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Re: Holding or investing?
Old 01-15-2004, 08:28 AM   #21
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Re: Holding or investing?

Not to mention - Meskermann's Corallary " That which hit's the fan is not distributed equally".
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Re: Holding or investing?
Old 01-15-2004, 09:03 AM   #22
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Re: Holding or investing?

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I wasn't around during "The Great Depression" but a return of "hard times" wouldn't surprise me a bit.
John, if you were retiring today, what's the least amount you would have in financial assets (not counting house, possessions, cars, etc.). Assume a husband/wife with no debt and a house free and clear.
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Re: Holding or investing?
Old 01-15-2004, 01:02 PM   #23
 
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Re: Holding or investing?

Hello Bob_Smith! Interesting question, especially
since when I did actually retire, it was mostly just
because I wanted to, not because I someone thought I could. But, I
digress. You left out a few details, but I will answer
anyway. Since I am only about 2 years from SS and
since my wife is still working, $100,000 should be plenty.
If I drew it down a little before I hit 62, no problem.
A paid off house and a working wife plus SS on the
horizon? Looks like a no-brainer to me. Got to remember though that I am basically from the
Terhorstian school on ER. Most people couldn't (wouldn't?) do it,
where for me it's relatively easy.

John Galt
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Re: Holding or investing?
Old 01-15-2004, 02:04 PM   #24
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Re: Holding or investing?

John, Your a kept man . How many of you other ERers are also being supported by a working spouse?

When we had our second child back in 1991, my wife became a full time homemaker, and has remained that way. When I think of ER, I tend to view that as including both spouses, no

Doug
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Re: Holding or investing?
Old 01-15-2004, 02:53 PM   #25
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Re: Holding or investing?

I have a follow up question for folks who are parking money . . . As of today, how long have you had money parked outside your target allocations? or waiting to put it somewhere better?
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Re: Holding or investing?
Old 01-15-2004, 03:45 PM   #26
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Re: Holding or investing?

Are we going to get the results of your analysis of this survey at some point? I can't wait to hear your conclusions.

I moved from long-term munis to various short-term instruments starting in July and ending this month. So, various funds have been parked from 0-6 months waiting for interest rates to head up. Still waiting
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Re: Holding or investing?
Old 01-15-2004, 04:11 PM   #27
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Re: Holding or investing?

Quote:
John, if you were retiring today, what's the least amount you would have in financial assets (not counting house, possessions, cars, etc.). Assume a husband/wife with no debt and a house free and clear.
As I am sure that John Galt will proudly acknowledge, he's not typical. *I think that his backup plan for supporting himself in retirement is to keep a set of rabbit snares in working order.

I'm not criticizing the Social Security system when I say that its benefits for most people (including Medicare) will be sufficient to keep them alive, but not to support the type of lifestyle which most people in the U.S. consider "comfortable." *Those dependent on Social Security will be able to afford very little dining out, entertainment or travel. *They will get around town in one very modest old car at best, and will face a real financial crisis if their house is found to have termites or a leaky roof or whatever.

Assuming that a married couple defers retirement until 67, and *that they will live another 20 years, then I think that they could withdraw perhaps 6% per year of their assets. *But if they only have $100,000 in assets, this amounts to only about $6,000 per year. *That won't go very far. (For example, I just looked at an assisted living arrangement for my mother that would provide a small but very nice efficiency apartment, with meals, for $4,100 per month.) *I think that there are going to be a lot of people taking out reverse mortgages to supplement their other sources of income.

And, to pick up from another discussion, there are going to be tough times ahead financially. *But people who are preparing for a repeat of the 1930's Depression will be like the U.S. Navy preparing for war with Japan in 1941 by docking the Pacific Fleet in the "safety" of Pearl Harbor.
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Re: Holding or investing?
Old 01-15-2004, 05:42 PM   #28
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Re: Holding or investing?

Well, I went into half cash in june to buy my new house, then liquidated the rest of my portfolio over july and august. I got the cash settlement on selling my old house in early october. At that point I decided to spend some time figuring out my investment strategy and wait until 1/1 to buy back in. Couple of months. And i've been in my non-end-state portfolio for about a week and a half. Its up $13k w/o dividends registered yet.

So Ted...whats the right strategy for when the Germans bomb Pearl Harbor? Is it a stepped strategy based on specific occurences? A spread spectrum and do nothing sort of strategy? What sort of future do you perceive and how long does it last? I've heard so much doom and gloom about our monetary policy and bad times ahead for US stocks and bonds that i'm almost depressed...
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Re: Holding or investing?
Old 01-15-2004, 07:26 PM   #29
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Re: Holding or investing?

Quote:
I've heard so much doom and gloom about our monetary policy and bad times ahead for US stocks and bonds that i'm almost depressed...
TH, I like to hear gloom and doom. It's when everyone is feeling elated about the outlook that I get concerned.
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Re: Holding or investing?
Old 01-15-2004, 08:21 PM   #30
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Re: Holding or investing?

Quote:
Are we going to get the results of your analysis of this survey at some point? *I can't wait to hear your conclusions.
The beauty of this board is that we all see the results immediately.

Really, I'm just curious. It should be obvious to anyone who is paying attention that there is more than one way to skin this cat (or maybe for this board "scale this fish" would be more appropriate). Sometimes it seems to me like the biggest debates are over issues that probably have a minor effect. At times it seems like we have little in common concerning our strategies and at other times we all seem to agree. I know how I've chosen to skin it, so I'm more likely to learn something valuable if I ask questions about other techniques.
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Re: Holding or investing?
Old 01-15-2004, 09:41 PM   #31
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Re: Holding or investing?

I guess we won't really know the results until one of us runs out of money. Hopefully, Ted will have done well enough that he can bail us out when that happens

As far as doom and gloom goes, if you worry about it, perhaps you're taking too much risk. Personally, the idea of being heavily invested in the stock market and hoping that future performance is no worse than historical performance gives me the willies. Not because I necessarily think that bad times are ahead -- I just feel that it requires a leap of faith, and the underlying theories supporting the idea are a bit shakey.

Obviously, there are no guarantees, but I'm starting to lean towards a combination of hard assets and TIPS as the next best thing to a worry-free retirement.
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Re: Holding or investing?
Old 01-16-2004, 04:00 AM   #32
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Re: Holding or investing?

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I guess we won't really know the results until one of us *runs out of money. * Hopefully, Ted will have done well enough that he can bail us out when that happens *
As I have said elsewhere (and Robert J. Samielson said again in a recent column in Newsweek) the fundamental economic problem facing us in the future will be that of the working population supporting a substantially larger retired population. *Compounding this problem will be a declining availability/increasing price of oil.

The unwillingness of the American people to address these problems explicitly, through higher taxes and serious energy conservation measures, indicate that the financial system will address them through inflation (which is to say, devaluation of certain financial assets). *As I have said in numerous posts, I think that TIPs provide the most assured protection against this. Stocks, REITs, and high yield bonds promise higher returns for at least the immediate future.

But another thing for sure is that those of us who manage to retain the greatest wealth ARE going to be forced (through the political process) to "bail the others out" to some degree. *(As an economic fact, what will really be necessary is that our per capita consumption will need to be constrained so that the limited real wealth will be available to others.) *The way that this will probably happen is through increased taxation of income and possibly of assets, including taxation of all social security benefits. *Those of us who have a lot of financial assets will still be better off than those who don't, but not by as much of a margin as today.

P.S. The idea of increasing the size of the working population through increased immigration will simply defer the problem farther into the future and make it worse then, because even more workers will be required to support the immigrants when they retire. It is physically impossible for the population to keep exponentially increasing forever, and a policy based on the nutty assumption that it can is doomed to fail in a big way.
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Re: Holding or investing?
Old 01-16-2004, 04:13 AM   #33
 
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Re: Holding or investing?

wabmester,

Quote:
As far as doom and gloom goes, if you worry about it, perhaps you're taking too much risk. * Personally, the idea of being heavily invested in the stock market and hoping that future performance is no worse than historical performance gives me the willies.
I understand where you are coming from, but the only thing that prevents the 'willies' is developing a long term plan and sticking to it. If you have to keep re-thinking your position day in and day out, this will give you the 'willies'.

I suggest you read Larry Swedroe's book. "What Wall Street does not want you to know". My guess is that when you are finished you will have a few more insights. Can't hurt for a smart guy like yourself.
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Re: Holding or investing?
Old 01-16-2004, 07:36 AM   #34
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Re: Holding or investing?

I haven't read Swedroe's book, but I've read some of his articles, and he seems to be a pretty diehard MPT guy like Bernstein and the rest.

MPT basically tells you that historical data will give you a good idea of volatility, a fair idea of covariance, and a poor idea of future returns. It also assumes that the stock market is efficient, and when it's not efficient, MPT backpeddles with the old "revert to the mean" idea.

My concerns in the short-term are that the forces that cause the stock market to divert from the efficient model are overwhelming the forces that would cause it to be efficient, and that the risk "premium" paid by the market vs less risky investments has dwindled.

Longer term, my concern is that the idea of the market trending up is based on an ever-growing GDP. The last 100 years have been remarkable in terms of US growth, but I think the country has matured to the point when we shouldn't expect that kind of growth going forward.

So, from my standpoint, the stock market promises risk and volatility without promising the kind of returns such risk should warrant.
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Re: Holding or investing?
Old 01-16-2004, 08:16 AM   #35
 
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Re: Holding or investing?

Hey Wabmester! Re. stock market risk...........
Amen brother!

John Galt
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Re: Holding or investing?
Old 01-16-2004, 09:11 AM   #36
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Re: Holding or investing?

Ted,
Addressing future problems with increasing taxes reminds me of the Democrat's philosophy of "taxing us into prosperity". A philosophy that Howard Dean and my infamous governor Rendell (of Pa) aspire to.
One way to address the problem of oil, is to find ways to use less of it. Another way is to get and use the oil in Alaska while we're looking for other ways to use less of it. We need to put the screws to OPEC. And spending money on space travel definitely hurts our future. The politicians had better wise up; I'm not holding my breath.
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Re: Holding or investing?
Old 01-16-2004, 09:34 AM   #37
 
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Re: Holding or investing?

Bennevis, it's a good idea not to hold your breath
until the politicians wise up. Guarantees you a quick demise.

BTW, I lived in Texas when Dubya was elected
governor. There was not a happier man in Texas when
he beat Ann Richards. Now, he has lost me completely.
I don't think he has any reservations whatsoever about
spending our money willy-nilly on every crackpot idea
that appears. Sooooooooooo, in that respect he
out-Democrats the Democrats. It may get him
reelected, but I have lost all respect for the man,
and it pains me to say that.

John Galt
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Re: Holding or investing?
Old 01-16-2004, 09:40 AM   #38
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Re: Holding or investing?

I love big govt., I love space travel, and Howard Dean reminds me of Harry Truman - Give them HELL Howard! Even when your wrong - I still like you.

P.S. My pension comes from Lockheed.
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Re: Holding or investing?
Old 01-16-2004, 09:41 AM   #39
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Re: Holding or investing?

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Ted,
Addressing future problems with increasing taxes reminds me of the Democrat's philosophy of "taxing us into prosperity". * * A philosophy that Howard Dean and my infamous governor Rendell (of Pa) aspire to.
One way to address the problem of oil, is to find ways to use less of it. * Another way is to get and use the oil in Alaska while we're looking for other ways to use less of it. * *
It is a basic economic principle recognized particularly by "free market" economists, that the real tax on a population is whatever government spends. If government expenditures greatly exceed the taxes that are explicitly collected, then government must borrow and/or "print" money to make up for the deficit. (borrowed money must be paid back with interest, making future government expenditures even greater.) So, in the absence of sufficient taxes, government ultimately turns to "printing" money at a rate that is much higher than the real growth of the economy can absorb, creating accelerated inflation. This effectively takes purchasing power away from people holding financial assets and lightens the financial burden on workers who are paying taxes and interest.

I think that there are a lot of legitimate ways for government to spend money -- particularly on national defense -- but if people aren't willing to pay higher taxes to support this, they will pay the cost in other ways that are even less fair. Having served overseas in the Army myself, I don't have much sympathy for people whining about their taxes and high gasoline costs while American troops are dying for our national interests -- particularly when one of these is to maintain access to world oil markets.

Advocating developing the Alaska oil fields as a solution is basically a cop-out because the oil there is only a fraction of a year's usage by the U.S. I'll support doing it when we seriously encourgae conservation by putting a tax on oil that reflects its true cost and mobilizes market forces to encourage conservation.
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Re: Holding or investing?
Old 01-16-2004, 12:10 PM   #40
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Re: Holding or investing?

So this brings on an idea and a question that keeps poking me.

If oil exploration increases and a shortage are in the cards then buying oil and gas stocks (Vanguard Energy?) seems like a great long term bet...and the current returns and yields dont suck either.

This whole TIPS thing keeps making me think. I agree that when inflation is in gear they'll make the world of sense. But they seem to have lousy returns. What are the current (- inflation) yields? Under 2%? Given that the fed will probably raise rates 100 to 150 basis points BEFORE they see significant inflation (just to give some room to cut if the economy slows down), wouldnt that boost the immediate (- inflation) tips yields for new bonds sold? Or do I just completely not understand some fundamental aspect of these?
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