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Old 08-04-2011, 02:53 PM   #161
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Originally Posted by ziggy29
Funds generally don't "guarantee" a certain rate of return to pensioners. What some of them do is set benefit levels based on assumptions about future returns on pension fund investments. And really, I think anything that projects returns north of 7% is likely "overpromising" and setting itself up for a crisis -- both to pensioners and, in the case of public sector pensions, the taxpayers.
Well said. The question is what happens when the overpromises continue and the taxpayers refuse to cover the shortfalls? I think we are seeing the answer. Maybe we better get Congress back in session.
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Old 08-04-2011, 03:08 PM   #162
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Originally Posted by ziggy29 View Post
Funds generally don't "guarantee" a certain rate of return to pensioners. What some of them do is set benefit levels based on assumptions about future returns on pension fund investments. And really, I think anything that projects returns north of 7% is likely "overpromising" and setting itself up for a crisis -- both to pensioners and, in the case of public sector pensions, the taxpayers.
Well, > 7% will be an overpromise until we get inflation bacik up to mid to high single digits. Then it'll be a breeze.
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Old 08-04-2011, 03:15 PM   #163
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Where is that word 'guaranteed'? That's what I questioned on your post.

-ERD50
The other guys already answered this, but I was talking about an implied guaranteed return of 8%. When they set benefit payouts based on assuming they will get >8% market returns, in essense they have guaranteed the pensioners an 8% return. If the market doesn't make 8%, they still have to deliver benefits to the pensioners as if it did anyway. Then comes trouble for taxpayers, who were really the ones behind the "guarantee".
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Old 08-04-2011, 04:31 PM   #164
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The S&P doubled in 2 years and now is off about 5% YTD and 8% from it's recent high - give or take a bit. This is a hiccup. Folks need to stop watching CNBC and get back to enjoying life.

edit to add: at current prices and based on GMO or Shiller PE type valuations, US "blue chip" equities are now priced to be much better investments compared with fixed income. just sayin'...
I always chuckle when people seem to know where the market is going. It may be a hiccup or it may be the start of the next bear market. Who really knows? Don't most down markets start out with just a 5% drop and then keep dropping? ....just sayin.

Edit: By the way, I don't believe in buy and hold.
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Old 08-04-2011, 04:33 PM   #165
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I found that to be a very welcome 'safety net' back in 2008 when, the same month the market hit bottom, I applied to begin taking SS benefits. Can't help wondering how many folks who have been delaying will decide 'I've waited long enough' should if as the market continue its decline.
We've been fortunate in that we both have pensions, retiree health care, and a reasonably low cost of living. Our plan has been to move a chunk of our IRAs into SPIAs when practical. It appears "practical" is about five years out now so we'll tweek our plan and file for social security early instead of waiting. By waiting a few years (until the rates recover a bit) our potential earning's increase on the SPIAs will outweight the increase in delaying social security. At least that's the plan. Always subject to change.

Sure am glad we're no longer in the market.
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Old 08-04-2011, 04:44 PM   #166
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Ha! Another 1400 point loss or so and I'll be able to get all my cash in that I didn't get invested last time. Unless I chicken out again. I figure I'll buy my AA in equities with my cash, then the equity market stagnate for a decade or so while inflation rises to the point where my cash (if it was still there) would be earning 12% or so. Of course, then I'd at least be able to buy my AA for bonds, unless of course the gov't manages to continue holding the yield down. Dawg, where are those meds?
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Old 08-04-2011, 04:46 PM   #167
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Ha! Another 1400 point loss or so and I'll be able to get all my cash in that I didn't get invested last time. Unless I chicken out again. I figure I'll buy my AA in equities with my cash, then the equity market stagnate for a decade or so while inflation rises to the point where my cash (if it was still there) would be earning 12% or so. Of course, then I'd at least be able to buy my AA for bonds, unless of course the gov't manages to continue holding the yield down. Dawg, where are those meds?
Maybe you should start dollar cost averaging in now so you don't miss it again.
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Old 08-04-2011, 05:17 PM   #168
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I found that to be a very welcome 'safety net' back in 2008 when, the same month the market hit bottom, I applied to begin taking SS benefits. Can't help wondering how many folks who have been delaying will decide 'I've waited long enough' should if as the market continue its decline.

I'm 62 and 4 months and may jump into SS at any time. I feel better that I have that option. I have a different mind set this time around. Haven't even looked at the port in the last few weeks, let it do what it's going to do. Just sittin at the dock of the bay.
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Old 08-04-2011, 09:46 PM   #169
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I don't recall any 'guarantee' of 8% returns in my pension fund. Can you quote that language from your pension fund?
Funds generally don't "guarantee" a certain rate of return to pensioners. What some of them do is set benefit levels based on assumptions about future returns on pension fund investments. And really, I think anything that projects returns north of 7% is likely "overpromising" and setting itself up for a crisis -- both to pensioners and, in the case of public sector pensions, the taxpayers.
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The other guys already answered this, but I was talking about an implied guaranteed return of 8%. When they set benefit payouts based on assuming they will get >8% market returns, in essense they have guaranteed the pensioners an 8% return. If the market doesn't make 8%, they still have to deliver benefits to the pensioners as if it did anyway. Then comes trouble for taxpayers, who were really the ones behind the "guarantee".
Yes, ziggy's answer is a much better description than saying it is a 'guarantee' of 8% return.

However, if return are less, it can mean the company needs to cough up more money to fund the system. That has happened. OTOH, if the company goes bankrupt, they can't do that. Then the PBGC kicks in, but maybe they can't fund it.

It's why I don't like 'promises'. Give me the money. No one is more interested in looking over it it than me. My personal accounts are 'fully funded' (even if 'full' isn't what I wish it was, but at least I know what it is).

-ERD50
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Old 08-04-2011, 11:40 PM   #170
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Haven't even looked at the port in the last few weeks
But how about the sherry?
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Old 08-06-2011, 09:32 AM   #171
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Over the years, I've learned the hard way that it's really hard to time the market. As a result, I do have the discipline to stay put when things start getting volatile. However, I can't help thinking that the ongoing battle over the debt ceiling offers a unique opportunity to earn some extra trading profits. It's a slam dunk that some time over the next four weeks, the market is going to crash because of the contention in Washington. So my thoughts are... get out now and jump back in during the crash

Thoughts anyone??
ScaredtoQuit might just be proven right about the market crashing given all that has transpired this past week- only his timing might have been off by a few weeks.
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Old 08-06-2011, 10:22 AM   #172
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Old 08-08-2011, 04:15 PM   #173
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ScaredtoQuit- You must be enjoying the mayhem that is unfolding before our eyes.
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Old 08-08-2011, 07:56 PM   #174
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I have mixed feelings. Glad that I didn't lose net worth directly but you have to be pretty callous to enjoy a downturn.
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Old 08-09-2011, 03:56 PM   #175
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Enjoying the mayhem... hardly!
Enjoying the buying opportunities... only a little... When I attempted to load up yesterday, I ran into a new rule with Vanguard that effectively kept me away from most of my dry powder. I just wish I had been a little truer to my convictions and sold more before hand. As a result of the repositioning I did with my portfolio, my declines are a little less painful... but still painful (about 4% as of today).

Yes, I do feel somewhat vindicated by what happened. If you guys take a look back at the responses, you will see that I took a severe beating for just asking the question. I could not understand why my question was perceived as utterly ridiculous. Based on what has been happening in politics for some time now, it was pretty obvious to me that we had an irresistable force meeting an imovable object.
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Old 08-09-2011, 04:20 PM   #176
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Bottom line is everyone after the fact says the same thing, shoulda, coulda woulda.

I surely admit that I have no idea what is going to happen in the market. Most of the time when I get a feeling of what's going to happen it turns out that I'm wrong. So I sit and collect dividends and such and hope for the best.
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Old 08-09-2011, 05:00 PM   #177
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ScaredtoQuit- You must be enjoying the mayhem that is unfolding before our eyes.
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I have mixed feelings. Glad that I didn't lose net worth directly but you have to be pretty callous to enjoy a downturn.
I don't think it is fair to accuse him of 'enjoying' the fact that the market dropped. He said he felt it was certain to happen, which is very different. If a weatherman predicts tornadoes, I wouldn't claim he was happy when they came.

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Enjoying the mayhem... hardly!

... If you guys take a look back at the responses, you will see that I took a severe beating for just asking the question. I could not understand why my question was perceived as utterly ridiculous. ...
If you look back at my responses, I don't think I said it was ridiculous to think the market might drop. I said it doesn't make sense to say it is certain (a 'slam dunk') to happen. If it was certain, you can be certain that the money would have already left the market. Who would wait for the drop if they knew it was going to happen? That is how markets work, they anticipate the future. IF you want to go against the market, you might win sometimes, but if you view it as certain, I predict you'll take some big losses.

And the drop came after the debt deal, and after the 4 week 'slam dunk' period. So (not that it's important), I'm not sure that 'vindicates' you anyhow.

The market goes up and down - that's my prediction, and I'm vindicated continuously.

-ERD50
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Old 08-09-2011, 05:16 PM   #178
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If you look back at my responses, I don't think I said it was ridiculous to think the market might drop. I said it doesn't make sense to say it is certain (a 'slam dunk') to happen.
If the Gang of Six had been able to come up with a legislative proposal a few weeks earlier it might have carried the day. An agreement like that would have lead to a rally rather than a crash. Note I said might have, not would have.
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Old 08-10-2011, 10:59 AM   #179
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Was my choice of words a little strong? Perhaps "slam dunk" was a little over the top. But I thought suggesting that something bad was going to happen as a result of the debt debate was a pretty easy call because of all of the ENMITY that currently exists in Congress. (Don't you guys watch the news?)

I remember just after QE2 was announced and there was a really successful hedge fund manager on CNBC. One of the commentators asked him the secret of his success. He responded that all he did was LISTEN to what was being said. He went one step further and predicted that the initiation of QE2 would DEFINITELY lead to higher equity prices. It did. And as a result, I'm sure that manager's fund has continued to prosper.

Yes, I was wrong about the exact date - things DO go wrong when you're bold enough to make a prediction about a crash. But I think I'm on pretty firm footing to say that the S&P downgrade and the nastiness of the resolution of the debt ceiling debate weigh quite heavily on the current decline in market conditions.
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Old 08-10-2011, 11:32 AM   #180
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Was my choice of words a little strong? Perhaps "slam dunk" was a little over the top.
Well, they were your words. Would you prefer I respond to what you didn't say? Or put words in your mouth?

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But I thought suggesting that something bad was going to happen .... (Don't you guys watch the news?)
You still don't get it. Yes, we watch the news, just like everybody else. That is why I said that if 'everybody knows', then it is already factored into the market. It will take something else to move the market from there.

EXAMPLE: Remember when Microsoft announced a one-time $10 dividend (I might have the details wrong, going from memory)? As soon as it was announced, the stock rose by approximately that amount (minus the time-value of money between thee announcement and the effective date, and +/-other external events). Since it was known by everyone, it was immediately factored in. You couldn't get in after everyone heard about it on the news, and take advantage of it.


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I remember just after QE2 was announced and there was a really successful hedge fund manager on CNBC. One of the commentators asked him the secret of his success. He responded that all he did was LISTEN to what was being said. He went one step further and predicted that the initiation of QE2 would DEFINITELY lead to higher equity prices. It did. And as a result, I'm sure that manager's fund has continued to prosper.
And I can assure you they didn't interview the fund manager that tried that and failed. Doesn't make good TV. Survivor-ship bias.

Quote:
Yes, I was wrong about the exact date - things DO go wrong when you're bold enough to make a prediction about a crash. But I think I'm on pretty firm footing to say that the S&P downgrade and the nastiness of the resolution of the debt ceiling debate weigh quite heavily on the current decline in market conditions.
See donheff's post a few back - that is a possibility. Good news could have pulled the market up from it's 'baked in' reduction. You just can never tell (well, probably not often enough to do well).

-ERD50
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