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Author: temsike Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Re: A genuine note of thanks Date: 1/1/2009 11:38 PM
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DorothyM
Of course that assumes that recovery will begin in 2009 -- not a certainty. It's POSSIBLE that losses will continue in 2009 and beyond. Certainly a 40% increase within the next couple of years is very optimistic -- not impossible, just optimistic.

I tried to keep it simple by using an illustrative example. No where in my post did I mention a recovery occurring in 2009. We may not see any type of recovery for a decade. And then again we may see one in 2009.

Typically, when a recovery occurs after a bear market, we'll see an initial increase of 40%. The second year is an 10% increase and the third averages 5%.

Last year about this time, my portfolio was 65/35. My stocks dropped about 45% to an allocation of 48/52. On Tuesday, I did my annual rebalance to 70/30. Thus, when the recovery comes, my port will recover better than if I would have left the allocation at 48/52 or just rebalanced back to 65/35.

If the market drops hard again in 2009, I'll go to 75/25 and if it drops again in 2010. I'll rebalance to 80/20. I won't go beyond 80/20 unless we get Price to Book values of less than 1 and PE values of less than 8.

I believe in buying low and selling high and I actually do it.
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