Another Recession?

[Nodack]

Have been reading the news like always and China is having economic troubles that are panicking the markets. Already people were saying that the market has done too well and is in need of a correction of around 10%. Other people have been predicting another recession for some time now and think they come every 8-10 years. Others have been saying that the next recession will be worse than the Great Depression. I just read an article claiming companies are buying up resources and commodities which is another sign of trouble.

I know as well as anybody else that talk is cheap and some people predict doom and gloom 24/7. Ron Paul has been one of those. I am not here to talk politics or assign blame in any way. I am here to say I think trouble is here and I just put in the order to sell all my stocks in one of my accounts before they drop like a rock like the last recession. My stocks lost about 20% of their worth last week alone which is a pretty drastic. I have scheduled a call with the guy who manages my money market accounts to discuss strategy on Monday. I am sure he will say to hold tight and do nothing just like he did in the last recession where I lost half of everything like all good money managers are suppost to do.

I see stocks go up and down all the time and never bat an eye, but this feels bad to me and I am not waiting around until it's too late this time.

Thoughts? Am I just paranoid?

[Superbone]

I don't know if you're paranoid but you're trying to time the market. How do you know when to get back in. Just like in the last drop that had a great recovery to all-time highs, I'm not going to panic and I will stay in the market. In fact, as the market drops is when you get great deals on your stocks. I will continue to purchase at a discount. I will stay the course and ride out any correction and into recovery.

[Indy]

I don't know if you're paranoid but you're trying to time the market. How do you know when to get back in. Just like in the last drop that had a great recovery to all-time highs, I'm not going to panic and I will stay in the market. In fact, as the market drops is when you get great deals on your stocks. I will continue to purchase at a discount. I will stay the course and ride out any correction and into recovery.

I think that is a good strategy if you are mostly in index funds and mutual funds. If half your net worth is tied up in 4 of 5 companies, it would be a good time to think very hard about that.

[Superbone]

I don't know if you're paranoid but you're trying to time the market. How do you know when to get back in. Just like in the last drop that had a great recovery to all-time highs, I'm not going to panic and I will stay in the market. In fact, as the market drops is when you get great deals on your stocks. I will continue to purchase at a discount. I will stay the course and ride out any correction and into recovery.

I think that is a good strategy if you are mostly in index funds and mutual funds. If half your net worth is tied up in 4 of 5 companies, it would be a good time to think very hard about that.

Good point. I am almost entirely in index funds. But if half your net worth is tied up in 4 or 5 companies, you might want to thing about diversifying more. Unless you're the next Warren Buffet, then have at it.

[Indy]

I don't know if you're paranoid but you're trying to time the market. How do you know when to get back in. Just like in the last drop that had a great recovery to all-time highs, I'm not going to panic and I will stay in the market. In fact, as the market drops is when you get great deals on your stocks. I will continue to purchase at a discount. I will stay the course and ride out any correction and into recovery.

I think that is a good strategy if you are mostly in index funds and mutual funds. If half your net worth is tied up in 4 of 5 companies, it would be a good time to think very hard about that.

Good point. I am almost entirely in index funds. But if half your net worth is tied up in 4 or 5 companies, you might want to thing about diversifying more. Unless you're the next Warren Buffet, then have at it.

pretty sure he even recommends index funds.

[Superbone]

I don't know if you're paranoid but you're trying to time the market. How do you know when to get back in. Just like in the last drop that had a great recovery to all-time highs, I'm not going to panic and I will stay in the market. In fact, as the market drops is when you get great deals on your stocks. I will continue to purchase at a discount. I will stay the course and ride out any correction and into recovery.

I think that is a good strategy if you are mostly in index funds and mutual funds. If half your net worth is tied up in 4 of 5 companies, it would be a good time to think very hard about that.

Good point. I am almost entirely in index funds. But if half your net worth is tied up in 4 or 5 companies, you might want to thing about diversifying more. Unless you're the next Warren Buffet, then have at it.

pretty sure he even recommends index funds.

He does for the average investor and for his wife but that's not what he does.

[Ghost]

I think there may be something to your paranoia. I believe I have mentioned that I freelance in designing online training. This is often an industry that dries up when companies are looking to cut expenses, or are not forecasting great things. It doesn't always, but it can sometimes function as a leading indicator of things to come. And business has been extremely slow all year. Winter (Q1), that's common. But it's been a serious drought for me all summer.

But that doesn't mean you should abandon your investment strategy. Get out of specific stocks, maybe. Diversify your funds more. Talk to your investor dude about protecting your assets, but don't think you can predict the future. Unless you are planning to retire imminently, a diversified portfolio will still survive a crash.

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[Mori Chu]

I always worry about the value of the condo I own in Seattle. Bought it for $370k in 2007, then the market crashed, and after alllll this time it's finally back up to around $390k estimated value. I was hoping to wait a few more years for it to go up a bit more and then sell it, but if the market's about to drop, that is scary.

[Indy]

I always worry about the value of the condo I own in Seattle. Bought it for $370k in 2007, then the market crashed, and after alllll this time it's finally back up to around $390k estimated value. I was hoping to wait a few more years for it to go up a bit more and then sell it, but if the market's about to drop, that is scary.

Are you able to rent it and not lose money? If so, just keep doing that until it is paid off. It will be worth it in the long run.

[Nodack]

Friday the markets took a big downturn and everybody had the whole weekend to stew over their stocks and like me a lot decided to sell. I trade online and set all my stocks to sell the very first thing Monday morning... just like everybody else did. Even though I sold the second the market opened I managed to lose 7k on Monday. The Dow went down over 1000 points in the first ten minutes of trading. Ouch! I guess I wasn't paranoid enough.



I know we have had these conversations about what to do with your investments during a downturn/correction/recession before and the general concensus is to stand pat and do nothing. I have a hard time just doing nothing and hoping for the best. The real truth is nobody has a crystal ball and can see the future.

In the last recession I stood pat and watched my stocks plummet and finally sold right at the bottom of the fall, which really didn't hurt or help me. The market hit bottom and kind of stayed there for awhile. I waited and guessed correctly that the market was rebounding and went all in and made out on the rebound. If I would have gotten out early I would have had a lot more to reinvest.

I called the guy who manages my money market accounts this weekend and he said to call him on Monday and we can discuss our options. Today I call and they say he is out of the office today. LOL. I guess if I was him today I would run and hide too. He would just tell me to stay put anyway.

If the market goes up from here than I was just paranoid and jumped the gun. Its sad to say, but now that puts me in a position that I will be hoping for a bigger market crash so I can reinvest at the bottom again. Now I know what Republicans feel like hoping Obama fails.

[Superbone]

This is just a little blip in the history of the stock market. I'm pretty confident that the market will be higher in ten years than it is now. You're doing the opposite of what you're supposed to do: Buy low and sell high. You just locked in losses by selling.

[Nodack]

This is just a little blip in the history of the stock market. I'm pretty confident that the market will be higher in ten years than it is now. You're doing the opposite of what you're supposed to do: Buy low and sell high. You just locked in losses by selling.

All in the perspective. You say I locked in losses. I say I locked in my gains. Like a gambler at a slot machine that won a bunch of money at that machine, but now lost on several pulls in a row and is thinking of getting out while he still has gains. His next pull might be the big one or he could lose ten more in a row. I am still way up over my original investment, so if it tanks now I will have a nice chunk to re-invest. If I kept it in and it tanks, I would have a much smaller piece left when the market turns around. I bought low and sold medium high. Now I have to hope the market tanks and everybody else losses money so I can make money. That kind of sucks.

[Ghost]

No, you could be happy with your small win here and do the smart thing, putting that money right back in.

The fact that you compare yourself to a gambler at a slot machine should tell you a lot about your lack of a reliable investment strategy. I would compare you more to a guy with a headache who thinks he is better qualified to treat it than a real doctor is.

The best investment plan is actually extremely simple... It's to invest. You just devested. Maybe you win, maybe you won't. The guy who is consistently putting money in, though, will outperform you long term if you just want to play slots.

Good job on the minor win today. But stop playing slots.

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[Superbone]

If I kept it in and it tanks, I would have a much smaller piece left when the market turns around.

See, this is not true. It's all just paper gains and losses until you sell. If you don't sell, you would have the exact same piece left when the market turns around. You would have the exact same number of shares. What you are trying to do is market timing. Very few are successful at it and not all the time.

I will not be selling any of my investments and will continue to invest at a bargain while the market is down. All along keeping my portfolio balanced which results in buying low and selling high.

[Nodack]

I see what you are saying and it is probably the safest bet and also the best strategy for Ametica as a whole, not having everybody panic at the first sign of trouble and sending the markets spiraling. The strategy is sound.

I still disagree with your analysis a little bit. I would have the same number of shares if I left it all alone and when the market eventually goes back up to where it was I will be back to par. It could be one day or it could be a year. If stocks tank for six months like the last recession I will still have 80% of what I started with to invest at the bottom. If I kept it in and never took it out I will have all my stocks, but they could be worth 50% or less than what I started with at the bottom, which gives me 30% more money invested at the bottom, which should make my bottom line when stocks do go back to where they were much higher than if I stayed put.

If you play the stock market you are gambling. I pulled out thinking it was heading south in a hurry. I checked China's market way early this morning and it took another dive which gave me some relief thinking I was on the right track. Then the U.S. Markets opened up and I expected them to tank as well, but they staged a big rally and I felt foolish that I got out so fast. Then at the end of the day the rally turned to free fall and the DOW ended up down another couple hundred points making me glad I got out.

Normally I rarely check the markets or my stocks. They go up and down all the time, but generally all level out and point north. It's these big recession swings that get me nervous. There is no right or wrong way to do stocks IMO because nobody knows what will happen until it already happened and that is too late. Your way is the easiest safest bet Bone, but a man's got to do wha a man's got to do.

[Indy]

I see what you are saying and it is probably the safest bet and also the best strategy for Ametica as a whole, not having everybody panic at the first sign of trouble and sending the markets spiraling. The strategy is sound.

I still disagree with your analysis a little bit. I would have the same number of shares if I left it all alone and when the market eventually goes back up to where it was I will be back to par. It could be one day or it could be a year. If stocks tank for six months like the last recession I will still have 80% of what I started with to invest at the bottom. If I kept it in and never took it out I will have all my stocks, but they could be worth 50% or less than what I started with at the bottom, which gives me 30% more money invested at the bottom, which should make my bottom line when stocks do go back to where they were much higher than if I stayed put.

If you play the stock market you are gambling. I pulled out thinking it was heading south in a hurry. I checked China's market way early this morning and it took another dive which gave me some relief thinking I was on the right track. Then the U.S. Markets opened up and I expected them to tank as well, but they staged a big rally and I felt foolish that I got out so fast. Then at the end of the day the rally turned to free fall and the DOW ended up down another couple hundred points making me glad I got out.

Normally I rarely check the markets or my stocks. They go up and down all the time, but generally all level out and point north. It's these big recession swings that get me nervous. There is no right or wrong way to do stocks IMO because nobody knows what will happen until it already happened and that is too late. Your way is the easiest safest bet Bone, but a man's got to do wha a man's got to do.

Dack, are you living off of the proceeds, or planning to do that at a (much) later date? Are you close to needing the money?

I am 15-20 years away from "retirement" which basically just means that is how long it is going to take me to save the amount I want to have to be able to live off of interest the same way I am living now. I can't imagine what it would be like to continually try and gamble on the market in a short-term strategy like you mention, especially for the next two decades!

[Ghost]

I have been trying to find this series of articles comparing the hypothetical best market timer, the worst, and the guy who just invest steadily. I read it over the summer and it was fascinating and surprising (the best guy doesn't do as well as you'd expect, while the worst does far better than you would think). But, I can't find it.

But here's one that talks about the guy with no luck, who always buys before a crash.

http://awealthofcommonsense.com/worlds- ... ket-timer/

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[Ghost]

Also, the difference between "playing the stock market" and following a long term investment strategy is that the latter is NOT gambling. You like to play slots though. So, when are you pulling the lever again and jumping back in? Do you have a plan for that?

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[Nodack]

I play at a Casino about 3-4 times a month and never ever gamble. I suck. To me going to the Casino and gambling is just throwing your money away. My wife plays video poker or plays 21 at the table sometimes and has decent luck, but I haven't put any money into a machine in many years.

Indy, I don't live off the proceeds. Investing to me is for future retirement and fun. About twenty years ago I was a fan of Apple along with about ten other people. The PC people had a field day making fun of Apple and Apple users. I had to put up with a lot of crap. Everybody kept saying Apple was going out of business soon, so you should just buy a PC. Apple was in trouble. They went in a horrible direction after they fired Steve Jobs. Now they had just hired back Steve Jobs and I believed he would turn the company around and decided to open an online trading account and invest all I could scrape up at the time, which was 2k. I bought Apple shares for cheap and sure enough Steve Jobs turned the company around and that 2k got a lot bigger. I treated my online trading as a hobby/experiment, but since it got bigger I didn't want to lose it.

I have another account that was started when my father passed away. He gave us kids a little nest egg from his retirement account that we treat as our retirement account now. We stayed with his broker company and add a little to it every month. It's all managed by them and all we pick is whether we want to go safe, moderate or aggressive. I chose aggressive. That account in over decade with what we added has basically paid the same as if we just stuffed the money in a mattress. For them being the experts they really suck IMO. We haven't lost anything, but really haven't gained anything.

I shouldn't talk $ here, but my experimental account that I manage has gone from 2k to 90k before this last market crash. Now I have 67k left in that. My point being I am not an expert, but my experimental trading has yielded far greater results than the so called experts that I pay have managed to get.

[Ghost]

I guess you don't need to gamble a few bucks at the casino when you do it every day. You seem to have had a good run on those slots. Congrats!

Do you know what is in your managed account? Are we talking a managed fund, or are you paying someone else to play a few slot machines on your dime? Also, did you really lose over 25% on a day the market lost just over 10%?

Sorry to pick on you, and I know you aren't going to listen any more than a gambler on a hot streak would. Just don't flatter yourself into thinking you are smarter and better than everyone else who has tried your strategy and failed. The odds are against you long term, and the house always wins.

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