Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-11-2010, 08:20 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by haha View Post
I do think there is not much around now . . .
Good thoughts. Thanks for them.

Long CDs do seem like one of the better bargains out there as long as you're careful to only buy the ones with small break fees. 3% won't make you rich, but you do come out ahead in almost every environment.
__________________

__________________
Gone4Good is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-11-2010, 08:24 AM   #22
Recycles dryer sheets
Steve O's Avatar
 
Join Date: Dec 2007
Posts: 291
And here I thought all the worker bee's were slaving away paying off all that CC debt and being responsible...

Write-offs are driving decline in credit-card debt - MarketWatch

This doesn't look too good, all the people that default will not be getting credit in the future...
__________________

__________________
FIRED at 39 in 2008...
Steve O is offline   Reply With Quote
Old 03-11-2010, 08:32 AM   #23
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Steve O View Post
This doesn't look too good, all the people that default will not be getting credit in the future...
It's good in the long term in that it helps stave off another debt bubble. It makes things more painful in the short term as it reduces demand that much more, but it's like eating your least favorite vegetable -- for a while it tastes terrible, but in the end it's good for you. IMO, that's what this credit contraction is.

As much as I want to see the economy turn the corner and stay there for a while, rushing it with artificial infusions of more credit and spending only set the stage for a repeat performance of what we went through in 2008-09.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-11-2010, 11:13 AM   #24
Thinks s/he gets paid by the post
 
Join Date: Jul 2004
Posts: 1,072
From the Pension thread.
Quote:
"One of the big concerns for me how do we get to an 8% average return, given the current bond and stock markets. Bonds have a had great 30 year run as interest rates have plummeted from the double digit range. A big portion of bond returns came from capital gains. Given the current interest I don't think it is mathematically possible (baring a depression) for bonds to have another 10 or 30 year period like the last one. The pension/insurance/private equity/hedge fund manager and individual investor all face the same challenge. If you have 30-60% of your assets in fixed income and we know those returns going forward are going to be less, it requires stocks to have double digit returns. Considering the remarkable rally (at least some of which makes sense compared to winter 2008/spring 2009 market levels) we have had in the last year is that a realistic assumption?"

You know - I seem to remember Bernstein in Four Pillars predicted lower rates of return - i.e. he thought that 3-4% (I'm relying on faulty memory regarding the numbers and am too lazy to look it up right now) was what one should look for in equities - 8% was very high for him - I guess my next question is where have these people been with this Pension thread as Four Pillars has been out for awhile.....
__________________
Deserat aka Bridget
“We sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm.” - George Orwell/Winston Churchill
deserat is offline   Reply With Quote
Old 03-11-2010, 02:21 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by haha View Post

Sometimes we forget that you can last a very long time just by taking refuge when things appear to be not very promising. Today's dilemma is that inflation could break out at anytime, and reach any level. So what we want is investments that would thrive in an inflationary environment, but would not get killed in a prolonged environment like today's.

My approach is to avoid guaranteed losers in an inflationary environment. For me that means absolutely no non-indexed long bonds.

I want to do well in inflation, and survive in other conditions. I am willing to forgo upside during deflation, as I think a true prolonged deflaion is unlikely. Nevertheless, I don't want guaranteed losers in a deflationary enviromnment either. Visibility is just not good enough to leave that whole flank undefended.

TIPS are not cheap, but they survive deflation and they thrive in inflation.

Quitting work early is risky, so if we want to do it we should realize what we may encounter.

Ha
The trouble is that none of these investments provide sufficient income unless you have very low income requirements or a very large portfolio.

Lets take a look at $1 Million invested conservatively in today environment

AA income
5 Year CD ladder 25% $4,000
10 yr TIPs 20% $2,800
30 yr TIPs 20% $4,400
Total Stock Mkt 35% $7,000
Total 100 $18,200

Even assuming zero inflation withdrawing 4% (or 3.5% for early retirees) while receiving income of under 2% leaves a pretty huge gap if we have another decade of flat equity returns.
__________________
clifp is offline   Reply With Quote
Old 03-11-2010, 03:56 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Quote:
Originally Posted by clifp View Post
The trouble is that none of these investments provide sufficient income unless you have very low income requirements or a very large portfolio.

Lets take a look at $1 Million invested conservatively in today environment

AA income
5 Year CD ladder 25% $4,000
10 yr TIPs 20% $2,800
30 yr TIPs 20% $4,400
Total Stock Mkt 35% $7,000
Total 100 $18,200

Even assuming zero inflation withdrawing 4% (or 3.5% for early retirees) while receiving income of under 2% leaves a pretty huge gap if we have another decade of flat equity returns.
Well, I don't want to play the "well what would you do card?" Overall this just is not an easy time to live on capital.

However, even another 10 years of flat markets does not mean that there won't be reasonable things to buy, or perhaps to sell, somewhere along the way.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 03-11-2010, 07:56 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,260
Quote:
Originally Posted by clifp View Post

Even assuming zero inflation withdrawing 4% (or 3.5% for early retirees) while receiving income of under 2% leaves a pretty huge gap if we have another decade of flat equity returns.
I'm pretty sure that if you look at some of those FIRECALC runs, there would be portfolios that had to draw 2% of principle for a while, yet ended up in a happy place.

Of course, we don't know if this is one of those runs, or another one that ended poorly. As Ha said a few posts back:

Quote:
Quitting work early is risky, so if we want to do it we should realize what we may encounter.

Ha

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 03-11-2010, 08:53 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by haha View Post
Well, I don't want to play the "well what would you do card?" Overall this just is not an easy time to live on capital.

However, even another 10 years of flat markets does not mean that there won't be reasonable things to buy, or perhaps to sell, somewhere along the way.

Ha
Well I suppose it is some constellation that even wise and sage investor like Ha Ha and others on the forum are having a difficult time. On the other hand I really was looking for an EASY BUTTON, and was hoping you could provide it. But "not easy" is a real understatement.

Even in Fall 2008 and last spring, when the financial system was collapsing, I was confident that high quality stocks were really undervalued and eventually fundamentals would triumph fear. Unfortunately, I was all in, with no cash left by Jan 2009 and could only watch as the cards were dealt last March.
The good news is that I and the numerous folks on the forum who didn't sale have been vindicated by the market rally in a very short time.

I find this environment to be the worse ever for investing, with some clearly overpriced assets, no under-priced assets, and cash paying nothing.

Buffett's advice that investing is different than baseball you don't have to swing at bad pitches certainly applies today. I just find it harder to sit and do nothing when Mr Bear Market and the Great Recession has put lots of runs on the board in the last few years.
__________________
clifp is offline   Reply With Quote
Old 03-11-2010, 09:45 PM   #29
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,032
Quote:
Originally Posted by clifp View Post
Well I suppose it is some constellation that even wise and sage investor like Ha Ha and others on the forum are having a difficult time. On the other hand I really was looking for an EASY BUTTON, and was hoping you could provide it. But "not easy" is a real understatement.

Even in Fall 2008 and last spring, when the financial system was collapsing, I was confident that high quality stocks were really undervalued and eventually fundamentals would triumph fear. Unfortunately, I was all in, with no cash left by Jan 2009 and could only watch as the cards were dealt last March.
The good news is that I and the numerous folks on the forum who didn't sale have been vindicated by the market rally in a very short time.

I find this environment to be the worse ever for investing, with some clearly overpriced assets, no under-priced assets, and cash paying nothing.
I agree. The only investment I have bought recently that I feel totally great about is i-bonds (even with a dismal real rate of only 0.3%!). I had another lump sum to invest today and I had to force myself to invest half of it in stocks because I had let my AA slip below 45% equities, but I kept the other half of it in cash (earning 0.8%) because I just didn't know what else to buy at this point.

In late 2008 / early 2009 I was pretty scared, but at least I saw some investments with appealing valuations and I had enough liquidity to double down on a few things which paid off handsomely when the market recovered. Now, I am more concerned about protecting those gains and I am willing to wait until better buying opportunities present themselves before putting the cash to work.
__________________
FIREd is online now   Reply With Quote
Old 03-11-2010, 11:26 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,389
Quote:
Originally Posted by FIREdreamer View Post
...I am willing to wait until better buying opportunities present themselves before putting the cash to work.
Well, there have recently been "dancing" and wh*** postings.

You may get your chance soon.

Or not.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 03-13-2010, 08:59 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
My recent investment activities include:

1) Buying my first ever CD
2) Moving cash from money market funds to an on-line savings account
3) Buying 30yr TIPS at auction
4) Taking stock mutual fund dividends as distributions rather than reinvesting

5) At some future date - selling some stock to bring my allocation down to a lower target in accordance with a now lower planned withdrawal rate.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-13-2010, 09:19 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,408
1. Learn to speak a few words in Norwegian.
2. Stamp out any deep thinking.
3. Meditate on : Pssst Wellesley.

heh heh heh - this thread needs a little humor. For extra points you can look up the current SEC yield of said fund.
__________________
unclemick is offline   Reply With Quote
Old 03-13-2010, 09:41 AM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,455
Quote:
Originally Posted by unclemick View Post
1. Learn to speak a few words in Norwegian.
2. Stamp out any deep thinking.
3. Meditate on : Pssst Wellesley.

heh heh heh - this thread needs a little humor. For extra points you can look up the current SEC yield of said fund.
Oh Mick! You do so broaden our perspective!

Audrey

P.S. I already looked it up yesterday and posted it for Midpack - 3.27%
__________________
audreyh1 is online now   Reply With Quote
Old 03-13-2010, 10:19 AM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Hmm, I guess I simply do not know what all the anxiety is about. Bonds look generously valued to me, but if you stay within 5 to 7 year maturities you can lock in a decent yield and go back to sleep for a while. Equities OTOH, look pretty attractive to me. You can buy very attractive companies at low multiples and in many cases get a pretty fair dividend yield at the same time. What, for example, is terrible about SYY at $28 and change? The thing is a juggernaut in its market with a stable balance sheet, solid cash flow generation and the ability to beat its smaller competitors to death in this environment (or buy them). There are many similar examples to point to. It appears to me that many companies agree with me because I note that merger activity (especially strategics) is starting to really ramp up.

BWTFDIK?
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 03-13-2010, 04:14 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by brewer12345 View Post
Hmm, I guess I simply do not know what all the anxiety is about. Bonds look generously valued to me, but if you stay within 5 to 7 year maturities you can lock in a decent yield and go back to sleep for a while. Equities OTOH, look pretty attractive to me. You can buy very attractive companies at low multiples and in many cases get a pretty fair dividend yield at the same time. What, for example, is terrible about SYY at $28 and change? The thing is a juggernaut in its market with a stable balance sheet, solid cash flow generation and the ability to beat its smaller competitors to death in this environment (or buy them). There are many similar examples to point to. It appears to me that many companies agree with me because I note that merger activity (especially strategics) is starting to really ramp up.

BWTFDIK?
Nothing wrong with Sysco I've owned it for a couple years and it is now a whole penny/share higher than when I bought it. I've collected a 3%+ dividend, which has been raised by a few pennies. While I agree its competitive strength is excellent, cutting back on restaurant meals is an obvious economy measure for many Americans and that will clearly impact SYY profits. The company has 15-16 P/E which while not outrageous isn't exactly cheap for a slow growing business.

Now I much prefer collecting Sysco 3.5% dividend which the company has consistently raised, to keeping the money in cash or say buying a 10 year Treasury bill at the same yield. But if the risky equity portion of your portfolio is only earning 3.5% in income and perhaps another 3-4% in capital gains you are looking at 7% total returns and only if the economy recovers in a reasonable fashion. It is hard to construct a portfolio that you can withdraw 4% a year from.
__________________
clifp is offline   Reply With Quote
Old 03-13-2010, 07:11 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by clifp View Post
Now I much prefer collecting Sysco 3.5% dividend which the company has consistently raised, to keeping the money in cash or say buying a 10 year Treasury bill at the same yield. But if the risky equity portion of your portfolio is only earning 3.5% in income and perhaps another 3-4% in capital gains you are looking at 7% total returns and only if the economy recovers in a reasonable fashion. It is hard to construct a portfolio that you can withdraw 4% a year from.
Help me out here: you just outlined a portfolio that ears 7% a year and you can't figure out how it could suuport a 4% withdrawal?
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 03-13-2010, 07:36 PM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by brewer12345 View Post
Help me out here: you just outlined a portfolio that ears 7% a year and you can't figure out how it could suuport a 4% withdrawal?
I wasn't being clear but I am talking about the standard 4% inflation adjusted SWR. If we assume a normal 3% inflation rate (and obviously there is a decent risk that inflation could be much higher) . I figure a company like Sysco to increase dividends at rate equal to inflation and the stock price to keep pace with dividend payments. Thus SYY and similar companies can provide a real return of 3.5%. If you have a 50/50 AA that means that cash and fixed income need to generate the rest. They currently fall way short of that mark. Even if you move to 75/25 AA like mine it is really tough to construct a decent Growth and Income portfolio. Not to mention if we have a W shaped recovery the equities risk being punished again.
__________________
clifp is offline   Reply With Quote
Old 03-13-2010, 07:41 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by clifp View Post
I wasn't being clear but I am talking that standard 4% inflation adjusted SWR. If we assume a normal 3% inflation rate (and obviously there is a decent risk that inflation could be much higher) . I figure on a company like Sysco to increase dividends at rate equal to inflation and the stock price to keep pace with dividend payments. Thus SYY and similar companies can provide a real return of 3.5%. If you have a 50/50 AA that means that cash and fixed income need to generate the rest. They currently fall way short of that mark. Even if you move to 75/25 AA like mine it is really tough to construct a decent Growth and Income portfolio. Not to mention if we have a W shaped recovery the equities risk being punished again.
As far as I can tell, 3% inflation is not even on the horizon on the moment. If and when it materializes, its hard to imagine that SYY won't be a major beneficiary (and so will lots of other compaines). And if your port spits 3.5% real over several decades, we would be talking baout a major historical anomaly vs. what similar portfolios have earned over long stretches of history.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 03-13-2010, 09:52 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Quote:
Originally Posted by brewer12345 View Post
Hmm, I guess I simply do not know what all the anxiety is about. Bonds look generously valued to me, but if you stay within 5 to 7 year maturities you can lock in a decent yield and go back to sleep for a while. Equities OTOH, look pretty attractive to me. You can buy very attractive companies at low multiples and in many cases get a pretty fair dividend yield at the same time. What, for example, is terrible about SYY at $28 and change? The thing is a juggernaut in its market with a stable balance sheet, solid cash flow generation and the ability to beat its smaller competitors to death in this environment (or buy them). There are many similar examples to point to. It appears to me that many companies agree with me because I note that merger activity (especially strategics) is starting to really ramp up.

BWTFDIK?
You make a good case, Brewer. But Martin Whitman wrote in The Agressive Conservative Investor that the financial position of the security buyer is at least as important as the financial position of the security issuer. So as a retired non-pensioner I feel that I want to be shooting fish in a barrel or I don't plan to shoot. In the past, I always had opportunities to do that. Those days may be over, but they may not, and meanwhile I am not hurting myself much by keeping some powder dry. Equities really have not done much for close to 6 months.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 03-14-2010, 03:33 AM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by haha View Post
You make a good case, Brewer. But Martin Whitman wrote in The Agressive Conservative Investor that the financial position of the security buyer is at least as important as the financial position of the security issuer. So as a retired non-pensioner I feel that I want to be shooting fish in a barrel or I don't plan to shoot. In the past, I always had opportunities to do that. Those days may be over, but they may not, and meanwhile I am not hurting myself much by keeping some powder dry. Equities really have not done much for close to 6 months.
In my case, I've found that I can miss fish in barrels. Case in point, I have touted the bank BB&T as great dividend stock many times. "it has paid dividends for more than 110 years, raised them for more than 20 years, and only cut them once by a penny during depression" was something I use to say. All of which was true right up until last spring when the dividend was chopped form .47 to .15. Now a .15 dividend is three times a typical post TARP bank stock, the stock is trading at $30 not far below my $35 purchase price and I think BB&T is worthy candidate for the least stupid bank in the last decade.
But alas it is still a stupid bank and my dividend check has gone from $1880/year to $600 and the prospects for earnings and dividend growth aren't great.

Back in 2007 BB&T made $3.14 returned 60% of that to share holders as dividend, was conservatively run, very well capitalized and the stock traded for $40 providing a 4.7% yield. In 2009, it earned 1/3 as much the dividend is 1/3, still conservatively run, but God knows how much dodgy debt on underwater residential and commercial properties are on its books. In 2007, BB&T at $40 was fish in barrel, in 2010 at $30 it is a sniper shoot.

I could do the same analysis for almost every stock in my portfolio. 3M same price today as 2007, yet it is earning 1/3 less, and has significant unfunded pension problems. KMP 2007 price $53 2010 price $65 revenue down 24% earning down 45%. Intel 2007 $19 2010 $21 revenue down 9% earnings down
35%. I know the market is forward looking but it seems like Mr. Market is predicting that a better than 2007 economy is just around the corner.
__________________

__________________
clifp is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Medium term car rental utrecht FIRE and Money 1 09-15-2009 01:58 PM
Vehicle Safety:IIHS Tests A Few Small Cars Against Medium Cars samclem Other topics 15 04-16-2009 01:29 PM
SS May Never Run Out of $$ mickeyd FIRE and Money 37 06-06-2008 09:55 AM
What a run! Sam FIRE and Money 52 10-10-2006 09:32 PM

 

 
All times are GMT -6. The time now is 07:26 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.