Anyone here who blew it? Retired too soon?

[VoyT]

I have a relative who retired in 2000 and recently went back to work ... think it was a combination of losing a bundle in the market and the middle generation sandwich -- ill parents and divorced children who both needed $$ help....

 

[astromeria]

When I realized that my mother is taking 6% of her port to live on (plus Social Security), I had a moment of panic. Then I remembered that she's 80 years old! On the other hand, both of her parents lived to 93, and Mom's in excellent health so I expect she'll be around another 20 years--hmm, without LTC insurance. On the 4th hand, her port is 65% individual bonds, 25% small postions in ~40 individual stocks (mostly dividend-payers but some growth), and 10% CDs. She trusts her broker, who doesn't churn her account and doesn't appear to be ripping her off. And on the 5th hand, she spends a relatively high percentage on discretionary--should be easy to cut back, if necessary.

 

[audreyh1]

...  but found that he couldn't handle the responsibility of his own entertainment.  I think his symptoms were actually bordering on chronic depression, until he found solace in the structure of the workplace.

Yep!  There really seem to be some folks who have to work in order to avoid depression!!

I think I remember one guy saying he couldn't really get out of bed in the morning, and then pretty much would get sucked into watching TV all day, every day. (That's depression, folks!)

Audrey

 

[cute fuzzy bunny]

I suppose some people just cant live without external structure and 'entertainment' provided by work, and some people might really like what they're doing most of the time.

It makes me wonder though when people leave and go back a year later because they missed it or felt bored. I imagine heroin addicts feel the same pull...

Theres something inherently good about a healthy life. Filling an unhealthy or unhappy one up with stuff to keep yourself from dwelling on it isnt necessarily the best solution.

 

[brewer12345]

When I realized that my mother is taking 6% of her port to live on (plus Social Security), I had a moment of panic. Then I remembered that she's 80 years old! On the other hand, both of her parents lived to 93, and Mom's in excellent health so I expect she'll be around another 20 years--hmm, without LTC insurance. On the 4th hand, her port is 65% individual bonds, 25% small postions in ~40 individual stocks (mostly dividend-payers but some growth), and 10% CDs. She trusts her broker, who doesn't churn her account and doesn't appear to be ripping her off. And on the 5th hand, she spends a relatively high percentage on discretionary--should be easy to cut back, if necessary.

Sounds like she is fine, even with a 6% withdrawal rate. Likely that she won't outlive her conservative portfolio.

 

[Cut-Throat]

I know one guy in Minneapolis who ERd at 42 and is now back to work. I don't know him well enough to ask if he ran out of dough or just got bored.

Would his initials be C.K. by any chance?

 

[Nords]

When I realized that my mother is taking 6% of her port to live on (plus Social Security), I had a moment of panic. Then I remembered that she's 80 years old!

Sounds like she is fine, even with a 6% withdrawal rate.  Likely that she won't outlive her conservative portfolio.

Boy, is she gonna be sorry when she's 122 years old!

 

[TromboneAl]

I'm going to own up to having been a Dirty Market Timer in late 1999. Moved half my portfolio to D&C Balanced and the other half to cash and bonds.

No claim to any real skill in my timing, just got very uncomfortable with equity prices and all the Y2K "the sky is falling" BS.

Same here, REW! That was my final real-life lesson about market timing.

Actually, it didn't turn out badly for me. I DCA'd to lower stock holding over the period of May-December 1999, then started DCA'ing back in early 2000. However, I stayed more heavily in long bonds that I might have otherwise, so I think I did better than I would have without any timing.

I sure was convinced that even if there wasn't a Y2K problem, people would fear it and sell stocks in December. I was 100% wrong, and that convinced me that you can't reliable guess what is going to happen in the market.

Wittgenstein said that you can't be cured until you have the disease, and I think that's true of market timing.

 

[cute fuzzy bunny]

I think there are two kinds of "market timers". The ones who mistakenly believe they can establish a high and low water mark on a stock or an asset class with the intent to get in and out of it and profit by "buy low, sell high", and the ones who look at a hideously overpriced market and get the hell out or see a hideously underpriced market (probably caused by some disaster or major event), take two courage pills and buy.

For the latter, no calculator or spreadsheet or ratios are required. Its usually something pretty obvious, like stocks with no earnings and no business plan that are worth more than general motors, or after someone flies a plane into a building.

 

[audreyh1]

I think there are two kinds of "market timers".  The ones who mistakenly believe they can establish a high and low water mark on a stock or an asset class with the intent to get in and out of it and profit by "buy low, sell high", and the ones who look at a hideously overpriced market and get the hell out or see a hideously underpriced market (probably caused by some disaster or major event), take two courage pills and buy.

For the latter, no calculator or spreadsheet or ratios are required.  Its usually something pretty obvious, like stocks with no earnings and no business plan that are worth more than general motors, or after someone flies a plane into a building.

That's why I like the Asset Allocation approach to market timing.

A lot of people I know got out of REITs in 2003, because they were "ridiculously overvalued". Same in 2004. 2005 - well now EVERYONE knew that there was now way - time to sell REITs. Well - 2005 was still a positive year!

Well, each of those good years I kept trimming back to my original allocation percentage. And darn it - the REIT funds kept going higher.

Yes, there are times an asset class is overvalued. But you can't predict WHEN it's going to correct - so it's extremely easy to be WAY TOO EARLY as several of my buddies noticed on their REIT predictions. I guess I prefer to let an asset class run, keep trimming back to "neutral" when it gets "hot", and wait for the asset class to correct so that I can BUY MORE.

Personally that's why asset allocation appeals to me. It's a rational way to "market time". There is no guessing involved.

Audrey

Oh yeah - you can repeat the above story with bonds. How many people have gotten out of bonds expecting them to crater 2 years ago? I mean EVERYONE knew that 10-year treasury rates were going to go way up. It was obvious - right?

 

[cute fuzzy bunny]

Audrey - point taken...although I'll bet people who sold their tech stocks in 1998 feel a lot better than the people who sold in 2001.

REITS dont meet the criteria of "HOLY **** THATS WAY TOO #$^%#ING HIGH@!". Not yet anyway.

 

[audreyh1]

REITS dont meet the criteria of "HOLY **** THATS WAY TOO #$^%#ING HIGH@!".  Not yet anyway.

There are a lot of people who disagree with you! The word "bubble" is thrown around WAY too casually.

Audrey

 

[cute fuzzy bunny]

There are a lot of people who disagree with you!

Wow, thats a freakin' shock...

 

[HFWR]

There are undoubtedly localized residential re bubbles around, but I don't see a commercial/industrial bubble anywhere, so REITS don't seem terribly overvalued to me...

 

[cute fuzzy bunny]

I havent looked at the vanguard REIT fund since I sold it some months ago. The PE is in the mid 30's. That may fall into the "stupidly overvalued" category. However, looking at the chart below, it hasnt had the steep run-up that made the nasdaq "stupid", and its value increase has been fairly measured and steady.

Looking at that chart, it looks like something that didnt really go anywhere for a while then about when people started getting interested in reits it turned up sharp. Taking the full 10 years into consideration, its not ringing all three alarm bells. Maybe people just put more money into them and they started putting it to work and creating value.

I probably wouldnt be a buyer right now though, and I would consider being a seller. I still think it falls more into the "uh oh" category than the "stupid" category. I thought it was peaky when I bought it a couple of years ago, as I did with Energy. Made good money on them.

Templetons thesis that he got rich by "selling too soon" is well taken here. Or we could see 5 more years just like the last 5. I wish there was a lot more historical data on reits than there is...

 

[audreyh1]

There are undoubtedly localized residential re bubbles around, but I don't see a commercial/industrial bubble anywhere, so REITS don't seem terribly overvalued to me...

Sorry - I'm not trying to claim there is a bubble in REITs in spite of the common market pundit insistence that there is (or that REITs will be killed by rising interest rates).  I was trying to make a point about the dangers of trying to market time these sorts of things and being way too early......

BTW - when I first started investing in REIT funds they had come off of a very nasty correction of 20% or more.  Few investors would touch them for a couple of years after that - but that turned out to be an excellent time to buy.

I get such a kick out of it when conventional wisdom is proved to be wrong - which it usually is! Contrarian at heart!

Audrey

 

[HFWR]

Well, I've been in a while, too, and my cost basis is lower, plus my allocation isn't out o' whack, so I think I'll stay put for now. I could be wrong... :

 

[Maximillion]

HFWR, I agree with you, but travelling around Florida, the one area we stayed in with homes in the $400,000 +++++ Range, I bet every third house had a For Sale sign on it(Hernando County)

Lots of listings , very few sales, it is a Buyers Market.

Couple of Hurricanes, prices should drop at least 20%.

Flood Insurance, Hurricane Insurance, Sink Hole Insurance, Termite insurance, etc etc etc.

 

[wildcat]

Take this as you want but IMHO the yields on REITs indices are historically low. I don't believe the P/E is an accurate measure of value when it comes to REITs since dividends account for a lot of the return. I am not saying the "b" word but I see it as an unattractive investment for the time being.

 

[HFWR]

I'm not putting any new money in...

My slice/dice approach is to occasionally rebalance if and when the percentages get out of whack. I have those same thoughts, just not sure when/if to pull the trigger. When to get out, when to get in...

 

[free4now]

I think there are two kinds of "market timers".  The ones who mistakenly believe they can establish a high and low water mark on a stock or an asset class with the intent to get in and out of it and profit by "buy low, sell high", and the ones who look at a hideously overpriced market and get the hell out or see a hideously underpriced market (probably caused by some disaster or major event), take two courage pills and buy.

For the latter, no calculator or spreadsheet or ratios are required.  Its usually something pretty obvious, like stocks with no earnings and no business plan that are worth more than general motors, or after someone flies a plane into a building.

Just because it's my nature, I'll play devil's advocate on the latter approach. In order to successfully time the market, you have to be successful on both your entrances and exits. It might be possible to know when the market is hideously overpriced, but then if you get out you also need to get back in when the market is correctly priced. The getting back in is the harder part, and doing it falls under CFB's first kind of market timer. When getting back in you don't have the "hideous" indicator to confirm that you are doing the right thing.

And there is always the danger that when the plane hits a building that might actually be the start of something that takes the markets down over the long term. I would argue that 9/11 was in fact a significant part of what led Shrub to ramp up his spend n' borrow approach that is going to have long term negative effects on our economy; those effects just haven't been fully felt yet because the fed's low interest rates covered up the problems so far.

 

[audreyh1]

I'm not putting any new money in...

My slice/dice approach is to occasionally rebalance if and when the percentages get out of whack. I have those same thoughts, just not sure when/if to pull the trigger. When to get out, when to get in... 

HFWR - I'm doing the same as you. I have my slice. I trim it when it gets out of whack. I add when it gets hammered. It's the only way I know how to "market time".

Audrey

 

[HFWR]

My two positions are RWR (P/E 17.35) and IGR (P/E 13.85) with divs of 4.43 and 7.74 trailing. Forget the exact ERs, around 0.4 and 0.9, IIRC...

IGR has about 50% (again, IIRC...) the same holdings as RWR, i.e a lot of US, but gives me some intl exposure. Both held in tax-deferred acct., about 12% of portfolio.

 

[cute fuzzy bunny]

Couple of Hurricanes, prices should drop at least 20%.

I would think so too, but the current run up started right after 5 of them hit in series not that long ago...

 

[Rich_by_the_Bay]

Lots of listings , very few sales, it is a Buyers Market. Couple of Hurricanes, prices should drop at least 20%.

Flood Insurance, Hurricane Insurance, Sink Hole Insurance, Termite insurance, etc etc etc.

I'm no chamber of commerce rep, but Florida is more complicated than you may think. Hurricanes had surprisingly little impact on housing, though the market is softening now in keeping with lots of pricey areas around the country. Sink holes are a highly localized phenomenon and other than in those areas are not a factor.

On the other hand, there is no state income tax (offsets alot of the high insurance premiums and then some). Prices for non-housing goods are average. The weather and beaches are spectacular in my opinion. The population, while not without its issues, is diverse, has a nice mix of south and midwest (on the Gulf coast) and Canadian, south, and northeast on the Atlantic coast; all areas enjoy a strong Hispanic presence as well.

Hurricanes are horrible, but even here most were not seriously affected and in a given area they last hours to a day on average, unlike months of frigid winter gridlock, or dust and brushfires, 110 in the shade, or mudslides, etc.

Bottom line: I probably would not have chosen Florida if it weren't for a great career opportunity but now that we are here, I reckon we like it about as much as anywhere we have lived - including the NE, Wisconsin, and Tucson. Maybe not everyone's cup of tea, but we're happy as clams here. One of the good places to live, worth the premium (if any) to us.