reason. Most of the USA is much more conservative than say California and the (Northeast). Progress in politics is a very slow process if anything changes at all. If Sanders get the nomination, I think Warren would make a perfect match as VP. Unfortunately that Socialist label is going to sink that ticket in many parts of the country.  That ticket would be fought tooth and nail by the capitalistic establishment. A moderate Democrat might have a better chance. I bet Warren would be on top of the 403b nonsense goings on in a flash however!!

I had to stop taking zantac for heartburn after a carcinogen was found in it . I believe its now off the market. Now I read a needed   (Metformin) by diabetics was found today to be seriously  tainted too. I'm not diabetic but we have got to clean  this  up!! Why is the FDA asleep?  Maybe Warren is exactly what we need . 

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I will admit that it is still tough to watch account gains go from a high to a low so quickly. There are articles out there about this being the fastest correction ever, which is pretty unnerving, so I can understand why some people would want to get off the volatility roller coaster for a while. "Stay the course" is the best advice I have to cope. "Buy the dip" is the second best advice, but there's no guarantee the market won't dip even further. Maybe another good piece of advice would be to never look at and make decisions about your portfolio when gains are at a high or a low.

I've been investing small amounts since I started working full time in 2001, but never kept to close of an eye on the accounts. I think I've lost more due to bad financial advisers than market activity. Opportunity cost loses are probably huge. We started contributing to retirement accounts aggressively in 2015, so we've had that easy ride up.

Market looks like it'll close up ~4% today...

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4 minutes ago, ScottO said:

I think I've lost more due to bad financial advisers than market activity.

Absolutely. Me TOO!!!

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My portfolio is still up overall, but the dip wiped out a lot of the gains.   I thought about rebalancing a couple of weeks ago and got distracted.  Shook my head when the market turned.  I"m still over 20 years from retirement so I'm keeping my fingers crossed and staying the course.  Maybe I'll stop looking for a while and check again next year. 

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3 hours ago, tony said:

I would rather trust Bogle's advice for the average investor over Buffett's anyday.

Is there much difference between them?  Doesn't Buffett encourage people to buy and hold ("forever") a Vanguard S&P 500 fund?  He does encourage buying during declines, I guess that's a bit of market timing that would be a difference, but they are largely on the same page when advising the non-professional investor.  Contrast Buffett with those CNBC pundit types (let alone brokers and insurance salespeople): there are many, many sharks out there. I don't see Buffett as one of those... 

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