Well said.
Sorry if that small attempt at humor was taken as a serious insult. It was a reference to the Jack Kennedy line.
The point is that Buffet’s advice is that most of us and most of the experts will fuck up timing the market. I don’t think even that his move to cash heavy over these past two years plus is trying to time the market; it is him not seeing individual stocks that he wants to pick as a value based investor.
But you are right that I don’t think us average Joes are going to do well making “moves that feel rational”. I personally think it would be irrational for me to have the hubris to believe that I can get out and back in at the right times.
This is honestly my very humble opinion, as someone who recognizes that the big moves are driven by the institutional investors who have scores of experts and programs to try to predict what will happen when, and who represent roughly 80% of the trading volume. I for one have no expectation of being able to read the tea leaves better than they do. (Mind you I do allow myself a small portion of my portfolio to pick my own stocks, but I consider that play, and am thrilled that a few have done well enough to offset the whiffs.) I personally will keep to my allocations set by my volatility tolerance based on my personal circumstances and not vary based on my confidence that I know better than the big institutions what will happen next.
But fact checking - the claim that
is generally false, especially for widely owned and traded companies. The big gorillas are the institutional investors with their scores of experts.
Your implication that Buffet is suddenly moving to cash as a result of fear of Trump crashing the market is also false, as the move has been in progress for over two years.
There are IMHO, emphasis on humble as I don’t know, very “rational” reasons to shift a balance from S&P index funds to other index equity choices. In my mind there is the simple fact that the big tech firms have become so big that the S&P is almost closer to a sector play than a diversified basket! I am considering altering my allocation balance, not out of trying to out guess corrections, but staying true to a principle of being widely diversified.
Again, apologies that my small joke offended.
No, Buffett (two Ts) famously mocks hedge fund managers, who have a “2 and 20” fee structure - 2% of AUM along with 20% of all profits. Hedge funds make up a small fraction of big investors. As far as I’m aware, Warren doesn’t have strong feelings about the managers over at American Funds, or Blackrock, or other major houses. He had high praise for Jack Boyle of Vanguard for revolutionizing the boring practice of a long-term benchmarked investment strategy.
Value investing isn’t, technically, timing the market but at Warren’s size it’s going to look damn near identical.
There’s no absolute rule that there can’t be a company that’s undervalued when the Buffett Indicator is at 200%, but it’s fairly unlikely. Any businesses that are undervalued are almost certainly going to be tiny. To get businesses of the size that Buffett can spend meaningful percentages of his cash on, you probably need fairly widespread economic malaise.
Someone may have said that in this thread. I didn’t.
Perhaps I misunderstood the implication of
in the context of this thread?
That it’s not entirely insane to cash out from the market on the occasion.
I mean, I could probably read some tea leaves over what all Mr. Buffett might have been thinking and whether that coincides with American politics. I didn’t in that post and I didn’t in any follow-up. Rather, I mentioned the Buffett Indicator and a discussion on the market being over- versus undervalued.
In general, I’d say that I’ve rarely seen an example of someone adding intent onto someone’s words past what they actually said, and some good result coming from it.
If I did read tea leaves on politics, I’d venture to guess that the premise of value investing is that you stand to profit the most when you’re attaching your carriage to the most rational actors, making the most reasoned moves. If that’s exactly the sort of person who is most likely to run into hardship, and no one can predict what will or won’t be a safe route forward, then there’s little work to be done but cycle between waiting things out or finding a better environment to work in.
Add that to an overvalued market and that only seems more the right zone to be in.
I acknowledge that a disciplined value based stock picker will have to look hard to find much to be thrilled about investing in right now. This thread though was asking specifically about whether to reposition out due to being “worried that Trump’s actions will lead to a sell-off in markets.” And most of us here are not long time seasoned value based stock pickers, biding our time for the right picks.
The specific impetus was regarding the promise to implement tariffs and the announcement of them. And it’s been an interesting start to the week about that. Will they be back? Will they last longer next time if they do come back? I can’t try to position my long term plans on trying to figure that out and my fears of Trump policies crashing the markets were unfounded last time (although I don’t regret my slight move to being more conservative which was overdue anyway.)
Regarding attaching our carriage to the most rational actors … my experience is that the market is an irrational beast. YMMV.
Right. I just want to say, I’ve preached many times that one cannot time the markets and should not try. However, most of the big events that move markets can’t be seen in advance (ie, a pandemic or a sub prime crisis). In this particular case we have someone broadcasting intentions that would generally be bad for equities. So it may be less timing the markets and more “you can see the storm coming your way, maybe time to take in the patio furniture”
That’s really what’s behind the question.
And I note that Friday’s/yesterday’s sell off has been quieted because of this 30 day reprieve. Will we have another “crisis” every 30 days? I dunno.
Pretty much everyone agrees that:
- It’s folly to try to time the market; and
- You should periodically re-balance your asset blend
I see these things as related. The difference is timing vs. watching the asset blend.
The main two types of re-balancing I do are:
- Buy stocks when the percentage of stocks is lower than I want it to be; and
- Move stocks to bonds when the percentage of stocks is higher than I want it to be.
The hardest part (for me) is deciding what those percentages will be (and the thresholds that trigger re-balancing).
But once I decide, I can pretty much ignore sharp changes in the markets.
This way, I’m not basing the move on timing, but on the thresholds. My emotions are less likely to influence me when timing is not a factor.
PS: In 2020, I made a nice sum when I bought stocks after they dropped, and later recovered.
PPS: I’m sure there are much more financially knowledgeable people on this thread than me. I’m just sharing my layperson’s experiences.
This is the common wisdom and is exactly what my financial planner does for me.
Thing is that you are much better at staying true to the discipline than many of us, to your advantage. Personally I’ve been guilty of both the failings of staying true to plan.
I’ve been lazy. I should rebalance regularly, at least yearly or when they become out of allocation range by some preset amount, but I put it off, and off. Other chores to do. I’ll get to it.
Then pulling the trigger to pull some out of where performance has been good … is hard. That’s me right now. I know that by rebalancing rules I am overdue to move some out of the S&P index and into the others, and rationally I am thinking mid and small cap value adds diversification that the S&P index fund increasingly lacks. But FOMO! It may continue its great run no matter what Trump does and his idiot advisors are united in wanting US based big tech to do well.
Kudos to you for staying true. Maybe this week will be the one I rebalance! Just need to find that round tuit. It’s here somewhere … if not then I do need to get a round tuit.
I think if we get to that point, the global economy would be so messed up that no form of ‘cash’ would be worth anything any more?
It’s an interesting question: given how globally interconnected all forms of trade, commerce and industry have become, how fragile or robust is the whole system?
One theory might be that it’s all a house of cards, and one critical failure could bring it down.
On the other hand, maybe there are negative feedbacks that could prevent that?
covid showed us, that the real life economy is not as frágile and frail as thought…
sure, some things were trickier to get, but basically you could purchase everything your heart desired.
I expect you’re right.
What I was trying to do, but maybe a bit too cagily, was suggest that the first step to developing a reaction plan is to decide how bad things will get.
A decision to retreat entirely to “cash” IOW in US terminology that’s bank savings and / or money market accounts is a decision that only makes sense if you assume a near worldwide Depression to rival the 1920s.
So my charge back to the OP is "what do you think will happen? Once you’ve decided that, come back and we can discuss sensible measures.
My own non-expert view is things won’t get too wacky and “retreating to cash” would be colossal folly. And very expensive.
Well, to be clear, I wasn’t talking about a 100% cash position. But, where I’m overwhelmingly in the S&P 500, the past 5 years have been outstanding. I’m also 51, so my concern was that Trump’s policies (esp. tariffs and picking fights with allies) would tank markets and possibly trigger a long term bear market. Since that’s literally what he said he would do, and I think the outcome of those things is predictable.
So I was considering moving 50% to a combination of Money Markets and conservative bond funds while the jury was out. Basically take some profits and evaluate.
However, I’m now a little bit off the ledge in that I think he’s going to threaten a lot of these things and not actually go through with them (except China, I think). Which will increase volatility but maybe not cause a crash & burn.
I believe I kept references to Trump in line with his promised policies and expected outcomes, and avoided being political. I hope I did, anyway.
I think you, and the rest of us have been admirably restrained on that front.
My view is volatility is a feature, not a bug, in the eyes of the current regime. They or their allies can take a position, then spook the market in whichever way is profitable to that position. Lather rinse repeat.
If the markets or the economy gets blown up, that’ll be the result of an oops, not a deliberate plan.
I’m 66 and rather equity-heavy for a guy my age. But I’m also not all-in S&P 500. Neither I nor my advisor see any reason to change my mix. Most particularly we/I don’t see a flash crash, where if you’re not out in the first 5 minutes your net worth is forever halved. If there is to be a recession and sustained bear market, there’ll be weeks or months to get used to the idea and reposition while you’re still well ahead vs. bailing out right now in Feb 2025.
My personal bottom lines:
Trying to call either the peak or the trough is a mug’s game. Acting a little late but acting correctly is, over the long haul, much more profitable than acting too early or acting wrongly all together.
Expect volatility, expect stupid headlines, and coast along into the future with a weather eye on the medium term, not the instant ticker.
I hope you are right. In the 2008 case I have to admit that I took my eye off the ball for a while because of other life events. I guess I subconsciously thought: oh well, markets fluctuate,
I shouldn’t sell in a down market and it’ll recover in a short while…
Ouch. Some things actually went to zero! These days I watch our investments like a hawk, daily.
And I hold very few individual stocks now: I have been cured of the illusion that I can successfully pick stocks by research…
But of course there is still the issue of capital gains tax to be considered when looking at strategic reallocation.
Yeah, it’s kind of a pet peeve of mine that I can’t make adjustments without paying the CG tax. The tax itself doesn’t bother me so much, but it would be nice if there were a way to change an investment and just keep the basis where it was and not pay the tax.
I know it would be complicated, but at the same time with everything on computers I think it could be done.
Well, I don’t think the IRS is going to go for that one… 
They allow it in an IRA or 401k (unless I have my info completely wrong), but most of our assets are in taxable accounts.
A friend of mine had investments go away in the 2008 crash. Her company’s shady retirement provider offered a very limited set of fund choices, and she ended up holding some of those “bets on bets” stock derivatives.
Black swan events like 2008 often cause bonds to tank as well: if a company folds, they can’t repay their debts.
I’ve never held an individual stock or bond, and I’ve never regretted it.