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Old 11-11-2008, 03:11 PM   #41
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Sounds like he needs a lecture on "Inflation 101"..........
I gave him the lecture but he has the bank balance to compare with my portfolio losses!! All I could do was laugh and say, "Well, that is THIS year!! You're gonna get hit hard by inflation eventually."
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Old 11-11-2008, 03:13 PM   #42
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Agreed. I'm following a list of strong companies with solid dividend yields and a good history of paying them.

A couple weeks ago I bought some ADP and today they increased the dividend nearly 14% ($1.32/yr up from $1.16). So even in a market going nowhere, this provides some solace and a reminder that I'm taking the right approach...
Yep, same here. It's made it easier on the psyche since these positions just keep getting drowned in red! And I'm running out of free cash to buy with!
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Old 11-11-2008, 03:16 PM   #43
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Frank just took me out to lunch and we had a similar discussion. He thinks that in general equities are a gamble and that keeping money in the bank is where it's at.
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Want2R, your point about inflation is a good one, but wouldn't a scenario still be possible that inflation goes up and the stock market doesn't beat it and even whittles down savings even more? So---did you convince Frank?
A lot of short-term emotional "logic" is being applied to long-term situations.

Dimson & Marsh's studies showed that the only asset to trump inflation over the long term is stocks. Nothing else. Even stocks occasionally lost to inflation, but over the long term (a decade at a time) only stocks beat inflation. It's not as if there's another choice of an inflation-beating asset class.

So you think you're unhappy now, and might be happier with a fixed-income portfolio? You don't know unhappy yet!! Those of you feeling the need to flee to the "safety" of 100% fixed-income investments are welcome to spend a few days with my parents-in-law. They fled to safety at the of the 1990s and were firmly in cash/Treasuries by 2001. Some of you could go around the house turning off lights until you're reading in the dark, while others could turn the thermostat down to 64 degrees. Then you could dial online at 56K (broadband costs too much and there's nothing on the Internet worth it anyway) or watch a library-supplied DVD of the Sopranos' fourth season (HBO is too expensive). You could sleep on a bed under six or seven quilts (those darn electric blankets just waste energy) and shower in tepid water. Laundry is a lot of fun because it's a great conversation-starter hanging around the condo on dryer racks instead of in that wasteful electric dryer. (Free humidification, too!) And when the utility bills arrive, you can help kvetch about electricity costs going up 5%-- from $50/month last year to $52.50 today-- and accuse each other of wasting electricity on your various "leisure" activities.

I guess there are a couple of asset classes that will keep up with inflation-- for example, a COLA-adjusted annuity. But those of you contemplating putting your portfolio in cash would probably recoil in horror at the idea of actually spending money for some sort of inflation-protected asset.

I guess that leaves it to I bonds & TIPS...
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Old 11-11-2008, 03:19 PM   #44
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I gave him the lecture but he has the bank balance to compare with my portfolio losses!! All I could do was laugh and say, "Well, that is THIS year!! You're gonna get hit hard by inflation eventually."
Tortoise and the hare.

I look at it this way. I don't have a one year plan. I have a plan that is intended to carry me for 50 or 60 years with a reasonable likelihood of success. Cash sitting in a bank account may feel very good today, but it has about a zero percent chance of getting me to the finish line 60 years hence.

Edit: Or, what Nords said
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Old 11-11-2008, 03:44 PM   #45
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I gave him the lecture but he has the bank balance to compare with my portfolio losses!! All I could do was laugh and say, "Well, that is THIS year!! You're gonna get hit hard by inflation eventually."
Next time the market returns 20%, re-explain the rule of 72 when his cash is getting 1.5% in a checking account........
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Old 11-11-2008, 04:03 PM   #46
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Next time the market returns 20%, re-explain the rule of 72 when his cash is getting 1.5% in a checking account........
Well, I can explain but I have found that it is impossible for me to actually change people, especially him, so there is no point in trying. I accept and adore the whole package as is, and I try not to worry about aspects that I cannot change. Maybe if I provided a good example he will eventually decide on his own that he wants to change his investment philosophies. The market isn't helping me in providing a very good example, though, since I have been losing.

At least he isn't doing penny stocks any more, which he was messing with five years ago!! That was driving me up the wall.

However, I don't think he even gets 1.5% in his bank account.
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Old 11-11-2008, 04:09 PM   #47
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Nords, thanks for the bit of a reality check about your ILs living on fixed investments (as well as the reminder that stocks have always performed better than any other investment over a decade---here's to 2009-2019! Never been one for New Year's Eve, but 2009 can't get here soon enough at this point!), but are your ILs really struggling---or just being overly cautious, as older people can become? My parents would go on travel tours where the older people had the money for the all-inclusive trip, but would still sneak food into their purses and pockets for snacks that weren't part of the deal!). And if someone has a high enough net worth and a low enough SWR, wouldn't it be (theoretically, at least) possible to live on the fixed income investments?

FD, yeah, I agree that 1.5% is pretty paltry, but I think we all know that any friend of W2R would be smart enough to at least be in muni bonds or CDs paying a (slightly) higher amount? And while I would be thrilled with a 20% return of the market, if at this point I/we all have lost over 40%, aren't we still behind over 21.5% (not getting the 1.5 percent of the Frank's checking account and still being down the 20% that the past months have brought)

YrsToGo, with your comment about the tortoise and the hare....didn't the tortoise win the race by being slow and steady? Yet you commented that "Cash sitting in a bank account may feel very good today, but it has about a zero percent chance of getting me to the finish line 60 years hence." So---maybe in this crazy new economy, we need to rewrite the fable and let the hare win....albeit after many sprains and dislocations and time-outs?
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Old 11-11-2008, 04:15 PM   #48
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Nords, thanks for the bit of a reality check about your ILs living on fixed investments (as well as the reminder that stocks have always performed better than any other investment over a decade---here's to 2009-2019! Never been one for New Year's Eve, but 2009 can't get here soon enough at this point!), but are your ILs really struggling---or just being overly cautious, as older people can become? My parents would go on travel tours where the older people had the money for the all-inclusive trip, but would still sneak food into their purses and pockets for snacks that weren't part of the deal!). And if someone has a high enough net worth and a low enough SWR, wouldn't it be (theoretically, at least) possible to live on the fixed income investments?

FD, yeah, I agree that 1.5% is pretty paltry, but I think we all know that any friend of W2R would be smart enough to at least be in muni bonds or CDs paying a (slightly) higher amount? And while I would be thrilled with a 20% return of the market, if at this point I/we all have lost over 40%, aren't we still behind over 21.5% (not getting the 1.5 percent of the Frank's checking account and still being down the 20% that the past months have brought)

YrsToGo, with your comment about the tortoise and the hare....didn't the tortoise win the race by being slow and steady? Yet you commented that "Cash sitting in a bank account may feel very good today, but it has about a zero percent chance of getting me to the finish line 60 years hence." So---maybe in this crazy new economy, we need to rewrite the fable and let the hare win....albeit after many sprains and dislocations and time-outs?
As someone confirmed for me earlier - the market when down about 40% has to rise about 70% for a "hold em" investor to "get even". Then you have to go up about another 1.5% to have the basis for your "better" argument. Watch out he does not buy a couple of long term CD's too.
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Old 11-11-2008, 04:16 PM   #49
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FD, yeah, I agree that 1.5% is pretty paltry, but I think we all know that any friend of W2R would be smart enough to at least be in muni bonds or CDs paying a (slightly) higher amount? And while I would be thrilled with a 20% return of the market, if at this point I/we all have lost over 40%, aren't we still behind over 21.5% (not getting the 1.5 percent of the Frank's checking account and still being down the 20% that the past months have brought)
Nope, I think he gets less than 1%. He is smart enough to find a better interest rate, but I don't think it's important to him.

MEN!!! Sometimes I think they were put on earth to drive women crazy. But we love them anyway.

He does like the fact that he hasn't lost as much as others lately! So maybe he is the smart one, at least for now. And who knows how he will be investing next year.
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Old 11-11-2008, 04:33 PM   #50
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I'm digging some Steely Dan, Eagles, Fleetwood Mac, Dr John, Little River Band and others as I work here at home. I'll save AC/DC for tonight when I'm half crocked.
Love 'em all! ....... AC/DC...a little head bangin' music perhaps?
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Old 11-11-2008, 05:31 PM   #51
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YrsToGo, with your comment about the tortoise and the hare....didn't the tortoise win the race by being slow and steady? Yet you commented that "Cash sitting in a bank account may feel very good today, but it has about a zero percent chance of getting me to the finish line 60 years hence." So---maybe in this crazy new economy, we need to rewrite the fable and let the hare win....albeit after many sprains and dislocations and time-outs?
Yup, the analogy is a little backwards with respect to who is "fast" and who is "slow" but the tortoise is where you place your bets for the long hall. If you want the apparent "sure thing" you'd bet on the hare.

The tortoise is behind right now, but I have faith he's gonna cross the finish line whereas the "sure thing" never will.
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Old 11-11-2008, 05:32 PM   #52
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I considered switching almost totally out of equities last year; never got around to it. Was without electricity during the initial crash. Now is just too late to worry about it.

Of course, I do have a small but adequate pension.
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Old 11-11-2008, 05:41 PM   #53
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A few weeks ago, right after the big drop, I went through a period where I was tempted to throw my hands in the air and give up on the market. It was short lived though. My wife and talked about it and we decided that we had to stick to the plan. We are young dreamers. We figured that if the market went down another 50% from here, it would be painful but, assuming the market never snapped back, it would only postpone our retirement by 1-2 years based on our current savings ability. On the other hand, if this is truly the buying opportunity of a lifetime, it could pay handsomely down the road and we decided that it was worth the risk. So we have been buying equities on market dips and today I even bought my first ever shares of a commodity fund. But we are not going crazy either. We buy small chunks at a time. I guess greed has finally trumped fear in our case!
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Old 11-11-2008, 06:11 PM   #54
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The time to sell was last year or even 4 months ago, not now. I was fortunate to change my allocation to more cash earlier in the year, but that did not keep me from "losing" $500K. I have seen some posters losing double that, hopefully from a larger portfolio than mine.

I have cautiously been buying. It is desperate time like this that scares investors to bail out at the bottom. People in this forum tend to have more bonds, hence were able to sail through the 2001-2003 bear market. I was mostly in equities, hence lost 50%. But I did not abandon the market, and at this point, still have a little more than 2X what I had at the 2003 bottom, by switching away from tech stocks that I had fallen in love with.

This episode reminds all of us to be disciplined in raising our cash as we age, or take early retirement. And we need to remember to rebalance at both the top and bottom of the market.

Again, given the devastation of equities around the world, not just in the US, I see more opportunities than risks. Still, I will never deplete the cash that I have set aside for living expenses for 5 years, or 30% of portfolio, whichever is higher. This cash can stretch even longer if I go into the "extreme frugal mode", the lifestyle that UncleMick said brought tears to his eyes, when remembering it.
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Old 11-11-2008, 06:17 PM   #55
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Hmmm - the good news is my retirement is on full auto: Target 2015 with auto deduct to Prime MM once a year.

The bad news is my retirement is on full auto: my greed and lust meter is pegging wanting to go 100% stocks.

Trying to visualize the Reneck Riviera say Fort Walton, Destin, etc - Jimmy Buffett's - it's 5 o'clock somewhere to get my mind off investing for later - I'm 65, only been ER'd for 15 yrs - need to keep practicing til I get in 'right.'

So - Mexico and a cruise - or do I skip all winter vacations/buy stock so's I can brag at the doughnut shop this winter?

heh heh heh - other than trying to run up the score male hormone wise - I've heard this vicious rumor you can't take it with you.
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Old 11-11-2008, 07:02 PM   #56
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Everyone a few years ago was saying "buy real estate, its value never goes down, you can't go wrong". Well, when everyone else was buying, wasn't that the time to sell?

Now everyone is saying "stocks screwed me, cash is king, everything you were taught about the market is wrong and get out while you still can". Well, when everyone else is selling, isn't that the time to buy?

People in general seem to have short memories. They forget there was a real estate recession in the mid 1990s and real estate prices actually fell, and the stock market actually came back after the Great Depression and every single other depression and recession. In hindsight, those were great times to buy. Well here we are, in another recession, so isn't it time to buy?

We can't forget the general trend of the market is upward. Remember back in the late 1990s everyone thought we were entering a "New Economy" and the rules had changed. People said tech businesses didn't need revenues to be profitable. Well clearly the rules of the economy did not change then, and there's no reason for us to believe they have changed now. So shouldn't we expect an upward trend going forward?

So, all of this is to ask... why follow the crowd and do what everyone else is doing? Seems like the best thing to do is to do what what everyone else is not doing.

I can tell you for us, we try to follow this ideology. We just bought our first piece of real estate this year, and we continue to buy stocks. Stocks are cyclical though, and always have been as I understand it, so if comes time where we can't wait out cyclical changes, then we'll invest in a more conservative market, bonds and cash.
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Old 11-11-2008, 11:17 PM   #57
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... but are your ILs really struggling---or just being overly cautious, as older people can become? My parents would go on travel tours where the older people had the money for the all-inclusive trip, but would still sneak food into their purses and pockets for snacks that weren't part of the deal!). And if someone has a high enough net worth and a low enough SWR, wouldn't it be (theoretically, at least) possible to live on the fixed income investments?
Well, they're Depression-era children, so they'll be sneaking food for the rest of their lives.

But, judging from the things they do and do not discuss with their daughter, they are struggling. All self-inflicted, too.

All four of their Ashkenazi parents lived well into their 90s, and were perhaps centenarians. The parents lied about their ages so often during the emigration that they were no longer sure of their ages. Based on FIL's condition at age 74 and MIL at age 71, I think they still have at least 25 years left.

If they had a high-enough net worth then I would hope that the financial stress level would be lower. My BIL, their son, is a CPA and manager of their finances so I hope that when "the money call" comes that there's at least been a discussion and a plan.
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Old 11-12-2008, 11:00 AM   #58
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As someone confirmed for me earlier - the market when down about 40% has to rise about 70% for a "hold em" investor to "get even". Then you have to go up about another 1.5% to have the basis for your "better" argument. Watch out he does not buy a couple of long term CD's too.
The good news is that, when the market recovers, it does so in a big way. I believe that new bull markets recover 1/3 of the bear losses in the first three months of the rally.

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Old 11-12-2008, 11:40 AM   #59
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The good news is that, when the market recovers, it does so in a big way. I believe that new bull markets recover 1/3 of the bear losses in the first three months of the rally.

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So when the 1/3 bull runs you can wait for it and then jump back in and get the 2/3 pickup? I think I will wait for the bull to run.
But seriously, your chart on the last line says 5 years to recover. So if the average drop is 30% (this one must be above (below) average) and when the Bull runs the average gain is 150% (i.e., $100 - 30 % = $70 then the 150% comes in so $70 (70 X 150%) becomes $105 AFTER 5 years)). I wonder about that since the Bears are coming more often lately. I probable got it all wrong but that is why I stay away from Wall Street.

I, frankly did not understand much of what Secy Paulson said this morning either but then I shy away from things I do not understand.
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Old 11-12-2008, 11:44 AM   #60
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So when the 1/3 bull runs you can wait for it and then jump back in and get the 2/3 pickup? I think I will wait for the bull to run.
OAG, you know you won't be buying any stocks. You won't give up your CD's until they pry them from your cold dead hands...
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