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Old 12-22-2007, 10:14 AM   #21
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I retired in 03' but in Jan, 2000 I listened to Bob Brinker and got out of the market. Went back in in March of 03 and have been doing nicely with a 60/40 mix and 2-3 yrs of ER. Of course the recent roller coaster rides make me nervous, but I'm hanging in there. Brinker remains bullish.
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bigla, almost exactly my story, too (RE EOY 2003). Bob actually said 'lighten up' (reduce your equity portion to 35% of what it was) not 'get out' in 2000. Still a great call. I was selective of what I got out of, I'd need to go back and look at what my actual AA went to. I had some big cap gains, but it was worth it.

I expect his next call to be along the same lines - there is too much 'risk' in getting out completely. You might miss a big jump up, or get back in at the wrong time.

FireCalc is based on re-balancing each year, over 40 years, I wonder which is more effective? Unanswerable, so it is just 'wondering'.

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Old 12-22-2007, 01:58 PM   #22
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Retiring in 1999 - it was obvious even to me, who had been scared out by other periods of high P/E ratios in the 90s and thus missed out on some investing opportunities - that things were seriously out of whack. Thus, instead of following the usual advice of averaging in over a 1 year period, I selected 2 years minimum. I was that nervous, for good reason as it turned out.

But currently the market stats are not nearly so out of whack as they were in 1999. They may be in the real estate market, and the economy might have a year or two of less than stellar growth ahead, but I don't seriously expect a repeat of the >>50% cut in the Nasdaq like we had in 2000-2002.

In fact, many folks say the market stats are currently quite reasonable.

Audrey
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Old 12-22-2007, 02:04 PM   #23
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In fact, many folks say the market stats are currently quite reasonable.
For some definition of "reasonable." Worst case, market values are 2X what they might be (if you average earnings over the business cycle). In 2000, the nasdaq was arguably 10X what it should have been.

Housing is probably only 1.5X what it should be, but it's a big number, and banks are more important to our economy than dot-coms were.
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Old 12-22-2007, 02:20 PM   #24
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In fact, many folks say the market stats are currently quite reasonable.
Audrey
As I remember, many folks said the same thing in January 2000, and January 1973. Many folks will always be saying this.

Ha
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Old 12-22-2007, 03:03 PM   #25
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My ordinary income in my main taxable account is just short of being all I need for my customary annual expenses. I also have some extra taxable income from I-bonds and CDs that have good terms, but I would not want to tap them for living expenses because they cannot be replaced under current conditions. So I consider this income unavailable except in a big emergency.

I keep enough money in cash in my main taxable account that when used to add to my income should easily support me for years, and sometime over the next few years I will begin SS which should end all tightness.

But if I had a big expense that couldn't be spread out over time, I possibly don't have enough cash. I could sell traded (and thus marked to market) fixed income securities in my IRA and make a withdrawal, but so far at least that has seemed like a bad idea due to tax considerations.

I am thinking that I maybe should up my cash reserve to $50,000 or so, readily accessible in my taxable account. With low interest rates I would be sacrificing income, but maybe it is better strategically anyway.

Any comments or sharing of how others look at or deal with this?
Ha, Assuming you did not want to change your current investment setup, I would probably just plan to take a margin loan in the case of an large unexpected expense. They you could figure out the most tax-efficient way to pay it off at your leisure. If the big expense never comes up, then you don't sacrifice income.
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Old 12-22-2007, 03:24 PM   #26
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As I remember, many folks said the same thing in January 2000, and January 1973. Many folks will always be saying this.

Ha
I don't remember ANYONE saying this in Jan 2000. The S&P500 stats were way out of line....

Audrey
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Old 12-22-2007, 04:29 PM   #27
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I don't remember ANYONE saying this in Jan 2000. The S&P500 stats were way out of line....
Audrey
Maybe these will function as a wee reminder?


Amazon.com: Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market: Books: James K. Glassman,Kevin Hassett,Kevin A. Hassett

(Copyright 1999, 2000 by James K. Glassman and Kevin A. Hassett)

OR

In the fall of 1999, journalist James K. Glassman and economist Kevin A. Hassett published a book provocatively titled Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market. The New Economy was not a high-tech version of tulipmania, they argued, and the stock market was not overvalued. Properly understood, wrote Glassman and Hassett, the Dow--then upwards of 10,000--was actually undervalued:"Stock prices could double, triple, or even quadruple tomorrow and still not be too high." It was a bold thesis, and more than a few skeptics disputed it in op-eds and book reviews. But this was the height of the boom, the authors were telling Wall Street exactly what it wanted to hear, and Dow 36,000 was a sensation. It rapidly became a New York Times bestseller, sparking incessant water-cooler conversation and wide coverage on the nation's business pages. Glassman, having already been a chat-show host and nationally syndicated financial columnist for The Washington Post, became a bona fide celebrity, widely profiled in the press and invited on television shows across the country to predict that the party, far from being over, was just getting started.

So optimistic was Glassman, in fact, that a few months after the book appeared, he launched a dot.com, Tech Central Station, based on just the kind of vague-but-intriguing business plan that attracted so much venture funding at the height of the tech boom. good cover."

OR

Henry Blodget (born 1966) is a former securities analyst who was senior Internet analyst for Merrill Lynch during the dot-com bubble.
Blodget received a Bachelor of Arts degree from Yale University and began his career as a freelance journalist and was a proofreader for Harper's Magazine. In 1994, Blodget joined the corporate finance training program at Prudential Securities, and, two years later, moved to Oppenheimer & Co. in equity research. In December 1998, he predicted that Amazon.com's stock price would hit $400 (which it did a month later, gaining 128%). This call received significant media attention, and, two months later, he accepted a prized position at Merrill Lynch.[1][2] Blodget's influence continued to increase, and, in 2000, he was voted the No. 1 Internet/eCommerce analyst on Wall Street by Institutional Investor, Greenwich Associates, and thestreet.com. In early 2000, days before the dot-com bubble burst, Blodget personally invested $700,000 in tech stocks, only to lose most of it in the years that followed.[3] In 2001, he accepted a buyout offer from Merrill Lynch and left the firm.

OR

Dear Abby (Joseph Cohen)


By Barbara Eisner Bayer (TMF Venus)
March 30, 2000 Down, down, down the market goes. Where it stops, nobody knows. And who's to blame?

This week we can point our little fingers at Abby Joseph Cohen, the managing director and chair of the Investment Policy Committee of Goldman Sachs (NYSE: GS). On Tuesday, she announced a reduction in the stock allocation in Goldman Sachs' model portfolio from 70% to 65%.

"For the first time in a decade," the media-appointed leader of the bulls declared, "our model portfolio is no longer recommending an overweighted position in technology." Uh oh.

Or from Bloomberg,

Bloomberg.com: Worldwide

[Abby] stayed bullish on computer-related stocks for too long as the S&P 500 suffered a bear market from March 2000 to October 2002. Cohen said in October 2000 that technology shares would be a good investment in 2001. The S&P 500 Information Technology Index tumbled 26 percent that year.

OR

Goldman Strategist Remains Bullish, Though Less So, for 2000 - New York Times

Published: December 31, 1999
Abby Joseph Cohen, one of Wall Street's most influential strategists, said yesterday that the stock market's stunning 1999 ascent had turned her into a regular bull.
''I used to be a superbull. Now I'm just a bull,'' the chief United States market strategist for Goldman Sachs said in an interview on the floor of the New York Stock Exchange.
For 2000, Ms. Cohen is forecasting single-digit percentage gains for blue-chip stocks, in contrast to the double-digit percentile advances the Dow Jones industrial average registered in each of the last five years, including 1999.

If you need more, do not hesitate to ask. Glassman as syndicated business wrier for the Washington Post, Blodgett as Chief Investment Strategist for Merrill Lynch, and Abby Joseph Cohen bearingthe same august title at Goldman Sachs are merely the most prominent and most widely quoted and followed of the year 2000 bulls, not by any means the only ones.

Ha
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Old 12-22-2007, 04:33 PM   #28
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Ha, Assuming you did not want to change your current investment setup, I would probably just plan to take a margin loan in the case of an large unexpected expense. They you could figure out the most tax-efficient way to pay it off at your leisure. If the big expense never comes up, then you don't sacrifice income.
Good suggestion Brewer. This is what I used to do.

Ha
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Old 12-22-2007, 04:49 PM   #29
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I retired in March 2000. My answer is closest to category 1, although I did reduce my standard of living a little too just because I was worried. But I keep several years worth of living expenses in bonds/cds/cash so I didn't have to sell anything, and by 2004 my investments had not only recovered but increased.
I get a small pension too, not nearly enough to live on.
My asset allocation was and is about 60% stock, 40% bonds/CDs/cash. It was really hard to buy on the way down, and I must admit I let it get a little more than 5% out of whack (my normal trigger to rebalance) a couple of times, but never as much as 6%.
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Old 12-22-2007, 04:52 PM   #30
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Oh sure, there were tons of people saying the markets could go higher and higher at the end of 1999.

But still, P/Es were highest they had EVER been. The yield on the S&P500 extremely low. These two situations have reversed considerably.

IMO, the markets were bubbilicious then, they are not now.

Audrey
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Old 12-22-2007, 05:00 PM   #31
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But still, P/Es were highest they had EVER been. The yield on the S&P500 extremely low. These two situations have reversed considerably.

IMO, the markets were bubbilicious then, they are not now.
Things are definitely better than 2000. Even better than 1929. But we're still way up there by some metrics.
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Old 12-22-2007, 05:17 PM   #32
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Oh sure, there were tons of people saying the markets could go higher and higher at the end of 1999.
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I don't remember ANYONE saying this in Jan 2000.
Audrey
:confused::confused:

Ha
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Old 12-22-2007, 05:19 PM   #33
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OK, stop fighting you two, and place your bets. The wheel is in motion! Where she stops, nobody knows.
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Old 12-22-2007, 05:31 PM   #34
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OK, stop fighting you two, and place your bets. The wheel is in motion! Where she stops, nobody knows.
Ok. Its a dark day and I have been putting off going out to wear myself out.

Better get going before I get any more tedious.

Ha
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Old 12-22-2007, 07:31 PM   #35
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I retired in May 1999, being practically at ground zero for dot com bubble mania, running Intel's website and constantly talking to dot com start up folks who either wanted to sell me a product or wanted Intel to invest in their company, at times I really wanted to believe that this time it would be different. At somepoint I convince myself that while the internet would change how business worked it didn't change economics.

By Jan 2000, I sold all my high tech stocks (but kept a lot of Intel) and put most of the money into REITs and Bonds. Still I had a lot of money in the market and lost about 30% from 2000 to 2002.

When I retired I had a pretty simplistic view of how much was enough $2 million @5% in a Muni Bond was $100K a year more than I need to live on, and my IRA was my inflation hedge. My back up plan was if my net worth ever dipped below $2 million was to go back to work, at times it looked close but never dropped that low.

I agree with Audrey the market now days doesn't seem bubblicious like it was back in 2000. Never the less there were plenty of people back in 2000 saying the market had plenty of upside potential. Nowdays I hear more people predicting that collapse in housing prices will drag the economy and market down with it. I don't hear much optimism. So being the contrarian, I am cautiously optimistic that 2008 will be a pretty good year for stocks.
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Old 12-22-2007, 09:59 PM   #36
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:confused:


:confused::confused:

Ha
There were plenty of folks saying the market could go higher and higher, but I don't remember anyone saying that the market was "reasonably valued" by traditional metrics such as P/E which was at all all time high. The ultra bulls just came up with all sorts of excuses why it was "different this time".

Audrey
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Old 12-23-2007, 07:52 AM   #37
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Yawn - it's sort of entertainment like watching the rerun of Casablanca for the umpteeth time and still enjoying it.

Having started in the 1966 - 1982 flat and further warmed up with the 1987 one day bump - before 'retiring in Jan 93 - having the 'been there done that's' like active fund picking, slice and dice, etc out of the way - I finally reached the 2000 - 2006 now 07 time frame with a version of the 60/40 policy portfolio - Vanguard Lifestrategy for ten years, now Target Retirement 2015(like trading in for a new model of the same car).

Ala Bogle - hurry up, just stand there - BUT! - I can't say there wasn't some serious pucker during 2002,03 downleg - even for an old phart such as myself.

Da Plan: 100% Target Retirement 2015 on full auto - 5% variable deduct every Jan. That's 85% total portfolio.

15% Norwegian widow stocks, holy grail get me to Margaritaville stocks, and just putzer's for play money on long winter nights.



heh heh heh - due to Katrina any 4% withdrawal rule was violated but I also snuck in a few cheap bastard years 2000 - 2007.
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Old 12-23-2007, 07:43 PM   #38
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unclemick, I've seen you refer to the norwegian widow stocks several times now. Could you give me a sample of what you mean?:confused:
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Apparently Credit Card Delinquencies Are Rising
Old 12-23-2007, 09:32 PM   #39
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Apparently Credit Card Delinquencies Are Rising

Unpaid Credit Cards Bedevil Americans: Financial News - Yahoo! Finance
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Old 12-24-2007, 08:39 AM   #40
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"Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy."

So we have two reasons for pain in the world in 2008 - the mortgage crisis and global warming!

The truth about credit card debt - MSN Money

Bill Whitt at the VIP Forum, a Washington D.C. research firm, helped me dig even deeper. By analyzing the credit card debts of all the households the Fed surveyed, Whitt discovered:
  • Only 29% of households owe $1,000 or more on their cards.
  • 21% owe $2,000 or more.
  • 6% owe $8,000 or more.
  • 4% owe $10,500 or more.
  • 1% owe $21,400 or more.
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