Are we headed for a "fall"?

[REWahoo]

Quote:

Originally Posted by Pete I've found it curious in ER forums, that to be negative about the economy (or a portion of it) quickly leads to "doom and gloom" ridicule. Were there any doom and gloom forecasts about the tech bubble or eventual real estate crash? Were they ridiculed? Did anyone listen and save themselves a lot of heartache?

What I've had difficulty in doing is separating the folks who warned about the Y2K crash, the tech bubble or the real estate disaster from the permabears who see financial Armageddon around every bend. An additional complication is so many of those who post here to tell us the sky is falling seem to have developed abrasive online personalities (one recent gold bug comes to mind) which may be a reaction to the reception they've received on this and other forums. Nevertheless, it is difficult for me to take all the gloom & doom prognostications seriously since so many of them have proven to be wrong - and the results of trying to time the market have been dismal, at least for me.

I'm more comfortable choosing an asset allocation I can snuggle up to at night and going along for the market ride with the faith the long-term trend will continue to be favorable.

[Pete]

Quote:

Originally Posted by Gone4Good What's surprising is that folks who tend toward pessimism would even think about something as uncertain as early retirement . . . which is probably why they find strong resistance here.

True. But for me, the pessimism was motivation to over prepare. And of course I wasn't always pessimistic. More than 10 years ago I might have been overly optimistic.

[bbbamI]

Quote:

Originally Posted by REWahoo I'm more comfortable choosing an asset allocation I can snuggle up to at night and going along for the market ride with the faith the long-term trend will continue to be favorable.

Oh c'mon it's much more fun in retirement to worry, wring your hands and pull your hair out every day isn't it? At least that way you'll have an answer when someone asks "What do you do all day?"

As far as snugglin' goes, I'll be cozying up to my teddy bear the next couple of nights. DH has gone on a road trip (he's soaking up every moment of retirement). Silly man...he's enjoying himself.....

[Pete]

Quote:

Originally Posted by REWahoo I'm more comfortable choosing an asset allocation I can snuggle up to at night and going along for the market ride with the faith the long-term trend will continue to be favorable.

This has proven to be a fairly good idea, but I just couldn't help having my "faith" shaken when so many people around me were all of a sudden able to buy million dollar homes here in SoCal. I had to become bearish (about real estate), get off my pillow, and sell some real estate.

I think I might have become a perma bear (I think just a realist) in the 80's. I looked back to the 60's and saw how much manufacturing was gone and saw how much the gov't was growing and couldn't help it. It didn't stop me from investing in it, but....

[LARS]

Quote:

Originally Posted by Gone4Good There is no "safe" way to do what we're all trying to do. So to even attempt it implies some level of optimism. What's surprising is that folks who tend toward pessimism would even think about something as uncertain as early retirement . . . which is probably why they find strong resistance here.

Ah yeah, there’s a safe way: its call having a boatload of capital relative to your expenses. Worked fine for me despite my "pessimistic", though I consider it cautious, approach…

[W2R]

Quote:

Originally Posted by REWahoo What I've had difficulty in doing is separating the folks who warned about the Y2K crash, the tech bubble or the real estate disaster from the permabears who see financial Armageddon around every bend. An additional complication is so many of those who post here to tell us the sky is falling seem to have developed abrasive online personalities (one recent gold bug comes to mind) which may be a reaction to the reception they've received on this and other forums. Nevertheless, it is difficult for me to take all the gloom & doom prognostications seriously since so many of them have proven to be wrong - and the results of trying to time the market have been dismal, at least for me. I'm more comfortable choosing an asset allocation I can snuggle up to at night and going along for the market ride with the faith the long-term trend will continue to be favorable.

+1 Sticking with our chosen asset allocations and rebalancing when indicated got many of us through the worse market crash since the Great Depression during 2008-2009. Even given the severity of that crash, those of us who did this have recovered most or all of our net worth already, whereas some others unfortunately suffered great portfolio damage.

(Edited to add: here's a link to a thread about how much our portfolios had or had not recovered, from a few months ago: http://www.early-retirement.org/foru...yet-48116.html )

Like REWahoo, I have found that nearly all of my market timing efforts have bombed spectacularly. I do not envision myself as some sort of big investing guru or market wizard and it would be dangerous for me to do so. Greed is not an advisable basis for my financial decisions and could result in losing everything. I am just a quiet retired person successfully living off my portfolio as it grows in the long term.

[kcowan]

I am largely in cash and cash equivalents. I am happy to be on the sidelines except for some blue chip stocks, some funds for BRIC and Europe, and my bond ladder. Every takeout in the last two years: Petrocanada, Shell Canada, and Corriente sits on the sidelines. Until some fundamental value returns to the markets, I am happy to wait for it.

I also have the proceeds of two houses sold before the crashes in their respective markets on the sidelines. YMMV

(I have bought a condo in PV but that was a lifestyle purchase.)

[REWahoo]

Quote:

Originally Posted by kcowan I am largely in cash and cash equivalents. I am happy to be on the sidelines except for some blue chip stocks, some funds for BRIC and Europe, and my bond ladder. Every takeout in the last two years: Petrocanada, Shell Canada, and Corriente sits on the sidelines. Until some fundamental value returns to the markets, I am happy to wait for it. I also have the proceeds of two houses sold before the crashes in their respective markets on the sidelines.

Congratulations on your successful effort to time the market and know when to exit.

Quote:

Originally Posted by kcowan Until some fundamental value returns to the markets, I am happy to wait for it.

Please let us know when it is safe to go back into the water.

[Leonidas]

There are a fair number of members/visitors here who seem to have compiled a ER financial plan that depends on a lot of things going just right, and almost nothing going wrong. That's just too risky for my tastes. When things go wrong in their plans they don't have much of anything to fall back on. For them it's a short fall from ER to a job as the greeter at Wal Mart with Sam's Choice cat food for dinner.

If you're in that position the world sure can be a scary place.

For me, it's multiple streams of income, multiple years of expenses covered, the ability to be a cheap bastard and live on beans and rice if I have to, a 10+ year horizon on investments, and an asset allocation that can withstand a lot of brutal treatment from Mr. Market and his friends Recession, Inflation, Deflation, et. al.

Most importantly, I didn't write my ER plan, cover it with shellac and stick it on the wall while crying, "done!" Things change in this world and I have to be prepared to deal with it. Where my money is today may not be where I want to have it 20-years from now. As the Tau of Uncle Mick teaches us: "To survive retirement, one must be agile, mobile and hostile".

So, I will beat up on the permabears and the nutjobs who constantly shout "the world is ending." I have limited patience for the poor planners who suddenly wake up to risk. But for anyone who wants to talk about how to make money on the changing economy or markets - I'm ready to talk.

[Meadbh]

Hear Hear!

[Running_Man]

Quote:

Originally Posted by RonBoyd Perhaps it is the gloomy predictions by Dex -- he does present compelling arguments -- that has made me more sensitive to this issue than I should be but... Doomsayers Beware, a Bright Future Beckons I am curious of the thoughts of others on the subject.

The view of the optimists is just fine so long as you were not a Russian citizen in the early 1900's or a Jew in Germany in the late 30's or fully invested in stocks as you were retiring in 1930. The idea that the world is just one big continual unstoppable uptrend and that naysayers have been proven wrong time and again is absurd

The ability to analyze a situation whether an American Indian in 1800 or living in Russia in the early 1900's or a Jew in the 1930's in Germany or a resident of Hiroshima in 1945 or an investor in the late 1920's or a real estate investor in 2005 and the implication of what the consequences of those actions could be and take precautions is obviously superior to the what me worry approach when the low percentage result occurs. However precious few ever take those steps when confronted and if they do take steps are typically ridiculed for their hesitance at avoiding a low probability high risk event.

People who are optimistic are revered and put up as examples of how to be willing to take risks, but for every Warren Buffet and Bill Gates there are many more who become bankrupt and lose all their money. But for any opportunity taken there is a percentage of likelihood in the opposite occuring, for many the best percentage play they can conceive is asset allocation, and as that has not yet failed it is not an idea yet ridiculed, yet if a low probability event comes along and destroys asset allocation models, the ridicule will certainly arise.

People living in Germany today, considered the most stable of all European countries have in the last 100 years 2 instances of their currency being worthless and so there is considerable pressures in that country for social responsibility.

Everything comes to a cash flow problem in retirement, the uncertainy of need for future cash flows to fund a retirement balanced against the level of risk needed to be taken to assure a level of returns to fund that need. Where this cash is going to come from in an era when the US Government went for 9 percent of GDP in 1910 to 45 percent in 2010 leading to a long term uptrend bias that is displayed in Firecalc as a basis for the next 40 years. Now that 1/3 of that spending is not funded I see little chance of a continuance of the same trend over the next 100 years as that would requre spending of 75% of GDP and a positive outcome for the economy. This same issue has halted growth in Japan for 20 years.

As for the gold thread I always find it amusing that threads that are deemed "not worthy of discussion" generate the highest number of views and posts.

[haha]

Quote:

Originally Posted by W2R +1 Sticking with our chosen asset allocations and rebalancing when indicated got many of us through the worse market crash since the Great Depression during 2008-2009. Even given the severity of that crash, those of us who did this have recovered most or all of our net worth already, whereas some others unfortunately suffered great portfolio damage.

I think I know what you are saying, but I also think that it is only partially true. What got us through the crash is that it turned out to be a one year wonder. Clearly, to panic and sell after the crash is not good, but then neither is that market timing as most of us would practice it.

A successful timer has to be realistic, he can't get every last bit of froth. When valuations are high, you sell down partially at least. When they are low, you refill with stocks.

It is far from perfect, but so is buy and hold and asset allocation. The base Firecalc allocation-70% S&P and 30% CP- has gone nowhere for ten years, and if one were retired and practicing this he would likely be broke today.



Ha

[Moemg]

Quote:

Originally Posted by W2R +1 Sticking with our chosen asset allocations and rebalancing when indicated got many of us through the worse market crash since the Great Depression during 2008-2009. Even given the severity of that crash, those of us who did this have recovered most or all of our net worth already, whereas some others unfortunately suffered great portfolio damage.

Besides re balancing and asset allocations the people who made it through the most successfully were still working or had recent inheritances to bolster their portfolios. The rest of us learned that to survive an asset allocation is nice but so is flexibility .

[Pete]

Quote:

Originally Posted by haha It is far from perfect, but so is buy and hold and asset allocation. The base Firecalc allocation-70% S&P and 30% CP- has gone nowhere for ten years, and if one were retired and practicing this he would likely be broke today.

+1.

20 plus years in Japan.
20 plus years from the 60's to the 80's.

Buy and hold has some history, but there has been plenty of history that shows we must act...

Now might or might not be one of those times. But to quell half the argument by calling them "doom and gloomers" or "permabears" doesn't help.

[REWahoo]

Quote:

Originally Posted by Moemg Besides re balancing and asset allocations the people who made it through the most successfully were still working or had recent inheritances to bolster their portfolios.

Yep, a little side job selling on eBay sure doesn't hurt when the market goes in the dumper.

There are many ways to survive in the rough and tumble world of retiring for those of us without a big pension check and what is right for me may not work for someone else. But I would argue the flexibility to expand/contract spending needs in response to changing economic conditions may be the ultimate lever in achieving long-term success.

[Dawg52]

Quote:

Originally Posted by bbbamI As far as snugglin' goes, I'll be cozying up to my teddy bear the next couple of nights. DH has gone on a road trip (he's soaking up every moment of retirement). Silly man...he's enjoying himself.....

He needs to read some of this doom and gloom to set him straight.

Quote:

Originally Posted by Pete I think I might have become a perma bear (I think just a realist) in the 80's. I looked back to the 60's and saw how much manufacturing was gone and saw how much the gov't was growing and couldn't help it. It didn't stop me from investing in it, but....

I'm not a doom a gloom basher. I'm pretty much a perma bear. See my signature. I just need a little humor to get me through it. And a med or two.

[Texas Proud]

Quote:

Originally Posted by Running_Man The view of the optimists is just fine so long as you were not a Russian citizen in the early 1900's or a Jew in Germany in the late 30's or fully invested in stocks as you were retiring in 1930. The idea that the world is just one big continual unstoppable uptrend and that naysayers have been proven wrong time and again is absurd The ability to analyze a situation whether an American Indian in 1800 or living in Russia in the early 1900's or a Jew in the 1930's in Germany or a resident of Hiroshima in 1945 or an investor in the late 1920's or a real estate investor in 2005 and the implication of what the consequences of those actions could be and take precautions is obviously superior to the what me worry approach when the low percentage result occurs. However precious few ever take those steps when confronted and if they do take steps are typically ridiculed for their hesitance at avoiding a low probability high risk event. People who are optimistic are revered and put up as examples of how to be willing to take risks, but for every Warren Buffet and Bill Gates there are many more who become bankrupt and lose all their money. But for any opportunity taken there is a percentage of likelihood in the opposite occuring, for many the best percentage play they can conceive is asset allocation, and as that has not yet failed it is not an idea yet ridiculed, yet if a low probability event comes along and destroys asset allocation models, the ridicule will certainly arise. People living in Germany today, considered the most stable of all European countries have in the last 100 years 2 instances of their currency being worthless and so there is considerable pressures in that country for social responsibility. Everything comes to a cash flow problem in retirement, the uncertainy of need for future cash flows to fund a retirement balanced against the level of risk needed to be taken to assure a level of returns to fund that need. Where this cash is going to come from in an era when the US Government went for 9 percent of GDP in 1910 to 45 percent in 2010 leading to a long term uptrend bias that is displayed in Firecalc as a basis for the next 40 years. Now that 1/3 of that spending is not funded I see little chance of a continuance of the same trend over the next 100 years as that would requre spending of 75% of GDP and a positive outcome for the economy. This same issue has halted growth in Japan for 20 years. As for the gold thread I always find it amusing that threads that are deemed "not worthy of discussion" generate the highest number of views and posts.

I would call the examples you posted as 'black swans'... but in reality you could see some of them coming... there were a lot of people who took their wealth out of Russia... out of Germany or even out of the stock market prior to your examples...

I am not planning on a super major disaster happening... sure, it might happen, but I am not buying bullets and not building a bunker because they exist...

To me, the biggest threat that I can see that I am not investing for is a major terrorist attack... with a full nuke in the middle of NY or Washington... that would really cause a lot of problems for our country... and I suspect the market would crash big time... who knows how long it would take to get things fixed...

I do agree that the spending of our government is way to high... and I think that it will be corrected over time... will it cause a major disruption... I do not think so... but it could..


As for you last comment on the gold thread... go back and see how many people actually made a comment based on what was said... a lot of it is the joy of watching the 'wreck'.... just like NASCAR.. you have to watch!!!

[REWahoo]

Quote:

Originally Posted by haha A successful timer has to be realistic, he can't get every last bit of froth. When valuations are high, you sell down partially at least. When they are low, you refill with stocks.

That's not being no stinkin' market timer, that's rebalancing!

[bbbamI]

Quote:

Originally Posted by Dawg52 He needs to read some of this doom and gloom to set him straight.

Heh...he knows I do enough 'research' for the both of us. Besides he married a woman that can pinch a penny so tight, it squeals "Uncle!"

Quote:

Originally Posted by Dawg52 I'm not a doom a gloom basher. I'm pretty much a perma bear. See my signature. I just need a little humor to get me through it. And a med or two.

I like your style.....

[Running_Man]

Quote:

Originally Posted by Texas Proud As for you last comment on the gold thread... go back and see how many people actually made a comment based on what was said... a lot of it is the joy of watching the 'wreck'.... just like NASCAR.. you have to watch!!!

I found this interesting as I read the original post and thought to myself --not interested, when it got to 5 pages and 3,000 views I thought wow what is being discussed. It was a NASCAR race only the crowd was throwing fuel on the driver after he crashed!