” The thing that worries me more than anything else is what happens when the machines have to start selling.” What happens when the computerized circle jerk ends?
Team Goy #432
Robert Gore
October 18, 2017 10:53 am
Sounds like Hard Core Doom Porn.
bigfoot was here
October 18, 2017 11:26 am
Oh what a lovely mess. If a couple has $500k in equity and savings with twenty years plus of retirement ahead of them and Social Security in a late inning Ponzi Scheme, what do they do?
Interest rates are not just low, they are lower than at anytime in history. Purchasing power of the dollar goes down every year sometimes faster, sometimes less fast, but always in the same direction and you can bet that in ten years it will be cut dramatically, let alone twenty.
So what does the couple do? Buy bonds from risky companies at low rates. Idiocy. Buy stocks in a market that looks bubbly? Yes, but not all out and with a diversified portfolio with ten or fifteen percent stops. Buy gold and silver? Yes, get the real stuff and bury it. Buy cryptocurrencies? Yes, at least two or three percent, enough to make a difference if they go up and not enough to kill you if they go to zero. Insurance you buy and hope not to use, but with metals and cryptos, you can hope to better yourself substantially. What other choices does one have? Other than to take up farming with settler’s tools?
I have a few ideas for you.
-VCSH is a short-term corp bond etf, pays 2.1% w/ a monthly dividend, with ave credit quality of “A”. That’s good quality corp debt and it’s short-term (currently about 3 years on ave)
-EALDX is short term govt bond mutual fund which is paying 2.16%. Monthly dividend.
-TOTL is Gunlach’s tactical bond fund containing most MBS, Treasuries pays 2.9%. It’s actively managed by Gunlach but is an ETF w/a monthly dividend
-Various Muni Bond CEFs paying about 5% (XMPT, MMU, MNP, NZF). They have some leverage which means that what they pay out has dropped but the share prices haven’t dropped much. Monthly dividends.
-FPE is a preferred stock fund that acts like a junk bond and pays 5.4%. It’s an ETF so there’s no premium/discount to NAV. Preferred shares are risky, they are basically junk debt, so you could buy and equal amount of TLT (20+ year treasuries etf) which is likely to rise if the market is in trouble to offset any loses in FPE. Monthly dividend
-TLT yields 2.47% but is 20+ year duration, so if yields spike, this will go way down. But it will go way (back) up in a market crash (a good chance as people need good collateral in a crisis and they will likely buy treasuries incl TLT).
You could own some dividend paying stocks/CEFs like DNP (utilities), MO (Altria), O (reality income REIT) and get 4 to 6%. You could put stop losses under them or short sell some IWM (Russell 2000) to partially offset risk. There are also BDCs which are loan companies. They are steady now, but would be very risky in a downturn but they pay 8 to 9% monthly. MLPs are candidates too but very risky, some REITs are quite risky (Reality income is one of the better ones).
I’m in your shoes and so are so many other people like us. That EALDX is like holding cash, so that is the safest but still yields 2.1% (it’s yield will rise if short term rates continue to rise without much risk).
Stocks could easily go down 50 to 70% in the next bear market. If you can wait, sitting in cash or short term funds, and buy when blood is running in the street and panic prevails, that would be the best option. Then you could buy of bunch of dividend champions like JNJ, PG, KO which would be yielding 4 or 5% after a sharp fall. Here’s that list for your “buy the rout” shopping list: http://www.dripinvesting.org/tools/tools.asp
I realize that I need to write a blog post about this very topic (which forces me to think more about my own plan).
Hey, Doug, that is awesome of you to make all those suggestions!
I just have a hard time with putting $100k into a bond that yields $2100 a year. The risk/reward makes me antsy. I do own a host of China stocks, so I am nuts as well as antsy with those. I have to tell myself every day, “Don’t fall in love.”
The Stansberry guys are mostly all into the “melt-up” scenario, so there’s that. I don’t sleep well, but I own a variety of names that are doing well enough to keep me in.
I did fall in love with miners, though, and hold about twenty of them. Once in a while I get one that goes way the hell up and it helps with all the losses. I should tattoo “Inevitable is not imminent” on the back of my hands.
I especially like your EALDX idea and will give that shot for one. I do own DHI and used to own O, which I am very sorry to have sold. That was a good one for sure.
Even if today was the top, it still isn’t going to be a cliff. Even if the first leg down is 10%, there will be good exit opportunities many months from now. For all we know the DOW still has another 2000 or 15000 points to go. It is impossible to guess given all the freshly printed central bank fiat floating around.
Just follow this chart and you will always capture 90% of every bull market’s gains, avoid 90% of bear market losses, and suffer only relatively minor losses from whipsaws.
Thanks, Icono. That chart looks pretty special, especially the 13/34/1 MACD.
I’m going to compare it to one I use for long-term trading that employs the McClelland indicator with 13/39 moving averages along with TSI and RSI in TradeStation.
Iconoclast, I think you’re probably right that the first 10% decline might be bought, giving you an exit point later. That is sound advice in general. However, the suppression of volatility, algo-trading, risk-parity schemes –taken together– are reminiscent of portfolio insurance schemes in 1987. I wouldn’t be surprised that a 3 or 4% decline could turn into a 10% decline or more in just a few days (think Aug ’15 flash crash–hoping that I have the year correct). That potential is definitely there. It might be worse than that. One could probably buy that dip for a trade on a rebound, but one must remember to sell that trade.
This country (and the world) is reaching the end of the road of can-kicking. Yesterday I pinned a blog post with that theme at the top of my blog. https://gulfcoastcommentary.blogspot.com/
I just looked at that “We’re Reaching The End Of The Road” blog post, still not entirely happy with the phrasing/wording and I’m still working on it.
Personally, I have 38% in Short-term bond funds as noted above, 21% in defensive dividend-paying equities offset by 11% short positions in IWM, QQQ and SPY, 9% in preferred share CEFs/ETFs (HTD, FPE, FFC, DFP), 14% cash, 10% in muni bond CEFs, 10% in Treasuries (AGG, TLT), 5% in GLD and 4% in BDCs. WARNING: this allocation might change at any time. 🙂
My bet is that Europe is on the path to disaster first, followed by the US, then China…but who knows. I think crisis is coming very soon, within months, maybe weeks. That’s why I’m so defensively positioned. Like I mentioned, if the market took a 10% flash crash, erasing the Trump-bump, I MIGHT add to longs for a trade.
Bob
October 18, 2017 6:12 pm
In retrospect, 2001 -2009 was a wave 4 sideways correction in three waves. The edge we are on is likely a larger-degree wave 2 correction, shorter, sharper and more scary. Good luck to us all. It won’t be the end by a long shot, unless Yellowstone blows, or Ebola goes airborne…
BSHJ
October 19, 2017 4:55 pm
If you are up 50% and it goes down 20%…..you have lost some prior gains but overall, is it really a big deal?
” The thing that worries me more than anything else is what happens when the machines have to start selling.” What happens when the computerized circle jerk ends?
Team Goy #432
Sounds like Hard Core Doom Porn.
Oh what a lovely mess. If a couple has $500k in equity and savings with twenty years plus of retirement ahead of them and Social Security in a late inning Ponzi Scheme, what do they do?
Interest rates are not just low, they are lower than at anytime in history. Purchasing power of the dollar goes down every year sometimes faster, sometimes less fast, but always in the same direction and you can bet that in ten years it will be cut dramatically, let alone twenty.
So what does the couple do? Buy bonds from risky companies at low rates. Idiocy. Buy stocks in a market that looks bubbly? Yes, but not all out and with a diversified portfolio with ten or fifteen percent stops. Buy gold and silver? Yes, get the real stuff and bury it. Buy cryptocurrencies? Yes, at least two or three percent, enough to make a difference if they go up and not enough to kill you if they go to zero. Insurance you buy and hope not to use, but with metals and cryptos, you can hope to better yourself substantially. What other choices does one have? Other than to take up farming with settler’s tools?
Bigfoot, I’m feeling your pain.
I have a few ideas for you.
-VCSH is a short-term corp bond etf, pays 2.1% w/ a monthly dividend, with ave credit quality of “A”. That’s good quality corp debt and it’s short-term (currently about 3 years on ave)
-EALDX is short term govt bond mutual fund which is paying 2.16%. Monthly dividend.
-TOTL is Gunlach’s tactical bond fund containing most MBS, Treasuries pays 2.9%. It’s actively managed by Gunlach but is an ETF w/a monthly dividend
-Various Muni Bond CEFs paying about 5% (XMPT, MMU, MNP, NZF). They have some leverage which means that what they pay out has dropped but the share prices haven’t dropped much. Monthly dividends.
-FPE is a preferred stock fund that acts like a junk bond and pays 5.4%. It’s an ETF so there’s no premium/discount to NAV. Preferred shares are risky, they are basically junk debt, so you could buy and equal amount of TLT (20+ year treasuries etf) which is likely to rise if the market is in trouble to offset any loses in FPE. Monthly dividend
-TLT yields 2.47% but is 20+ year duration, so if yields spike, this will go way down. But it will go way (back) up in a market crash (a good chance as people need good collateral in a crisis and they will likely buy treasuries incl TLT).
You could own some dividend paying stocks/CEFs like DNP (utilities), MO (Altria), O (reality income REIT) and get 4 to 6%. You could put stop losses under them or short sell some IWM (Russell 2000) to partially offset risk. There are also BDCs which are loan companies. They are steady now, but would be very risky in a downturn but they pay 8 to 9% monthly. MLPs are candidates too but very risky, some REITs are quite risky (Reality income is one of the better ones).
I’m in your shoes and so are so many other people like us. That EALDX is like holding cash, so that is the safest but still yields 2.1% (it’s yield will rise if short term rates continue to rise without much risk).
Stocks could easily go down 50 to 70% in the next bear market. If you can wait, sitting in cash or short term funds, and buy when blood is running in the street and panic prevails, that would be the best option. Then you could buy of bunch of dividend champions like JNJ, PG, KO which would be yielding 4 or 5% after a sharp fall. Here’s that list for your “buy the rout” shopping list: http://www.dripinvesting.org/tools/tools.asp
I realize that I need to write a blog post about this very topic (which forces me to think more about my own plan).
Hey, Doug, that is awesome of you to make all those suggestions!
I just have a hard time with putting $100k into a bond that yields $2100 a year. The risk/reward makes me antsy. I do own a host of China stocks, so I am nuts as well as antsy with those. I have to tell myself every day, “Don’t fall in love.”
The Stansberry guys are mostly all into the “melt-up” scenario, so there’s that. I don’t sleep well, but I own a variety of names that are doing well enough to keep me in.
I did fall in love with miners, though, and hold about twenty of them. Once in a while I get one that goes way the hell up and it helps with all the losses. I should tattoo “Inevitable is not imminent” on the back of my hands.
I especially like your EALDX idea and will give that shot for one. I do own DHI and used to own O, which I am very sorry to have sold. That was a good one for sure.
Thanks again.
You are welcome, sir. 🙂
Even if today was the top, it still isn’t going to be a cliff. Even if the first leg down is 10%, there will be good exit opportunities many months from now. For all we know the DOW still has another 2000 or 15000 points to go. It is impossible to guess given all the freshly printed central bank fiat floating around.
Just follow this chart and you will always capture 90% of every bull market’s gains, avoid 90% of bear market losses, and suffer only relatively minor losses from whipsaws.
http://stockcharts.com/public/3828047/chartbook/137721114
Thanks, Icono. That chart looks pretty special, especially the 13/34/1 MACD.
I’m going to compare it to one I use for long-term trading that employs the McClelland indicator with 13/39 moving averages along with TSI and RSI in TradeStation.
Iconoclast, I think you’re probably right that the first 10% decline might be bought, giving you an exit point later. That is sound advice in general. However, the suppression of volatility, algo-trading, risk-parity schemes –taken together– are reminiscent of portfolio insurance schemes in 1987. I wouldn’t be surprised that a 3 or 4% decline could turn into a 10% decline or more in just a few days (think Aug ’15 flash crash–hoping that I have the year correct). That potential is definitely there. It might be worse than that. One could probably buy that dip for a trade on a rebound, but one must remember to sell that trade.
This country (and the world) is reaching the end of the road of can-kicking. Yesterday I pinned a blog post with that theme at the top of my blog. https://gulfcoastcommentary.blogspot.com/
I just looked at that “We’re Reaching The End Of The Road” blog post, still not entirely happy with the phrasing/wording and I’m still working on it.
Personally, I have 38% in Short-term bond funds as noted above, 21% in defensive dividend-paying equities offset by 11% short positions in IWM, QQQ and SPY, 9% in preferred share CEFs/ETFs (HTD, FPE, FFC, DFP), 14% cash, 10% in muni bond CEFs, 10% in Treasuries (AGG, TLT), 5% in GLD and 4% in BDCs. WARNING: this allocation might change at any time. 🙂
My bet is that Europe is on the path to disaster first, followed by the US, then China…but who knows. I think crisis is coming very soon, within months, maybe weeks. That’s why I’m so defensively positioned. Like I mentioned, if the market took a 10% flash crash, erasing the Trump-bump, I MIGHT add to longs for a trade.
In retrospect, 2001 -2009 was a wave 4 sideways correction in three waves. The edge we are on is likely a larger-degree wave 2 correction, shorter, sharper and more scary. Good luck to us all. It won’t be the end by a long shot, unless Yellowstone blows, or Ebola goes airborne…
If you are up 50% and it goes down 20%…..you have lost some prior gains but overall, is it really a big deal?