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Re: Getting to Enough
Old 02-22-2005, 08:56 AM   #61
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Re: Getting to Enough

You can just tell when you have enough, though not always before that. I have three kayaks. I got rid of two, five was too many. When I had one, that was not enough. Two would do as does three (two singles and one double, allowing different kayaking combinations). But five was too many, could not use them all, atking up space and the like.

There, that was shorter than another poster.
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Re: Getting to Enough
Old 02-22-2005, 09:43 AM   #62
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Re: Getting to Enough

There, that was shorter than another poster.

Short posts make sense when the issue being addressed is a kayak question. When the issue being addressed is an SWR question, the safety of people's retirements is at stake. In those corcumstances, I think it makes sense to use up whatever number of words it takes to make things reasonably clear.

There have been a number of issues that have caused confusion during our discussions of the SWR matter. Some have caused confusion for perfectly understandable reasons, some for not so understandable reasons. My goal with my posting when responding to both sorts of confusion is to lessen the confusion. I do that with a short post when I believe that a short post can do the trick. When I see a need for a longer post, I go with something longer.

I think that we need to put more focus on the accuracy of SWR posts and less on their length. SWRs matter. They matter enough for us to want to report what the historical data says accurately. My view is--post short, post long, or post in-between. But post to lessen the confusion and post to get it right. That's where I am coming from re this thing, in any event.
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Re: Getting to Enough
Old 02-22-2005, 10:27 AM   #63
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Re: Getting to Enough

[quote=ex-Jarhead

UncleMick: *The 2000-03 woke me up after a long slumber. *Hung in there by my fingernails. (Was about 80stk, 20bonds & cash, and vowed when and if I got even to reverse percentages. *(Did so a few months back.)
No more wide receiver for me.
Got uncomfortably close to the red-zone.
May get eaten up eventually by a 4 yard and cloud of dust ala Woodey Hayes offense, but too late in the game to get beaten by a long pass.
Let's hear it for the defense.
[/quote]
-------------------
During the 2000-2003 recession, I was working and 100% in Equities. I stayed there, kept contributing and Mega-corp was matching with its stock(50 cents on the dollar I believe). Totals went down but have gradually returned. When I retired, as I've stated before, I moved most of my money to Vanguard index funds. Have a 40-60 ratio stocks/bonds. If the market dived again, I don't think I would be as blase' as I was at start of the century.

Jarhead, I believe your defense correlates to Warren Buffet's dictum of the power of "negative" thinking. Expect the worst, and invest accordingly (defensively). Too many people did the opposite during the 90s and they suffered.
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Re: Getting to EnoughExpect the worst, and invest
Old 02-22-2005, 10:45 AM   #64
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Re: Getting to EnoughExpect the worst, and invest

Expect the worst, and invest accordingly (defensively).

I view this as a common sense observation. I've been reading these boards almost daily for close to six years now, and I have seen lots and lots of viewpoints expressed. There are differences in the viewpoints expressed. For the most part, however, a common thread is that the majority of them are rooted in some form of common sense.

I do not think that is so of the claims put forward in the REHP study. That study claims that it is "100 percent safe" to take a 4 percent withdrawal from a 74 percent S&P allocation regardless of the valuation levels that apply. This defies common sense, in my view.

When I began putting together my plan, the REHP study had not yet been published. But there were other studies and analyses out there that said pretty much the same thing. They said that it is always "optimal" to put most of your money in stocks. This was something I just could not buy. It just doesn't make sense to me that there could be one investment class that would always be the best. When something sounds too good to be true, it usually turns out that it is not true.

So I looked at the numbers. I hate numbers. But I felt that I had no choice. I have people depending on me to get this stuff right. So I couldn't afford to just say "Oh, that's what the expert says, so I better just put all my faith in it." I looked at the numbers, I saw where the claims being made fell flat, and I adjusted my investment strategies accordingly.

There are a lot of people who think that SWR analysis is too complicated for them to understand. There are complex aspects to it. But the core stuff is not complex. If I can understand it, anyone can. The reality is that the historical data does not contradict what your common sense tells you, the historical data backs up what your common sense tells you.

The historical data indicates that stocks are a wonderful asset class to invest in. But the historical data also indicates that valuation levels matter. Both of those things are so. That's what your common sense tells you, isn't it? Well, that's just what the historical data tells you too when you examine it using an analytically valid methodology.
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Re: Getting to Enough
Old 02-22-2005, 10:58 AM   #65
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Re: Getting to Enough

Quote:
You can just tell when you have enough, though not always before that. I have three kayaks. I got rid of two, five was too many. When I had one, that was not enough.
I'm actually curious about this, though it may have been answered in some other kayaking thread. Do you use different kayaks for whitewater than for oceans?

arrete
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Re: Getting to Enough
Old 02-22-2005, 11:17 AM   #66
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Re: Getting to Enough

Do you use different kayaks for whitewater than for oceans?

I don't know anything about that. But I was reading an article the other day about Cloud Kayaking--it's all the rage on the West Coast--and it said to be sure to get a specially made Kayak for that. Do not, I repeat do NOT, try to use a whitewater kayak for Cloud Kayaking. It's not safe.
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Re: Getting to Enough
Old 02-22-2005, 11:54 AM   #67
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Re: Getting to Enough

Quote:
-------------------
*

Jarhead, I believe your defense correlates to Warren Buffet's dictum of the power of "negative" thinking. *Expect the worst, and invest accordingly (defensively). Too many people did the opposite during the 90s and they suffered.
Eagel43: Have had many light-bulb moments in my life, and the last one reinforced my current frame of mind that without a pension, and my age, and a very bad habit of playing a lot of tournament golf I would be much more able to handle "being nibbled to death by ducks", than taking a big hit.
Distribution is a whole lot different than accumulation.
Most of the advise on this board, or any other board should be digested, and the hard decision will have to be made on your personal situation.
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Re: Getting to Enough
Old 02-22-2005, 12:00 PM   #68
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Re: Getting to Enough

Quote:

I'm actually curious about this, though it may have been answered in some other kayaking thread. Do you use different kayaks for whitewater than for oceans?

arrete
Basicly there are two kinds of kayaks, whitewater and ocean kayaks (maybe like stocks & bonds?). Within each kind there are several subgroups. It gets down to hull shape and the shape of waves you will be dealing with. Both forms of kayaking are fun. I am primarily an ocean kayaker, prerhaps Riverrat can say more about river paddling.
Kayaks may be more safe than they appear. One fellow crossed the Atlantic iand another crossed from California to Hawaii in a kayak. Both a bit nuts but some people crave risk. If you are taking a long trip you have to be able to sustain an average daily distance (sort of like a SWR) if you don't you may not make your destination.
Then, if out on the ocean, you have to be prepared for bigger waves than those graphed from the Great Depression. A rogue wave/tsunami can give you a great ride or a final resting place depending on how well prepared and whether you see it coming.
Finance--kayaking--its all the same to me.
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Re: Getting to Enough
Old 02-22-2005, 12:23 PM   #69
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Re: Getting to Enough

Hmmm

Sounds like Yakers experienced a 'kayak bubble' and emerged all the wiser.

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Re: Getting to Enough
Old 02-22-2005, 12:39 PM   #70
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Re: Getting to Enough

Quote:
SG and TH

Do you suppose the inflection point is because the "stodginess" of interest rates overwhelms the "volatility" of stock? Curious that it would happen at a particular point.

Higher dividend stocks are nice, but I think they've become so popular that it's a little late to get into them. I'll stick with my guys who increase my capital gains (hopefully).

Can anyone translate unclemick, or do you learn as you go along

arrete
I'd like to give a better answer, and in context, except the thread is so loaded with troll crap its hard to see where the original line of discussion was running. So I guess its been successful once again.

To give a generic answer, i'm not happy with either stocks or bonds right now, but considering the size of my cash position I dont want to keep any more money "out of play". I'm finding it interesting and curious that some members would bail out or make conservative changes if they experienced a drop...thats exactly when you want to stay in, or increase your holdings.

To once again borrow that quote..."Its an interesting business that when things go on sale everyone runs away"...
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Re: Getting to Enough
Old 02-22-2005, 01:13 PM   #71
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Re: Getting to Enough

the thread is so loaded with troll crap its hard to see where the original line of discussion was running.

You don't say.
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Re: Getting to Enough
Old 02-22-2005, 08:39 PM   #72
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Re: Getting to Enough

Quote:
SG and TH

Do you suppose the inflection point is because the "stodginess" of interest rates overwhelms the "volatility" of stock? *Curious that it would happen at a particular point.

Higher dividend stocks are nice, but I think they've become so popular that it's a little late to get into them. *I'll stick with my guys who increase my capital gains (hopefully).

Can anyone translate unclemick, or do you learn as you go along

arrete
Hi arrete,

TH has already given you an answer or I would have missed the question. I had to kayak back two pages to find your post.

There are two different plots that show an inflection point for stock/bond allocation.

The one TH brought up is a plot of return vs risk using stock/bond allocation as a variable. Risk is defined in terms of investment beta (variation). For this case, stock performance has higher returns and higher risk than bonds. In general, the more stock you have in the mix, the higher the return but the higher the risk. However, if the stock portion gets small enough, the variations it imposes (risk) affect the mostly bond portfolio more than the improvement in returns. So going from 85% bonds to 95% bonds not only drops returns, but increases risk. You can define functions on a spreadsheet (superimpose a sine wave and a line with positive slope) for a bond like and stock like performance and add them to observe this effect. You have to play around with variables, but if you want to understand how it happens you can see it. I couldn't see any reason why this would happen, in general, for any two mathematical series, but for historical stock and bond performance, it is true.

The second plot is a SWR plot vs stock/bond allocation. In this case, stocks have outperformed bonds for every 30 year period in US financial history. But a portfolio will fail if the short term stock drop depletes your money early in the cycle. Some bonds protect you from early bankruptsy, but too many keep you from earning enough to stay ahead of inflation.
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Re: Getting to Enough
Old 02-22-2005, 10:47 PM   #73
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Re: Getting to Enough

I agree completely. With a 30 year horizon and stainless steel or brass reproductive organs, a high or all stock portfolio will do ya

A small dose of bonds will take out some of the stomach wrenching if (god forbid) we hit a long, severe rough patch.

On the flip side, inflation will eat you alive if you dont have something that gives you better than the usual intermediate bond return. A dollop of stocks can help fix that.

The 20% thing on both sides is interesting though, but I guess it has to have a break somewhere.
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Re: Getting to Enough
Old 02-23-2005, 02:19 AM   #74
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Re: Getting to Enough

stocks have outperformed bonds for every 30 year period in US financial history.

If I am not mistaken, what you are getting at here is what Jeremy Siegel was getting at when he came up with the title of his book "Stocks for the Long Run." I am rejecting the "Stocks for the Long Run" paradigm. I think that it is important news to aspiring early retirees if in fact the "Stocks for the Long Run" paradigm does not hold water. That's why I spend so much effort trying to get a place at the table for discussion of the Data-Based SWR Tool.

There is no dispute over the fact that what you say above is so in a limited, technical sense. I'm obviously not saying that Jermey Siegel (or intercst) failed to look at one of the 20-year or 30-year periods in the historical record. So what am I saying? I am saying that the conclusion implicit in your words above is a misleading one. Siegel goes places with that statement where I don't think he should be going (Siegel does this a little bit) and intercst goes places with that statement where I don't think he should be going (intercst does this a lot). The question at the root of all this is--Is it reasonable to look only at the historical record in forming an assessment as to what is likely to happen in the future?

That's what you are doing here. You are looking at earlier 30-year time-periods, making a statement as to what happened in them, and then suggesting that something else is so. The "something else" is that it is reasonable to believe that stocks will also do well in the next 30-year time-period. I am rejecting that suggestion. I am saying that it does not logically follow from the words quoted above. I am saying that you are failing to consider a critical variable in the analysis, and that, had you considered that critical variable, you would have arrived at a very different assessment of what is likely to happen in the next 30-year time-period.

Stocks did not do equally well in all of those earlier 30-year time-periods. In some of them, stocks did moderately well. In some, amazingly well. There is a varaible that you could have used to tell you at the start of those 30-year periods whether stocks were likely to do only moderately well or amazingly well. That variable is the valuation level that applied at the start of the 30-year period. There is a strong correlation between the valuation level that applies at the start of a 30-year returns sequence and the long-term return obtained from a stock investment.

Add that variable into your assessment, and you get a very different answer for what is likely to happen in the next 30-year time-period. We have never before been at the valuation levels we entered in the late 1990s. So obviosuly you cannot just look at what happened in earlier 30-year periods to develop an informed assessment of what is likely to happen in the 30-year period now coming up. What you need to do is to examine how much starting-point valuation levels affected the result in the past and then factor that effect into your analysis as to what is likely to happen this time. When you do that, you come to a conclusion that a 4 percent take-out for a high-percentage stock portfolio is not at all safe for those retiring today.

I know that you do not agree with me, SalaryGuru. I am not seeking agreement here. What I would like from you is an honest assessment of whether the question I am putting on the table is a question of sufficient importance to those seeking early retirement that we should be engaging in reasoned discussion of it at this forum.
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Re: Getting to Enough
Old 02-23-2005, 02:37 AM   #75
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Re: Getting to Enough

The question at the root of all this is--Is it reasonable to look only at the historical record in forming an assessment as to what is likely to happen in the future?

I would like to reword that. I think that is is reasonable to look at the historical record as a whole in forming an assessment as to what is likely to happen in the future. I think it is analytically invalid to look at one aspect of the histroical record and ignore other critical aspects.

The returns sequences that we have experienced in the past are one aspect of the historical record, and I think we need to look at those. The effect that changes in valuation levels have always had in the past is a second critical aspect of the historical record, and we need to look at that factor as well in order to draw informed conclusions. To look only at one factor and ignore other critical factors is an analytically invalid approach, in my view.
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Re: Getting to Enough
Old 02-23-2005, 03:36 AM   #76
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Re: Getting to Enough

Quote:
With a 30 year horizon and stainless steel or brass reproductive organs, a high or all stock portfolio will do ya
That's pretty much what I have. I occasionally weed out a stock or 2 which usually gives me enough to live on for the next year. I hope I am only weeding out ones that aren't going anywhere, but you never know.

My husband gets kind of green whenever I mention bonds or CDs. It just makes him ill to think of passing up possible higher returns. So I don't have a bond or CD ladder, and not likely to get one. He is willing to look for high dividend yielding stocks, but I think those have mostly been run up.

So I guess I'll keep doing what I've been doing. It's worked so far.

Don't know about brass or stainless steel, though.

arrete
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Re: Getting to Enough
Old 02-23-2005, 11:18 AM   #77
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Re: Getting to Enough

If you're going all stock, or nearly all stock, I would highly recommend a 3-5 year cash buffer either in short term bonds or cd's. A 7 year bear market, which has happened and probably will happen again will cream your port if you have to tap down your stock holdings while they're off 20-30%+...
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Re: Getting to Enough
Old 02-23-2005, 12:15 PM   #78
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Re: Getting to Enough

If you are 100% stock with enough dividends to live on - AND enough nerve to ride out down markets - you are home free. However! - there are some periods down history lane where dividend growth didn't keep up with inflation.

Chickenheartedness prevents me from going there - so balanced index plus dividend stocks is my reserve after pension and early SS.

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Re: Getting to Enough
Old 02-26-2005, 07:53 AM   #79
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Re: Getting to Enough

Quote:

I'd like to give a better answer, and in context, except the thread is so loaded with troll crap its hard to see where the original line of discussion was running. *So I guess its been successful once again.

To give a generic answer, i'm not happy with either stocks or bonds right now, but considering the size of my cash position I dont want to keep any more money "out of play". *I'm finding it interesting and curious that some members would bail out or make conservative changes if they experienced a drop...thats exactly when you want to stay in, or increase your holdings.

To once again borrow that quote..."Its an interesting business that when things go on sale everyone runs away"...
TH: After a 20 year bull mkt. in stocks and bonds, and last 5 year run-up in Real estate prices, INMHO, there is going to be a helluva lot more pain ("blood in the streets"), before that sale is held.
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Re: Getting to Enough
Old 02-26-2005, 10:08 AM   #80
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Re: Getting to Enough

I couldnt agree more. When I look at every investing option available and want to put a substantial windfall into CASH theres a problem. I almost always find something to put money into thats better than a long CD.
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