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hello, here's my story
Old 12-03-2005, 07:51 AM   #1
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hello, here's my story

Just discovered this forum and retirement is my topic these days. I am 56, have been living in New York for the past 30 years. Owned a condo in Manhattan until April of this year when I sold it in expectation of a popping of the bubble. I earn about $140,000 salary per year and always make the maximum 401k contributions. I have no debt and no property, not even a car. My liquid assets are $1.1 million. I did fairly well investing during the 90's, but I am much more focused on it now. The job is fine; excellent boss, regular hours, and little stress. However, I find it boring and would like to have my time to myself. But there is a complication: my wife is 27 and about to start a career in fashion design. If it were just me I would move away from NYC to somewhere with a lower cost-of-living. But I want my wife to have the career that she has dreamed of. So, we are committed to NY for the next 3 or 4 years until she can determine whether she likes working in the fashion industry or not. If not, then we would consider moving back to her country of Thailand, where the cost of living is quite cheap, at least at the current exchange rates.

All that's background. My concern is how to invest. About 40% is in tax-deferreed retirement accounts. At the moment, the after tax money is in T-bills, while I am waiting for the Fed's increases to peak before going for a longer duration. However, I am very wary of the stock market. I am persuaded that we are in a secular bear market so buy-and-hold may be a good way to lose money. Also, there is the likelihood of a resumption of the decline of the dollar once US interest rates start moving down again. (I have to admit that I am, in general, a gloom-and-doomer.) I worry about long-term investing in stocks with a high likelihood of an eventual 1987 or 1973-74 crash at sometime during my investing career. So these are the various approaches that I am currently considering:

1. Simply stay in T-bills and wait for the next recession and stock market crash (in 2006 or 2007?. Invest in equities at that point. If the real estate market crashes, then buy property although perhaps not immediately since deflation can be persistent.

2.. For Treasury bond exposure do T-bills until it looks like the Fed will start cutting and then spread out into a ladder with a 5-year maturity.

3. Use a market timing scheme to move in and out of equities frequently n an attempt to get some return while reducing risk. I know all about the conventional deprecation of market-timing. In the 90's bull market timing was unnecessary and the mutual fund companies railed against it because it didn't suit their interests while buy-and-hold did. However the current period may resemble more closely the 70's, another secular bear market and the heydey of market timing schemes. I will split the equity entries between a US total market index ETF and a foreign one.

4. At the time that the Fed starts lowering interest rates, move half of the bond allocation to funds of unhedged foreign bonds in the expectation of the resumption of the dollar decline.

5. Maybe put a small amount of the US bond allocation into I bonds as an inflation hedge, even though I don't think consumer inflation is a big risk long-term.

My goal is to fund as early a retirement for myself as possible, but that is complicated by not knowing now whether we will live in high-cost NYC or elsewhere. As long as we are here I will keep working. My retirement strategy must also provide for my wife's eventual retirement for which there are many variables at this early date.

Any suggestions or comments?
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Re: hello, here's my story
Old 12-03-2005, 08:20 AM   #2
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Re: hello, here's my story

Quote:
Originally Posted by NYCGuy
Just discovered this forum and retirement is my topic these days.* I am 56, have been living in New York for the past 30 years.* Owned a condo in Manhattan until April of this year when I sold it in expectation of a popping of the bubble.* I earn about $140,000 salary per year and always make the maximum 401k contributions.* I have no debt and no property, not even a car.* My liquid assets are $1.1 million.* I did fairly well investing during the 90's, but I am much more focused on it now.* The job is fine; excellent boss, regular hours, and little stress.* However, I find it boring and would like to have my time to myself.* But there is a complication: my wife is 27 and about to start a career in fashion design.* If it were just me I would move away from NYC to somewhere with a lower cost-of-living.* But I want my wife to have the career that she has dreamed of.* So, we are committed to NY for the next 3 or 4 years until she can determine whether she likes working in the fashion industry or not.* If not, then we would consider moving back to her country of Thailand, where the cost of living is quite cheap, at least at the current exchange rates.

NYCGuy: If you haven't already started on a "solid" work-out program, by all means, get going. (Concentrate on the cardio)

Keep a good supply of "Wheat Bread" on hand.

As far as advice on other matters, hang in there, the Cavalary will be arriving in short order.
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Re: hello, here's my story
Old 12-03-2005, 01:10 PM   #3
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Re: hello, here's my story

"I am 56... But there is a complication: my wife is 27..."

You'll get a lot of sympathy here.
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Re: hello, here's my story
Old 12-03-2005, 01:45 PM   #4
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Re: hello, here's my story

Wow, someone who lives in NYC and has no debt !!!! Not too shabby !

<<<However the current period may resemble more closely the 70's, another secular bear market and the heydey of market timing schemes.>>>

I have to agree with you here. I see trouble on the horizon. The yield curve is about to invert, intrest rates are rising, we have a huge trade imbalance, a high national debt and citizens who are over leveraged.

I recently paid off my mortgage and have no debt. I am saving my early retirement money in I-bonds. There is no interest earned until they are cashed, so it's like an IRA in that sense. In addition, there is no state or local taxes due upon cashing them in.

I also have my 401k (Government TSP) in short term securities. I am hoping the economy and market tanks sooner rather than later. Sure don't want it to tank in seven years when I bail from my job.

I wish I had answers for you, but it sounds like we have the same mindset. Have you estimated how much you will need to live on in retirement ?

I hope you keep posting here.

Best regards,

-helen
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Re: hello, here's my story
Old 12-03-2005, 04:13 PM   #5
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Re: hello, here's my story

Oh man 56 and she is 27.

I gotta say I have seen this story more than one time.


Lottsa luck dude!
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Re: hello, here's my story
Old 12-03-2005, 04:32 PM   #6
 
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Re: hello, here's my story

xxx
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Re: hello, here's my story
Old 12-03-2005, 05:33 PM   #7
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Re: hello, here's my story

Quote:
Originally Posted by Helen
I hope you keep posting here.
Me too! Hey, could you tell us a bit more about your wife?

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Re: hello, here's my story
Old 12-03-2005, 05:50 PM   #8
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Re: hello, here's my story

Hi, NYCGuy. I'm glad you're here. I agree with much of what you said about everything . In fact, I think you may have stolen ideas #1-3 . Those are currently my basic portfolio. I'm rather conservative until I see how economic events shake out and prefer to remain diversified in your first three choices, plus PM shares as a basic US$ hedge. But I have a wee bit of almost everything, except index funds and financial shares and housing stock and and almost anything that I think will go down in price from the coming possible recession, unless I think the returns may be higher than the risk. So, you're pretty sure about a recession? You don't think the administrative branch any part of the gov't can keep the economy going?
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Re: hello, here's my story
Old 12-03-2005, 06:10 PM   #9
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Re: hello, here's my story

So what would you ERs rather have 1) crash which historically is likely be short-lived or 2) flat market for a decade. I only hear about the big crash but the 2nd option is just as likely.
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Re: hello, here's my story
Old 12-03-2005, 06:46 PM   #10
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Re: hello, here's my story

wildcat: Worst case to my mind is stagflation. The horror, the horror. Seriously, hardly anyplace to place to run while your dollar investments erode. And if the gov't lies about inflation, then I-bonds and TIPS don't keep up. If they lie .
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Re: hello, here's my story
Old 12-03-2005, 09:01 PM   #11
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Re: hello, here's my story

Helen, congrats on getting debt-free. It's a wonderful feeling, isn't it? I just bought I-bonds for the first time in Oct. and am considering adding after the first of the year. They seem like a good item, more convenient than TIPS and easier to ladder. As Apocalypse points out, there is the moral hazard posed by the gov't's setting its own inflation rate. Still, you have to take some risk, somewhere, don't you?

Jarhead, you ex-grunts keep in shape, do you? Something I intend to focus on now, after some years of creeping neglect. Thanks for the reminder. It's oddly effective to hear, even from a total stranger.

Apocalypse, what is "PM"? My current investing dilemma, after extracting myself from the housing bubble, is how to hedge the dollar. I looked at the everbank.com foreign cds, but it's not too attractive. The commodity currencies have trade deficits (except Canada), are overvalued, and will drop quickly in a US recession. Plus there is the 1.5% cost of the currency round-trip and the severe early withdrawal penalties. I mentioned unhedged foreign bond funds, such as RPIBX. This could be promising, but if the dollar doesn't drop it won't do well on its own. There are ideas for individual stocks, but I would rather not own common stocks. Does anyone have any other ideas for hedging USD? Not gold. I missed that one. Too to late to buy anything that is at a 23 year high, in my opinion.

wildcat, I am not convinced that there will be a crash and recession, rather than a flat market, but I think there is more possibility than ever before of a perfect storm in housing, stocks, and the dollar resulting in a once-in-a-lifetime watershed that defines our lives thereafter like the '29 Crash did for my parents' generation. Bernanke could continue Greenie's campaign against the housing bubble ("inflation") or he could blink. I think he will blink and start lowering sooner. Current Fedspeak is that raising will continue. If the Fed does start lowering, it won't save the housing bubble, but it could spark another bubble in equities. On the other hand, if they do keep raising, or even if they just stop, as the effects of the raises to date spread throughout the economy it could start a serious recession: housing bubble bursts, consumers stop spending and start saving, F & GM die, etc. As Greenspan described the Fed's operation as designed to prevent the worst case even if it is not the likeliest, I focus on avoiding being caught in a disaster.

If the storm gathers the gov't will certainly do its best, but the Fed, in particular, has experience only in managing the US economy and its inflation. The global economy remains in the wild, unmanaged state that the US economy found itself in prior to '29.

Apocalypse, how is your maket timing performing?
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Re: hello, here's my story
Old 12-04-2005, 07:05 AM   #12
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Re: hello, here's my story

Quote:
Originally Posted by Apocalypse . . .um . . .SOON
wildcat:* Worst case to my mind is stagflation.* The horror, the horror.* Seriously, hardly anyplace to place to run while your dollar investments erode.* And if the gov't lies about inflation, then I-bonds and TIPS don't keep up.* If they lie .
I love the smell of real estate in the morning. It smells like victory.

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Re: hello, here's my story
Old 12-04-2005, 07:51 AM   #13
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Re: hello, here's my story

Quote:
but I think there is more possibility than ever before of a perfect storm in housing, stocks, and the dollar resulting in a once-in-a-lifetime watershed that defines our lives thereafter like the '29 Crash did for my parents' generation.
Not bad for me so long as I have the courage to continue buying equities. IMHO it is tough to compare today to 1929. Bad things could sink the market but I don't foresee The Great Depression Part 2.
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Re: hello, here's my story
Old 12-04-2005, 09:55 AM   #14
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Re: hello, here's my story

NYCGuy:

PM stocks? Precious metal . . . yellow gold, Minnesota tea. Gold bugs are a derivative cult of the infamous 'doom and gloomer' cult. We would go door-to-door spreading the gospel, but some people have guns. Here is one of our secret symbols that we worship at:

http://finance.yahoo.com/q/bc?s=VGPM...=m&q=l&c=vfinx

We in the cult think that the real rise in price has yet begun. We believe that a diversified portfolio should contain more than paper money products (but not necessarily housing products, eh?) and more than even overseas paper product because other countries, too, are printing up paper money to beat the band. What do you think causes huge bubbles if not an oversupply of paper money and easy . . . umm . . . very relaxed credit standards? Many cultists would say much some of the gains in the financial markets over the past thirty years has come from easy credit and plenty of it. The housing gains are just part and parcel of that phenomenon.

I think 10% of a portfolio in PM stocks is an admirable goal. If you think prices are too high righ now start with a good PM fund (see above) at 2-3% and then add on the dips if you think there's something to the above truth story.

My timing: I'm currently holding natural gas stocks bought after Rita and some speculative gold shares (a little of which I recently sold). My plans are to reach out on bond duration if and when I see things as ripe and events are starting to break the way I expect. And, oh, when the risk-reward ratio is more to my liking.

I like Hussman Funds too, although I don't own any as yet.

I have more cult info if you desire

Oh, and don't forget to rebalance.



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Re: hello, here's my story
Old 12-04-2005, 01:33 PM   #15
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Re: hello, here's my story

NYCGuy your thinking too hard.

Since you are making a commitment to stay in NYC for a few more years and will continue to work keep your investments safe. You will have enough money one you move out of NY and overseas.

T bills, I bonds and a small amount in a stock mutual fund for now. If the co-op or condo markets goes down enough consider buying even if you keep it for investment purposes.

Why risk your money when you will have enough without the risk.
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Re: hello, here's my story
Old 12-05-2005, 09:05 AM   #16
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Re: hello, here's my story

NYCGuy, I am in the metro area, so I hear you on the toppiness of the Manhattan condo market.

I am not all that sanguine about the outlook, but I still have an equity-heavy port. I'm about 15% in EFA (partial dollar hedge there) and I have a portfolio of small caps, some of which are not economically senstitive (like STON) and some of which will be an attractive inflation hedge (EGLE, among others). I Maintain about a 10% position in GIM (unhedged foreign sovereigns) and PCRDX (unlevered commodities index collateralized with TIPS). I am slowly edging into exchange traded debt and preferreds because I think we are going to be in a declining rate scenario within 12 months.

If you wish to hedge a collapse of the USD, foreign bonds (GIM, etc.) will do it. Commodites also work simply because they are priced in reference to international markets, so if the USD collapses, commodities will get very expensive for USD-denominated buyers even if they are flat in other currencies. I'm not that wild about gold simply because I think a focus on just one commodity isn't appropriate.

Also consider your time horizon. You are likely to be on God's earth for another 25 years or better. More than enough time for a modest equity position to ride out a market bear.
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Re: hello, here's my story
Old 12-05-2005, 05:58 PM   #17
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Re: hello, here's my story

Brewer, Thanks for the suggestions. PCRDX has high expenses, but then there aren't too many commodity funds. GIM looks interesting, similar to RPIBX. It seems too early to buy them now while the interest rate cycle is dominating exchange rates. I expect to buy some when the Fed increases look to be topping out.

GTM, I am inclined to take some risk because it is not clear that my wife and I will move overseas. If it turns out that she loves her career in fashion here in NYC, then we will stay here. In that case I will work longer than otherwise, but will still retire eventually. If we stay then the assets we have are not enough to see both of us through. I plan to learn all I can and take the investment slowly for the next year or two. Apartments in NYC may be a good buy if they revert below historical valuations, but it could be a long cycle. I will be watching.

Apocalypse, I did own a little of the Gold ETF, but sold out. I agree that it is good to own gold, but my feeling is that I missed this run. Anything selling at a 23 year high is too expensive to buy, in my opinion. I read Hussman's weekly market commentary and like his funds, which have down well in both up and down markets. I also like his policy on having his own assets in his funds.
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Re: hello, here's my story
Old 12-05-2005, 07:09 PM   #18
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Re: hello, here's my story

If you have access to it, some brokerages will let you invest in PCRIX, which is 50BP cheaper.

I don't think interest rates make much difference to GIM simply because it has a pretty low duration (3 and change).
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Re: hello, here's my story
Old 12-05-2005, 08:05 PM   #19
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Re: hello, here's my story

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Originally Posted by NYCGuy
If we stay then the assets we have are not enough to see both of us through.*
Good luck trying to assure lifetime financial security for a 27 year old. Unless you are truly rich, plan to die with your boots on.

Ha
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Re: hello, here's my story
Old 12-05-2005, 08:07 PM   #20
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Re: hello, here's my story

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Originally Posted by NYCGuy
Apocalypse, I did own a little of the Gold ETF, but sold out.* I agree that it is good to own gold, but my feeling is that I missed this run.* Anything selling at a 23 year high is too expensive to buy, in my opinion.
Shorting CEF. Boy, I'm gonna have to think about that one. It could become a long-term cap gain...
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