cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Frequent Contributor

What to do now

Written on 3/17/2020 at 11 PM.

This is just another opinion for anybody with flexibility:

1) The markets, in general, are in a turmoil with no direction and extreme volatility, I don't see any indication to buy anything and why I'm at 99+% cash.  Remember, I'm in cash when I can't find anything I'm excited about, otherwise, I own something and I owned something about 98+% of the times invested at over 99% but now CASH is king for me.

Since stocks are already down so much, raising cash now is too late but you also don't want to rebalance (buying more stocks) because they can go lower. At this point wait for an entry point to increase risk and you definitely want to increase risk at this level, even if you are a conservative investor.

2) If you think you bought something cheap, it can get cheaper (Falling knives).  High volatility like this means indecision.  In most cases when you buy cheap enough it’s OK but this time it’s different. It’s not a financial crisis it’s a virus crisis with many unknowns.  Look around your neighborhood and you can see it’s different.  We will have a recession and markets will not have a V shape recovery.

3) Buy your best ideas, not seconds and thirds. Use buckets.  If you already bought your first bucket, regardless of why, don’t DCA, your next buckets should be higher.  R48 calls it Pyramid up but I have used it for 20 years before I knew him, it's similar to "don't average down".  It’s easier with many stocks (or stocks indexes) because of their volatility and lower distribution.  For bond funds use M* total return chart, example (PIMIX), bond charts are smoother with lower trends,

4) When to buy your first bucket? You got to use charts because it’s mechanical and many algos use it. I looked for several indicators that work for me and I used several but it’s too complicated.  For Stocks: based on 2008 (which resembles 2020) the easiest is 100 moving average (Again, R48).  50+200 MA are the most used but 50 is too fast but 200 is too slow. MACD and looking at trends may confuse some/many. For CEF: use weekly MACD.  For bond OEFs: use a simple chart trend. See below

5) This market is so confusing and unpredictable; we can have a 10% rally and another 20% bear market.

6) For retirees that have enough and don’t want to lose much, take it slow, be over-conservative.  Your perception of risk is not accurate.  To measure your risk compare your portfolio to VFIAX+VBTLX combo.  If you lost more than your perception then your risk is higher.

7) For me and others who don’t mind to use possible better performing categories, select the ones with better momentum. 

IDEA1: QQQ looks to me as a better choice than SP500 coming out of this meltdown because these giant high tech companies rule the world and the indexes and the strongest. QQQ also has a lower loss YTD then the SP500.  

IDEA2: I am going to let the charts, trend, and prices tell me what is hot. Bonds: I can envision HY and HY Munis will do well.

Maybe the above has no merit and starting tomorrow everything will turn around.  My investing style now is in a crisis mode until markets will change it.

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

Charts for T/A

Stocks: SP500 (chart) from 2008 to 2009. See the 3 moving averages below. 100 MA(red line) is the best, not too early and not too late.  For the current chart, you this (link)

Chart1.PNG

 

CEFs: PCI(chart).  Use weekly MACD and enter when it's positive

Chart2.PNG

Bond OEFs: PIMIX (chart). You want to see several weeks of uptrend

Chart3.PNG

158 Replies
Highlighted
Frequent Contributor

Re: What to do now


@FD1001 wrote:  (R48 reply in bold below)

This is just another opinion for anybody with flexibility:

1) The markets, in general, are in a turmoil with no direction and extreme volatility , I don't see any indication to buy anything and why I'm at 99+% cash.  Remember, I'm in cash when I can't find anything I'm excited about, otherwise, I own something and I owned something about 98+% of the times invested at over 99% but now CASH is king for me.

2) If you think you bought something cheap, it can get cheaper (Falling knives).  High volatility like this means indecision.  In most cases when you buy cheap enough it’s OK but this time it’s different. It’s not a financial crisis it’s a virus crisis with many unknowns.  Look around your neighborhood and you can see it’s different.  We will have a recession and markets will not have a V shape recovery.

3) Buy your best ideas, not seconds and thirds. Use buckets.  If you already bought your first bucket, regardless of why, don’t DCA, your next buckets should be higher.  R48 calls it Pyramid up but I have used it for 20 years before I knew him, it's similar to "don't average down". 

R48 reply:  Wow, in this OP, FD is stating he invests like I do, which I have used since 1972, and have posted same for 14 years!  How can I disagree with what he says here.  Of course, I clearly support his sentence.  Do as he says...to greatly minimize chance of loss.

It’s easier with many stocks (or stocks indexes) because of their volatility and lower distribution.  For bond funds use M* total return chart, example (PIMIX), bond charts are smoother with lower trends,

4) When to buy your first bucket? You got to use charts because it’s mechanical and many algos use it. I looked for several indicators that work for me and I used several but it’s too complicated.  Based on 2008 (which resembles 2020) the easiest is 100 moving average (Again, R48).  50+200 MA are the most used but 50 is too fast but 200 is too slow. MACD and looking at trends may confuse some/many.

Yes, in bear markets, I use a 100 day Moving Average.  Price must move above MA, to accumulate.  This is often a "second bucket buy".  I APPLY THIS TO EACH FUND UNDER CONSIDERATION.

I also use a COMPELLING VALUE to make some first bucket buys in bear markets.   I discussed in other threads recently.

5) This market is so confusing and unpredictable; we can have a 10% rally and another 20% bear market.

This is typical of bear markets.  Often the bottom is a huge down day followed by a strong reversal to the upside intra-day...like down (Dow) 2000, up 1500 at close.

6) For retirees that have enough and don’t want to lose much, take it slow, be over-conservative.  Your perception of risk is not accurate.  To measure your risk compare your portfolio to VFIAX+VBTLX combo.  If you lost more than your perception then your risk is higher.

7) For me and others who don’t mind to use possible better performing categories, select the ones with better momentum. 

Ah, the fourth pillar of R48's investing method: use momentum to your advantage.

Example1: QQQ looks to me as a better choice than SP500 coming out of this meltdown because these giant high tech companies rule the world and the indexes and the strongest. QQQ also has a lower loss YTD then the SP500.  Example2: I am going to let the charts, trend, and prices tell me what is hot. I can envision HY and HY Munis to do well.

Here's some considerations: Conservative, looking for yield: Utilities VPU

                                               Just retiring...Vanguard Dividend Growth Fund, VDIGX (VIG etf)

                                                Great momentum/growth...IHI Medical Devices

                                                 A real flyer:  MJ...a little pot never hurt anybody! (now down 75%)

The first three have very strong momentum.  Consider start with compelling value.  For MJ, insist on fund crossing 100 day moving average on the upside.  Also consider adding to your best funds you own.  Scared of the market?...wait to 100 day MA cross on upside, for each fund.

Maybe the above has no merit and starting tomorrow everything will turn around.  My investing style now is in a crisis mode until markets will change it.

I don't invest by predicting anything, such as U shape or V shape recovery; or covid 19 outcomes...or anything like this.  I assess what to own in the future, the market tells me when to act.

Hey, I feel like a Democrat and a Republican coming together to solve corona virus help others by showing what we do.

R48 in bold.


 

0 Kudos
Highlighted
Follower ○○○

Re: What to do now

R48,

What is suggestion for me to do at this time? I do not hold a lot of cash, tie most of $ in stock. 60%, Bond 35%.  thanks.

 

0 Kudos
Highlighted
Participant ○○○

Re: What to do now

@FD1001  / @retiredat48 

I appreciate the investing mindset for these turbulent times. Would you provide a primer for visualizing 100 day moving average using M* or other online graphs that are easy to create?

Many thanks!

Brian

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now


@BrianG wrote:

@FD1001  / @retiredat48 

I appreciate the investing mindset for these turbulent times. Would you provide a primer for visualizing 100 day moving average using M* or other online graphs that are easy to create?

Many thanks!

Brian


Already did. I updated my OP and you can use the link  ;-)

Highlighted
Frequent Contributor

Re: What to do now

In general, ifn you are all cash, you wait until the markets turn and pyramid up, or you dollar cost average, or both.  Ditto ifn you have a cash cache.

OTOH, ifn you are fully invested, at all times, there's nothing much to do, except to rebalance if your allocation, whatever it is, gets too far out of whack.

If you are an income focused investor, with more cash coming in each month than what you withdraw and spend, you either accumulate excess seed corn, going forward, or you reinvest in whatever assets you hold for whatever reason you want.

Easy peesy!

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Participant ○○

Re: What to do now

I agree with FD and R48 on the basic point of waiting for market averages to break back above a MA before buying. That is what I am doing. 

I wonder though what MA period makes the most sense. I'd agree you don't want to use an MA period that is so short that you get pushed in and then back out. But with the sharp drop we've had, 100 or 200 day MAs are a long way from that. So for instance, looking at the chart of VTI below, what would be wrong with a 20 day MA? Why not adjust the MA period to the situation you're dealing with, of an exceptionally sharp drop?

VTI chart.png

0 Kudos
Highlighted
Participant ○○○

Re: What to do now


@FD1001 wrote:

@BrianG wrote:

@FD1001  / @retiredat48 

I appreciate the investing mindset for these turbulent times. Would you provide a primer for visualizing 100 day moving average using M* or other online graphs that are easy to create?

Many thanks!

Brian


Already did. I updated my OP and you can use the link  ;-)


@FD1001 

Excellent post and helpful links.  

I haven't posted predictions because my guess is as worthless as the next person's opinion.

And how could we?  If tomorrow some reputable pharma group says they have a vaccine, this all changes in a  heartbeat.  Conversely, the middle class stops buying for many months ... we're in a world of hurt for a very long time that cascades poorly like dominos. 

So, armed with no knowledge or even a strong viewpoint, I'll continue to buy upon panic as that has worked out well in the past.  Fortunately, I have the dry powder to do it along with no concerns about cash flow for many years. 

Obviously there are posters here where that is not their situation.  Act accordingly.     

Whatever you do ... don't panic.  This too will pass.  The worst mistake is to listen to your fear and become an unfortunate statistic.  You can't predict the bottom or the move from the bottom or the month/years to recover.  So, the thought of you getting out and getting back in successfully are bleak ... as history has shown time and time again.

ctyankee    

 

0 Kudos
Highlighted
Follower ○○○

Re: What to do now

@FD1001 and @R48 , thank you for analysis.

I am also in 99% cash. Do you recommend temporarily to park some money in CD's - locked up for 6 months , or MM - SPAXX or FZDXX . my money are in fidelity.

Sophia 

0 Kudos
Highlighted
Explorer ○○

Re: What to do now

I have always taken more risk than I should and have stayed mostly in well managed funds. So I am staying the course.  I have bought stocks myself but never had as much time to do the  proper homework.  Made some money on some lost some money on others.  I read alot of what you guys write and it's all good information.  

TC

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now

ElLobo "OTOH, ifn you are fully invested, at all times, there's nothing much to do, except to rebalance if your allocation, whatever it is, gets too far out of whack."

FD: from the OP...you also don't want to rebalance (buying more stocks) because they can go lower. In a normal 5-10% down market, it's correct but in a bear market, I would wait for an entry.

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

Academic I wonder though what MA period makes the most sense. 

After looking at several MA, 100 looks to be a good compromise, 50 is too fast and 200 is too slow. I can add more T/A but the simplicity makes it easier.  If you think you can come up with other great simple TA please post about it.

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

From the OP: If you think you bought something cheap, it can get cheaper (Falling knives).

FD: PCI is trading now at 16+, it looked so cheap yesterday at 18+

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

Sophia: Do you recommend temporarily to park some money in CD's - locked up for 6 months ,

FD: not me, I'm never locking anything.  I'm in MM.

0 Kudos
Highlighted
Participant ○○○

Re: What to do now

FD, ironic that you are promoting the use of buckets and having cash now in the middle of a market crash when for years you 'knocked' both ideas.

 

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now

 "OTOH, ifn you are fully invested, at all times, there's nothing much to do, except to rebalance if your allocation, whatever it is, gets too far out of whack."

FD: from the OP...you also don't want to rebalance (buying more stocks) because they can go lower. In a normal 5-10% down market, it's correct but in a bear market, I would wait for an entry."

Some bonds are down as well recently.  If your allocation isn't out of whack, you stay put, regardless of whether either market recovers, or when!   And that's only if you rebalance, based upon rebalance band triggers, not ifn you rebalance once a quarter or once a year, for example!  8-))

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Contributor ○○

Re: What to do now

@jmrdnc : Some (a general statement) have super mind and lightning timing.  I witnessed/enjoyed the magic show several times already (in early 2019 and this time; from 100% equity at bull, say just a month ago, to 0% cash at bear, then to 100% equity instantly at the next bull).  

Again, take all (many are very good/prudent) advice as just inputs and do your own management (it is your money and you alone should be in total control and responsibility). 

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now

           Personally being retired we just tweak now. Following our method during times like this which for us is about the 5th, we sold two growth stocks which we are slowly divesting from our portfolio anyway. We then reinvested the proceeds into two stocks we hold that had tanked worse and are undervalued plus we added to our index funds, also tanked. It’s never a bottom but with patience all should have greater value going forward which is there purpose. Plant and harvest capital gains in the future when/if available.

           As far as income holdings, CEF’s mostly, we shuffled to higher yield (after 30% drops in value) allowing us to sell one position for cash and increase cash flow in anticipation of cuts in payouts and/or greater sales on anything. 

           Everything we can spare is on reinvestment plus all excess to needs cash is auto invested in a muni fund, multi bond fund or left as cash. We’ll continue to look for sales of interest in anticipation of better days ahead.

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now


@ElLobo wrote:

 "OTOH, ifn you are fully invested, at all times, there's nothing much to do, except to rebalance if your allocation, whatever it is, gets too far out of whack."

FD: from the OP...you also don't want to rebalance (buying more stocks) because they can go lower. In a normal 5-10% down market, it's correct but in a bear market, I would wait for an entry."

Some bonds are down as well recently.  If your allocation isn't out of whack, you stay put, regardless of whether either market recovers, or when!   And that's only if you rebalance, based upon rebalance band triggers, not ifn you rebalance once a quarter or once a year, for example!  8-))


Why is so difficult with you :-) 

Even if you need to rebalance according to your own rules, I still would not do it.  Bear market rules superseed "normal" markets.  Suppose your rebalance rule is "5% off" and you have 50/50.  Let's assume your bond portion stays the same if stocks went down 10% you rebalance. If stocks went another 10% down, rebalance.

From this point, no matter what stocks are doing, do not rebalance, especially in times like this with all the unknown.  From this point start buying based on T/A entry-level for the first bucket after seeing uptrends and MA.

The above is just another opinion  ;-)

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now


@vagabond wrote:

@FD1001 and @R48 , thank you for analysis.

I am also in 99% cash. Do you recommend temporarily to park some money in CD's - locked up for 6 months , or MM - SPAXX or FZDXX . my money are in fidelity.

Sophia 


Hi Sophia

Sophia is one who communicates with me off-forum...for years!  Sorry I haven't replied to your portfolio review request, but I am both inundated with requests (which is OK), but I also have to spend time on my own portfolio during a high volatility time.

Don't lock anything up in 6 months CD for piddling interest...keep in money market funds...use federal mm funds if corp debt scares you.  Key is to get your courage (called "behavior") up, to buy into the stock market for excellent values and far more yield.  View this as an opportunity.

Also (for all), if it appears money market funds based on corp short term loans develop a credit risk, you can have Fidelity and Vanguard keep your money in a standard bank account.  No interest is paid, BUT YOU GET FDIC INSURANCE.  I did this during the financial crisis.  Note also gvt set up a credit facility to keep mm funds OK.

 

Bye Sophia...

R48

 

 

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now


@jmrdnc wrote:

FD, ironic that you are promoting the use of buckets and having cash now in the middle of a market crash when for years you 'knocked' both ideas.

 


The majority of posters buy in buckets...such as dividing into five buckets, the amount you want to invest in a stock or fund., then buy in five increments  TV's Cramer buys in buckets.  Former poster Capecod buys in buckets, and actually pyramid up's most of his accumulation buys...and he pyramid downs sells.

It is the best way there is to meet Warren Buffetts two investing rules :#1 Do not lose money   #2 Reread rule 1.

R48

0 Kudos
Highlighted
Follower ○○○

Re: What to do now

Thank you @retiredat48 

i am reading all your posts. Thank you for what you do.

Sophia 

0 Kudos
Highlighted
Frequent Contributor

Re: What to do now


@steelpony10 wrote:

           Personally being retired we just tweak now.

R48 in bold: I have never taken my portfolio below 50% equity allocation, in any past bear market.  Too risky to me, as if stocks zoom upward, I could be left behind.  Possible I could get below 50/50 this time.  But I also use a hedge called PSTIX, a fund that moves inverse the market.  If stocks go down 3%, it goes up 3%.  Working so far.

Following our method during times like this which for us is about the 5th, we sold two growth stocks which we are slowly divesting from our portfolio anyway.

Ah, strategic sales...good.  so you are not "buy and hold".

We then reinvested the proceeds into two stocks we hold that had tanked worse and are undervalued plus we added to our index funds, also tanked.

Had you used Pyramid Up investing, buying in buckets, and 200n day Moving Average Controls, you would not have had this tanking/underwater position.

But none of this is "bahavior-wise easy."  I fall back on my investment model approach, discussed briefly in next post, to help stay in control.

Good day, Steelpony


R48 in bold.

           



         


 

0 Kudos
Announcements

Morningstar is here to help you respond to the Coronavirus crisis.