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Greater LBYM inspired by falling market?
Old 08-08-2011, 06:37 PM   #1
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Greater LBYM inspired by falling market?

Several of us have said that when markets fall, we plan to spend less than our usual SWR during a thriving market. I know that during 2008-2009, I wanted to spend less than I had been spending.

Are you starting to feel that way, yet? I am already thinking of putting off some furniture purchases, and I haven't browsed on Amazon even once since that first drop last week. We seem to be gravitating towards less expensive restaurants, and I am starting to turn the thermostat up when I can bear it. None of this is actually necessary, but it almost seems instinctual when faced with a falling market.
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Old 08-08-2011, 06:46 PM   #2
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It's a little late for us. We have already booked our flights and hotels for a trip to Seattle and Vancouver. We may refrain from spending too much there.
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Old 08-08-2011, 06:53 PM   #3
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We did cut expenses by 10-15% in 2008. And for the past few weeks, again, I have not been in a mood to spend money. I definitely feel like we should be hunkering down.
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Old 08-08-2011, 06:59 PM   #4
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I'll start to consider it when our SWR is > 4%. Who knows, the market can rise as fast as it falls.

Meanwhile, I'll just convert some cash to dividends. I've never owned a stock that cut it's dividend, but there's always a first time.
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Old 08-08-2011, 07:22 PM   #5
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We have been spending less on groceries. We buy hamburger and hot dogs, make omelets for dinner once a week, lots of salads, and local produce. I am considering giving up cigars (about $100 per month). No trips planned for the next 6 months. Still keeping our $125 per month cell plan and $165 cable/phone/Internet plan for now.
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Old 08-08-2011, 07:28 PM   #6
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Yes, DH and I do plan to tighten our belts a bit. Not putting on the tin foil hats but do want to be a bit more cautious given recent events.
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Old 08-08-2011, 07:29 PM   #7
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I'm not making any changes at this time. I already live below my means and my budget includes a very small amount of savings each month. If things keep going south I won't hesitate to cut back. I'm watching and waiting for now.
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Old 08-08-2011, 07:36 PM   #8
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The short answer is yes. Any six figure down days get my attention.

I had planned on making offers for two rental properties in Las Vegas. I suspect I am only going to make one offer since I am not comfortable borrowing money in this environment.

Second I was toying with getting a new/newer car next year. Mine is 9 years old and certainly shows it age, but is running ok. That thought is now postponed for at least a year.

You multiply changes of mind like I have by many million of investors and it has a real impact on the economy. This in turn impacts also affects corporate earning. Lower earning also impacts corporation ability to payout dividends (although thankfully most corporations with the possible exceptions of banks have strong balance sheets).

Having lived through several dividend cuts in 08/09 I am not anxious to repeat the process. Dividend cuts bother me more than 600 point days. This is in turn will cause me do some belt tighting and like you it is instinctive.

The self fullfilling prophecy is the truly scary part of a a bear market.
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Old 08-08-2011, 07:37 PM   #9
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It's a little late for us. We have already booked our flights and hotels for a trip to Seattle and Vancouver. We may refrain from spending too much there.
We saved a lot of money on our trip to Vancouver in May by using Entertainment online . It is $4.95 a month and gives you access to the discounts for all the cities .We got two for one tour tickets and admission to several attractions plus two for one at some restaurants including the one in our hotel . Vancouver was beautiful .
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Old 08-08-2011, 07:46 PM   #10
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LBYM ispired by falling markets is just the "wealth effect" in reverse. This is a well known phenomenon.

Wealth effect - Wikipedia, the free encyclopedia

What is the Wealth Effect?
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Old 08-08-2011, 07:58 PM   #11
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Since I am only Semi-Retired and still have a paycheck I do plan to continue spending on things that I want to get done before full retirement. I just had a dental implant done today. i also had a $1500 auto repair bill.

I will buy if I can get a great deal for my money. I may not take that vacation that I was going to take after Labor Day. I will go to a friends wedding in October.

I guess you are correct. I am watching the cash outflow more carefully. No drastic cuts yet.
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Old 08-08-2011, 08:06 PM   #12
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Greater LBYM inspired by falling market?

Yes....I'm taking $1k instead of $2k for a spur-of-the-moment night of gambling.
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Old 08-08-2011, 08:43 PM   #13
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We had plans for some home improvement projects (hardwood and ceramic flooring, etc.) over a 3 year period. In case things get worse than I anticipated, DW and I agreed to defer these expenses until things improve.

If many people are thinking the same way, I guess this will cause some ripple effect as less money will be injected into the economy, more unemployment, ....
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Old 08-08-2011, 08:48 PM   #14
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Not really -- I make sure we set $X aside every month for savings and investments. If we do that I'm happy. Crappy economic times add concern for sure, but I think we've found a balance between too much living for today and depriving ourselves for a future there's no guarantee we'll see.

Plus, I haven't invested "new money" in my IRAs for a year now, so we have a lot of cash to start using. I have some of my accounts on autopilot but not these yet. Thus we have a lot of underinvested accounts that I'm thinking I need to start gradually working into being invested.
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Old 08-08-2011, 09:24 PM   #15
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Having lived through several dividend cuts in 08/09 I am not anxious to repeat the process. Dividend cuts bother me more than 600 point days. This is in turn will cause me do some belt tighting and like you it is instinctive.
I agree here. I had minimal div cuts in the last recession, and overall my portfolio income increased, as increases outweighed the few cuts there were.

I have 2 out of 15 holdings that may have soft dividends- WY (a REIT), which I bought for the trees, not the dividend, but they are not earning it so it may disappear. WY is quite leveraged to homebuilding. I would imagine a REIT with no dividend will hit the skids fast, so I'll just buy some more- though I would prefer to buy it all cheap rather than just some of it.

Also I have an oil and gas MLP that has no debt, but does not pay a fixed dividend. The payment is just a passthrough of royalties received in the previous quarter +1. If we get into a recession, NG prices will surely lose more ground, thugh they are low enough already! Anyway, this dividend floats up and down, but in the many years I have owned it it has never been missed totally.

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Old 08-08-2011, 09:43 PM   #16
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Greater LBYM inspired by falling market?

Yes....I'm taking $1k instead of $2k for a spur-of-the-moment night of gambling.
Wow. I had a spur-of-the-moment night of gambling about a year ago. My limit was $50. I guess I'm cheap!
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Old 08-08-2011, 09:47 PM   #17
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We saved a lot of money on our trip to Vancouver in May by using Entertainment online . It is $4.95 a month and gives you access to the discounts for all the cities .We got two for one tour tickets and admission to several attractions plus two for one at some restaurants including the one in our hotel . Vancouver was beautiful .
I will check it out.
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Old 08-08-2011, 11:13 PM   #18
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Wow. I had a spur-of-the-moment night of gambling about a year ago. My limit was $50. I guess I'm cheap!
Ahhhh....maybe...maybe not. Could be you just enjoy spending your money in other ways.
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Old 08-08-2011, 11:32 PM   #19
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No way.

We've had dips like this about five times in the last five years. We haven't recovered to the levels we had after the 2007 drop - does that mean I would be depriving myself for the past 3.5 years?

I plan on a fairly conservative average WR. The whole point to the FIRECALC runs is to show how a portfolio would perform through these kinds of ups and downs with a steady, inflation adjusted withdraw. Seems awful early to decide this dip is different.

If you are planning on a > 4% average WR, I guess I could understand. That may well need a variable spending model.

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Old 08-08-2011, 11:55 PM   #20
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No change. I was DIY & LBYM before early retirement, and remain so after. It never included re-using saran wrap, nor washing out tin foil, so won't start now

What I will do is pay more attention to the market daily (what a drag on my karma) so if it drops to my lower rebalance point, that I increase my equities holding. Back in March or so of 2009, I missed it, my Equities allocation went 5 percentage points below my low-end trigger and I didn't know it, didn't realize it till days later, an opportunity missed.
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