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Old 11-15-2008, 01:32 PM   #101
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I'm not bailing out - I'm planning to live off my salary while I'm still working (3 years), then cash for 4 years, then proceeds from real estate investments for 3 years, until my equities reach an all time high (hopefully in 10 years or so), and then start tapping them.
For those of us still working, it's important to keep this long term perspective. In my own case, my target RE date is/was 2013. This meltdown has been an important reminder to build liquidity, which I will do with future earnings. I'm currently low on cash so I am compromizing by reducing DCA to $2500 per month in dividend stocks and accumulating the remainder of my (tax deferred) savings in cash. At some point I may build a bond ladder with some of that. If I can maintain my current earning power and LBYM status, by 2013 I should have accumulated sufficient cash to carry me and the taxman/woman for another 4-5 years. One would certainly hope that markets would have improved 9-10 years from now. Otherwise we might just as well go live in a cave.

Friends are not forthcoming with detailed information. Thus far I'm not aware of anyone who has baled out of the markets, but many people have said they have stopped looking at their funds. People who have planned retirement dates in the near future appear to be sticking with their plans.
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Old 11-15-2008, 02:19 PM   #102
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Sigh... how long can I hold on to my faith in the market and the economy? I might have to unplug the phone, the TV and the internet for a while...
I feel that markets are not really a place for faith. But there is room for analysis.

Except for 1929-'32, the biggest declines in the Dow or S&P were about 50%, peak to trough. Most bear markets were much shallower. The 50%-ers bottomed in 2002/03, and 1974. In 1999/2000, valuations were unusually high, even for a market peak. 1974 is less clear. The peak in January 1973 had many stocks at very high PEs (Nifty Fifty), but overall was perhaps not very different from the recent 2007 peak.

On 10/10/2008 the Dow made an intraday low of 7774, a 48% fall from last October's peak.

Now 50% is not written in stone, but as we can see, we are spitting distance from the twin minimum bear market troughs of 1974 and 2002. One always needs to remember that the past is not the future, but the odds would seem to favor the proposition that the Dow is very close to a low. Very strange is that there have been no meaningful rallies in this trip down.

Ha
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Old 11-15-2008, 04:23 PM   #103
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Very strange is that there have been no meaningful rallies in this trip down.

Ha
Maybe this time it truly is different.
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Old 11-15-2008, 04:29 PM   #104
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Maybe this time it truly is different.
I'll drink to because of that...
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Old 11-15-2008, 04:39 PM   #105
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A glimmer of hope: stopped by the library yesterday and the Nov 7th issues of Value Line had their estimate of median stock performance (their analyzed stocks) for the next 3 to 5 years of 160%. In July 07 it was only 35%. At the Oct 2002 low that number was something like 100%.

I could even live with half of this estimate since 80% means 12.5% compounded return for 5 years. If it returned 120% we are talking about 17.1% CAGR for 5 years.

Things could get better -- really .
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Old 11-15-2008, 09:35 PM   #106
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Originally Posted by haha View Post
I feel that markets are not really a place for faith. But there is room for analysis.

Except for 1929-'32, the biggest declines in the Dow or S&P were about 50%, peak to trough. Most bear markets were much shallower. The 50%-ers bottomed in 2002/03, and 1974. In 1999/2000, valuations were unusually high, even for a market peak. 1974 is less clear. The peak in January 1973 had many stocks at very high PEs (Nifty Fifty), but overall was perhaps not very different from the recent 2007 peak.

On 10/10/2008 the Dow made an intraday low of 7774, a 48% fall from last October's peak.

Now 50% is not written in stone, but as we can see, we are spitting distance from the twin minimum bear market troughs of 1974 and 2002. One always needs to remember that the past is not the future, but the odds would seem to favor the proposition that the Dow is very close to a low. Very strange is that there have been no meaningful rallies in this trip down.

Ha
Yep, I agree. As a matter of fact I wouldn't be surprised to see a '74 scenario play out, as I think there's been an overreaction on the downside caused by the forced selling and panic/fear. That would mean a very quick upturn to recover a good bit of the loss from the high and then a sideways market for a few years bringing valuations down to historical lows, and then a big bull. Time will tell if I'm right or not but I'm betting on it by buying in with everything I can throw at the market over the next few months. It may be the only chance to get some big gains for quite some time.
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Old 11-15-2008, 10:08 PM   #107
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Yep- Had a guy just tell me earlier this week that after the Dot Com bubble burst on him and wiped at over 40% of his portfolio, he abandoned the buy and hold strategy this time around and jumped ship at the beginning of October. Went all into cash

Probably means he sold on Oct 10th, close to the current low. Time will tell if it was a smart choice short term. Long term he will have to buy in at the right time to be successful.
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Old 11-16-2008, 08:29 AM   #108
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Well, if you are looking for someone who might help bring the bottom about, here I am...sort of. I've sold off a bunch of my equities in the last three weeks (I'm thinkin' "way too late"). OK, maybe not a smart thing to do, but that's what I did. So, I'm about 1/3 cash; 1/3 bonds; 1/3 equities. And, since I'm still w*rking, I have also bought Sysco, United Tech, and added to Nucor. I used to be a buy-and-holder, but I think times have changed (at least for now). And, this time it does feel different (and, I hope I'm wrong about this). In 2002, I was OK with the market, but, not OK with this one.
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Old 11-16-2008, 08:41 AM   #109
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Well, if you are looking for someone who might help bring the bottom about, here I am...sort of. I've sold off a bunch of my equities in the last three weeks (I'm thinkin' "way too late"). OK, maybe not a smart thing to do, but that's what I did. So, I'm about 1/3 cash; 1/3 bonds; 1/3 equities. And, since I'm still w*rking, I have also bought Sysco, United Tech, and added to Nucor. I used to be a buy-and-holder, but I think times have changed (at least for now). And, this time it does feel different (and, I hope I'm wrong about this). In 2002, I was OK with the market, but, not OK with this one.
Probably smart. I'm still holding so the market will never recover as long as I own stocks. 'The Born Loser' syndrome. My bullies lost last night as expected. They will always be a loser too.
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Old 11-17-2008, 12:54 AM   #110
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Granted, the economy outlook is pretty bad, and the stock market is discounting that. But how about "deleveraging" by investors?

According to the following article in the recent BusinessWeek, hedge funds borrowed $6 for every $1 that they had. Then, funds of funds leveraged another $1 for $1. Investors in funds of funds leveraged some more. All these layers of borrowing are collapsing now. I will hold off buying for a while to see if all these margin calls have been met.

By the way, the article mentioned that funds of funds held $747 billion as of last year. Unbelievable huge amount of money!

Fall of the Funds of Funds - BusinessWeek
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Old 11-17-2008, 08:15 AM   #111
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Well I didn't even look at my Fidelity account over the weekend. Not going to for a while. My head is a little sore from all the head banging so going to give it a rest. Time for a quick shower and then make some money the only way I know how, through work. Got plenty of it for now.
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Old 11-17-2008, 08:28 AM   #112
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Well I didn't even look at my Fidelity account over the weekend. Not going to for a while. My head is a little sore from all the head banging so going to give it a rest. Time for a quick shower and then make some money the only way I know how, through work. Got plenty of it for now.
OK, who are you and what did you do with the Born Loser?

Much better way to deal with it all. A tiny bit of positive thinking can go a long way. Go make money.
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Old 11-17-2008, 10:29 AM   #113
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OK, who are you and what did you do with the Born Loser?

Much better way to deal with it all. A tiny bit of positive thinking can go a long way. Go make money.
Hey, I've perked up even more. Such a pretty day I'm headed to the golf course after lunch. I'll work tonight.
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