Greenspan/Bernanke tag team imperil ER...

[barbarus]

....by weakening the housing market and the economy in general.

Open Letter to Federal Reserve Chairman Ben S. Bernanke - iTulip.com Forums

A sufficient amount of money to retire today may well be too little in a few years.

Unless we're on the cusp of a new golden age of prosperity!

A personal perception: I would think at least 5 million dollars and probably closer to ten would be a prudent amount to save if planning an ER of more than a few years. And that's just for one person.

[dex]

What are you expecting to happen that gives you the 5 to 10 million estimate.

[barbarus]

Quote:

Originally Posted by dex What are you expecting to happen that gives you the 5 to 10 million estimate.

Time and rather vigorous inflation.
Since we're talking about early retirement, that means 30, 40, possibly 50 years to finance?

In my youth, (which wasn't THAT long ago), I'd have never imagined that a million dollars would not set anyone up for life. Here in 2007, even if I had $1,000,000, I would not ER. It could currently supply a modest, comfortable living, but certainly no luxuries. Twenty years from now, it will certainly not.

While the skillful investors (Brewer, HaHa, etc.) who understand the markets will be able to keep up, I don't think most of the readers of this forum are going to comfortably outpace inflation.

Now if I had 10 million....

[samclem]

Quote:

Originally Posted by barbarus While the skillful investors (Brewer, HaHa, etc.) who understand the markets will be able to keep up, I don't think most of the readers of this forum are going to comfortably outpace inflation.

Time will tell, of course. But if most forum participants have a balanced portfolio of equities and bonds, and if history is any guide, then they'll do better than inflation. That's what FIRECALC is about, right?
If you believe things are bound to be significantly worse than the period covered by the FIRECalc data set, then the burden of proof would appear to be yours.

But, definitely keep working as long as you feel you should.

[Nords]

Quote:

Originally Posted by barbarus ....by weakening the housing market and the economy in general. A sufficient amount of money to retire today may well be too little in a few years.

I'd say that blaming an ER failure on either Bernanke/Greenspan or inflation is a good way to escape personal accountability/responsibility. After all if they're preventing our ER then any actual effort or resistance would be futile.

Who was the poster in the DC area a couple years back insisting that their possum-living rock-bottom barebones-quality-of-life absolute minimum was $120K/year? We haven't heard from Donner's Plunge Protection Team lately, either!

Quote:

Originally Posted by barbarus A personal perception: I would think at least 5 million dollars and probably closer to ten would be a prudent amount to save if planning an ER of more than a few years. And that's just for one person.

Do you have any data or FIRECalc runs or actual experience upon which to base that perception?

Or is this another Chicken Little post?

[barbarus]

another Chicken Little post?

Nords, remember the Chicken Littles two years ago who were saying that housing was extremely overpriced and due for a great fall?

Massive economic disaster seems as improbable as a grand economic resurgence here in the US. Conversely, indicators are hinting that things are going to get worse in a substantial way. In the long run, stuff is going to cost more. More than the ability of most of us to keep up, I fear.

We'll find out as the years pass.

[unclemick]

Quote:

Originally Posted by barbarus another Chicken Little post? Nords, remember the Chicken Littles two years ago who were saying that housing was extremely overpriced and due for a great fall? Massive economic disaster seems as improbable as a grand economic resurgence here in the US. Conversely, indicators are hinting that things are going to get worse in a substantial way. In the long run, stuff is going to cost more. More than the ability of most of us to keep up, I fear. We'll find out as the years pass.

1966 - $8300/yr no experience, considered very good pay for a begining Boeing engineer in Seattle.

1992 - $60 k and out the door.

Then again as far as keeping up goes - some of us cheap bastards can run really fast.

all praise be to Bogle and balanced index funds.

heh heh heh heh heh heh heh heh heh -

[Delawaredave5]

Quote:

Originally Posted by barbarus Conversely, indicators are hinting that things are going to get worse in a substantial way. In the long run, stuff is going to cost more. More than the ability of most of us to keep up, I fear.

I think a "70's scenario" is quite possible- dollar keep falling, countries don't want to buy our debt, global oil starts trading in non-dollars, interest rates rise, China and Saudis diversify out of dollars, etc.

That's the reason for a balanced portfolio -and FireCalc's supposed to test that balance across a "wide array of storms".

Doesn't keep me up at night.......

[Bigritchie]

Quote:

Originally Posted by Delawaredave5 I think a "70's scenario" is quite possible- dollar keep falling, countries don't want to buy our debt, global oil starts trading in non-dollars, interest rates rise, China and Saudis diversify out of dollars, etc. That's the reason for a balanced portfolio -and FireCalc's supposed to test that balance across a "wide array of storms". Doesn't keep me up at night.......

If we do get a 70's scenario, maybe we will at least see some of those 10% checking accounts again hehe.

[cyclone6]

So some of you agree with me...that we're facing a very challenging investing environment coming up. (Or more likely, that its already started, and we'll just know for sure looking back at it a year or two from now - FED cut enthusiasm and Brewer's constructive comments aside...)

How are you folks positioning yourselves?

Heres where I am at the moment:

60% - CDs, MMs yielding 5+%
10% - Foreign unhedged bonds
20% - Absolute return fund (HSGFX)
10% - Conservative allocation (HSTRX) - largely in TIPS

As is readily apparent, I'm a big fan of Hussman - especially his track record during the '00-'02 market retreat. I really do believe that we are entering some very bleak investing times, and that the standard "60/40 buy-and-hold" approach could well get you much poorer. That being said, that is the advice you see damn near everywhere. So therefore I'm leaning towards trusting someone else to understand where this might be headed, and letting him worry about where to invest when the dollar is crumbling, housing is imploding, and - we shall see - the stock market starts to head south.

Think I might just keep 3 years of living expenses in CDs/MMs, keep my foreign bond percentage, and split the rest between the two Hussman funds...

You guys?

[fluffy]

What else would you expect from a chicken little website? The more of these I see the better I feel about economy.

[unclemick]

Quote:

Originally Posted by fluffy What else would you expect from a chicken little website? The more of these I see the better I feel about economy.

Hey - I used to read that website back in the dot.com 90's days when they said the bubble was gonna pop someday - lost interest when it finally did.

Had plenty of time cause we were retired on his and hers 300k - from 1993 when a dollar was a dollar(heh heh couldn't resist!).

Ya gotta pay attention to the wisdom of the real guru's like Bear Bryant and Yogi Berra - not those self appointed weenies who think they are knowledgeable.

I've only been practicing full time retirement since 1993.

Sooo - if someone wants to give me 5 or 10 mil so's I can become professional - I'm ready - put me in coach!

heh heh heh

[chinaco]

Here is some perspective.

If you look at the exchange rate of the EURO and $ today, is is not far from the Euro equivalent (ECU) in 1995.

Sometimes the dollar is weak. I am confident that it will come back.

[audreyh1]

Quote:

Originally Posted by chinaco Here is some perspective. If you look at the exchange rate of the EURO and $ today, is is not far from the Euro equivalent (ECU) in 1995. Sometimes the dollar is weak. I am confident that it will come back.

And I remember that as a bang-up year for tech stocks! I was working for a high-tech company at the time that had approx 50% in foreign sales. The company had a banner profit year as so did many others - Intels, Dells, etc.

Just think - the years 95-99 were awesome stock market years too.

Audrey

[brewer12345]

Run, little piglets, run!!!

[dex]

I would worry more about deflation rather than inflation.

The USA followed by China and India (relatively small) are the main drivers of world economic growth. The increase in raw materials will be offset by population growth which will force down wages.

There will be areas of higher than normal inflation in the future that we have not talked about over the next 30 years - Food, raw materials, real estate. This will be driven by the growth in population from abut 7B to 10B in 2050. But that increase in population, increase in productivity and new internet technologies will keep wages down or lower them in real terms. I would hate to be starting out now in the work force.

The usual wild cards are out there as they were in the 1970s price controls and other government screw ups in the USA, China or India.

The current credit issues should result in lower prices as people feel poorer and spend less.

I do agree that it will take more money to retire in the future, not because of what was previous mentioned but because a basic rate of inflation of 3+% has become acceptable by all concerned. This was not a generally held belief prior to the 1970s.

Add in the current federal debt and all the "Transfer payment", mandated programs in the federal budget and new health care programs to be enacted and we basically agree but for different reasons.

I believe history will look back at the baby boomer generation as the "Golden" generation that had a very good life that other generations will have a hard time matching.

[audreyh1]

Quote:

Originally Posted by dex I would worry more about deflation rather than inflation.

I agree! Not only is there considerable deflationary pressure from the global economy, but the pending housing slump will exert a strong domestic deflationary influence.

The Euro has appreciated 65% with respect to the US dollar since 2001. Did we see rampant inflation during that time? No, in fact we saw a deflation scare in 2002-2003.

It's tough seeing prices of commodities skyrocket - especially oil. And there are pressures increasing the price of food as well. But somehow it seems that all the other pressures (including weak domestic wage inflation) are counteracting those these at the present time.

I think that if you have a well rounded investment portfolio that includes international stocks as well as stocks of domestic companies that have international sales, your portfolio is somewhat protected from dollar devaluation. You can also hold some international bond funds in your mix, although there aren't as many good global bond funds to choose from as one might like.

Audrey

[Nords]

Quote:

Originally Posted by barbarus another Chicken Little post? Nords, remember the Chicken Littles two years ago who were saying that housing was extremely overpriced and due for a great fall? We'll find out as the years pass.

Hey, I retired in the middle of the tech wreck. I've been through the 1970s, 19 Oct 1987, 17 Sep 2001, and a whole bunch of other scary market scenarios. We didn't chase performance, we tried to stay diversified, we didn't pay (too many) high fees, and we didn't chicken-little out when the going got scary. We DCA'd into the market from 1982-2002, and we dumped in extra during the nasty dips.

Our diversified portfolio has doubled in the last five years (hit two new record highs last week) and we've been happily retired for all of those five years.

Quote:

Originally Posted by cyclone6 How are you folks positioning yourselves? As is readily apparent, I'm a big fan of Hussman - especially his track record during the '00-'02 market retreat. I really do believe that we are entering some very bleak investing times, and that the standard "60/40 buy-and-hold" approach could well get you much poorer. That being said, that is the advice you see damn near everywhere. So therefore I'm leaning towards trusting someone else to understand where this might be headed, and letting him worry about where to invest when the dollar is crumbling, housing is imploding, and - we shall see - the stock market starts to head south. Think I might just keep 3 years of living expenses in CDs/MMs, keep my foreign bond percentage, and split the rest between the two Hussman funds... You guys?

Guys like Hussman do a vital job of building that wall of worry for the market to climb over, even if they're only as accurate as a stopped clock.

We did some bargain-shopping over the last couple months and maybe I got a little overenthusiastic in depleting those cash reserves. We're at the point where the CD dividends & rental home's cash flow are going to have to replenish the money-market account for a few months. But I think I can live with the results.

31% Berkshire Hathaway (BRK.B), up 6% YTD
21% international dividend ETF (PID), up 12% YTD + dividends
17% Dow dividend ETF (DVY), up 2.7% YTD (nearly doubled up on this one)
13% small-cap value ETF (IJS), up 3% YTD + dividends
2% spouse's TSP ("S" fund), up 10% YTD
8% individual stocks, up 10-35% YTD
8% CDs at 6-6.25% APY (8-29 months)

Buy what's cheap, stay diversified, and stick to your plan...

Quote:

Originally Posted by brewer12345 Run, little piglets, run!!!

What he said.

Barbarus, I don't think there's anything I can say that'd change your "Yeah but" frame of mind. As long as you see cracks in that sky overhead, just ignore the cheery news you're getting from FIRECalc and the experts' DCA diversification advice. You have to find your own comfort zone, if you have one, so you keep working and contributing to Social Security & Medicare for the rest of us as long as you want, OK?

You have a nice life now.