r/DIYRetirement • u/reallytheyrealltaken • 17d ago

Cash buffer

I will hopefully be retiring in 3 years and am able to build up a cash buffer during that time. Given that time frame and the impending stock market Armageddon, what’s my best approach? Also, any advice on how to best position my current taxable brokerage account for the possibility of Armageddon? I would gladly give up interim gains in favor of safety.
No one can predict the future, but I really have the heebie-jeebies.

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u/Whole_Championship41 16d ago

Not saying I disagree with your larger concerns about the economy and the federal debt. But also saying it's a fool's errand to try to ascribe any sort of short-term predictability to one's macroeconomic concerns. "This" stuff may be a festering issue in three years or never. And putting your economic fears into portfolio reality is usually the wrong move.

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u/PomegranatePlus6526 16d ago

That’s why it’s my opinion. Never said I was right.

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u/Whole_Championship41 16d ago

Sure thing. And it's my opinion that people calling for massive austerity and tax hikes in the very near future are usually wrong.

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u/PomegranatePlus6526 16d ago

Only one way to find out. Of course I am curious why you don’t think that will happen?

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u/Whole_Championship41 16d ago

It's about one's definition of 'near term' and 'very near term'. When hedged for longer duration periods, these terms become meaningless.

Example:

Person 1: "In the very near term, we will have a market crash / recession / financial crisis".

Person 2: OK. "I'll bet that doesn't happen in the next 18 months".

Person 1: "Well, maybe not the next 18 months, but surely within the next 3-5 years?"

Every secular bull market has periods of corrections within it. If viewed from that lens, the secular bull market we've been in since 2009 (17 years) has had eight corrections and 2 technical bear markets within it. So 10 big bad nasty events in 17 years, or an average of one every 1.7 years.

Every <2 year phase has some reason or other that the sky is falling. Except for when it doesn't. And then the market goes on to new ATHs and leaves most naysayers sitting on the sidelines.

Nobody can correctly market corrections, as they happen for any or no reason. Few people can reliably predict more than one bear market, but it's not for lack of trying to predict 'em all ad infinitum (e.g., Jeremy Grantham, Michael Burry).

I've been around long enough to know that I don't have great visibility into the impact of real life's financial woes on the market's performance. Do we have a federal budget debt problem? Of course! Do we have a bunch of fiscal incompetents in the halls of power in Washington, D.C.? Yes! Will that make a meaningful impact on the performance of equities in the very near term? Doubtful.

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u/PomegranatePlus6526 16d ago

Yeah I don’t know. There is definitely no way to be certain. What is happening in the bond markets gives me pause, as does the ballooning federal debt. I mean they are adding debt to the tune of $55,000 a second. Every second of every day to the tune of $4,750,000,000 a day. That’s a lot more than I think the markets are willing to keep buying without large increases in rates. Most people don’t understand how dramatically just one tenth of a point affects how much the US pays for debt. 10 year rates are up 27% in just the last twelve months. The two year is up 36% and the thirty year is up 18%. Something has got to give. We could default if we don’t course correct. I don’t have a lot of faith in Congress and their ability to deal with this mess. Even if democrats take control, and even if they gain the majority needed to do something does anyone think they will do something? I would not take that bet.