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abenjami

I'm going to liquidate my portfolio

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The market has been riding strong since January when some people pissed their pants over a seasonal adjustment period.

The DJIA is trading at an all time high right now.

Will it crash next week?  Probably not.

Will it continue going up for the next month or so?  That's certainly possible.

However, I can tell you three things for sure.

1.  At some point in the relatively near future, it will go down below 17,000 again.

2.  From a long term perspective, it will go back up afterwards.

3.  None of us are going to be able to time it perfectly.

People often get too wrapped up in advanced analytics that they miss the obvious and forget basic economic principles.  Buy low, sell high.  The market is higher than it's ever been right now.

I'm liquidating and waiting for the fall.  When the time seems right, I will dump my wad of cash back in at a lower price point.

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4 minutes ago, abenjami said:

The market has been riding strong since January when some people pissed their pants over a seasonal adjustment period.

The DJIA is trading at an all time high right now.

Will it crash next week?  Probably not.

Will it continue going up for the next month or so?  That's certainly possible.

However, I can tell you three things for sure.

1.  At some point in the relatively near future, it will go down below 17,000 again.

2.  From a long term perspective, it will go back up afterwards.

3.  None of us are going to be able to time it perfectly.

People often get too wrapped up in advanced analytics that they miss the obvious and forget basic economic principles.  Buy low, sell high.  The market is higher than it's ever been right now.

I'm liquidating and waiting for the fall.  When the time seems right, I will dump my wad of cash back in at a lower price point.

OK, fundamentally, this is wrong.  What if it hits 20K?  It could stretch on for a long time, and you miss out on dividends, etc.

 

But yes, doing something drastic along these lines has crossed my mind many times.  It's particular appeal is in the rebalancing and freedom.  As in What would you buy TODAY rather than simply hold onto because you already have it?

 

The only time I almost pulled the trigger (and almost means maybe 30% chance), the market crashed not long after and that was that.  And not at all the same scenario, but I did liquidate a number of holdings right before the pull back end of last year to invest a chunk in a opportunity provided by a friend.

 

BTW, what happened with Maui?  PM me as needed.

 

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Hitting 20K means almost nothing when it falls back below 17k again.  Sure, I reap less profit taking because I miss out on the difference between 18.5 and 20k.  But that's how it goes when you aren't trying to time it perfectly.  It could also be at 15k soon and then I look like a genius.

I'm not trying to time it perfectly.  Been there, done that.  I'm taking a broader and more long term approach here.

I have a chunk of money right now.  I will keep contributing for the next 25 years.  All that really matters is this:

1.  Where is the market in 25 years when I am ready to pull out, get into something much safer, and start drawing from my pot.

2.  How low can I get in every time I buy.

Dividends are nice and all but they can quickly be erased by a drop in value.  At which point I buy back in and start receiving dividends again so maybe I miss a quarter or two.

Regarding Maui, that is on hold for now but I will definitely hit you up when i'm ready...

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Are you anticipating an election-related pullback?  That's not unusual when the White House gets a new (or former) family moving in.

 

Just seems too easy, too obvious though. Like if it were that certain then the big boys would be getting off the merry go round already.  Unless of course they are more willing to wait to the last second then jump so then can max out their ride time until then (when I wouldn't doubt). 

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3 hours ago, OILERMAN said:

This is one of the problems....

It could go higher for much longer and/or when you get in it could go lower much longer.....

You have to guess right twice

I like that.  Succinct way to phrase attempt at market timing.

 

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Volatility index is about as low, which indicates market complacency, as it usually can go, so it is probably not a bad idea to trim positions.  

With the volatility index being low, option premiums should be low too as that is what that index is trying to measure - the premium on option premiums, so you could just hedge your account with S&P puts, for example, instead of actually selling stuff. Index options have a lot of tax benefits such as gains from their sale, even if realized over a short term, are considered long-term gains by the IRS.  Plus by hedging with them, you are cutting your exposure without triggering taxable gains on stuff you would have sold.  Doing stuff like this, hedging as opposed to gambling, is the real purpose of options. 

Edited by 9 Nines

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5 hours ago, OILERMAN said:

This is one of the problems....

It could go higher for much longer and/or when you get in it could go lower much longer.....

You have to guess right twice

 

1 hour ago, chef said:

I like that.  Succinct way to phrase attempt at market timing.

 

Yes, but this is less true when taking a very long term approach.

I'm not trying to time it perfectly.

Which would be better?

Option 1:  Do nothing, wait 25 years, cash out.

Option 2:  Sell now, wait as long as I have to for it to fall below 17k, buy and wait 25 years to cash out.

Obviously Option 2 as the value of the market will be the same 25 years from now under both scenarios. 

The only risk to this strategy is if the market never falls below 17k again and i'm left holding a bunch of cash.

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1 hour ago, 9 Nines said:

Volatility index is about as low, which indicates market complacency, as it usually can go, so it is probably not a bad idea to trim positions.  

With the volatility index being low, option premiums should be low too as that is what that index is trying to measure - the premium on option premiums, so you could just hedge your account with S&P puts, for example, instead of actually selling stuff. Index options have a lot of tax benefits such as gains from their sale, even if realized over a short term, are considered long-term gains by the IRS.  Plus by hedging with them, you are cutting your exposure without triggering taxable gains on stuff you would have sold.  Doing stuff like this, hedging as opposed to gambling, is the real purpose of options. 

My entire portfolio is tax-deferred.  There won't be any taxable gains.

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54 minutes ago, abenjami said:

 

Yes, but this is less true when taking a very long term approach.

I'm not trying to time it perfectly.

Which would be better?

Option 1:  Do nothing, wait 25 years, cash out.

Option 2:  Sell now, wait as long as I have to for it to fall below 17k, buy and wait 25 years to cash out.

Obviously Option 2 as the value of the market will be the same 25 years from now under both scenarios. 

The only risk to this strategy is if the market never falls below 17k again and i'm left holding a bunch of cash.

Adjust your asset allocation to hedge against the risks you perceive in the stock market.  But don't  go from 100% stocks to 100% cash.  Stick some percentage in bonds or annuities if it makes you feel better.

And choose your investment vehicles carefully.  Check the fees and commissions that get paid out of your earnings.  A bad fund will destroy a great strategy.

 

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2 hours ago, abenjami said:

The only risk to this strategy is if the market never falls below 17k again and i'm left holding a bunch of cash.

This is risk enough right there.  With the break of the all time highs recently, the market in now supposedly in Wave 5 of the Elliot Wave.  There is no 'top out target' from here on.  It could 'theoretically' go to Dow 25k - 30k before it tops out, who knows. 

But even if it did top out near 30k before the next big correction, it may not go down to 17k again for many years after that, if ever.  Long time to hold a wad of cash and not put it to work.

Dropping from Dow 30k down to 17k again would be almost the same as it dropping from the Dow 18,500 range it's at now, back down to Dow 10k.  Long ways to drop with no known catalyst to get it there, as of yet anyway.

Good luck bro! lol  You may indeed time it right, or you may not.  You have good cash income coming in already, so you won't be hurting too bad either way.

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Sounds like you are a contrarian, my friend.. perhaps by some baby Berkshire when you get a pullback.. that's about as solid advice as one can get.. 

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6 hours ago, abenjami said:

 

Which would be better?

Option 1:  Do nothing, wait 25 years, cash out.

Option 2:  Sell now, wait as long as I have to for it to fall below 17k, buy and wait 25 years to cash out.

Option one without question

It's been proven time and time again

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Option 2 works if you're patient and if it happens. You've only got control over the first part. That's the risk. If it happens, though, it's the better option.

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