Wed 16 Aug 2006
With my current >90% exposure in equities, I’m feeling that I’ll be one of the first victims of a bear market.? With the recent minor run-up in the US equity markets, I’m thinking that the time is ripe to move at least a 10% chunk of my US equity exposure out and into either a money market account (like the VMMXX with it’s 5% yield) or into Bonds.? I’m becoming increasingly alarmed at the market conditions now and I’m interested in moving my main holdings out into cash in stages and allow my dollar-cost-averaging approach to continue on with my current asset allocation plan.
What are your thoughts?
I’m thinking that if the market continues to show strength throughout the day, I probably will move 5 – 10% of my Large and Mid-cap US equity positions.? I’m feeling very much exposed on these fronts.? Areas I’m probably not going to touch for now are my Small-cap, Foreign and Energy holdings.? Small-cap has already had a tough year and I’m probably going to keep those relatively untouched for now.? My international holdings are all up around 8 – 10% YTD and showing no clear signs of pulling back at the moment, so I’m planning on leaving these untouched for now.? I still feel that Energy has plenty of upside and I’ll continue to hold these funds for the foreseeable future.
Let me know if you think my concerns are unwarranted or you think I need to lay out my case for why Large and Mid-cap equities are heading for a significant drawndown in the future.
August 16th, 2006 at 7:34 pm
I feel like I’m the voice of Xmas past because I’ve been out of the blog loop for so long. Beach vacation combined with the start of fantasy football season has left me about 1000 bloglines posts behind. For all I know, the financial world could be totally different from the one I “left” a week and a half ago. Is gold still the standard? 😉
Well, I did take a quick glance at the charts today and all I can say is that I’m unimpressed with the technical picture painted. The two days of impressive runup are, to the eye trained in seeing value areas, nothing more than movement with the bell curve so to speak. If you economic view is still negative, then I can’t see a better time to sell.
That said, I still need to catch up on the macro picture before I venture to make suggestions in that department. I promise to return and post more on the subject. In general though I thing that yields on money markets are attractive from a long-term perspective. I think it is always good to lay out a case for a big change, even if it’s a simple case.
August 17th, 2006 at 9:13 am
So I’m wondering what lead you to take such a high allocation in equities in the first place? Have those conditions changed — or has the markets prices changed your opinion of what is happening?
One thing I would caution against is putting too much emphasis on the short term price action. In the past you have professed a 20+ year timeframe. Does 4 months of sideways price action change that?
That said, I’m much more conservatively positioned than you right now. The largest asset allocation I have is towards cash, and my equity holdings are either in value mutual funds or international value.