Bloomberg Poll

[Gumby]

I know people who cashed out in early 2009. They just could no longer take the emotional pounding of constant losses. The young wife and I kept buying, week in and week out. Our portfolio is substantially higher today than it was one year ago. In fact, we are within shouting distance of our all time high (which occurred circa Dec 2007)

 

[clifp]

A Bloomberg poll with some pretty startling results -
I can’t believe this. The actual poll results, though, are clear. 29% said a little worse and 17% said a lot worse. How can this be?

The article is here Americans Say They Missed 73% Rise in S&P 500 as Economy Surged - Bloomberg.com

The poll results and methodology are here http://media.bloomberg.com/bb/avfile/rnUZ3cMJKhxI

This is probably too sophisticated of analysis for the typical respondents of the poll but here is one possible explanation.

If you asked me if the "The value of your investments over the last year" has gotten a lot better, a little better, or about the same., etc. I would be torn between answering about the same or a little better. Obviously the price has gotten a lot better. However price and value are very different concepts in my mind. (I've read too much Buffett and Graham..)

Thinking back to March 2009, I was confident that price of stocks would increase, if that would happen in 1, 2, or 5 years I wasn't sure. I also expected the value to increase in the next year. The value being the future profits of these stocks. The price has increased about what I expected (I predicted Dow 12,200 by Jan 2010) but the future profit potential for stocks has gone up very little, because the economy is in shape bad shape.

Another way of looking at is if you had $1 million in CDs the Fed data say that on average were get 1.8% for a 6 months CD today that rate has dropped to .3%. So the value of the cash in term of income production has dropped by by 5/6ths!

 

[REWahoo]

Then again, last year we had a poster (forget who) that was strongly advocating putting everything in 30 year treasury bonds . . . maybe 7 out of 10 people followed his advice.

You mean this guy?

http://www.early-retirement.org/for...llionaire-club-recently-40769.html#post751439

 

[Gone4Good]

You mean this guy?

http://www.early-retirement.org/for...llionaire-club-recently-40769.html#post751439

That's him. (you have some crazy, ridiculous, memory for this stuff).

But I stand corrected. He wasn't touting 30-year treasury bonds. He was touting 30-yr zeros. (A strategy which would have lost ~27% over the past year, btw)

 

[REWahoo]

That's him. (you have some crazy, ridiculous, memory for this stuff.

Maybe so, but I still have trouble remembering what day it is...

 

[Gone4Good]

Maybe so, but I still have trouble remembering what day it is...

Recently noticed that too. Goes with the territory, I guess . . . I kind of like it, though.

 

[FIREd]

You mean this guy?

http://www.early-retirement.org/for...llionaire-club-recently-40769.html#post751439

I remember Architect! He joined the board in November 2008 and posted his last message in March 2009. So he was pushing treasuries at a time where stocks were at their cheapest in at least a decade. So I hope he comes back during the next bear market to tell us when to start buying cheap equities again.

DW and I stayed the course even though, by early 2009, we were pretty shaken. We doubled down on a lot of things and made really one big, crazy bet. Fortunately it all worked out and the results have been amazing... Of course hindsight is always 20/20 and it could have all ended in tears. I think we dodged the bullet this time, but we might not be so lucky next time.

MIL almost caved in near the bottom. In 2007, 95% of her portfolio was in international stocks (at age 64!). She reluctantly listened to my advice and went for a 65%/35% stock/bond portfolio during the summer of 2007. I wanted her to go a bit more conservative but she thought that her risk tolerance was pretty high. I guess it wasn't. By February 2009, MIL was so terrified that she was itching to sell everything. It took a lot of convincing on my part for her to keep sitting on her hands. She has recovered almost everything she lost during the crash but it was close.

 

[NW-Bound]

For a lot of folks, their "investments" includes home equity- which hasn't recovered like their 401K or other market-based investments. Perception is reality.

I suspect that is true. My own two brothers care a lot more about their home values, which have dropped $350K since the top of the housing bubble, judging by the comparative sales in their neighborhood. Despite having two homes (each of lesser value than theirs), I never care about their values as I do not consider them an investment. But I very much care about my stocks and MFs; those I "mark to market" every day.

About recovering since a year ago, oh yes, big recovery for me. If I had gone "all in" like some people here did, my oh my, I would have soooo much more. No, only 72% in equities, even now. Still 6-7% short of my personal highwater mark in 2007, but the amount I have recovered since the low was enough to almost buy 2 of these. Introducing the 2011 Monaco Cayman motorhome - Photo Gallery

But of course I didn't, and bought an LBYM used class C instead. I still love to count my money.

 

[W2R]

I am shocked and amazed at the results of this poll.

It is hard to imagine how anyone's portfolio could be down compared with a year ago. My portfolio has risen significantly, as was true for several who posted earlier in this thread.

Maybe the poll participants are spending money from their portfolio. Well, I am too but only my living expenses - - maybe they are sending kids to college, buying houses or RV's, burying money under the house, and so on.

 

[Alan]

Maybe the poll participants are spending money from their portfolio. Well, I am too but only my living expenses - - maybe they are sending kids to college, buying houses or RV's, burying money under the house, and so on.

There is also the nightmare situation of having to sell equities throughout 2008 for income. Many folks don't think through the withdrawal phase of ER or have insufficient emergency funds to cover job loss etc.

 

[theloneranger]

Well, I stayed in and continued to add.
Net worth is now 25% more that the previous peak 22 months ago and twice the value 16 months ago at the low point.
Not to mention being helped by a significant increase in value of employer stock.
People stopped buying a lot of things but still spent money on food.

 

[ziggy29]

There is also the nightmare situation of having to sell equities throughout 2008 for income. Many folks don't think through the withdrawal phase of ER or have insufficient emergency funds to cover job loss etc.

Yep. This shows why a prudent AA or a "buckets" approach is in order. Had someone made sure they had 5-10 years of retirement withdrawals in safer stuff like cash and short term quality bonds, they never would have had to draw down their equities bucket in 2008 or the first half of 2009. And in the second half of 2009 early into 2010, they could have used the rally to sell some stock and replenish the "safe" buckets.

Before I considered my emergency fund large enough, I kept part of my Roths in safer stuff -- treating it as a backstop to the "emergency fund" since I could withdraw contributions tax-free. Fortunately it never came to that, the emergency fund reached a healthy level through '08 and '09 as I saved at [-]a paranoid[/-] [-]an obsessive[/-] a healthy clip due to the uncertainty of the jobs picture through it, and now my Roth doesn't even enter my planning as a "level 2 emergency fund."