Is the stock market going to tank?

[4matic]

I've put a bunch of money in USAA's govt securities fund (USGNX). Is that a decent strategy for someone skittish about our world? I'm usually an index fund long term guy, but I'm willing to give up gains right now so I can feel a bit more comfortable about my money.

It's a five year average duration bond fund with a heavy balance to Mortgage backed securities. It is basically an index fund of bonds based on MBS. It's hard to define interest rate risk but it's there.

Five year duration is relatively short in the bond world so in that respect you have limited your risk. Something like TLT is 20 year duration.

[Danno]

Why did you pick that fund in the first place? How does it fit in your overall investment portfolio?

As I said, I normally have all my money in broad index funds, because I view everything as a long term play. But I am skittish about our current world and our current leader, and decided to pull a lot (not all) of my money out of those index funds for now, accepting that I will not be able to time the market and accepting that I will (and have) lost out on gains I would have received. But I sleep better.

As for how I picked this one, I was looking at USAA funds because that is where my money is, and looking for funds that would protect my capital in the event of a downturn. This isn't a stock fund, so that seemed good, and did well in 2008, which also seemed good. But I'm not an expert so don't know what kind of risk exposure it has in today's world.

[4matic]

Interest rate risks:

1. Currency
2. Inflation
3. Central Bank policy
4. Politics: Sovereign selling, increased supply to finance deficits.

I could make a list that goes on and on. I mean, look at the Libor rate. It has a technical/structural problem that could lead to a bond selloff.

You can buy a two year note yielding 2% plus and have no risk.

[406]

Yeah, I wasn't suggesting buy an etf, rather buying the actual bond from us treasury .gov, in addition to the cd's.

[406]

Sorry, this is the moment where I shut up.

No worries, lots of people seem to think etf's for bonds...my preference is just buy the bond.

[Brock Landers]

Inflation is low. Growth is high. Still bullish.

Bond ETFs are a no-no

[iceman]

Yeah staying the course for now. If earnings estimates disappoint it's run for the lifeboats.

[4matic]

Yeah staying the course for now. If earnings estimates disappoint it's run for the lifeboats.

Earnings could be good and still goes down. It could make fed more aggressive. Rates are on the move today.

[jackstraw]

Inflation is low. Growth is high. Still bullish.

Bond ETFs are a no-no

Corporate debt to gdp is at an all time high just above 2008. Interest creeping up. Tax laws help and hurt. Da bears are coming out of hibernation...eventually. ...and Cheeto

[iceman]

Well I could get hit by a meteor tomorrow. Probably will be. I've got $142.00 in my wallet, I'll be fine until then.

[uglymoney]

As I said, I normally have all my money in broad index funds, because I view everything as a long term play. But I am skittish about our current world and our current leader, and decided to pull a lot (not all) of my money out of those index funds for now, accepting that I will not be able to time the market and accepting that I will (and have) lost out on gains I would have received. But I sleep better.

As for how I picked this one, I was looking at USAA funds because that is where my money is, and looking for funds that would protect my capital in the event of a downturn. This isn't a stock fund, so that seemed good, and did well in 2008, which also seemed good. But I'm not an expert so don't know what kind of risk exposure it has in today's world.

It sounds like your overall portfolio is too aggressive compared to the size of your sack. Stocks are a long term play. Stay long ftw just like keeping a car forever wins. If that means putting a larger portion of your portfolio in more conservative investments so you can sleep at night when things get volatile then do that instead of jumping in and out. You might get lucky but if you keep doing it you will eventually get burned or at best cut into the gains that you are taking all that risk for in the first place.

Just my 2 cents. I am 46 and have invested in the market every paycheck since I was 22 and I always figure I benefit from market drops because I can buy portions of companies cheaper. I have an aggressive mix but enough boring stuff for sleeping.

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[Danno]

It sounds like your overall portfolio is too aggressive compared to the size of your sack. Stocks are a long term play. Stay long ftw just like keeping a car forever wins. If that means putting a larger portion of your portfolio in more conservative investments so you can sleep at night when things get volatile then do that instead of jumping in and out. You might get lucky but if you keep doing it you will eventually get burned or at best cut into the gains that you are taking all that risk for in the first place.

Just my 2 cents. I am 46 and have invested in the market every paycheck since I was 22 and I always figure I benefit from market drops because I can buy portions of companies cheaper. I have an aggressive mix but enough boring stuff for sleeping.

That's a reasonable 2 cents. and that is what I have done for many years. But these seem to be unreasonable times. And I'll admit, my uncomfortableness is as much about the Cheetoh as it is about a volatile market. Just feels like shit is going to blow up -- possibly literally -- in ways that we have not seen in a LONG time. So I don't jump in and out, at least haven't before this period. And I'm not completely out, not by any means. It's all in funds, no individual stocks, but my back of the envelope calculation was that I am now maybe 40% stocks?

In any case, my question wasn't whether that is wise; it may not be but I am ok with that. My questions is whether the place I have chosen to park my 60% will actually provide the type of protection I am seeking (ie won't lose much or any value when the market goes in the shitter).

[digitaldeath]

10 shares of BABA now


thank you kind china sirs

[uglymoney]

I know D. To further not answer your question market is betting heavily right now that Cheetoh doesn't get his way with these crazy tariffs. Money runs this place after all.

If he does get his way we're all going to take a huge hit either way. I don't know if you can really fully insulate yourself.



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[4matic]

My questions is whether the place I have chosen to park my 60% will actually provide the type of protection I am seeking (ie won't lose much or any value when the market goes in the shitter).

You want a guarantee go to Sears.

A five year duration fund will lose if interest rates go up. How much depends on the how much rates go up. If stocks go down because interest rates go up you will lose some money.

The advantage of a bond fund is that the duration is kept fairly constant and if rates go up you are buying bonds with higher rates as the others roll off. Also, a bond fund allows a certain level of liquidity that an individual bond may not have in case you need to sell.

[Danno]

You want a guarantee go to Sears.

A five year duration fund will lose if interest rates go up. How much depends on the how much rates go up. If stocks go down because interest rates go up you will lose some money.

The advantage of a bond fund is that the duration is kept fairly constant and if rates go up you are buying bonds with higher rates as the others roll off. Also, a bond fund allows a certain level of liquidity that an individual bond may not have in case you need to sell.

Have you read the stories about service at Sears these days?

Thanks for the info.

[Mazderati]

You want a guarantee go to Sears.

I can get a good look at a T-bone by sticking my head up a bull's ass, but I'd rather take a butcher's word for it.

[Brock Landers]

Corporate debt to gdp is at an all time high just above 2008. Interest creeping up. Tax laws help and hurt. Da bears are coming out of hibernation...eventually. ...and Cheeto

At much much lower rates, with maturities pushed out to 2020 or further. If it was a problem credit spreads wouldn't be at duration adjusted all time tights.

Interest is mayyybe creeping up (at worst), but if that was a problem earnings wouldn't be growing (and just as importantly trending) up over 15% this quarter. Rates moving up from day...2.2% on the 10y to 2.6% is not an issue for firms...even floating rate (since for fixed rate borrowers it isn't a problem). Earnings are growing faster than rates. Typical late cycle

Tax laws don't help a ton all the time. But generally they don't hurt at all. It's typical, normal, late cycle shit. Late cycle could last a while though (why wouldn't it the whole run has been long).

Above 4-5% 10y TSY....that's a problem for companies if rates keep rising. Without any inflation rates will not jump too far. Simple as that. Until then, expect more volatility (2017 vol regime was a ridiculous anomaly) but that doesn't mean a down market.

Ps if you buy a bond fund don't buy an etf. Buy a mutual fund or active etf.

[4matic]

At much much lower rates, with maturities pushed out to 2020 or further.

Companies are vulnerable to higher rates in 18 months? Markets will start to discount that if they haven't already. HYG is holding up reasonably well, better than I thought, but is at an 18 month low in price. We also need to consider expanding supply of debt in the face of fed absence and deficit funding needs.

[Brock Landers]

Companies issue debt at varying maturities so they don't get stuck with it all at once. The first real period where there's any significant maturity still out there is 2020. It's not that big and would likely get pushed out again this year as has happened the last 6-7 years.

The supply thing is definitely something to consider. Especially with the deficit expanding and tax cuts need to be paid for (this was the bump the 5 year yield got earlier this year). It's inflationary for sure. But it's also down the road and rates already reflect it (Tsy stated they'd likely use the 5-10 year belly to issue debt). Fed reducing its buying will be a factor but I think dampened by more foreign buying.

[SKIP IN7RO]

Tomorrow is looking bleak.
https://www.nytimes.com/2018/04/05/b...war-china.html

[4matic]

Beans are only down .12c tonight so it’s not dire yet. If the Asian markets turn down hard (up now) It could get real. The E mini rallied 110 points from its Tuesday low so a 40 point pullback doesn’t mean much.

[SkiCougar]

Tomorrow is looking bleak.
https://www.nytimes.com/2018/04/05/b...war-china.html

1000 point rally in 2 days; you new some news would come out and rervse that. still gotta blow thru the 200 day to get really nasty but there's too much upward ressistance now to think another serious reversal is around the corner; maybe in the fall if the trade war doesn't amount to anything.

[splat]

You want a guarantee go to Sears.

Not if it involves Sears' stock.

[4matic]

With this much recent volatility there is no trend or conviction so a 1000 points down (or up) tomorrow is possible.

For example. Tomorrow is NFP. Rates are near the top of their range. It’s more than possible to test both sides of the weekly range and then expand the range in one direction or another. Feb. 8 was a 1500 point range in DJIA and daily range is still expanding.