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Old 02-14-2010, 10:29 AM   #41
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my interest to go "all cash" is prompted by all the bad news I read and hear about the future of the U.S. & world economy
emi guy, unless you're the first person on earth to hear the bad news, the markets have already adjusted to take it into account. The bad news, or at least the consensus of what it will be, is already built into the prices of stocks and bonds. So you won't benefit by investing, or not investing, according to the bad news you expect.

Not everybody looks at markets this way, but I definitely do.
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Old 02-14-2010, 11:23 AM   #42
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Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.
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Old 02-14-2010, 11:33 AM   #43
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Sitting on about 40% cash right now. Dribbled a little into the market over the past year or so, but kept a fair amount of powder dry for stock/mutual fund purchases when opportunities arise.
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Old 02-14-2010, 12:32 PM   #44
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7 month emergency fund is about 2/3 cash, 1/3 S&P500.
Retirement funds are 100% S&P500 as they have been for the past ~20 years.
Kids' college are a mixture of S&P500 and target-age 529's.
Extra things include a small equity stake in my previous employer and some options from my current high-tech employer.

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Old 02-14-2010, 01:06 PM   #45
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Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.
I concur. A pension from one of Canada's big banks would be about the most stable sources of income around. I too would consider that "fixed income" if I had it. Moshe Milevsky ("Are you a stock or a bond?") would definitely consider you a bond.

OTOH I have no such pension and I include a significant chunk of FI in my portfolio, mostly in my RRSP. I am going to include some real return bonds. I am also focusing on dividend stocks.
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Old 02-14-2010, 01:33 PM   #46
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Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.
I agree with you. If your pension covers all your income needs then 90% equities is probably quite reasonable if you are happy enough with the swings in the market.
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Old 02-14-2010, 02:02 PM   #47
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Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.
Many people consider the "cash value" of their pension as fixed income within their allocation, which can work fine. If the pension is large enough that you need to tap little or none of your retirement portfolio for income, your allocation to equities might be limited only by your stomach for risk. You are in the situation of being *able* to take risks if you are comfortable with it, but not in a great need to take a lot of risk.
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Old 02-15-2010, 11:11 PM   #48
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Sitting on about 40% cash right now. Dribbled a little into the market over the past year or so, but kept a fair amount of powder dry for stock/mutual fund purchases when opportunities arise.
I thought that we have too much in cash (~26%).
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Old 02-16-2010, 06:40 AM   #49
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Wow, that's quite a change in AA. What prompted you to make such a change?
All the bad news and fear. I also happened upon Harry Dent's latest book on the coming economic collapse and that just did it for me. It was probably a knee jerk reaction to the other extreme. We shall see. I'm still not sure I want to get back into equities just yet.
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Old 02-16-2010, 10:33 AM   #50
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emi guy, unless you're the first person on earth to hear the bad news, the markets have already adjusted to take it into account. The bad news, or at least the consensus of what it will be, is already built into the prices of stocks and bonds. So you won't benefit by investing, or not investing....
The way I see it is that there are two camps; the doom and gloom camp that thinks that all this deficit spending and national debt will bankrupt our economy and the other side that acts like this is a somewhat normal business cycle that will correct itself eventually. The market cannot price both predictions into itself.....

I think it depends on which camp ends up being right.

When the market crashed last year, the market seemed to be caught completely off guard evidenced the fact that it fell so far, so quickly.

I'm sure that in time, things will be fine but at 51 with hopes for an early retirement, I'm not sure I can wait that long. If only my crystal ball were not on the fritz!
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Old 02-16-2010, 10:35 AM   #51
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The way I see it is that there are two camps; the doom and gloom camp that thinks that all this deficit spending and national debt will bankrupt our economy and the other side that acts like this is a somewhat normal business cycle that will correct itself eventually. The market cannot price both predictions into itself.....
Well, I think this is also evidenced by the coexistence of both strong inflationary AND deflationary pressures in the economy. All the money being printed and all the increasing public debts suggest inflation, but persistent unemployment and lack of consumer demand for discretionary "stuff" is deflationary.

At this point no one really knows which economic force will win, but at this point I think deflation is the more pressing concern because it would increase the debt in real terms even more rapidly -- and because it points to continued distress in the demand (and employment) aspects of the economy.
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Old 02-16-2010, 10:45 AM   #52
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... my interest to go "all cash" is prompted by all the bad news I read and hear about the future of the U.S. & world economy.
Here is an interesting perspective on that very subject from a new book "SONIC BOOM: Globalization at Mach Speed":

Quote:
...just as favorable economic and social trends are likely to resume, many problems that have characterized recent decades are likely to get worse, too. Job instability, economic insecurity, a sense of turmoil, the fear that even when things seem good a hammer is about to fall—these are also part of the larger trend. As world economies become ever more linked by computers, job stress will become a 24/7 affair. Frequent shakeups in industries will cause increasing uncertainty. The horizon has never been brighter, but we may not feel particularly happy about it.
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Old 02-16-2010, 10:46 AM   #53
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Saw Network from 1976 the other day.
1976
Howard Beale: I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's work, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there's nobody anywhere who seems to know what to do, and there's no end to it. We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TV's while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be. We know things are bad - worse than bad. They're crazy. It's like everything everywhere is going crazy, so we don't go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is, 'Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won't say anything. Just leave us alone.' Well, I'm not gonna leave you alone. I want you to get mad! I don't want you to protest. I don't want you to riot - I don't want you to write to your congressman because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you've got to get mad.
Howard Beale: [shouting] You've got to say, 'I'm a HUMAN BEING, Goddamnit! My life has VALUE!' So I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell,
[shouting]

Diana Christensen: [flipping through the newspaper] You know, Barbara, the Arabs have decided to jack up the price of oil another 20%... uh, the CIA has been caught opening Senator Humphrey's mail... there's a civil war in Angola... another one in Beirut... the, uh, New York City's still facing default... they finally caught up with Patricia Hearst...

34 years ago

still alive.
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Old 02-16-2010, 11:30 AM   #54
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The way I see it is that there are two camps; the doom and gloom camp that thinks that all this deficit spending and national debt will bankrupt our economy and the other side that acts like this is a somewhat normal business cycle that will correct itself eventually. The market cannot price both predictions into itself.....

I think it depends on which camp ends up being right.

When the market crashed last year, the market seemed to be caught completely off guard evidenced the fact that it fell so far, so quickly.

I'm sure that in time, things will be fine but at 51 with hopes for an early retirement, I'm not sure I can wait that long. If only my crystal ball were not on the fritz!
I believe that the truth probably lies somewhere between the 2 extremes. I believe that the US will end up looking more and more like Western Europe, i.e. slower growth, higher systemic unemployment and, on average, what feels like a stagnant or slightly lower standard of living. When I was growing up in Europe, I always felt like life was one long endless recession. Seen from an economist's perspective and based on the traditional definition of a recession, it certainly wasn't the case. But for a lot of people that's how it felt. When unemployment permanently hangs around 10%, losing your job becomes somewhat of a personal tragedy. It can take years before you can find another one (even in "good" times). So people tend to be very cautious. They watch their spending and don't take risks (like investing in the stock market or quit a job to start their own company). Not the end of the world, certainly, but probably not "back to business as usual" either. I am far more worried about the future in Europe personally. European countries will have to clamp down on government spending to rein in their already large deficits. However, government spending represents an important part of the economy in many, less liberal European economies. So, cuts in government spending will be felt very strongly there and it could have a destabilizing effect.
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Old 02-16-2010, 11:45 AM   #55
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I thought that we have too much in cash (~26%).
Shrug. Much of that cash was accumulated before the March 2009 crash. If I had invested it before that date, I would have lost a substantial amount. That said, I should have invested it between March 2009 and September 2009. Had I done so, I would be up ~60%+

Live and learn. These days, I'm dribbling in money every week when there are pullbacks.
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Old 02-16-2010, 11:53 AM   #56
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I guess I'm one of the rare ones on here who posts that is in all cash.
( I feel there are many like me, just not participating in this forum and thread).
I 80% retired 10 years ago at 47, and 100 % retired a year ago at 56.
I was probably 85% stocks until 1997 then started ramping down stocks and increasing cash to 90% cash in 2001 and went all cash about 2005.
I have my dollars split between 15% I-Bonds, 10% cash value in a 401k, and the balance in different CD's at PenFed, two other local credit unions, and two different local banks.Since going all cash,I have been able to average 5.25% return until the last 6 months when my I-Bonds had a 6 month 0% return, and will return to about a 4.80% return in April.It will continue to go lower as my higher % CD's mature and I replace them with lower ones.I do believe in the next year or two rates will increase a lot from current(as will inflation)
I have been able to keep all my dollar amounts under the amount covered by CUNA or FDIC insurance.
We will have on IRA at PenFed that goes over the 250k level for about a year and a half until some 6.25% CD's mature and I will transfer some of it.
My SO has a small pension that started 2 years ago.
We have always lived below our means, so we are still able to save some each year, and SS doesn't start for another 5 to 10 years.It helped a lot we were debt free at 38 years old including home.We were able to enjoy some of the stock market gains, and we were able to lock in most of those gains(not all).
I had read some articles in the middle 90's that told of the risk if you retired and had a big market downturn early in your retirement followed by flat markets for a few years. My gut told me to do it, and I missed almost all of the big losses some experienced.
I know I'm am taking a risk in all cash,but our lifestyle and reserves make it seem to work for us.I have tried to look at all the angles for us, and this seems to work. I sleep very well at night.

YMMV from me.
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Old 02-16-2010, 12:02 PM   #57
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Live and learn.
Actually, when it comes to the stock market few of us will even live long enough to learn anything of value. Mostly what we "learn" is what happened last time around, and like generals fighting the last war, we mistakenly apply the lesson to current but necessarily different conditions. From about 1995 to 1999 it was very smart to learn to buy the dips. From Late 2007 through February of 2009 it was a really bad idea to buy the dips. Sure, they were dips, just the wrong dips. Smart investors buy the right dips.

The way many people feel and post about recent history is very much conditioned on what is happening at the time they post or comment. " Oh, if I had only loaded up last March" will be posted when the market has been going up strongly. If it starts going down, like recently (prior to the last few days) we post about all the risk out there and how the end is near.

I believe that reality is that the situation is always ambiguous and unless we are willing to make hard and fast and unvarying rules which few of us are emotionally able to do, we will always be blown around by whatever is going on at the time that we are making decisions.

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Old 02-16-2010, 12:31 PM   #58
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I believe that reality is that the situation is always ambiguous and unless we are willing to make hard and fast and unvarying rules which few of us are emotionally able to do, we will always be blown around by whatever is going on at the time that we are making decisions.
Agree 100%.
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Old 02-16-2010, 05:40 PM   #59
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I think that I will take the suggestion to read "Four Pillars" as my interest to go "all cash" is prompted by all the bad news I read and hear about the future of the U.S. & world economy. As "Novaman" expressed, the markets seem to be gyrating based on market manipulation by the various federal stimulus programs rather than normal corporate growth. Seem like our society is going through a fundamental shift in it's desire to consume and that it could forever change the growth track of companies. I know the experts of the world suggest ignoring the "noise" of the media but for the life of me, I don't see a way out of all this deficit spending, debt and unfunded liability mess other than masssive growth in the private sector. Yet, consumers, the private sector, don't seem to be reacting accordingly.
That said, and based on reading the replies to my OP, I guess cash would only make things worse. I feel like my options are cash or roll the dice that things will return to the way they use to be. BTW - I'm currently 60/40 (stocks/bonds) at 51 Years old. -Cataman
Instead of Bernstein's Four Pillars you might want to first read Bernstein's more recent book The Investor's Manifesto. See this link (posts on Feb 16th) for more info on the book: http://www.early-retirement.org/foru...-43066-18.html
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Old 02-16-2010, 08:11 PM   #60
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Currently about 10% cash and 90% equities. I view my pension which starts in 2 1/2 years as a fixed income stream. Hence don't think I need a fixed income allocation. What does the board think of this idea? Haven't read much in the literature about this idea.
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I agree with you. If your pension covers all your income needs then 90% equities is probably quite reasonable if you are happy enough with the swings in the market.
I agree in general with Alan, in that it depends on the proportion of your retirement income needs that you expect to be getting from your pension. If your pension is secure, COLA'd and has your expenses pretty well covered, than you can do whatever you want on the portfolio side with little repercussion for your lifestyle. Swing for the fences for your heirs, charities, whatever. But if you will be relying on your portfolio to generate a significant part of your necessary living expenses, I would think you might want to lessen the volatility on the investment mix. I think a good way to look at it is to determine what kind of income stream you will need your portfolio to kick off (after accounting for pension), and then adjusting your portfolio mix accordingly for your lifestyle and risk tolerance for that portion of your income. Also, if your pension is non-cola'd, then your portfolio will be called upon to carry a ever increasing portion of the burden going forward, and you'll need to think about how much growth you'd like versus how much volatility would be acceptable for that ever-growing need. Early in accumulation I too considered my pension as a "bond like" part of my portfolio, and put pretty much everything else into equities. But as I get closer to seriously considering an early retirement, I am better able to quantify the additional income I will *need* from the portfolio, over and above an early-out non-cola'd pension and, especially after the last couple of years of volatility in the market, I think a 90% equity allocation on the portfolio side is more risk than I'll want to carry once I'm ready to start withdrawals. Just another way of looking at it.
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