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Old 01-23-2008, 10:02 AM   #61
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Bonds vs CD's...I think I mentioned that somewhere in here but its easier to retype than to look for it. Hopefully I'll say the same thing twice

I'll buy CD's at rates over 5% and preferably over 6, especially for longer term issues (more than a couple of years). At cd rates under 6% and especially at rates under 5, I'll go with bonds. Shoot, when the prime MM fund was paying well north of 5%, I had a fair bit sitting there until the 6.25% penfed cd's came around.

I have some treasuries I bought a little while ago and am selling off since they've popped up quite a bit. I'll take the capital gain from that off the table for now. The rest of the bonds are in funds, mixed up with other assets and eligible for lots of rebalancing.
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Old 01-23-2008, 10:07 AM   #62
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Bonds vs CD's...I think I mentioned that somewhere in here but its easier to retype than to look for it. Hopefully I'll say the same thing twice

I'll buy CD's at rates over 5% and preferably over 6, especially for longer term issues (more than a couple of years). At cd rates under 6% and especially at rates under 5, I'll go with bonds. Shoot, when the prime MM fund was paying well north of 5%, I had a fair bit sitting there until the 6.25% penfed cd's came around.

I have some treasuries I bought a little while ago and am selling off since they've popped up quite a bit. I'll take the capital gain from that off the table for now. The rest of the bonds are in funds, mixed up with other assets and eligible for lots of rebalancing.
Not bad, not sure a 7-year rate of 5.25% is all that good, that's a LONG time..........
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Old 01-23-2008, 10:17 AM   #63
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Not sure I'd do that. I might do 5.25% for 3 years if I thought MM's would be paying 2 or 3% for those years and I wanted some emergency money in reasonably stable liquid form.

But I also wouldnt put more than a small amount in there. All we have in cd's is @6.25% and is pretty much our "Oh my dear god, something awful happened and we need $50,000 right now" money.

I sure would like some of those 8%+ EE bonds my dad bought about 20-25 years ago and still has a stack of...
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Old 01-23-2008, 10:22 AM   #64
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CFB, sorry, you had explained that earlier and exactly the same verbiage and numbers. Sorry,

Question for all but Finance Dude, do you think CDs will be available at higher rates any time soon. I seem to recall CDs being really bad rates prior to some tick up to those PenFed rates.

I'm kicking myself for not buying PenFeds at 6.25% but I really did not want to open another account.

5.25% might be the best for a while is my worry.

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Not bad, not sure a 7-year rate of 5.25% is all that good, that's a LONG time..........
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Old 01-23-2008, 10:41 AM   #65
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Honestly, I dont think you're going to see good cd rates for a couple of years. We'll have to wade through the recession for a year or 18 months, then the rapid fire inflation that'll hit right around the time the recession ends, causing the fed to jack up rates through the roof.

You'll get some good cd rates then.

Pretty frickin amazing that I said the same thing twice in the same thread...
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Old 01-23-2008, 10:49 AM   #66
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Question for all but Finance Dude, do you think CDs will be available at higher rates any time soon. I seem to recall CDs being really bad rates prior to some tick up to those PenFed rates.

I'm kicking myself for not buying PenFeds at 6.25% but I really did not want to open another account.

5.25% might be the best for a while is my worry.
No, I don't think CD rates are going to be good for quite awhile. I'm not a big fan of CD's, never owned any myself. However, they do provide comfort and FDIC coverage.

Since I think we all pretty much know the Fed will be cutting rates this year, I like my 20% allocation in bonds. Last time the Fed did big cuts, I made 11-12% in my bond funds........albeit it didn't last forever........
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Old 01-23-2008, 11:00 AM   #67
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CFB,

thanks for the 3yr thought because I do believe my MMs are going to drop like a rock soon.

But, with all the bargains out there in equities I'm darn near ready to abandon this fixed income thing for a while and roll some dice on a simple index fund port VTI, VEU, BND. She could handle that I think.

I see tomorrow as being a real bargain hunters day. Dead cat bounce material. The day that falling knife (like Wiley coyote) either sticks in a branch or continues falling.

And yes, like your dad's Bond certificates, I have a copy of a CD certificate I bought in FL in 1984. 11%

FD,
Do you think bond markets have already factored in what everyone on Earth thinks. The we eventually hit either 2.5% or 2.75%? In other words, does the bond market behave like the equities market?



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Not sure I'd do that. I might do 5.25% for 3 years if I thought MM's would be paying 2 or 3% for those years and I wanted some emergency money in reasonably stable liquid form.

But I also wouldnt put more than a small amount in there. All we have in cd's is @6.25% and is pretty much our "Oh my dear god, something awful happened and we need $50,000 right now" money.

I sure would like some of those 8%+ EE bonds my dad bought about 20-25 years ago and still has a stack of...
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Old 01-23-2008, 11:26 AM   #68
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FD,
Do you think bond markets have already factored in what everyone on Earth thinks. The we eventually hit either 2.5% or 2.75%? In other words, does the bond market behave like the equities market?
The smartest folks I have ever met are bond experts. How come you almost never see a "bond expert" on CNBC except Bill Gross, also known as "Mr. Pessimistic"?

Because bonds aren't very sexy for TV.......

In theory, bonds should behave inversely to stocks. The true "flight to quality" has happened to some extent, but not panic fleeing yet.........

When the feds cut rates, and you own bonds, your bonds become more valuable, because new bonds issued will be at lower coupons. So, you can get capital appreciation AND a coupon in a bond.

However, you DO NOT get principal guarantee on a bond, you can lose money, so CD's will always be popular...........
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Old 01-23-2008, 11:43 AM   #69
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However, you DO NOT get principal guarantee on a bond, you can lose money
I think our ISM/OSM investors will attest to that...
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Old 01-23-2008, 11:59 AM   #70
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My question was more wondering if the bond markets (I've never owned bonds or studied the market in them) behave like the equities market where expected interest rate changes have been absorbed (right or wrong) by the market before the actual rate change is announced.

I suspect the answer is yes, but I don't know that.

Reason for asking is that if I plan to buy bonds now might be a good time, since it offers the potential for capital appreciation as the Fed almost certainly drops rates and a safety net of holding to maturity, should rates rise. But is all that already factored into both new bonds issues coming out and also the existing bonds in the market?



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Originally Posted by FinanceDude View Post
The smartest folks I have ever met are bond experts. How come you almost never see a "bond expert" on CNBC except Bill Gross, also known as "Mr. Pessimistic"?

Because bonds aren't very sexy for TV.......

In theory, bonds should behave inversely to stocks. The true "flight to quality" has happened to some extent, but not panic fleeing yet.........

When the feds cut rates, and you own bonds, your bonds become more valuable, because new bonds issued will be at lower coupons. So, you can get capital appreciation AND a coupon in a bond.

However, you DO NOT get principal guarantee on a bond, you can lose money, so CD's will always be popular...........
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Old 01-23-2008, 12:03 PM   #71
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I get the strange sensation that this board has a long and storied history. Filled with skeltons lurking in closets. And posters of lore and long forgotten legends even.

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Old 01-23-2008, 02:23 PM   #72
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PB, 26 of your 33 posts (as of 10 AM HST Wed 23 Jan) have been to this thread. You started off with a comment about safety & simplicity and I think the conversaton is starting to get a bit off track from those goals.

Here's a comment from FinanceDude waaaaaaay back in post #36:
Quote:
I think you are making it way too hard.
With that in mind, I've excerpted a few of your remarks
concerning what your spouse wants from the ER portfolio:
Quote:
Originally Posted by Puppy Belly View Post
... so that the wife doesn't have to ever understand Mr. Market...
... the ins/outs of whether the wife will/can get the financial saavy.
- Wife wants no part of money management except spending.
she makes it very clear that she prefers having a hands off income producer.
- Current market conditions don't play in at all, just simply that she prefers to just cash the checks and live.
- She prefers her energies go into her clothing/jewelery design and involvement in “causes” as I call them.
- Very much an artist and activist with no interest in financial matters.
- Needs a hands off portfolio badly.
- Which would probably mean she would have to rely on a CFA
- These are exactly the reasons why a lady inclined to be in Arles at a Cafe Terrace at Night, should not be in a Yellow Room pouring over financial doom and gloom articles.
... she panic as her principal disappears?
- I do think some spouses, men or women, have no interest in money matters.
- Yes, she would be sold an annuity by the first salesman. She really enjoys her freedom to be creative and contribute to the community.
... with no worries that she will end up doing the wrong thing by some relatives suggestions or some salesman from an insurance company. They can be very convincing to a novice.
- The wife was especially impressed because she usually can't abide my crude explanations.
- And in my case, added risk of manipulation of the portfolio after my wife is on her own.
- Or is she forced to seek CFA assistance to restructure any portfolio I would set up other than a fixed income one.
- I suspect that any portfolio based on individual stocks would not be suitable for her but I might consider it using my Private Access rep at Fidelity to consul her.
- And also a PRFDX and ADVDX portfolio option. She would be fine with that.
- She is degreed in liberal arts and more than capable of learning the financial stuff but she has a point, why does she have to.
- If she ever agrees to take an interest, I would prefer to leave her a MM, CD/bond (paying yearly into MM), dividend, and growth port.
- She is warming to the idea of some discussion about the specifics, so progress, yeah.
- We have bounced the idea of annuities around a bit and she feels exactly as you mention, no access would scare her.
- She could handle that I think.


Compared to whatever it is that you're looking for:
Quote:
... want to set something very straight forward and safe...
- Any thoughts on whether Fed mechanisms/policy/skill are in place to avoid Carter-flation?
... struggling to determine whether this is a time of last chance to establish a decent ladder. Particularly observing the Fed and a policy that may be 2000-2003 like.
... like your idea of having some growth bucket and maybe 60/40 TR fund is a good compromise.
- I had not consider TIPS because they seemed very low on the "fixed" portion of the yield. But Zvi Bodie ...
- I'll try to come back with a strawman based on these suggestions to gauge how to structure the portfolio...
- But, could inflation be tamed much more easily now than in the Carter era. By that I mean much more cheap imports from China, India and equally low cost markets.
- Just had in my mind that the Fed was mover savvy these days. Hate to misjudge that one and see double digit inflation.
- But am I correct in the Fed rate comment? Because I wonder the same myself and thus my comment earlier that now might be the LAST, best chance (for several years) to do a CD ladder with the current near penurious rates.
... we may indeed see an inverted bowl or maybe an inverted flat bottom wok. My suspicion is that in 3-4 years the ordinate of the yield graph will read near 2% for nearly 90% of the abscissa. I saw a great article with an evaluation of Greenspan's performance over his last 10 years and Benacke's initial performance and my confidence in the Fed suffered. Basically we all know now that Greenspan was way too late in lowering the rates and too cautious when he did, then Bernacke's testosterone would not allow him to seem weak so he raised them back too soon. Now he is back pedaling and hopefully he has a reverse gear on that bike.
- I am also trying, as you suggest, to spreadsheet a scenario for the taxable account of all dividend stocks and/or all dividend funds and/or mixed.
- How do you feel about buying the stocks of BAC, BBT, WB, USB, etc, while they are hammered down but still paying good dividend share. The yields would be very high right now and maybe even better later this week?
- I like T Rowe Price and RPSIX and PRFDX are funds that make sense if individual stocks churn my stomach too much. Thanks for the Alpine tip, never considered that one before.
- Roth conversion is something I had not considered and I love the tax advantage. I need to look at the conversion process. RMDs are something I considered in my spreadsheet and it does complicate the process a bit.
- I like the Roth approach and since you have much longer to contribute wonder what you think the chances of the Roth rules being changed at some point by Congress? Seems some articles I read don't really allude to that but have words of caution.
- And likewise on the dividend stocks, some great points for me to work on. I read one post that suggested as few as 12 dividend stocks and I was not thinking that low but was wondering of if a portfolio of 4-5 banks, 4-5 utils, 4-5 bluechips, 4-5 REITs, 4-5 pharma, 4-5 healtcare, 4-5 consumer, 4-5 small, 4-5 mid and 4-5 comm, possibly 4-5 energy.
- Another thing that I do not understand is for instance. BAC is nearly half its Nov 07 price and still pays $2.40 div per share. That equates to 7.1% today but would BAC likely slash the div per share next year to provide a lower percentage yield? Guess what I'm asking is whether dividend growth is seen as growth in percentage or growth in per share value?
- BTW, I just started reading Josh Peter's Dividend Playbook so hopefully my knowledge will increase to the point of understanding the dividend game before I need to consider a portfolio selection.
... with some concerns of my own about the longer term US performance (both economy and market), I'm definitely looking for an approach that mitigates risk.
- So not looking for luxury, looking for stability and peace of mind.
- Just would leave with a certain piece of mind knowing income was guaranteed. If that is possible.
- Trading market risk for inflation and "unforseen event" risk.
- Yet I am convinced that the market will be a better performer over long periods (pretty much irrefutable) but which long period and is she in that period when she needs income.
- I forget whether it is Ferry or Swedroe but one likes annuities as I recall and the other doesn't so they seem to disagree to disagree. And I don't recall why. Do you recall that from the Boglehead forum.
- I did look at annuities once and now I can't recall what they base their payout on. What factors influence the rate, T-Bonds or the like?
- If this were the method I choose are you talking a fund like Wellesley that pays divs?
- Later this evening I will spreadsheet some of these div suggestions and other's suggestions and make a few runs to see what the income stream might look like. I need to re-learn those criteria and this Peter's book ...
- But meantime the Roth conversion is very interesting reading and considering.
- Also, how does this 3/4% cut in the FED factor in as you roll over your CD's at maturity.
- Wachovia for example, although, their exposure in CA worries Moody's evidently.
- The limited history does not include a real challenging market environment. Will the investing model hold up? Big question in my mind.
- I'm intigued by a concept of an annuity ladder.
- The Puppy Belly Annuity Ladder", ala, Coffehouse, Napkin, etc. Maybe Puppy Belly will replace the tired old Bogle Head stuff.
- Not sure I understand the issues of RMD vs SPIA.
- I'm mulling over a portfolio for her that might be fairly simple to manage: say 50/50 Stock/Bond Indexes. With a MM account to accumulate divs and cap gains distros. Maybe leave instructions to rebalance every 5 years.
- BTW, I have a pretty convincing spreadsheet uses this strategy... The results are damned interesting.
- Reason for asking is that if I plan to buy bonds now might be a good time, since it offers the potential for capital appreciation as the Fed almost certainly drops rates and a safety net of holding to maturity, should rates rise. But is all that already factored into both new bonds issues coming out and also the existing bonds in the market?
- I see tomorrow as being a real bargain hunters day. Dead cat bounce material. The day that falling knife (like Wiley coyote) either sticks in a branch or continues falling.
- Do you think bond markets have already factored in what everyone on Earth thinks. The we eventually hit either 2.5% or 2.75%? In other words, does the bond market behave like the equities market?


In over four years of reading this board's posts, I think you've set a new record for covering every single thought that could possibly pertain to the design of a portfolio.

Is it possible that your spouse's apparent lack of interest is because you're making it too freakin' hard?!? Maybe she's just waiting for you to run around in circles for a few more weeks, totally exhaust yourself, and then let you do whatever you want.

Here's a suggestion to cut through all your ponderings and to translate this analysis paralysis into some productive action:
1. Ask your spouse what she'd want to have in the retirement portfolio if you weren't around to manage it.
2. Do whatever she says with 90% of your assets and then keep your hands off it. My spouse suggests that, unless your spouse specifically asks for your opinion, you keep your thoughts to yourself too. She didn't exactly phrase it that way but I think I've accurately summarized her sentiments.
3. Invest the remaining 10% however you deem appropriate and (this is the important part) don't bother your spouse with the details. But you can mess with your 10% as much as you want.

Financially this may seem to be an awkward and sub-optimal compromise. However maritally this may save your life.

You ask a lot of questions and you seem to be working very hard to chase down all your various thoughts. On this board that's generally a sign of someone who hasn't taken the time to get a good fundamental understanding of asset allocation and the basics of long-term investing. Rather than cherry-picking your advice from a group (and being led anew by the latest post), perhaps you should read Bernstein's "Four Pillars" book and design a simple asset allocation that you feel comfortable with.

Then after you've run your 10% for a few years (and left your spouse's 90% on autopilot), maybe you'll have the comfort and the confidence to decide what you want to do... if anything.
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Old 01-23-2008, 02:34 PM   #73
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Originally Posted by Nords View Post

You ask a lot of questions and you seem to be working very hard to chase down all your various thoughts. On this board that's generally a sign of someone who hasn't taken the time to get a good fundamental understanding of asset allocation and the basics of long-term investing.
Nords- the time you put into your post was impressive. I think the comment highlighted above is true quite often with posters asking for "how to invest $X".

Knowing the basics with investing can take a person a long way.


I would not do what wife asked with 90% of our money. I might do it with 10%. My wife has implied trust in me financially. I'll let you know in 40 years if the trust was well deserved or the means to the end.
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Old 01-23-2008, 02:37 PM   #74
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Nords,
thanks for the summary, that was a lot of work to do that. Much appreciated.

I will ask a mod to lock the thread so it doesn't stray any further.

Probably have violated some board rules but some of the questions were her's in relation to things I could not explain well.

BTW, have read Bernstein's book, she wasn't interested.

Have on my desk, books in progress. Peter's Dividend Playbook, Malaspina's Nest Egg, Grangaard's Strategy, Live it Up by Merriman, Ben Stein's Time the Market.

My wife and I have about 1 month before we part ways for good and it appeared some people were willing to help me learn quick.

I'm sure you meant no disrespect, so none taken.

Will ask a few of the posters by PM if they agree.

Have a great day.

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PB, 26 of your 33 posts (as of 10 AM HST Wed 23 Jan) have been to this thread. You started off with a comment about safety & simplicity and I think the conversaton is starting to get a bit off track from those goals.

Here's a comment from FinanceDude waaaaaaay back in post #36:


With that in mind, I've excerpted a few of your remarks
concerning what your spouse wants from the ER portfolio:


Compared to whatever it is that you're looking for:


In over four years of reading this board's posts, I think you've set a new record for covering every single thought that could possibly pertain to the design of a portfolio.

Is it possible that your spouse's apparent lack of interest is because you're making it too freakin' hard?!? Maybe she's just waiting for you to run around in circles for a few more weeks, totally exhaust yourself, and then let you do whatever you want.

Here's a suggestion to cut through all your ponderings and to translate this analysis paralysis into some productive action:
1. Ask your spouse what she'd want to have in the retirement portfolio if you weren't around to manage it.
2. Do whatever she says with 90% of your assets and then keep your hands off it. My spouse suggests that, unless your spouse specifically asks for your opinion, you keep your thoughts to yourself too. She didn't exactly phrase it that way but I think I've accurately summarized her sentiments.
3. Invest the remaining 10% however you deem appropriate and (this is the important part) don't bother your spouse with the details. But you can mess with your 10% as much as you want.

Financially this may seem to be an awkward and sub-optimal compromise. However maritally this may save your life.

You ask a lot of questions and you seem to be working very hard to chase down all your various thoughts. On this board that's generally a sign of someone who hasn't taken the time to get a good fundamental understanding of asset allocation and the basics of long-term investing. Rather than cherry-picking your advice from a group (and being led anew by the latest post), perhaps you should read Bernstein's "Four Pillars" book and design a simple asset allocation that you feel comfortable with.

Then after you've run your 10% for a few years (and left your spouse's 90% on autopilot), maybe you'll have the comfort and the confidence to decide what you want to do... if anything.
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Old 01-23-2008, 02:40 PM   #75
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Not going to lock the thread, there's a lot of "learnin'" going on for folks who are active in this thread.

It will do what all threads do eventually, die..........
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Old 01-23-2008, 03:32 PM   #76
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BTW, have read Bernstein's book, she wasn't interested.
Have on my desk, books in progress. Peter's Dividend Playbook, Malaspina's Nest Egg, Grangaard's Strategy, Live it Up by Merriman, Ben Stein's Time the Market.
I don't think she needs to read the book. I was suggesting that you need to read the book.

One of the points of my post is that once you've read Bernstein's "Four Pillars" (not his other books) then you can stop pondering and start allocating.

If you've already read the book then review the asset allocation personalities in the back of the text and then start making decisions. You can save the rest of the books to read while you're working on your bucket list, but they won't help you finish the things that need to get done.

Quote:
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My wife and I have about 1 month before we part ways for good and it appeared some people were willing to help me learn quick.
A cynic would ponder whether your spouse is just going to wait you out and then do what she's been intending to do all along... so why not do it "with her" instead of "for her" or "to her"?
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Old 01-23-2008, 03:55 PM   #77
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How about this:

4 years expenses in mixture of MM and short term Treasuries
The rest in a good balanced fund or target fund
Read and continue to learn with your wife alongside

Take money as needed...............
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Old 01-23-2008, 03:57 PM   #78
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Originally Posted by Puppy Belly View Post

My wife and I have about 1 month before we part ways for good and it appeared some people were willing to help me learn quick.
Getting a divorce?? Didn't know that........... If that is the case, you probably will have bigger issues than asset allocation in the near term........one of the first being getting a good lawyer.
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This Thread is USELESS without pics.........:)
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Old 01-23-2008, 05:15 PM   #79
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FD, quick thank you to you and CFB and jIMOh and R Wood especially, among all that were so forthcoming with thoughts and ideas not just limited to her initial desire of safety. Very helpful.

I joined to ask questions in a way that we felt comfortable with. She was also reading and asking questions and I feel like it was worthwhile. She was very engaged with the thread and some of the suggestions were very welcome because she liked that type of explanation rather than cold dry ink.

She decided to end participation and let me just occasionally ask a question. So I'd like to say thanks and hope this was not a waste of time, it certainly was not for me.

PS: PM you about the parting.

Not leaving the board (too much good sharing).
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