If you look to the right side of this chart you’ll see the DOW all time high at 29,511 on February 12, 2020. At the extreme right edge you’ll see it today (3/20) close to its 52 week low at about 20,000. Close to 30% off the market top. You’ve got to figure its going to go lower. In 2008 with the Global Financial Crisis it went negative 48% off the top. I suppose if I cared I’d put 3% of available cash in the market now.
But frankly, I want to see it hit 15,000 before I got serious. Even then I don’t think I’d put more than 50% of available dollars at that point. I think it could get down to DOW 10,000 fairly easily, especially considering they want Trump out so bad. A lot of people think that’s what all this is about. DOW 10,000 would be a 2/3 decline. I think I’d put 80% of available cash in at that point. Never want to go 100%.
Buying opportunities like what may be coming don’t come along that often. For god sakes don’t sell now. Keep your powder dry. What I’m talking of course is an S&P 500 index fund. We’re getting closer, but we ain’t there yet. The bad news is I don’t think it would be in the trough long at 10,000. Psychologically it would be devastating. You’d need to be ready to pull the trigger quick if it gets that low.
[The great buying opportunities I know of with my limited knowledge were 1929, 1973, 1987, 2002 and 2009. Essentially 5 times in the past 100 years was there a distinct opportunity. Number 6 may be anytime. Doubling your money is a good opportunity. Tripling it is a great opportunity.]
Many people walked into the global financial crash of 2008 with way too much exposure to the stock market considering their proximity to retirement. I would like nothing better than to punch in the nose those “financial advisors” and union leaders who do not do a better job of advising their people. This stuff is so basic. “Buy low, sell high”, and do not get within 5 years of retirement with the same exposure you had when you were 10, 15 and 20 years out.
What brought this to mind was the market (the Dow Jones Industrial Average and the Standard and Poor’s 500) being at all time record highs. You can find all kinds of historical data that reinforces why a wise person notes times like these. Stats like 50% of the gains in the market occurred on just 33 days (rough example). What they’re trying to show you is that no one knows when the big gains are coming.
Its a matter of wait, wait, wait, wait, boom! Now that we have a 100 year track record to look back on, you can spot certain trends. The 1980’s and 1990’s were probably the biggest boom period stocks have ever seen. Yet people were still caught by the crash of 2000. There should have been some serious profit taking during that 20 year boom. Conversely, the next biggest 2 decade period was the 1920’s and 1930’s. Part of that period was during the “Great Depression”, when stocks were supposed to be “bad”. Ha.
The people who engineered the crash knew exactly what they were doing. In the late 1920’s when everyone was buying high, they stayed out. Waiting for the period after the crash, when everyone else was afraid to buy low. There’s a true story of a secretary who eventually bought a Washington luxury hotel, because after the crash of 1929, she started buying stocks like crazy! (Sylvia Bloom)
Doing the opposite of what the majority of people are doing will rarely harm you when it comes to money. That’s because the people in the know are counting on the “herd effect” in order to fleece the flock. They’re sharks, we’re not. If you understand that you can benefit. Not as well as them, clearly, but you can still benefit. There’s going to be a time to plow money into the market, this ain’t that time.
2019 is coming off a 23% gain. Only 27 times in the past 100 years has the market earned more than 20% in a year. Only 21 times has it earned more than 10%. Now is not the time to buy. The DOW is at 28,100. The S&P 500 is at 3,140. Now this spring or this summer, if they succeed in bringing on a recession to get rid of Trump, that will be the time to buy. When the DOW is at 23,000 and the S&P is around 2,600.
Gold is up $2.50 ($12 to $14.50) in just 14 months. Its okay to be dollar cost averaging into gold, but not to be buying a single big position in it. But if you are within 1 – 3 years of retirement, it is definitely a good time to be dollar cost averaging out of the market, and into something like gold. As soon as the Fed quits pumping trillions into the market, things are going to bottom out. Save your money, wait.
Experts put the day of the Stock Market Crash of 1929 as October 29. The day to buy was October 30th.