Get out now and beat the debt ceiling crash?

[W2R]

Ahhhhh geezzzzzz....it's freak out time on the forum again.

Think I'm gonna make mahsef a frosty coffee drink...with a little whipped cream and chocolate sprinkles.

Sounds good! Maybe I'll try making one of those too (or a diet version if I can figure one out). And pass the (virtual) popcorn, thanks.

 

[rescueme]

Ahhhhh geezzzzzz....it's freak out time on the forum again.

Think I'm gonna make mahsef a frosty coffee drink...with a little whipped cream and chocolate sprinkles.

+1.

I'm adding a bit of Kaluha to mine ...

 

[IBWino]

Ahhhhh geezzzzzz....it's freak out time on the forum again.

Think I'm gonna make mahsef a frosty coffee drink...with a little whipped cream and chocolate sprinkles.

I think this calls for something stronger like an Irish coffee.

 

[chinaco]

We are getting a lesson in the mechanics of the free enterprise system. Defined benefit pension plans and guarantees have no place in it. Our leaders can baffle the American people, but they can't fool free market capitalism. It's a perfect economic system but not a compassionate one. It just doesn't care what people think they deserve.

Not quite. DB plans work if managed properly (e.g., risk) and funded properly.


Besides... the pension problem is not just the govt... but a number of companies.

Numerous examples of it working.

 

[ERD50]

I am kind of worried about all of the pension funds if we get S&P500 in the 700 range again. Aren't most of them heavily invested in the stock market so they can get those guaranteed 8% returns they told the employees? ...

Originally Posted by ERD50
I don't recall any 'guarantee' of 8% returns in my pension fund. Can you quote that language from your pension fund?

From:

The Public Pension Crisis - NYTimes.com

"Pension funds subsist on three revenue streams: contributions from employees; contributions from the employer; and investment earnings. But public employers have often contributed less than the actuarially determined share, in effect borrowing against retirement plans to avoid having to cut budgets or raise taxes.
They also assumed, conveniently enough, that they could count on high annual returns, typically 8 percent, on their investments. In the past, many funds did earn that much, but not lately. Thanks to high assumed returns, governments projected that they could afford to both ratchet up benefits and minimize contributions. What a lovely political algorithm: payoffs to powerful, unionized constituents at minimal cost."

Where is that word 'guaranteed'? That's what I questioned on your post.

-ERD50

 

[Beryl]

I might be one of them! I always have that option, now that I am old enough for it, and I am glad about that.

Wow, down 370 points by now. Breathtaking. This reminds me of 2008, so much.

Really hate this.

I'll personally survive, I think. I moved my IRA to FDIC insured (will that matter?) accounts last Monday. So there has been no change (.01% APY) for a week. Normally, I'd see an average increase of $500 weekly with my conservative stock/bond funds.

The people who will be hurt worse will be the most needy.

 

[MichaelB]

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'...

 

[Gatordoc50]

Not quite. DB plans work if managed properly (e.g., risk) and funded properly.

Besides... the pension problem is not just the govt... but a number of companies.

Numerous examples of it working.

I'm not aware of any entity, public or private where it is working. Please give some examples, I'd like to research them and find out how they have been able to sustain success.

 

[calmloki]

Psst - just got off the phone ordering up surrender forms on our life insurance policies. Have had them, cross insured, for over 21 years. At this point, the amount they would pay at death is relatively trivial and will only become more so over the next 20 years. Our cash surrender value is roughly a 1/4 of the combined death benefit for both policies, and given that only one of us would benefit from a death and we could end up paying 1/2 the value of the policies in premiums over the next 20 years, what the heck - we'll take the cash now. Good to look around and make money when the market is crashing.

 

[ziggy29]

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.

 

[Gatordoc50]

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.

 

[MichaelB]

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.

 

[DoraM]

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".

 

[DallasGuy]

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.

 

[East Texas]

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.

 

[harley]

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?

 

[donheff]

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.

 

[73ss454]

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.

 

[ERD50]

Originally Posted by ERD50
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.

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

 

[harley]

Haven't even looked at the port in the last few weeks

But how about the sherry?

 

[novaman]

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.

 

[73ss454]

Everyone is right at some point but no one knows when.

 

[novaman]

ScaredtoQuit- You must be enjoying the mayhem that is unfolding before our eyes.

 

[Beryl]

I have mixed feelings. Glad that I didn't lose net worth directly but you have to be pretty callous to enjoy a downturn.

 

[ScaredtoQuit]

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.