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      01-17-2020, 03:53 PM   #1
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Going cash today

Ok so after today i put all my wife's and my 401k proceeds into a money market fund. This trajectory cant continue and a lot of economists feel that the economy is reaching if not already at full employment. I don't care if i miss another 2 - 5 percent in gains. I'm up 39 percent over the last 2 years and im sure there is a pull back coming. I'm protecting my profits. I will continue to contribute to my 401k but there is just no value at the moment. Its crazy how many times companies are trading their earnings


Thoughts?
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      01-17-2020, 04:03 PM   #2
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And, what if the next economic catastrophe is inflation?
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      01-17-2020, 04:28 PM   #3
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I work for a global investment manager and going cash is a safe option but you do need to factor in inflation and opportunity cost. It really comes down to what your time horizon is (i.e. time to retirement) and if you could stomach some volatility.

Currently, retail investors like you and me have access to alternative investment strategies, some of which, in short, can give you positive returns when the market goes down. They are known as liquid alts in the form of long/short, market neutral, anti-beta strategies that can hedge a portion of your portfolio.

There are some great balanced products (75 fixed income/25 equity) that have not taken a massive hit during the '08 correction. I have come across mandates that were down by only 5-7% during the recession and rebounded back in '09.

Do not forget that usually the markets tend to rally strong before a recession and missing the best years over 20-30 yr investing period, it can create a significant difference in absolute returns. In terms of a recession, word is that we should expect to see volatility over 2020 and potentially have a market reset in Q3/Q4 of 2021.

Just my 2-3 cents..
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      01-17-2020, 04:29 PM   #4
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Quote:
Originally Posted by DriverDaily View Post
And, what if the next economic catastrophe is inflation?
I guess we will need to do another realignment. I think that a gross market adjustment is much closer to reality then an overnight inflation crisis.
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      01-17-2020, 04:33 PM   #5
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This month is reminding me of January 2018 when things were going really well...until they weren't.
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      01-17-2020, 04:37 PM   #6
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More money is lost preparing for a market correction than in the correction itself.
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      01-17-2020, 04:42 PM   #7
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Quote:
Originally Posted by corn18 View Post
More money is lost preparing for a market correction than in the correction itself.
Yes but if the market keeps running I lose if it does not I win. Given the run already I think the the odds are on my side. Could I be wrong, sure. But I'm up 40% I don't stand to loos much going cash outside of the remaining momentum to the upside.

Once one big fish decided to take profits the algos will kick in.... January is like a honeymoon most years. I'll update this post February first....
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      01-17-2020, 04:43 PM   #8
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Interesting data...

S&P on average appreciates by 19% if the previous year return was 29%+.
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      01-17-2020, 04:45 PM   #9
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Quote:
Originally Posted by qba335i View Post
S&P on average appreciates by 19% if the previous year return was 29%+.
Thats baked in to this month's run up already. Time to take some cheddar of the table. Institutional investors are going to want to protect profits. It's easy padding for the remaining duration of this year hard not to lock some of this money in.

Also that's basically saying the trend is your friend till it isn't one fine morning.
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      01-17-2020, 04:54 PM   #10
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If you are certain inflation won't be an issue, and the market will crash exactly the same way as 08 instead of stagflating like the 70s, then why not just by shift from equities to bonds?

I don't think a 100% money market allocation makes sense unless you literally know what will happen tomorrow.
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      01-17-2020, 05:02 PM   #11
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Quote:
Originally Posted by bimmerfrk View Post
Quote:
Originally Posted by qba335i View Post
S&P on average appreciates by 19% if the previous year return was 29%+.
Thats baked in to this month's run up already. Time to take some cheddar of the table. Institutional investors are going to want to protect profits. It's easy padding for the remaining duration of this year hard not to lock some of this money in.

Also that's basically saying the trend is your friend till it isn't one fine morning.
The YTD on S&P is only 3.06% so technically still has some upside.

I work in the field and don't see a lot of selling... A lot of those big institutional investors/clients (might) have some hedges - but it's hard to know what they are doing without having access to the whole book.

Bottom line is - most people can't time the market and you can always make money - just have to be on the right side of the trade.
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      01-17-2020, 05:09 PM   #12
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*In for posterity like the guy last year that said he was getting out of the market because it was going to fall.....when the DJIA was at 24,000.




If you are that worried about a correction, just put a bunch of stop limit orders on your investments. Putting it in cash? Good grief!
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      01-17-2020, 05:20 PM   #13
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Pretty much did a similar thing.

Pulled out the cash for the M2C-- my wife (who manages my 401k) and my father (who manages my personal investments) both convinced me to pull cash off the table-- the theory being that when the market corrects, I can either have a new car, or I can watch my "paper profits" go up in smoke.

So, car.
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      01-17-2020, 05:26 PM   #14
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Quote:
Originally Posted by Run Silent View Post
*In for posterity like the guy last year that said he was getting out of the market because it was going to fall.....when the DJIA was at 24,000.




If you are that worried about a correction, just put a bunch of stop limit orders on your investments. Putting it in cash? Good grief!
I will just buy cheaper. Things come back around. Recent history with 1987 and dot com taught us that the people who kept buying were on top and all the people who sold were trying to get back in at much higher cost than before.
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      01-17-2020, 05:26 PM   #15
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Quote:
Originally Posted by qba335i View Post
Quote:
Originally Posted by bimmerfrk View Post
Quote:
Originally Posted by qba335i View Post
S&P on average appreciates by 19% if the previous year return was 29%+.
Thats baked in to this month's run up already. Time to take some cheddar of the table. Institutional investors are going to want to protect profits. It's easy padding for the remaining duration of this year hard not to lock some of this money in.

Also that's basically saying the trend is your friend till it isn't one fine morning.
The YTD on S&P is only 3.06% so technically still has some upside.

I work in the field and don't see a lot of selling... A lot of those big institutional investors/clients (might) have some hedges - but it's hard to know what they are doing without having access to the whole book.

Bottom line is - most people can't time the market and you can always make money - just have to be on the right side of the trade.
I'm not negating any of the statements posted. I'm doing what I feel is correct. This has been a large and long economic cycle, and its detached from actual pps/ earnings objectivity.

I work in alternative asset managment space; CLOs. So we really focus on credit. When the market tanks we make our best money as everyone rushes to an alternative investment mix. Given that I have had a feeling of calm in growth this past year. This month I'm following my gut instinct.

My gut states; yes we have made money and yes we lost money but given my positive situation and knowing we do not live in Iran I don't think inflation is a huge concern (at least short term 1- 3 months)

Given that I was not clear with time horizons. I'm waiting on a clear pullback in the next 2-3 weeks after which I will reevaluate my position in the market. You guys are crazy thinking this market will continue to rally. All the possible
relative technical analysis points to the entire market being overbought.

Whatever I digress, I'm just a simpleton avoiding the inevitable.
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      01-17-2020, 05:28 PM   #16
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Quote:
Originally Posted by Run Silent View Post
*In for posterity like the guy last year that said he was getting out of the market because it was going to fall.....when the DJIA was at 24,000.




If you are that worried about a correction, just put a bunch of stop limit orders on your investments. Putting it in cash? Good grief!
It's not real cash it a money market fund equivalent to cash. I can be reinvested in 24 hour period.
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      01-17-2020, 05:45 PM   #17
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Quote:
Originally Posted by corn18 View Post
More money is lost preparing for a market correction than in the correction itself.
Absolutely. Better to stay the course than to duck and dodge.
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      01-17-2020, 05:57 PM   #18
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I wouldn't do that to 401k funds unless you think you're retiring in the next couple years, in which case you should probably be diversifying your holdings to more of a fixed income profile anyway.

I never put a big chunk of money back into the market, which has been sitting in a money market, and the downside was I gave up about 8% if I compare the sale price to price today. But since I'm looking at using some of that liquidity in the short term for things like paying down the mortgage (huge interest savings), the lower return for the reduced risk is worth it.

But all retirement accounts are still invested as well as company equity so overall portfolio still has plenty of holdings.
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      01-17-2020, 06:59 PM   #19
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If truly concerned based on your analysis I’d say 20% - 30% liquid seems more rational to me. Avoids missing upside if you are wrong and the run continues, while mitigating downside risk and providing some liquidity to reinvest if the downside actually happens. Ultimately it’s your money and you need to do whatever makes you comfortable but doing anything other than leaving it in and averaging is a form of timing the market and we all know how that goes.
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      01-17-2020, 07:50 PM   #20
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Quote:
Originally Posted by bimmerfrk View Post
Ok so after today i put all my wife's and my 401k proceeds into a money market fund. This trajectory cant continue and a lot of economists feel that the economy is reaching if not already at full employment. I don't care if i miss another 2 - 5 percent in gains. I'm up 39 percent over the last 2 years and im sure there is a pull back coming. I'm protecting my profits. I will continue to contribute to my 401k but there is just no value at the moment. Its crazy how many times companies are trading their earnings


Thoughts?
bimmerfrk, you moved out of the market and into cash, correct? The reason you did that is because the trajectory can't continue. Did I get that right?

Have you given a reason based on economic fundamentals why the trajectory can't continue? I read, once, through all the posts and did not see an economic thesis put forward.
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      01-17-2020, 08:15 PM   #21
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To the OP... "Nobody ever went broke taking a profit". Not sure who said it, but it's true. I've been considering the same myself.

"Pigs get fat, hogs get slaughtered." -Gordon Gecko. Truth.
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      01-21-2020, 01:28 AM   #22
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Quote:
Originally Posted by flybigjet View Post
Pretty much did a similar thing.

Pulled out the cash for the M2C-- my wife (who manages my 401k) and my father (who manages my personal investments) both convinced me to pull cash off the table-- the theory being that when the market corrects, I can either have a new car, or I can watch my "paper profits" go up in smoke.

So, car.
Wait, you pulled money out of your investment accounts for a car?
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