Anecdote: I've seen recession prediction virtually every month by some trustworthy brilliant person during past 2 years. One of them was Mark Cuban who actually went all cash in last October/November. This is what he had done just before year 2000 bubble popped and he was one of the few surviving billionaires. To his credit, market did went bust on December 21, 2018 with massive drop of 20%. I was literally in awe of Cuban's instinct but then the market almost immediately recovered like nobody's business. I'm now suspecting that government has developed some extraordinary tools to keep market stable. Many conventional laws of economics are pretty much defunct at this point. Massive QEs, printing money and racking up debt has done nothing to cause inflation or any adverse effect. Even Iran situation, North Korea stuff, Seria bombing - all of that barely even registered on market. There is something very very strange going on.

"Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he ' could calculate the motions of the heavenly bodies, but not the madness of the people.' Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002-2003's] money. For the rest of his life, he forbade anyone to speak the words 'South Sea' in his presence."

https://www.businessinsider.com/isaac-newton-lost-a-fortune-...

Massive QE is the right answer -- markets are not controlled by average Joe, but by people who benefit form the QE.

Wasn't the crash timed with the FED tightening moves?

This is quite normal in a late stage bull market. There are often a series of dips and vacillations before it turns bear.

Most of the indicators have been flashing red for some time though, so I think the coming recession is no surprise.

Typically, no. It's been shown time and time again that people cannot reliably time the market. If they could, with leverage you could become the richest person on the planet in a short time.

You have to understand that if indeed people could in general know that the market was going to crash, then people would have already sold, and the impending crash would already have been priced in.

It follows from that, that the current price essentially is our collective best guess at what the future will bring, including any expectations of recessions. Selling beyond that point means you're seeing something that nobody else does, which either makes you a genius (or lucky), or wrong, and the odds are typically not in your favour.

You can find articles on recession indicators flaring up every month for the past decade. Suppose we had no sense of time, and just a sense of the daily weather to track the seasons. A few warm days in a row may indicate summer has landed, or it's just a normal fluctuation, a few weird days as winter turns to spring. And vice versa with cold days. There'll always be some indicators which may signal something bigger, and it could be just noise, or it could be truly indicative. You don't really know until after the fact. And if you could predict it, then it's likely everyone else could, too, and it'd have already been priced in so trying to time the market tends not to work.

This simplifies things a bit, but unless you're close to retirement (at which point you should reduce your exposure to volatile asset classes like stocks anyway), time in the market beats timing the market. There's lots of interesting articles on this like https://awealthofcommonsense.com/2014/02/worlds-worst-market...)

It's not a dumb question, frankly. But the saying is that "the markets can stay irrational longer than you can stay solvent". Yes, if you time the market by selling high and re-buying low, you can make more money. But the general advice is not to sell because a typical market participant isn't going to be able to time the market.

That said, I don't believe in the efficient market hypothesis, so I think people who claim that you can't time the market at all are either wrong or lying.

Yeah sure but if you have the ability to time the market then you wouldn't ask this question in the first place. You'd spend your day working 40 hours a week managing million dollar portfolios. Therefore telling people they can't time the market is perfectly good advice.

Passive investing does not imply buy and hold at all times. Timing the market is tricky or impossible but you can have some automatic market timing rule based on some leading market indicators like a factory activity or PMI.

It is enough to miss few good days or few bad days over years to make a tremendous impact on the final result.

https://www.fool.com/investing/2019/04/11/what-happens-when-...

Any time you have market timing rules, you get picked off by more sophisticated investors looking for structure.

Think of it like this, imagine you had an hour to build a rock paper scissors AI going up against entire teams of people building RPS AIs for many years. If you build an AI that just returns rand() every single time, you're guaranteed to win about 1/3rd of the time, if you attempt to code anything even slightly more sophisticated, you're likely to get murdered by the other participants. You would have to build something exceedingly beyond your capabilities complex to even get back up to that 1/3rd performance figure.

Same with Passive/Active investment. Either you are 100% Passive or you have to be incredibly, incredibly Active to even match the performance of being Passive, there isn't a middle ground.

> Any time you have market timing rules, you get picked off by more sophisticated investors looking for structure.

I don't see how this is a problem - you don't have to capture all of the value, you just have to do much better than you would have by just holding the shares as the market bottoms out. Even the more sophisticated investors are small-fry when the whole market is considered.

I understand your reasoning but can you show any actual research supporting that binary vision of the markets?

At which point an investor's strategy is below rounding error of optimization algoritms of more sophisticated investors? Or their costs of carry?

To better qualify parent's post: it's not that informed investors will target a small player specifically. They most likely won't as your instinct tells you, because there is no money in it. However, the sorts of strategies and algorithms that one could feasibly implement without having been in the industry for many-many years are very unlikely to beat the buy-and-hold strategy. The "simple" stuff has been by-and-large arbitraged away.

> The "simple" stuff has been by-and-large arbitraged away.

Purely theoretical conclusion then is that markets had been perfectly priced ahead over all time horizones.

For a retirement portfolio I'd likely stop buying and save cash for a correction and start buying after a significant decline/crash.

In doing so you lower your average buying price and have cash on hand if you need it.

Problem with that approach is when the market does recover those gains can come quickly. Missing out on just a few days can cut your returns in half.

Better to stay in the market and keep rebalancing your portfolio. That way your 100% invested at the bottom.

I won’t retire the next three decades. So I see no need to sell. I keep buying index funds, the same amount every month. Some months they are expensive, some months they are cheap. I rarely check in on the current worth. In the end it will even out.

> In the end it will even out.

That's something you might think will happen, but you have no idea as you cannot predict the future.

That's true but if you think about the scenarios in which growth won't happen you probably will have bigger problems than an under performing stock portfolio.

Exactly my reasoning as well.

Well I do have an idea. But yes, it’s true that I cannot predict the future.

Every crash ever has recovered.

Except the Japanese crash. If you started investing 30 years ago in japan with dollar cost averaging. Right now you'd be almost below your average purchase price. Just take a quick look at the nikkei 225

Makes no sense. If you want to trade, then trade. Timeframe is an illusion to make you feel comfortable. There is no difference between trading daily or yearly.

Also, the market can still go up in a recession, war or whatever.

The issue with more frequent trading is that you are paying more in transaction fees, and that it gives you more chances to make irrational decisions that result in lower returns.

That's not an "issue" but more like why you shouldn't trade in the first place. My point is, long-short timeframe are no different if you don't know the direction it is moving.

This has been visible for at least the last six months. Best time to sell was last August. This is the time to start buying, not selling.

If you bought Bitcoin at $1k, missed the peak at $2k, and sold at $1.5k, did you win or lose?

You lost because the gains aren't high enough to compensate for the even higher risk. Gambling $1k in Bitcoin is doable. Putting half your retirement funds into Bitcoin just isn't feasible. Because of this you will see the 50% ROI only on a tiny percentage of your portfolio.

I sold all the stocks in my fun money account a few weeks ago. I haven’t touched my 401k tho.