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I don't trade but I speculate there is an opportunity to trade this sort of data. These days, reports such as this lag the market so much that they are way too slow for retail investors with no attention span. I'll bet this data is 45 days old, by the time it is published. Further, I think inflation is probably worse than will be indicated in the CPI data.
I don't trade but I do like to try and time my purchases once I have decided to buy. It really makes little difference for a long term hold compared to other factors such as time in the market, allocation etc. If I am content to buy company between $48-$52 on Monday it doesn't matter if I guess wrong buy it at $51 Tuesday and it goes to $48 Wednesday. Sometimes I miss out (ATD) and that's ok. There will be other opportunities. It is more important what it will be 1, 5, and 10 years from now. I don't think anybody would know with any accuracy.

My guess is the market will either go up, down or sideways as a result of Wednesday's CPI report or whatever reason the media attributes to the market movements that day. However, the guessing part keeps me interested. I think if I had gone the passive route I would be more likely to bail during market crashes. Most others would say the opposite. I guess I am weird that way.
 

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Most retirees don't have the luxury of cash flow generation exceeding cash flow needs so one can be reasonably excused from that anomaly. It's not called 'withdrawal' or 'draw down' mode for nothing. It's a fair and reasonable comment.
It is possible to retire with enough resource to fund both a good lifestyle and an active investment strategy. Perhaps you should consider some new investment techniques?
 

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What is WBI and what does it mean when it's 210?
The Buffett Indicator is a perspective device created by Warren Buffett in which he takes the entire market capitalization of all publicly traded companies in the US and divides by the current GDP. It is akin to having someone stand beside a rocket to provide perspective of how large the rocket is.

The W in WBI comes from the Wilshire 5000 index. Technically, this is not every publicly traded company in the US but it almost is and it's calculated automatically every day.

So: WBI = Wilshire 5000 / US GDP




Peter lynch does something similar. He uses a the S&P 500 PE compared to inflation to gauge market froth.

Lynch suggests: SP500 PE should not be more than (20 - inflation) in a healthy market.

While the Lynch approach is different than Buffet's froth indicator, they mostly end up in a similar place. I track both and they rarely disagree, although it depends on what you the "window of reasonableness" when evaluating Buffett's indicator.


When my indicators show a frothy market, I back off DRIPs and buy less aggressively.
 

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It is possible to retire with enough resource to fund both a good lifestyle and an active investment strategy. Perhaps you should consider some new investment techniques?
Why be unnecessarily active when buy and hold works long term?

Added: I get that there are times when it is wise to part with something when it no longer measures up to expectations and buy something else that looks better. I do that every now and then, but that is a matter of the cash going from holding A to holding B. It is not a net new purchase.
 

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Discussion Starter · #66 ·
Why be unnecessarily active when buy and hold works long term?

Added: I get that there are times when it is wise to part with something when it no longer measures up to expectations and buy something else that looks better. I do that every now and then, but that is a matter of the cash going from holding A to holding B. It is not a net new purchase.
I still don't understand Tom's method. I don't mean to offend anyone, I'm just trying to figure out the mechanics of what he's doing.

Does this mean Tom is holding a large amount of uninvested cash, waiting for investment opportunities? Or is he trading XXX for YYY ?

My foot remains heavily on the accelerator of the investment car. That is how I mitigate risk.

The WBI has been 210 recently so I have been letting cash build for quite some time.
Apologies, I'm just confused by this. Foot "heavily on the accelerator" makes it sound like you're fully invested at all times. But then you say you've been letting cash build up.

So as I understand it, you accumulate cash and then wait to jump on opportunities? Is that the method?
 

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I still don't understand Tom's method. I don't mean to offend anyone, I'm just trying to figure out the mechanics of what he's doing.

Does this mean Tom is holding a large amount of uninvested cash, waiting for investment opportunities? Or is he trading XXX for YYY ?

Apologies, I'm just confused by this. Foot "heavily on the accelerator" makes it sound like you're fully invested at all times. But then you say you've been letting cash build up.

So as I understand it, you accumulate cash and then wait to jump on opportunities? Is that the method?
Could be a number of things, dividend payouts building up, asset allocation shift, etc.
 

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Why be unnecessarily active when buy and hold works long term?

Added: I get that there are times when it is wise to part with something when it no longer measures up to expectations and buy something else that looks better. I do that every now and then, but that is a matter of the cash going from holding A to holding B. It is not a net new purchase.
Paraphrase: "Why don't you do it like I do it?"

When we retired, it necessarily changed our investment strategy but only a bit. The reason I do it my way is because I understand my way, know what results to expect from decades of operation, and am content with the performance.

Over time, I will shift to a more passive approach because I am becoming less motivated to make money and more motivated to do other things while I am physically able. I do enjoy managing our nest egg, though.


I still don't understand Tom's method. I don't mean to offend anyone, I'm just trying to figure out the mechanics of what he's doing.
If your question is sincere in it's intent, no offence can be reasonably taken. There is no need to walk on egg shells. You are cool with me and I respect your unique approach.


Apologies, I'm just confused by this. Foot "heavily on the accelerator" makes it sound like you're fully invested at all times. But then you say you've been letting cash build up.

So as I understand it, you accumulate cash and then wait to jump on opportunities? Is that the method?
I believe the best defence I can have is a good offence. For now, I am sticking with what works.

When the WBI is bending the indicator needle, I let cash build.


Does this mean Tom is holding a large amount of uninvested cash, waiting for investment opportunities?
Yes.

The high WBI does not exclusively drive our portfolio. I estimate the value of every company I follow. I've still found value but it is really hard when the WBI is sky high. On the other hand, it has been extremely interesting to have a crystal clear picture of what a raging bull market looks like.

I turn off DRIPs selectively by company and how I see their value.


Or is he trading XXX for YYY ?
I do not trade.

I have sold stock but it is extremely rare. I consider myself a partner in the business. If management does something I feel is unethical, I sell regardless of price because I do not want them as partners. If management does a good job and I feel they are honest, I will stay with them until the ship either sinks or reaches an island populated with nubile young women who all have a nerd fetish.

At some point, I will sell down our portfolio because we aren't going to live forever but it continues to grow, for the moment.


Could be a number of things, dividend payouts building up, asset allocation shift, etc.
Exactly.

It will take us two more years to sell off our RE investments, best case.
 

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Discussion Starter · #69 ·
There's some significant damage showing in fund returns, and even balanced funds.

Year to Date returns to May 13 are
-14% Mawer Balanced Fund
-12% PH&N Balanced Fund
-11% VBAL and XBAL

With Mawer showing the worse decline because of their heavier growth stock exposure.

I crunched my end of week numbers and my YTD drawdown is only 6%, not too bad yet but I suspect it's going to get worse.
 

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Discussion Starter · #70 ·
Horrendous Walmart results yesterday, with inventories sky high (analysts say it's unheard of).
Overnight, people had their fingers crossed that Walmart had just screwed up execution. Maybe Target's earnings will be oK?

Today it turned out that Target also had horrendous results and their stock crashed 25%. Disaster.

That means the US consumer is in terrible shape.
 

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That means the US consumer is in terrible shape.
Depends on what you mean that the US consumer is in terrible shape.
Sales were up for both WMT and TGT but operational costs like labour, fuel, freight, etc were up even higher with a shift away from high margin consumer discretionary to essentials which led to disappointing profit.
So the US consumer still seems to be spending but they're spending on different things and needing to pay more.
 

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I think we will see a decrease in spending in both volume and dollar amounts. Many people have just begun to notice the increase in the cost of goods but haven't significantly changed their spending habits. They are also beginning to realize their wages will not keep up with inflation which create further hesitation in spending, in particular on expensive or unnecessary items. Most people I know are delaying vehicle purchases already not just due to lack of availability but due to price change. If the employment rate stays elevated and inflation lowers, people will become accustomed to the higher prices. I expect a couple bad quarters for retail but it is too early to tell if the US consumer is in terrible shape or is just realizing cheap money is gone.
 

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I think we will see a decrease in spending in both volume and dollar amounts. Many people have just begun to notice the increase in the cost of goods but haven't significantly changed their spending habits. They are also beginning to realize their wages will not keep up with inflation which create further hesitation in spending, in particular on expensive or unnecessary items. Most people I know are delaying vehicle purchases already not just due to lack of availability but due to price change. If the employment rate stays elevated and inflation lowers, people will become accustomed to the higher prices. I expect a couple bad quarters for retail but it is too early to tell if the US consumer is in terrible shape or is just realizing cheap money is gone.
What happened to the roaring twenties? I thought after the covid mess, consumer spending would be through the roof. I guess not
 

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Markets are just barely hanging on. The longer the S&P 500 hangs out just above the 20% bear market line, the more likely it breaks.

Of course who knows what will happen, but based on where we are today, I would say markets are indicating we are near or already in a minor recession. Which is not surprising - energy prices and interest rates must rise enough to stop people from using diesel and gasoline, because there isn't enough of it to go around.
 

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This data does not include the pandemic crash but here are some stats on market performance and recessions. The data is from the US not sure if Canada tracks similar.

The Relationship Between Bear Markets and Recession (dqydj.com)

"In the post-WW2 era, roughly 2/3 of bear markets are associated with a recession."
"Four times since WW2, the S&P 500 was in a bear market without a corresponding recession. The worst of those bears was in 1987, where the S&P 500 declined 35.94% peak to trough. That bear was also quite a long one - we went 700 calendar days between new all time highs in the S&P 500. "
 

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Nordstrom just reported quarterly results on Tuesday and sales figures were strong, +19% YOY to above prepandemic levels and raised its profic and revenue forecasts. Costco reports tomorrow and its numbers should be interesting.

We're in a very weird, uneven economic environment which makes financial forecasts very difficult IMO. Economists talked about a K-shaped recovery from the pandemic where white collar employees working from home that couldn't spend anything built up cash savings while a lot of service industry employees lost their jobs and struggled. I think we're seeing that play out a bit where some parts of the population are able to weather the current economic conditions particularly if unemployment stays low whereas others are struggling with inflation, higher interest rates, and limited wage growth. How this plays out overall is

What happened to the roaring twenties? I thought after the covid mess, consumer spending would be through the roof. I guess not
I would say we're not completely past the pandemic mess yet in addition to my comment about the pandemic impacting population segments differently. China and Taiwan and their zero covid policies are likely still impacting supply chains. And of course the war doesn't help. There's also likely a re-shift going on as companies adjust supply chains that were exposed during the pandemic. Travel hasn't fully opened up yet, particularly Asian countries.
 

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