Are we headed for a "fall"?

[Running_Man]

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]

+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]

+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]

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]

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]

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.

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]

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]

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]

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!"

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]

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!

 

[e86s54]

Yes, I am grateful to be here, to have houses and even an RV to spend the rest of my life in pursuit of happiness, and I will pursue it to Alaska and Prince Edward Island if I need to (Don't know about going beyond that though ).

Beyond that is the best! It's called Newfoundland! Nicest people and exquisite scenery!

 

[NW-Bound]

If the entire world goes down the tube, well, I am OK as we are all in this together.

If the US living standards decline because of the rest of the world is catching up, well, it is fair that if they work harder and smarter while we are slacking off, they deserve to improve their living. The latter bothers me only because of the way corporate America has been carrying their business in the last 20 years; Dilbert anyone? Ask Brewer about his workplaces with all the stupid meaningless slogans and empty mission statements. I have seen plenty of similar BS at the places that I have been. It was not like that when I started working 30 years ago.

Still, not all US corporations are that bad. There are still innovative and productive companies to own. We just have to work harder to find them. And of course owning some foreign equities wouldn't hurt either. What else does one do? Not all pessimistic posters here advocate owning gold and lead and K-rations, I don't think. And even the ones that do, well, they amuse me but do not bother me at all.


PS. Eh, about Newfoundland, I've got to get my RV out of the state of AZ first!

In fact, all this big talk about Alaska and PEI is so that I will have to keep my words and to actually do it. Will have photos to post as proofs that we make it there (will buy t-shirts too, of course) .

 

[Moemg]

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

It sure did not hurt but I'd have to sell full time to make up for my losses and the additional meds needed for these drops.
.
Speaking of meds ,we went in a Pharmacy in Cozumel and they sell absolutely everything over the counter including Cialis & Viagra . That is probably why the Americans living in Mexico are so happy !

 

[e86s54]

I work in a small office with two strong believers of the looming financial apocalypse. It can be a very depressing place at times.

My view of them is that they are the 'scared' of almost everything to the point that they are paralyzed and have difficulty enjoying life. One once had an ill conceived small business fail and has not taken a single risk in his life since then. He doesn't go on vacation, doesn't partake in any social activities beyond eating and his stress is making him grow old very quickly.

So they are both hoarding cash (even if they believe all fiat currencies will be worthless soon), buy some gold and silver (they store at home I believe), purchased guns for self defense and are constantly looking for properties in the woods (where the wives step in and veto the potential moves).

It's not that I don't believe in it completely, but try and take a realistic, sober and unemotional view. I live for today without forsaking tomorrow and concern myself with things I can control. I just don't see reading all these financial doom and gloom blogs as being helpful.

E86S54

 

[Gone4Good]

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 not my impression. I recall a recent thread on withdrawal strategies that gave me the impression folks here were building a lot of safety into their retirement strategies. They may start with FIRECalc, but many didn't end there. They lowered the WR below what FIRECalc considered 100% safe, identified spending that could be cut, or income that could earned, and generally had a few levers to pull in the event things went off the rails.

Maybe not everyone takes this approach, but a lot of those who posted in that thread certainly did.

 

[Gone4Good]

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.

And rarely have we had [FONT=&quot]c[/FONT]ontrarians offering thoughtful and well reasoned analysis. Instead it tends to be aspersions against the government, conspiracy theories regarding any and all official statistics, and gross generalizations about debt or manufacturing or whatever.

There are exceptions of course, but they have been few.

 

[Alan]

That's not my impression. I recall a recent thread on withdrawal strategies that gave me the impression folks here were building a lot of safety into their retirement strategies. They may start with FIRECalc, but many didn't end there. They lowered the WR below what FIRECalc considered 100% safe, identified spending that could be cut, or income that could earned, and generally had a few levers to pull in the event things went off the rails.

Maybe not everyone takes this approach, but a lot of those who posted in that thread certainly did.

I resemble that remark.

 

[Pete]

I used to be an efficient/rational market guy. When I was, I had no interest in threads like this. Market movement only meant rebalancing or a buying opportunity. The irrational and manipulated markets I've witnessed have changed my beliefs. I feel I have to take more responsibility...individual stock, sector rotation, some timing. For those of you who have a path, why waste your time with bulls or bears or threads named "are we headed for a fall"?

 

[W2R]

That's not my impression. I recall a recent thread on withdrawal strategies that gave me the impression folks here were building a lot of safety into their retirement strategies. They may start with FIRECalc, but many didn't end there. They lowered the WR below what FIRECalc considered 100% safe, identified spending that could be cut, or income that could earned, and generally had a few levers to pull in the event things went off the rails.

Maybe not everyone takes this approach, but a lot of those who posted in that thread certainly did.

I resemble that remark.

Me, too. Which is not to say that there aren't plenty of others here who prefer a higher level of risk. I took more risks when I was in accumulation phase than I would take now.

 

[Leonidas]

That's not my impression.

I misspoke, or mis-wrote, whatever the case. That reply went through a couple of revisions as I was running around helping get things together for a dinner party and every time I sat down to write I would change something. It got a little disjointed in the writing and revision processes.

I didn't mean to say that there were a significant number of members here who were like that, but we do get our share. Many of them don't stay long, but a few hung in there and their posts drew a lot of comments.

I used to be an efficient/rational market guy. When I was, I had no interest in threads like this. Market movement only meant rebalancing or a buying opportunity. The irrational and manipulated markets I've witnessed have changed my beliefs. I feel I have to take more responsibility...individual stock, sector rotation, some timing.

Okay, a discussion, that I like.

My first thought is that taking on those changes is going to require some effort. Not everybody wants to do that in ER - it can get to be too much like a job. My second thought is a question - how will those changes make a difference in what you feel is an unfair environment (manipulated markets)?

 

[brewer12345]

I used to be an efficient/rational market guy. When I was, I had no interest in threads like this. Market movement only meant rebalancing or a buying opportunity. The irrational and manipulated markets I've witnessed have changed my beliefs. I feel I have to take more responsibility...individual stock, sector rotation, some timing. For those of you who have a path, why waste your time with bulls or bears or threads named "are we headed for a fall"?

I am curious: if you really believe that the markets are just a giant game of 3 card monte, why would you invest in them at all? Surely you do not think you can beat the manipulators at their own game? Or perhaps you do?

 

[Pete]

My first thought is that taking on those changes is going to require some effort. Not everybody wants to do that in ER - it can get to be too much like a job. My second thought is a question - how will those changes make a difference in what you feel is an unfair environment (manipulated markets)?

Very true. It's not so much I want to take on any extra work, as I feel I have to. I feel irrational and manipulated markets change how I must invest. Example-1)Companies that previously looked like bad investments but are now too big to fail might be an investment opportunity. 2)I was thinking about moving monies out of stable investments that produced greater returns because they were with insurance companies, not insured banks. Perhaps the gov't will bail out failing insurance companies enticing me to leave my money there. 3) The manipulation in real estate, hype by sellers, paper fraud, artificially low interest rates, buy downs, shadow inventory, Freddie and Fannie, gov't incentive programs.....makes for a very tricky market. The property I sold is now literally selling for half. Should I have bought and held? Just rebalanced my portfolio? I think not.
In addition I must admit I do like active investing. Trading stocks, looking for the best banks, brokerages, creditcards, and the like. Some people like gardening...some like investing...I now have time for both.

 

[Pete]

I am curious: if you really believe that the markets are just a giant game of 3 card monte, why would you invest in them at all? Surely you do not think you can beat the manipulators at their own game? Or perhaps you do?

No matter what I wish, or what I think, this is the only game in town. As we have seen, the manipulators (ie, Geithner, Paulson, Summers and their friends) take the lions share. I am happy being the vulture easily living on the scraps they leave behind.

 

[W2R]

Not all pessimistic posters here advocate owning gold and lead and K-rations, I don't think.

No, some of them think that gold would be too difficult to trade for anything in a survival scenario.

PS. Eh, about Newfoundland, I've got to get my RV out of the state of AZ first!

The Newfies I've known are nice folks. You did know that Newfoundland is an island, didn't you? There are ferries. Go during the summer when it is more accessible.

In fact, all this big talk about Alaska and PEI is so that I will have to keep my words and to actually do it. Will have photos to post as proofs that we make it there (will buy t-shirts too, of course) .

How will we know you really got there and didn't just download photos off the internet? You would have to include yourself in a photo but then we would never recognize you anyway.

 

[FIREd]

Not all pessimistic posters here advocate owning gold and lead and K-rations, I don't think.

A few acres of fertile farm land and the knowledge to work that land will go a long way to sustain my family no matter what the economy looks like. And if the gold bugs want to eat, they'll have to give me their gold first...