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Old 11-12-2008, 08:33 PM   #41
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This is really good to hear! And it's not surprising. It's downright brutal to sit through this. And it's not hard to see that those who don't have a historical perspective, the knowledge of the statistics, and the kind of mutual support that we get here, would be bailing out. The emotions are very powerful.

One way I think of this situation that helps me stay calmer is this:

If I were to take all my money out of the market and it went down say 20% more, and then I was able somehow to magically reenter the market at exactly that level when it eventually goes through that point for the last time on the way up, I would earn money market rates on it during that time. But if I stayed in the market and earned the dividend rate I would be even or ahead since div rates (on a broad market porfolio) are at least what you'd get in a MM and much higher with a high(er) yielding type portfolio.

And of course it's not likely that somebody who bails out now would have the guts to get back in until it has risen substantially higher than their exit point, because they'll want to be sure that it's not just going to dive on them again. The volatility is what was killing them. So they'll undoubtedly lose out on some substantial part of the recovery.

And it's very unlikely that they would bail out and then be able to (i.e. have the guts to) get back in at some lower point thus enhancing their returns. And of course there's the problem with the possibility of bailing at the very bottom.

So if you're going to be invested at all why would you get out at this point? Unless you think the end of the world is indeed nigh, or at best that the market will be flat to down from here to eternity.

So, as long as you don't need to spend the money right now, why sell? (rhetorical)

Of course a bad strategy that left you short of cash equivalent money to live on at this point can't be fixed. You're left with the ugly prospect of having to sell at this untimely point. But that's not what we're talking about here, I'm sure. This is just about the emotions overwhelming people that perceive that permanent loss of large amounts of money.

But again, just from a selfish perspective, let them sell! We need it for a true bottom.

Anybody see any flaws in this thinking?
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Old 11-12-2008, 08:36 PM   #42
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Originally Posted by jIMOh View Post
I see it on internet boards like this- people bailing left and right. I work odd hours (1-10pm) so I don't interact with real people to know what the masses are doing.
My wife tells me about co-workers which are bailing.

We just keep buying and pray we stay employed long enough (another 18 years?) to be able to leave on our own terms.
That would be my dream shift. You get to sleep in and still go to bed at a reasonable time and live a relativly "normal" life. I work 4:54p-5:00a

I have not sold a thing during the drop and, for better or worse, won't sell anything no matter what(except rebalancing). I have 15+ years to FIRE.
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Old 11-12-2008, 08:42 PM   #43
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Originally Posted by toofrugalformycat View Post
The few people I talk with about investing have not bailed yet, nor have I.
But my buying of equities to rebalance is at a, shall we say, timid pace.

Me too !
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Old 11-12-2008, 08:53 PM   #44
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Originally Posted by ziggy29 View Post
...and hearing more people who had previously been committed to buying and holding, people who were committed to hang on to eventually get their losses back, throwing in the towel and surrendering?... I think many of them sense it will be a terrible long-term decision...but they just can't take it any more.
dh2b and i are using this as our new theme song...<get the music going>

For united we stand
Divided we fall
And if our backs should ever be against the wall
We'll be together...together...you and I...

full lyrics at http://upload-gdc.mtv.com/lyrics/son...6/lyrics.jhtml

he is a brand new investor as of June of this year. can you say Trial by Fire? poor guy. it is times like this that test a man's mettle.
he has said things like "i'll never be able to retire" and "i'm gonna lose it all". he has 10 yrs til retirement.
but between me and one of his cow*rkers, we keep him from panicking. he is staying the course. so am I.
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Old 11-12-2008, 09:41 PM   #45
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According to this article, now may be the time to buy--at least for some people.





"Consider the top line in the chart nearby, which depicts the dividend/price ratio for NYSE stocks. Dividends are stable over time, so this ratio lets us compare stock prices at different points in time. Read it as an upside-down price chart. When prices rise, as in the boom of the 1990s, you can see the dividend yield decline, and vice versa. The lower line is the following seven-year return; it tells you how much total return, if you invested $1 on a given date, you would have made in seven years."

and

'If you're less leveraged, less affected by recessions, and have a longer horizon than the average, it makes sense to buy. If you're more leveraged, more affected by recession or have a shorter horizon, it might be the time to sell, even though you might be cashing out at the bottom. If you're about the same as everyone else, do nothing and relax. If you're wrong, at least you will have excellent company."
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Old 11-12-2008, 09:50 PM   #46
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Originally Posted by samclem View Post
If you're wrong, at least you will have excellent company."
Yep, I take some solace in that statement as well. Misery loves company.

Interesting article. Thanks for the link.

Sure wish that div/price ratio was higher though. On second thought, I'll take what we've got. Now if I was 20 yrs younger....

It's funny (in a perverse way) remembering how div yields were being dismissed as irrelevant and passe' back in the late '90s.
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Old 11-12-2008, 11:45 PM   #47
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The buy and hold philosophy
is an idea whose time as ended
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Old 11-13-2008, 12:21 AM   #48
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The buy and hold philosophy
is an idea whose time as ended
Prove it.
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Old 11-13-2008, 12:52 AM   #49
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Originally Posted by FIREdreamer View Post
Prove it.
I wish y'all would quit quoting her so my ignore list would work.

Personally I agree with Helena. Everybody sell your stocks tomorrow. I need to have the price driven down so my DCAing will be at an ever decreasing price. Then when I sit back and hold for 10 years the prices can double a couple of times instead of just once.
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Old 11-13-2008, 11:14 AM   #50
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Originally Posted by jIMOh View Post
I see it on internet boards like this- people bailing left and right. I work odd hours (1-10pm) so I don't interact with real people to know what the masses are doing.
My wife tells me about co-workers which are bailing.
Quote:
Originally Posted by FIREdreamer View Post
I have noticed more people either throwing the towel or starting to doubt their strategy. I have seen it on various message boards but I have also seen friends and family members pulling the plug.
But with headlines like: "the death of buy and hold", "the death of dividend investing", "the lost decade", "the death of equities", etc... who can blame them?
These are the same people who, a year after the recovery, will point out that they were buying with both hands, including trading options, precisely at the bottom of the market.

Quote:
Originally Posted by harley View Post
I wish y'all would quit quoting her so my ignore list would work.
We need two more sections in the Soapbox: "Stock market doom & gloom" and ""Stock market Pollyannas"... those sound much more diplomatic than "pounding on a one-key piano".
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Old 11-13-2008, 11:34 AM   #51
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These are the same people who, a year after the recovery, will point out that they were buying with both hands, including trading options, precisely at the bottom of the market.
True - most people only talk about their wins.
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Old 11-13-2008, 11:54 AM   #52
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Why in the world would I want to stop my income stream?
While I am not buying at the moment, I certainly won't be selling.
Ziggy, you did such a great job with oil (thank you again), perhaps if you sold all your stock the market would start a slow recovery?
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Old 11-13-2008, 12:08 PM   #53
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Originally Posted by FIREdreamer View Post

Prove it.

To some people buy and hold may be the 11th commandment,
but not to me.

I sold high last year before I retired, so I am making money
not losing money in this current stock market crisis.

btw... the DOW just now dipped into the 7000s.


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Old 11-13-2008, 12:12 PM   #54
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Old 11-13-2008, 12:12 PM   #55
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btw... the DOW just now dipped into the 7000s.
Thanks, maybe it is time to start buying again.
Sysco or Kraft.... hmmm
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Old 11-13-2008, 12:23 PM   #56
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I am still buying, 401ks, 403bs, and a few individual stocks for fun. I am intrigued by the low pe ratios and high dividends of some individual stocks. Pfizer has a 7.6% dividend, Altria - 7.4%, Bank of America - 6.8%, Worthington Ind - 6.1% and trading at less than book value. Maybe they are all going out of business. I don't know. But if they somehow make it and we don't all go back to living off the land, some of these values will turn out to be good buys.
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Old 11-13-2008, 12:41 PM   #57
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I don't talk about investing to very many people in my daily life. One or two are in government treasury funds only and always have been. One lost her TSP password years ago and can't check her account or change allocations until she gets a new one. One is not bailing but is not putting any more into the market either, for now. Recently I found out that my brother is staying put and rebalancing, pretty much like me.

A couple of people at work have decided to delay retirement for now. But who knows? Is it the market, like they say? Or is it that they just aren't ready yet? Maybe they would have delayed retirement anyway.
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Old 11-13-2008, 12:53 PM   #58
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Helena, I won't quote you this time to avoid annoying people who wish to ignore you.

As usual, you made a provocative, one line statement earlier. Buy and hold is dead. As usual it is presented as a definitive truth yet completely unsubstantiated and unsupported by facts. I wanted to know if you really had some valuable insight that would benefit all of us or if you were merely a one trick pony. Your answer tells me that you are the latter (as others already suspected). I asked you to prove why buy and hold is dead, and predictably you can't (with the data available today it's impossible anyways but you cannot even recognize that). You think that reminding us that the market has been down for 12 months is all you need to make your point. That's ridiculous, plain and simple. History supports the buy-and-hold theory over the long term (B&H only makes sense over the long term anyways). Your "theory" is based, at best, on a gut feeling.
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Old 11-13-2008, 01:20 PM   #59
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Quote:
Originally Posted by Helena View Post
The buy and hold philosophy
is an idea whose time as ended
My 82 year chart says otherwise. Here are the numbers for 82 years:

Inflation: 3.1% average return
90 day T-bills: 3.9%
Medium term Treasuries: 4.9%
Long Term Govt Bonds: 5.4%
World Stock Markets: 8.7%
Balanced Portfolios: 9.1%

The numbers are from 1926-2007, so I didn't cherrypick.
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Old 11-13-2008, 01:26 PM   #60
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Screw it, I'm going down with the ship.
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