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9 minutes ago, texans_uk said:

Does this mean we’re heading toward a recession? Let’s find out.

People have been saying there's a recession coming for years, we're overdue for a correction for years (we got one technically and bounced right back), and the market is overvalued for years. Eventually, they'll be right and they might be right immediately. But they missed out on one of the best long term market runs in US history if they pulled out their assets in 2012 or 2014.

On 7/3/2018 at 9:33 AM, Heimdallr said:

In an IRA at your age, a recession won't hurt you at all. In fact it'll help in the long run because you'll be buying cheap. It'll all come back eventually.

A recession only hurts if you are near retirement age and will need to access that money before everything rebounds. 

I would be interested in hearing from the older members of the forum who lived through the '08 mortgage crisis on how much of this really holds true. Granted, there are recessions or corrections that really just hit Wall Street and not the general working public (e.g. the correction we had this year), but I'd imagine there weren't a whole lot of people without 8-figure level wealth who really got the advantage of buying cheap.

Even if you were one of the people who managed to keep their job during '08, how many people slowed down or stopped retirement account contributions to boost their emergency fund because they were worried about losing their job, then house shortly after? How many people ended up losing their jobs and couldn't buy cheap because they had to get back on their feet, re-stock their emergency fund, etc. etc.?

That said, I completely agree with the spirit of your post. Not investing because of a fear that the market will crash is a bad decision long term.

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51 minutes ago, texans_uk said:

Someone sent the below to me today.

not my words.... I remembered this from my trading training.  share buybacks is a key signal of end of business cycle:

 

Excessive debt may have dire consequences

The buyback spree that we’ve seen recently has led companies to go beyond their cash flows. As a result, companies have been using debt to finance expenditures. With cheap money available, US companies’ borrowing rates have surpassed their earnings rates. Companies such as Apple (AAPL), Prudential Financial (PRU), and IBM (IBM) have been the frontrunners in the share buyback race.

 

This phenomenon, as Barclays’ Jonathan Glionna has observed, is very typical of the end of a cycle. During this stage, one tends to see financing conditions tightening for companies that have been relying on debt (BND) to finance their expenditures and buybacks to drive up earnings. The excessive debt taken on by US corporations is sure to affect economic growth and prosperity.

 

Does this mean we’re heading toward a recession? Let’s find out.

I mean, that's nice.  But in the context of this thread the stock cycles are not important to wealth building.  You ride the waves, and eventually you come out on top.

Also, i'm sure if it was that simple loads of people would short the market when they saw this indicator and make a bunch of money.  So color me skeptical.

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44 minutes ago, ramssuperbowl99 said:

I would be interested in hearing from the older members of the forum who lived through the '08 mortgage crisis on how much of this really holds true. Granted, there are recessions or corrections that really just hit Wall Street and not the general working public (e.g. the correction we had this year), but I'd imagine there weren't a whole lot of people without 8-figure level wealth who really got the advantage of buying cheap.

Even if you were one of the people who managed to keep their job during '08, how many people slowed down or stopped retirement account contributions to boost their emergency fund because they were worried about losing their job, then house shortly after? How many people ended up losing their jobs and couldn't buy cheap because they had to get back on their feet, re-stock their emergency fund, etc. etc.?

That said, I completely agree with the spirit of your post. Not investing because of a fear that the market will crash is a bad decision long term.

I would imagine the normal american was severely hurt by the recession.  It's a recession for a reason.  The only people that really benefit are the ones who have a solid base and financial plan, don't lose their job, and have cash reserves laying around.  Without the first three of those, the chances of being dinged goes up.  Without the last one, it's impossible to really make a bunch of money.

 

For example, my Mom is a CPA.  Solid paying job, and kept it through the recession.  She's in good shape financially, no debts, good retirement, etc.  But when the recession hit, she panicked and sold stock near the bottom.  It hurt her bad.  Because she didn't have a solid financial plan and understanding of the market.

On the flip side, i'm sure there were people that understood not to pull their stocks/mutual funds, but had a bunch of credit card debt, a HELOC, etc that forced them to pull investments when times got tough.  I.E. they didn't have a solid base.

Then like you said, if you don't have a ton of cash reserves laying around, a market dip isn't a chance to make a killing because you're already in the market.  If a recession hit today, personally i'd be fine.  I have a large emergency fund, and solid job with a great resume if that turns sideways.  But i don't keep cash reserves around because i'm not worth 8 figures (yet :) ).  So my ability to profit from a dip is limited.  I would just have to ride the wave to the bottom and back.

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