Gyroscopic Investing

My entire portfolio is a bit "variable". I hold stocks, bonds, gold, and have an emergency cash fund, but it's not 25/25/25/25. I'm close to 50/35/10/5 stocks/bonds/gold/cash which is my preferred allocation at the moment. (The stock portion contains a dwindling 2.5% portion of Apple, which is probably the most infuriating buy and hold I've ever made in my entire life, but that is besides the point.)

The market feels toppy and due for a correction. I'm sure I'm wrong, but let's assume I want to do something with my bond allocation to address this possibility. My 35% bonds was made up of 20% total bond market (BND) and 15% intermediate TIPS (TIP). Over the past 2 days I've moved 5-6% of BND into TLT. I had some capital losses on BND so this seemed reasonable. Of course if I'm right and TLT gains during a correction, I'd be stuck either holding it or selling and incurring short term capital gains anyway.

Besides this bond move, I'm not sure what else to do to react to this gut feeling. Selling stocks and moving to cash doesn't seem viable because of the capital gains. Since there doesn't seem to be a right answer, maybe the best move is no move.

You definitely need more long term Treasuries to hedge that stock risk exposure.

Any time the stock market goes up 230% over a four year period when the underlying economy is sick sick sick, it's probably not a bad idea to think that a correction may be on its way.

This isn't like 1986 after the 1982 lows.  I would say that this is more like 1936 after the 1932 lows.

You could have bought stocks at the same price in 1949 that they were selling for near the cyclical peak in 1936.  That's what secular bear markets look like: fierce cyclical bulls within the larger secular bear, breaking the same hearts over and over and over.

MediumTex wrote: Any time the stock market goes up 230% over a four year period when the underlying economy is sick sick sick, it's probably not a bad idea to think that a correction may be on its way.

Do you really think the economy is that sick?

AdamA wrote:

MediumTex wrote: Any time the stock market goes up 230% over a four year period when the underlying economy is sick sick sick, it's probably not a bad idea to think that a correction may be on its way.

Do you really think the economy is that sick?

I just mean that it's nothing like the economies of the 1980s and 1990s with low unemployment and strong economic expansion.

We're sort of just limping along.  The credit market is still out of whack, businesses are hesitant to expand or make any new investments, unemployment is still high, and companies are increasing profits through gadget plays like cutting portion sizes and doing mass layoffs.

And like in the late 1930s, Congress has this strange preoccupation with cutting government spending at the worst possible time.

I would say that any large developed country that is experiencing a multi-year period of 0% rates on short term government debt has something wrong with its economy.

If the U.S. economy came into the ER and described the symptoms it has been experiencing since 2008, would you conclude that it was sick? 

I'm not saying it's sick like it's going to die.  I'm just saying that it's sick like it needs a daily application of ointment, a periodic steroid injection and some serious rehabilitation.

There is one big difference though between the 1930s and now, the gold standard was around back then.  I think this has moved with fiat currency to what I like to call the "economic bell curve end points" from depression to a modern end point of recession and inflation to a modern end point of hyperinflation.

Unless you are 100 years old don't buy T-bonds. what nonsense. this is for people who check their balance daily or hourly. Buy stocks with low forward P/Es and gold/silver/platinum that are all quite depressed. Buy what is cheap not what is expensive. People on here will try to get you to buy government bonds which are at 250 year highs supproted by ZERO fundamental value. 

Ignore them.

They are so afraid that they might lose one dollar tomorrow they do not care about next month or nest year.

The irony of the HBPP is that is designed for the person who only looks once a year but ideal for the temperment of the person who looks once per hour.

Kshartle wrote: They are so afraid that they might lose one dollar tomorrow they do not care about next month or nest year.

I think you have it backwards. the HBPP loses many dollars on a daily basis. But over the years, it's racked up consistent gains despite legions of folks just like you declaring that bonds have nowhere to go but down or gold is a useless yellow metal or nobody makes money with index funds or cash is a waste of space or...