There were pundits and advisors telling the public the same thing in 1970; ,71,72,73,74,75….$100 dollars in the S&P was worth $84 in 1975.
Remember your math. If the market drops 30% this year, it will take a climb of about 42 % just to get back to even. When was the last time you saw a 42% return in a year or even 2?

We all want to believe the best, but the market and economy doesn’t care what we want.

CNBC is full of Wall Street shills.

 

I also sleep well at night with most of my assets in short term cash equivalents or guaranteed return funds paying between 2-3%. Some people are bothered by returns less than the inflation rate but I am far more bothered by steep losses.

I bought a little bit of the S&P when it was down 25%. That position is staying in the +-5% range for now. If it breaks significantly to the downside I will sell it.

My first trigger to buy in size will be the FED 'pivot.' When they lower the Fed funds rate both bonds and stocks will be bid. I will primarily buy bonds initially. It will take stocks longer to get back to a real bull market after the initial pop so I will average in.

Like mentioned above you don't need to perfectly nail the trend reversal and statistically you will not. Just ease out of high risk when valuations are high and ease back in after they bottom. I don't always win but I've survived this downturn as well as 2008 with losses limited to 10%. Don't be afraid to be in cash. Wall Street hates that because they don't make as much in fees or have retail suckers to sell to so they always advise against it.

Rule #1 Don't lose money

 

Last comment first: ABSOLUTELY CNBC is full of Wall Street shills. But I've been watching for so long that I know that everyone's talking their book. It's a question of whether or not it makes sense to me, and a lot of what's said by the 'experts' doesn't make sense to me. A lot of those talking heads collect their fees based on AUM (assets under management for those not familiar with the abbreviation) so of course they're constantly pushing for people to invest more and dollar cost average.
I especially get a chuckle out of Cathie Wood, Elon Musk, and a few others warning the Fed to stop raising rates.

For returns, I've averaged better than 42% over several 2 year periods in the last decade. But I was invested in ETFs which had significant positions in FANG stocks, as I specifically looked for that in ETFs. I'm sure that those funds are further out on the risk spectrum than you're comfortable.
There is a lot of cash on the sidelines that is waiting for the Fed to pivot; that is a coiled spring that will have the markets have a significant initial recovery. You are much more risk averse since you're in retirement so I don't expect you to dive into non-dividend paying tech stocks which are likely to show those returns.

We are currently at the point where TINA's (there is no alternative) dead and many are parking their assets in US bonds (ironically, not British Gilts). When the Fed pivots and starts lowering interest rates, there will be less new money flowing into bonds because equities will once again offer a better return.

I'm perfectly fine with a rate of return at the moment below the rate of inflation, as I'm currently in a return of capital mode rather than return on capital. There will be opportunities in the future to get returns above the rate of inflation, but if depleting one's capital means you have to work much harder to get back to even.

Interesting choice to buy bonds initially. Which part of the curve and are you going into other products than Treasuries?

Hopp and Tallpilot, thanks for the discussion/exchange. I encounter far too many brain dead people who simply subscribe to the Boglehead school of thought where one dollar cost averages in both up and down markets which ultimately enriches fund managers. I find it very tiring when so many people who know nothing about the fundamentals of investing and the markets state something along the lines of it being unavoidable to dodge large market declines. The discussion with both of you has been a breath of fresh air.

 

Interesting discussion. Count me as just another "brain dead" Boglehead ....... who is doing just fine. Cheers!

 

There is a cost in being completely in cash, as you know. In hindsight it may appear to be the right answer today but cash's purchasing power will erode over time. RHA funds are meant to attempt to offset the rising cost of healthcare over the very long term, not just today. As mentioned above, your RHA is in approximately 30/70 stocks/bonds with 17% in TIPS. Most financial planners would say this is a completely reasonable asset allocation and very low cost.

This has been a very painful year for nearly every asset class. Hopefully your RHA is just a segment of your entire portfolio and you have other assets to cover your medical expenses (nobody is making you use your RHA today, as you are aware).

As most of your RHA balance is in fixed income over the time as your effective duration is pretty low.

Regarding the R/I committee, I disagree with you that they are somehow being irresponsible with the investment choices. Personally I don't any line pilot making tactical investing decisions with our monies, which is why they utilize several investment advisors. Unfortunately, its a generic solution sometimes and not catered to every pilots situation which it is important to take your entire portfolio into consideration.

 

Just treasuries between 10-30. The short end will obviously correct first so by owning the longer duration stuff I can ride the wave up while waiting for the earnings recession to end.

 

That was the answer I was expecting; just wanted to confirm your thoughts.


UK pension funds now having 'issues': https://www.reuters.com/world/uk/ban...ce-2022-10-11/

I am expecting to start seeing a hedge fund or few blow up any time now. Right now it's just pebbles being dropped in the pond; I'm cautiously watching for more problems.