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Author: Subject: What to do about the falling stock market?

Peach Extraordinaire





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  posted on 12/20/2018 at 06:19 PM
There doesn't seem to be much talk or news coverage about it, but the Dow Jones has dropped 4,000 points since early October. With trade wars, increasing trade deficit, exploding budget deficits, potential government shutdown, and daily Whitehouse scandals, I don't see much good news on the horizon for the stock market.

I'm wondering what, if anything, you guys are doing. Anybody selling forseeing big drops ahead? Anybody buying thinking this is a buying opportunity? Just holding on to what you have?

I recently bought a couple stocks that I like for the long term, but I'm getting uncomfortable with holding so much of my IRA money in mutual funds, at least right now. Maybe if the market drops another 6,000 or 7,000 I might feel better about moving money back into mutual funds, but right now the market run up based on enthusiasm seems to have been hit by a wall of reality. Most of my investments are in real estate, but I can't really put IRA money in real estate. I also don't want to put it in gold or other commodities, so I'm not sure what to do.

 
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Maximum Peach



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  posted on 12/20/2018 at 06:45 PM
For the past few years now I have been selling 1% per month of any mutual fund holdings I have and purchasing municipal bonds. It fits my personal philosophy better. With age, we should be risking less on equity anyway. I guess you can say I have been dollar-cost-averaging out of the market.

I met with the broker last week or so ago for a year end review and I didn't suggest or he didn't offer any radical changes. After living through the market dips in 9/11 and 2008 I guess I have become accustomed to these large market swings. With mutual funds, if they have good management, they are going to know way more than you or I or the advisors will. They can sell and go into cash and they can buy things they think are oversold. But I like reducing the overall exposure and glad I didn't start just now. I'd rather have investments in communities over multinational corporations anyway.

I did buy some gold and silver at a big dip a few years back. I'm still holding it. It is kind of like cash under the mattress until you sell it, doesn't get you any interest or dividends. I would buy more if the price were to drop. That is really just a small hedge and hard to think of that as a large portion of a portfolio.

I bought a CD earlier this year at 2.5% I think it was. Hell, I may even look into some treasuries since they are not taxed at the state level like CDs are.

Not a bad place to be in some cash at the moment.

Now that football season is over, I listen to CNBC in the shop almost exclusively. Naturally they talk about things alot and you hear many different perspectives from their guests.

Normally the market declines like this on recession fears, but there really are not any indicators of a recession. Growth does and appears to still exist. I'm not overly pessimistic myself. Markets go up and markets go down. Just depends what your age and window of relying on the money is.

[Edited on 12/20/2018 by nebish]

 

Peach Extraordinaire



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  posted on 12/20/2018 at 07:08 PM
CD's this year would have outperformed the SPX. Think about that.

There are market cycles, and then there is market turbulence due to chaos. The market does not like uncertainty. And the leader of the free world thrives on chaos & impulse - not good stimulus for the market unless you are short or in for the long haul. The good news is he will have a lovely Christmas at Mar a Lago.

 

Zen Peach



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  posted on 12/20/2018 at 07:36 PM
Actually the yield curve did invert (part of it did), which has predicted 11 recessions (2 other times we did not have a recession). Also, jobless claims are going up.... My financial planners think it is coming, but the problem is it could be 2 months or 2 years before it hits. Of course the problem is that a recession is 2 quarters of negative growth, so you are in it before you know it is happening. Growth is expected to be over 3% for this year though.....
 

Ultimate Peach



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  posted on 12/20/2018 at 08:33 PM
The Fed should have been more proactive during Obamas second term and bumped up the cost of borrowing money. Since the election, the Fed has been raising rates which is triggering alot of the sell-off. With a strong employment rate this market correction has more to do with investors deciding where to park their cash as opposed to a weakening of market fundamentals. Cost of energy is getting cheaper and America is open for more oil and gas production. One more reason we dont need to occupy 2 sheetholes in Asia. China is not so attractive as it once was for business and Brexit could trigger a reshuffle of the European economy. I dont think there will be another death-shock to the financial sector like in 2009 with housing, but there will be some pain with student loan defaults to be managed. We have the right man in the white house to navigate the US economy thru all this change happening.

 

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  posted on 12/20/2018 at 08:45 PM
quote:
The Fed should have been more proactive during Obamas second term and bumped up the cost of borrowing money. Since the election, the Fed has been raising rates which is triggering alot of the sell-off. With a strong employment rate this market correction has more to do with investors deciding where to park their cash as opposed to a weakening of market fundamentals. Cost of energy is getting cheaper and America is open for more oil and gas production. One more reason we dont need to occupy 2 sheetholes in Asia. China is not so attractive as it once was for business and Brexit could trigger a reshuffle of the European economy. I dont think there will be another death-shock to the financial sector like in 2009 with housing, but there will be some pain with student loan defaults to be managed. We have the right man in the white house to navigate the US economy thru all this change happening.

 

True Peach



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  posted on 12/20/2018 at 09:10 PM
Dow has had the worst December since the great depression, thanks to " bankruptcy don"
 

True Peach



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  posted on 12/20/2018 at 09:20 PM
"BANKRUPTCY DON" Making America 1929 again.
 

Peach Extraordinaire



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  posted on 12/20/2018 at 11:00 PM
quote:
For the past few years now I have been selling 1% per month of any mutual fund holdings I have and purchasing municipal bonds. It fits my personal philosophy better. With age, we should be risking less on equity anyway. I guess you can say I have been dollar-cost-averaging out of the market.

I met with the broker last week or so ago for a year end review and I didn't suggest or he didn't offer any radical changes. After living through the market dips in 9/11 and 2008 I guess I have become accustomed to these large market swings. With mutual funds, if they have good management, they are going to know way more than you or I or the advisors will. They can sell and go into cash and they can buy things they think are oversold. But I like reducing the overall exposure and glad I didn't start just now. I'd rather have investments in communities over multinational corporations anyway.

I did buy some gold and silver at a big dip a few years back. I'm still holding it. It is kind of like cash under the mattress until you sell it, doesn't get you any interest or dividends. I would buy more if the price were to drop. That is really just a small hedge and hard to think of that as a large portion of a portfolio.

I bought a CD earlier this year at 2.5% I think it was. Hell, I may even look into some treasuries since they are not taxed at the state level like CDs are.

Not a bad place to be in some cash at the moment.

Now that football season is over, I listen to CNBC in the shop almost exclusively. Naturally they talk about things alot and you hear many different perspectives from their guests.

Normally the market declines like this on recession fears, but there really are not any indicators of a recession. Growth does and appears to still exist. I'm not overly pessimistic myself. Markets go up and markets go down. Just depends what your age and window of relying on the money is.

[Edited on 12/20/2018 by nebish]


Right now the majority of my investments are in real estate, CDs and my own company. Buy my IRA has been mutual funds. Frankly they haven't done that great for a few years, and I don't pay enough attention to them. I'm not one to micromanage my stocks, but I definitely have a bad feeling right now and see a huge correction coming. I'm really at a loss as to what to do with my IRA right now.

 

Maximum Peach



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  posted on 12/20/2018 at 11:37 PM
quote:


Right now the majority of my investments are in real estate, CDs and my own company. Buy my IRA has been mutual funds. Frankly they haven't done that great for a few years, and I don't pay enough attention to them. I'm not one to micromanage my stocks, but I definitely have a bad feeling right now and see a huge correction coming. I'm really at a loss as to what to do with my IRA right now.


I would do whatever makes you feel the most comfortable. You hate to start selling anything now, but maybe you move a modest amount this week. Pause. A modest amount next week, or in a few weeks. Pause. And so on. And if the markets keep dropping atleast you will be minimizing the losses.

Rebalancing asset mixes is done all the time to match investor sentiment or predetermined ratios. If you truly have a bad feeling about this and did nothing, you will feel even worse if your fears become reality.

Or look at it this way....If you sell or move out of some equity mutual funds into another IRA investment and if the market stabilizes or even bounces back so in this example, you essentially sold at this "dip" (if it is a "dip") - is that a result you can live with and the loss you created? The answer to that should tell you what to do next.

To me, the risk of doing nothing and not following one's own instincts is worse than acting and being wrong. I can live with my own decisions being wrong. It is harder knowing you didn't act when you thought you should've and are now worse off for it. Only you know the right decision for you and your investment timeframe.

 

Maximum Peach



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  posted on 12/20/2018 at 11:42 PM
quote:
CD's this year would have outperformed the SPX. Think about that.

There are market cycles, and then there is market turbulence due to chaos. The market does not like uncertainty. And the leader of the free world thrives on chaos & impulse - not good stimulus for the market unless you are short or in for the long haul. The good news is he will have a lovely Christmas at Mar a Lago.



There are lots of reasons markets have been selling. I'm not going to argue that Trump isn't part of it, because it is. Part of it. Lots of things and varied reasons all playing on fears.



quote:
Actually the yield curve did invert (part of it did), which has predicted 11 recessions (2 other times we did not have a recession). Also, jobless claims are going up.... My financial planners think it is coming, but the problem is it could be 2 months or 2 years before it hits. Of course the problem is that a recession is 2 quarters of negative growth, so you are in it before you know it is happening. Growth is expected to be over 3% for this year though.....


I believe what you say about the yield curve. But jobless claims rose very mildly and less than expected, so hard to use that as any reasoning here. Again, I am no expert and don't pretend to be. I just try and listen to different opinions to form my own opinion. There is not any fundamental data that shows the US is heading towards recession.

Jobless claim story:
https://www.cnbc.com/2018/12/20/us-weekly-jobless-claims-dec-15-2018.html

 

Zen Peach



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  posted on 12/21/2018 at 12:55 AM
The fact is that jobless claims were going up when there should be a lot of seasonal hiring - so the data could be worse than it seems.... at least what my guy said.....
 

Zen Peach



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  posted on 12/21/2018 at 06:47 AM
I have a fixed annuity from my grandparents so I don't have to worry about that since it isn't variable. I have to take monthly distributions which is okay. Just a little padding to my account.

Another one I have is a J.P. Morgan brokerage account. The other one bequeathed. Third generation so they had a lot of it put into fixed assets so today's volatility doesn't bother me much although given where prices are now I might move more to stock funds. Buy low, right?

For 25 years I have also invested in index funds; the account maintenance fees are next to nothing.

The market will go back up. It always does. I think the worst thing you can do is sell now when the market is down. If you just hold on to what you have, your losses are on paper. I wouldn't make them real by selling low.

Just my 2 cents. Oh, bad term.

 

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World Class Peach



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  posted on 12/21/2018 at 07:46 AM
quote:
Obamas second term


When the economy was rocking six months ago and all you sheep were praising your daddy, you were singing a different tune. The second trouble brews, itís point the finger and play victim.




[Edited on 12/21/2018 by BoytonBrother]

 

Peach Extraordinaire



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  posted on 12/21/2018 at 08:09 AM
quote:
quote:
CD's this year would have outperformed the SPX. Think about that.

There are market cycles, and then there is market turbulence due to chaos. The market does not like uncertainty. And the leader of the free world thrives on chaos & impulse - not good stimulus for the market unless you are short or in for the long haul. The good news is he will have a lovely Christmas at Mar a Lago.



There are lots of reasons markets have been selling. I'm not going to argue that Trump isn't part of it, because it is. Part of it. Lots of things and varied reasons all playing on fears.




Agree - Trump is not the only reason, but if you look at charts, timing of proliferation of drops, I believe you'll find correlation to when he stepped up his rhetoric. The mkt is very much psychologically driven, and his persona is bad for this sort of thing.

Initially when elected we went on a good ride with expectations of good things from him. As time moved forward, and the reality of his plans & rhetoric set in, reality followed in the markets. He is a destabilizing force & can move markets with his big mouth, tweets, impulses, and actions.

 

Maximum Peach



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  posted on 12/21/2018 at 09:57 AM
I agree Martin.

Another thing, I have always kind of viewed "the markets" kind of like spoiled children. They protest for low interest rates, government spending and stimulus, quantitative easing, etc. There is no more of that on the horizon and as they say "they are taking the punch bowl away". While growth still should exist here, it could be lower growth. Will corporations have top line pressure, bottom line pressure ~ or both?

I think the run up in 2017 was the anticipation of what the tax plan would do for 2018 balance sheets. Now that is over, they are looking for what is going to boost returns in 2019 and there isn't any enticing or stimulative efforts.

Global recession fears are greater and more realistic, I think, than US recession fears and what do they say, something like 45% of the earnings of S&P companies are generated globally. So things like that are going to create pessimism.

Oil is another indicator. Which I hate where gasoline prices are compared to where crude prices are, gas and diesel are just way too high as a ratio to crude, but anyway...if oil plummeting on demand fears or is it a oversupply play - or both? As consumers, we generally, all love lower oil prices. Markets hate it, so as oil sells off, broader market fears expand if it is a demand related drop.

Then there is all this computer based selling, algorithm triggered selling deepens the down days. Talk of bringing back the uptick rule and stuff has been thrown around. Surely hedge funds would resist.

Portfolio rebalancing, tax loss selling. And Washington chaos - trade - a WH and President in turmoil - it all adds to it.

I know you, and I think everyone here disagrees with me and the administration on trade position, but let me say that just because the markets do not like tariffs and companies don't like tariffs or higher operating costs, just like they do not like higher labor expenses. But just because businesses do not want it, doesn't mean that as a country it isn't the right thing to pursue. And even if we disagree about the use and purpose of tariffs, I think everyone would agree that China violates patents, steals IP, forces companies to engage in partnerships with Chinese firms, etc...something needs done here to address this and what leverage did the US have to try and enact change? At the very least, putting tariffs on the table gives us a bargaining chip. All the people who say they hate tariffs atleast acknowledge that China is a bad actor and bringing change to how they operate is long overdue. I think it is a worthwhile undertaking even if markets partially sell of as a result.

 

Maximum Peach



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  posted on 12/21/2018 at 10:03 AM
Oh, and just to second what Lee is saying. Long term markets always recover and go up. It just depends what the timeframe is and how deep the drops go. Nobody knows where it will go, but you should match your investments to your acceptable level of risk 2112.

You mentioned real estate, that is real property you own I take it. One asset class I really like trying to find is good REITs. If you have some special knowledge and experience in the real estate field, you might be able to apply that to picking some good REITs to put money into.

 

Peach Master



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  posted on 12/21/2018 at 12:02 PM
quote:
The good news is he will have a lovely Christmas at Mar a Lago.


Guess "Donald" didn't get the coveted invitation to Putin's dacha for the holidays.

 

Peach Extraordinaire



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  posted on 12/21/2018 at 07:41 PM
quote:
Oh, and just to second what Lee is saying. Long term markets always recover and go up. It just depends what the timeframe is and how deep the drops go. Nobody knows where it will go, but you should match your investments to your acceptable level of risk 2112.

You mentioned real estate, that is real property you own I take it. One asset class I really like trying to find is good REITs. If you have some special knowledge and experience in the real estate field, you might be able to apply that to picking some good REITs to put money into.


My wife and I are co-owners in a fund that owns several apartment complexes, as well as a couple other investment properties. The apartments have always done well and are steady income. The other investment properties (retail space and vacant land) have been nothing but a money pit. I consider the apartments to be a safe investment, and if it was up to us we wouldn't have any holdings in any non-apartment properties. We also have a fair amount of cash in reserves in CDs. I consider myself a fairly conservative investor. My IRA is the only thing that has been invested in stocks (with a couple exceptions). I've never thought of REITs for my IRA. Do the distributions go into a cash account within the IRA? I doubt I can pocket it as income?

 

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  posted on 12/21/2018 at 10:22 PM
quote:
quote:
Oh, and just to second what Lee is saying. Long term markets always recover and go up. It just depends what the timeframe is and how deep the drops go. Nobody knows where it will go, but you should match your investments to your acceptable level of risk 2112.

You mentioned real estate, that is real property you own I take it. One asset class I really like trying to find is good REITs. If you have some special knowledge and experience in the real estate field, you might be able to apply that to picking some good REITs to put money into.


My wife and I are co-owners in a fund that owns several apartment complexes, as well as a couple other investment properties. The apartments have always done well and are steady income. The other investment properties (retail space and vacant land) have been nothing but a money pit. I consider the apartments to be a safe investment, and if it was up to us we wouldn't have any holdings in any non-apartment properties. We also have a fair amount of cash in reserves in CDs. I consider myself a fairly conservative investor. My IRA is the only thing that has been invested in stocks (with a couple exceptions). I've never thought of REITs for my IRA. Do the distributions go into a cash account within the IRA? I doubt I can pocket it as income?


I own REITs in an IRA.

The dividends they pay go into a cash account and then that money can be used to buy other shares of whatever.

A REIT I have been particularly found of is Welltower (WELL), formerly known as Health Care REIT Inc (HCN). I've owned it for over 10 years and it has done very nicely. I buy more from time to time. It pays a near 5% dividend.
https://www.cnbc.com/quotes/?symbol=well&qsearchterm=well

I also own Alexandria Real Estate (ARE) and ProLogis (PLD) formerly AMB. Both only pay about a 3% dividend.

I had Chatham lodging for awhile but sold it. I might look into another hotel type REIT at some point.

Every now and then I ask the broker for some analysis reports on stuff they like and then I sort through them and see if anything new is of interes to me. They don't actively manage anything, just offer some suggestions. Mutual fund managers or managed accounts are surely better at this than me. But I like to try and pick some on my own too.

I bought Realty Income Corp (O) this year and it has held up very well in this market. I was late to the party and bought at what turned out to be a peak in the 2018 market in January, but it still must be thought of highly. My price was $55.07 and even today it is still valued at 63.79. Pays about a 4% annual yield.
https://www.cnbc.com/quotes/?symbol=o&qsearchterm=o

 

Peach Extraordinaire



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  posted on 12/22/2018 at 03:25 AM
Thanks nebish. I will look into those. Sounds like what I am looking for.
 

Zen Peach



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  posted on 12/22/2018 at 06:38 AM
Just checked one of my brokerage accounts and I lost 8% last week. IN ONE WEEK! And of course, this doesn't count their fees. Yikes!

 

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Maximum Peach



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  posted on 12/22/2018 at 10:22 AM
quote:
Thanks nebish. I will look into those. Sounds like what I am looking for.


There are alot of different REITs. I tend to lean more towards commercial use, and like the tech and health sector. You can find residential property REITs, retail, lots of different types.

 

Peach Extraordinaire



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  posted on 12/24/2018 at 03:09 PM
And we are down another 1,000 points. We are down over 5,000 points since early October. The worst quarter since the Great Depression. Looks like we are on pace to wipe away all of those "historic gains" under Trump before the new congress take effect. Maybe before the new year. Funny that this isn't getting much media coverage from the liberal MSM and most Trump supporters still think the economy is doing great. Seeing Goober's Christmas post today, ignorance must really be bliss.
 

Zen Peach



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  posted on 12/24/2018 at 04:05 PM
The only good thing is my fees will be a lot less this quarter.............
 
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