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Old 06-10-2011, 07:28 PM   #1
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Default Pulling out of the stock market short term

So I have not liked what I have heard on the economic news front over the last few weeks. In particular the slowing recovery and the debt ceiling crisis are disconcerting. I am not overly concerned about the former. We will recover eventually.

But the high-stakes political brinksmanship and demagoguery that is going on right now over the debt crisis has me thinking that we are at least at risk for the market seriously suffering within the next two to three months. I do not have a lot of faith in Congress and the Executive branch getting it together and working this out soon enough. Or, put another, way, I think they may be too busy posting pictures of their penises and are at risk of not coming to a viable agreement.

So I pulled most of my investments out of equities and parked them temporarily in a money market. Fortunately I did this before today's market plunge (the Dow is back below 12,000). I am going to sit out for the next two to three months and see what happens. Since I own a Miata that naturally makes me an investment expert.

Thoughts? Anyone considering the same? Doubling down? Short selling? Buying more turbo stuff? Moving to Germany? Buying gold? Buying corn futures? Blowing it on blow and hookers since the world is ending soon anyway?

Discuss...
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Old 06-10-2011, 08:12 PM   #2
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Good for you.

I think the safest thing to do is to diversify into:
- income producing real estate
- Yen and Swiss Franc
dollar cost average getting into these:
- silver
- gold
- commodities
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Old 06-10-2011, 09:11 PM   #3
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hookers and blow for me
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Old 06-10-2011, 09:29 PM   #4
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I personally have been into gold, silver, guns this year.
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Old 06-10-2011, 10:13 PM   #5
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And im too young to understand any of it hahaha
Website tips for where to learn?

Dann
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Old 06-11-2011, 08:13 AM   #6
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Don't be out for too long.
The upheaval of the Arab world and the tsunami in Japan both will both drive worldwide demand up in 2012.
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Old 06-11-2011, 11:09 AM   #7
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Uh, now is the time to be getting IN. Buy low, sell high. When it's down, you buy and sit on it. Sure, things may go further south for a while, but you gotta think long term. It won't stay down forever, and then you'll be making some serious gains.
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Old 06-11-2011, 11:09 AM   #8
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Originally Posted by nitrodann View Post
And im too young to understand any of it hahaha
Website tips for where to learn?

Dann
Google US debt ceiling crisis and you will find all you need to know. wsj.com would work too.
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Old 06-12-2011, 12:24 PM   #9
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Quote:
Originally Posted by rleete View Post
Uh, now is the time to be getting IN. Buy low, sell high. When it's down, you buy and sit on it. Sure, things may go further south for a while, but you gotta think long term. It won't stay down forever, and then you'll be making some serious gains.
I think what you mean is keep buying on a regular basis? Leverage DCA?

my only comment to ZX is this: isn't the 10th of June a little on the late side to be thinking about debt limit related market decisions?

The bears have been making money since late april.

the justification if you want out of the market is that you might only miss two months of growth but the caveat there is that you don't know what that growth will be. I suspect one of three (or a combination) outcomes:

people worry and pull out and the market slowly fizzles downward for a while until the debt limit vote at which point:

A) the limit is raised and the market rallies (justification to stay in)

B) the limit is not raised and the market tanks (justification to get out)

C) big swings of uncertainty with half the market buying on the dips to try to time the market and a small rally or tank at the time of the vote (ie no big change in the big scheme of things and you dont win or lose either way)

I think the trick, like Jason mentioned is to find those investments that aren't going to be (as) subject to the risks. Insulate yourself from the uncertainty and hedge the potential dropout.

I'm planning for C with a little B personally. But I fully expect a small-scale A based on the practicality of avoiding the consequences of not raising the limit.

In other words, hopefully 1/3 of my holdings will do well enough to offset hits in another 1/3.
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Old 06-12-2011, 01:57 PM   #10
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my only comment to ZX is this: isn't the 10th of June a little on the late side to be thinking about debt limit related market decisions?
Not really. Because of the way we are set up at work I am buying and selling shares in CREF equity funds. They are set up to prevent frequent buying and selling of shares and therefore one cannot get in and out several times a month for example. Also, a sell order is not executed until the end of the next business day. Because of this, until now, I have been watching but not yet reacting. The market has been declining steadily for about a month now so in hindsight it would have been a good idea to get out sooner.

But hindsight investing is easy of course. So what I am gong for is this. It is clear that over the course of several days that the market almost always drops faster than it gains, especially when reacting to good or bad news. Therefore it is a little easier to time the recoveries than it is to to time the declines. So IMO the downside risk is more substantial than the upside risk (missing out on a rally). If Congress gets its act together the market will react positively, and though I may miss out on some of the rally, I will still have time to get in, especially looking at the long-term, which I normally am. If Congress does not get its act together, the market will react suddenly and drastically, and there will be less time to react.

Time cost averaging is a mostly a myth by the way. Studies have shown that random buys into the market do no better or worse than steady periodic investment. The reason that regular purchases work is due to discipline. That is, people tend to invest more when they buy regularly, via payroll deduction for example, than if they try to save up money and buy a lump purchase.

There is also the benefit with 401k and 403b setups of buying funds with pre-tax money. But, and this is a big BUT, this only works if taxes do not increase later on. If they do increase later on, and this is clearly a reasonable risk, then lump after-tax purchases into a Roth make more sense. I am splitting between both myself. The company contribution to my retirement fund is pre-tax. My contribution is post-tax (Roth).
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Old 06-12-2011, 02:18 PM   #11
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so it sounds like you have a good handle on what you want to do.

and an interesting thought... if your statement about the market dropping faster than it gains is true, it would make sense to invest in bear funds which would show a reverse pattern of steady, slow decreases and abrupt increases. buy whenever and wait for the spike corresponding to the market drop to sell and then wait a while until it comes back down to your buy-in price.
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Old 06-12-2011, 10:04 PM   #12
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There's millions of ways to look at this and millions of ******** (with a media outlet) to listen to. If anyone knew what the deal was they'd be charging an arm and a leg and everyone would do that. With that in mind and from my seemingly useless education, Here's what i'm doing: There's one of two simple things to do. I'm going to either cash out and take a penalty and risk it vegas style on silver (Which i wouldn't suggest if you have a family or only one source of income) OR play it safe and transfer all of it to an extremely low growth mutual fund and buy back in when I think it has leveled out. What you should do is buy an intro to econometrics book, and a intro to economic forecasting book and build your own model using eviews, R, or SAS. Believe it or not my brother uses his own models and has done extremely well for a guy that can't take off a door panel without breaking everything.
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Old 06-12-2011, 11:17 PM   #13
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I'm all in, fully leveraged. Send me $100 in a self addressed stamped envelope and I will share my secrets of financial success in this turbulent market!
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Old 06-12-2011, 11:27 PM   #14
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the only guaranteed way to make money off the market regardless of outcome is to charge a brokerage fee.
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Old 06-12-2011, 11:41 PM   #15
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I yanked all of my **** out fourth quarter 2007 and I'm glad I did. I've made more playing scratch off tickets than I ever did in the market. My old man hates me for it.
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Old 06-13-2011, 11:10 AM   #16
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On a day where I'm looking to pack-up and move to Houston, this scares me a bit.
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Old 06-13-2011, 11:56 AM   #17
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I haven't changed a thing. Everything that was set with IRA's and general mutual fund buys a couple of years ago are still going. My only pending change is to decide where the next $1,500 a month is going in two months when the house is paid off. My wife and I are capped on 401k and can't contribute to a Roth most years. I suppose that I can just increase contributions to the mutual fund. As it sits now, almost all of my wife's salary is directed into investments. That $1,500 change would put her entire salary into investments and we live off of mine. Other than that, I'm thinking about piling up some extra money and buying some real estate with cash. No rentals - been there and done that. It's too hard when I travel. Maybe a house to fix up and flip or some farm ground.
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Old 06-13-2011, 11:58 AM   #18
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Do you have a plan for when the USD erodes another 30% or so?
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Old 06-13-2011, 01:14 PM   #19
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My GF now owns two condos in Houston, more to come...
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Old 06-13-2011, 01:27 PM   #20
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Quote:
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Do you have a plan for when the USD erodes another 30% or so?
I have no plan other than amassing as much of the worthless fiat paper as I can. Pretty confident with my approach.
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