Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-14-2014, 10:15 PM   #61
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,167
Quote:
Originally Posted by NW-Bound View Post
Following is the recent historical price of a barrel of WTI crude, linked from Wikipedia.

The price plummet in early 2009 is easy to understand in the context of the demand destruction due to the then-current financial crisis. What is harder to explain is the price run-up immediately preceding that crash, when oil got up to $140/bbl in mid 2008. I still remember some posters lamenting paying $5+/gallon for gas to drive to work. And there were politicians demanding investigation into alleged collusion or conspiracy for price fixing. Then, 6 months later, I was shocked to find gas below $2. Crazy!


This is good example why it's nuts to play the futures markets. Even us in the oil business can't figure out the price movements. What's quoted on TV and in the above graph are futures prices which have little to do with the current prices (plural) of a barrel of crude oil in liquid form.
__________________

__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 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 12-14-2014, 10:19 PM   #62
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Quote:
Originally Posted by haha View Post
This is definitely not true if you follow the total return portfolio liquidating over one's lifetime approach. There, the cash value of your shares is what counts.
I realize that it's not always the case, but I still cling to the hope that over the long haul the price of most stocks bears some relationship to the ability of the underlying company to make money. Or at least people's belief that >others< might believe they'll make money in the future.
__________________

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is online now   Reply With Quote
Old 12-14-2014, 10:58 PM   #63
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: 16,512
Quote:
Originally Posted by NW-Bound View Post
Following is the recent historical price of a barrel of WTI crude, linked from Wikipedia.

The price plummet in early 2009 is easy to understand in the context of the demand destruction due to the then-current financial crisis. What is harder to explain is the price run-up immediately preceding that crash, when oil got up to $140/bbl in mid 2008. I still remember some posters lamenting paying $5+/gallon for gas to drive to work. And there were politicians demanding investigation into alleged collusion or conspiracy for price fixing. Then, 6 months later, I was shocked to find gas below $2. Crazy!


Me too - that crazy early 2008 run-up looked very suspicious. Didn't make sense at the time.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 12-14-2014, 11:15 PM   #64
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 1,905
Quote:
Originally Posted by NW-Bound View Post
Following is the recent historical price of a barrel of WTI crude, linked from Wikipedia.

The price plummet in early 2009 is easy to understand in the context of the demand destruction due to the then-current financial crisis. What is harder to explain is the price run-up immediately preceding that crash, when oil got up to $140/bbl in mid 2008. I still remember some posters lamenting paying $5+/gallon for gas to drive to work. And there were politicians demanding investigation into alleged collusion or conspiracy for price fixing. Then, 6 months later, I was shocked to find gas below $2. Crazy!


Notice the chart stops right above $80 for the current drop. We are actually a little over $57, the current drop is much steeper than the chart shows.
__________________
ejman is offline   Reply With Quote
Old 12-14-2014, 11:22 PM   #65
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,435
Sure. The folks doing pro bono work at Wikipedia cannot update the chart fast enough in real time.

The point was to show that the current drop in oil price is nowhere as bad as what happened just a few years ago, a point discussed by some posters earlier in this thread.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 12-15-2014, 12:38 AM   #66
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,435
Quote:
Originally Posted by samclem View Post
... I still cling to the hope that over the long haul the price of most stocks bears some relationship to the ability of the underlying company to make money...
Me too. Else, we would liquidate and go to cash under mattress or Krugerrands. However, the market is currently predicting that the ability of businesses to make money will be impaired for a while, hence discounting that cash flow. And as happened most of the time, it turns out to be true that company profitabilities do go down, so they call the stock market a leading indicator. Or is that a self-fulfilling prophecy?

The question one asks is whether the price correction is overdone, and makes equities undervalued. That, I don't think is true yet, except perhaps for some specific companies. And then, as was shown in the Great Recession fiasco, many financial company stocks turned out to deserve that kind of punishment. As Buffett has famously said, only when the tide is out that we can tell who has been swimming naked.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 12-15-2014, 03:35 AM   #67
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,414
Quote:
Originally Posted by tuixiu View Post
But this doesn't validate what you said.

A 1.74% return from March 2000 does not make your previous claim of 1.3% over the past 15 years true.

Sorry if I'm busting your balls but as other poster alluded to it sue seems like you are cherry picking timeframes to try to make a point, and in fact providing questionable information as well that you then attempt to correct with a shrug and new data.
actually that 1.73 was only with the ending of novemenber at 2067. today we are lower so the the return is lower. it is a moving target. the info is constantly updating on the link i posted monthly . december has not been calculated yet. in fact that number reflects no fees at all as funds would have so the origonal number which i think may have been from october's update which i still had may not be far off at this point.

as far as 1.73 vs 1.32 it still is below a 2% real return which spells failure for a 15 year period which generally means a failed retirement in theory mathamatically .

so wehether you kill the portfiolio with a bullet or a grenade math says it is dead anyway and the last 15 years were going to be logged as a failure period. real return on bonds and cash were zero to negative so they didn't provide much help.


t.rowe and raddr did the math for a hypothetical y2k retiree and found 1000 bucks would have been down by 60% in only the first 10 years ,

regardless of how things improved there is not enough money left to act upon since that money still had at least 20 years more to go.

micahel kitces computed that the common denominator to every failed time frame was the fact real return averages for the first 15 years were below 2%.

in no case did what happened after those 15 years make a difference in the outcome once that die was cast as to little money left to help save things.


all that matters is we are below 2% in real return , who cares if is is 1.32 ,1.40 or 1.50 etc , dead is dead.

if you retired at least a year later your withdrawal rate would have been based on a much lower amount so you would be fine from that point on.

however growth on existing money would still have been below average from 2000 on.. the 20 year records and 25 year were heavily influensed by the great 18 year bull market that ran from 1987 to 2004 and averaged almost 14% . these are nominal non inflation adjusted returns.

__________________
mathjak107 is offline   Reply With Quote
Old 12-15-2014, 05:47 AM   #68
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by audreyh1 View Post
Yes we did, in 2008 it was even worse.
Ditto for the mid-1980s. The oil price got so low that towns that sprung up around oil fields in remote areas (in the US) were bulldozed. Eventually, the S&L crisis happened.

Overall, low oil prices helps every other aspect of the economy. People have more money to spend and goods can be manufactured for less. Of a more distressing aspect, the recent GDP growth has been heavily weighted towards the value added by all the fracking O&G spending and production. My concern is whether the rest of the economy is recovered enough to take advantage of the boost lower energy prices should bring.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 12-15-2014, 05:51 AM   #69
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by aja8888 View Post
This is good example why it's nuts to play the futures markets. Even us in the oil business can't figure out the price movements. What's quoted on TV and in the above graph are futures prices which have little to do with the current prices (plural) of a barrel of crude oil in liquid form.
+1

No refinery pays the prices in the futures market on a day-to-day basis. First, the oil traded is a very small sample of the oil in the market. Second, the spot prices are used for negotiating longer term supply agreements.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 12-15-2014, 07:57 AM   #70
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: 16,512
Quote:
Originally Posted by ejman View Post
Notice the chart stops right above $80 for the current drop. We are actually a little over $57, the current drop is much steeper than the chart shows.
Yes, but it didn't drop from $147, more like $105 or so.

The 2008 drop was from $147 to $35.

Whatever drove it up to $147 so fast is a mystery. The financial crisis and subsequent recession is what brought it down, and it probably undershot so badly because it had been so way out of whack in the first place. For some reason, speculators had piled into oil in 2008.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 12-15-2014, 09:13 AM   #71
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,167
Quote:
Originally Posted by audreyh1 View Post
Yes, but it didn't drop from $147, more like $105 or so.

The 2008 drop was from $147 to $35.

Whatever drove it up to $147 so fast is a mystery. The financial crisis and subsequent recession is what brought it down, and it probably undershot so badly because it had been so way out of whack in the first place. For some reason, speculators had piled into oil in 2008.
USA Today article, 7/11/2008 quoted:

"Political unrest in oil-producing regions -- along with production cutbacks by refineries and fairly resilient demand for diesel fuel -- have been keeping energy costs high.

Iran, which has long been under U.N. scrutiny for its uranium enrichment program, has been testing missiles this week, including a new missile capable of reaching Israel. On Thursday, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies, and Iran responded with another missile launch. Neither the United States nor Israel has ruled out a military strike on Iran.

Then on Friday, there were rumors of Israeli military exercises taking place in Iraqi air space. The rumors were reportedly denied by Israeli officials.

"The war of words is quite heated," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Mass. "And it raises the possibility of some serious problems in the area -- either the cutoff of Iranian exports, or Iranian strikes on tankers in the Strait of Hormuz."

About 40 percent of the world's tanker traffic passes through the Strait of Hormuz.

Meanwhile, Brazilian oil workers were threatening to go on a five-day strike next week unless the state-run oil firm Petrobras gives them an extra day off at the end of their 14-day shift. Those supply worries added to those sparked Thursday when Nigeria's main militant group said it would resume attacks in the oil-rich region.

Light, sweet crude for August delivery soared to an all-time high of $147.27 a barrel before settling at $145.08, up $3.43. That's slightly below last Thursday's settlement record of $145.29 a barrel.

Meanwhile, the dollar weakened against other major currencies Friday. Because oil is bought and sold in dollars, oil's rise has not been as severe for countries with stronger currencies; meanwhile, traders have been using commodities as a hedge against the tumbling dollar."

Politics, threat of a war, cutting off oil tanker traffic through the Straits of Hormuz, unrest in Brazil, falling dollar, all of which can happen at any time. (or similar events)
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 12-15-2014, 09:20 AM   #72
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,435
I did not buy the conspiracy theory either. Oil is a world-wide commodity, and it's hard to believe a collusion between OPEC countries and producers from other countries, the US included. The OPEC cannot even agree between themselves.

Still, it's hard to believe the price run-up, which is as crazy as the run-up in housing prices in the real estate bubble, and the latter repeats every so often.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 12-15-2014, 07:46 PM   #73
Full time employment: Posting here.
 
Join Date: Feb 2008
Posts: 920
Quote:
Originally Posted by mathjak107 View Post
actually that 1.73 was only with the ending of novemenber at 2067. today we are lower so the the return is lower. it is a moving target.
So we can claim any return we want because changes in the market might make it eventually true?


Quote:
Originally Posted by mathjak107 View Post
as far as 1.73 vs 1.32 it still is below a 2% real return which spells failure for a 15 year period which generally means a failed retirement in theory mathamatically .
Which 15 year period?

Again showing real returns with dividends reinvested here: S&P 500 Return Calculator - Don't Quit Your Day Job...

Even the peark March 2000 you mentioned shows over a 2% return to today. I'm not doubting one exists (I sure haven't run every 15 year period) but sure am having trouble getting that calculator to back up either your original 1.3% claim or your later 1.73%.

Nov 99 to Nov 2014 shows 1.954% real return with dividends reinvested, does that mean failure for a portfolio? It would be interesting to know which percentage of portfolios would fail after a 2% return over first 15 years, especially if you keep in mind very few people are 100% stocks during withdrawal phase and much of the last 15 years has been a bond bull.
__________________
tuixiu is offline   Reply With Quote
Old 12-15-2014, 08:34 PM   #74
Thinks s/he gets paid by the post
 
Join Date: Jun 2014
Posts: 1,035
well we broke 2000 on the S&P today. This is equivalent to breaking the 5th seal in Revelations. Really. As the next logical conclusion for anyone with a camera pointing at them, we will crack 1500, then the party really get's groovin'.
__________________
dallas27 is offline   Reply With Quote
Old 12-15-2014, 08:47 PM   #75
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,435
Dallas27, were you the one who started a thread recently asking what the mood on this forum was during the "real" market crash of early 2009?

I was here then, and we spent a lot of time talking about the Great Depression soup lines that everybody has seen photos of. And we talked about the Dust Bowl too. And the Mad Max movies were mentioned quite often. What a fun time!
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 12-15-2014, 09:09 PM   #76
Thinks s/he gets paid by the post
 
Join Date: Feb 2014
Posts: 1,050
Don't worry. The Fed will have to buy all that defaulting high yield oil paper with a new round of QE.

Bad news = exploding market

Rates at 0% for the next decade at least.
__________________
jim584672 is offline   Reply With Quote
Old 12-16-2014, 01:14 AM   #77
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2013
Posts: 5,327
Quote:
Originally Posted by NW-Bound View Post
Same here. But counting from personal top, it's $178K gone!

Well, it's still the money that the market god gave loaned. It still hurts though.
We decided we didn't have the nerves of steel to withstand losses like that any more at our ages and not having full time employment any longer to offset it.

We just keep working on lowering our expenses instead so we can live off a very conservative AA and withdrawal rate. I'm just not a good risk taker.
__________________
daylatedollarshort is offline   Reply With Quote
Old 12-16-2014, 02:00 AM   #78
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,435
The way I look at it, if I weren't in the market I would not have that money to "lose" in the first place. And also, life would not be as exciting.

Lemme see after today's drop, how much I have "lost" since that personal top. It's...

Oh wait! I forgot to account for our withdrawal for spending since that high watermark. So, it's only $147K, even after today's loss. Ah, I feel better now.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 12-16-2014, 02:40 AM   #79
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,414
Quote:
Originally Posted by tuixiu View Post
So we can claim any return we want because changes in the market might make it eventually true?



Which 15 year period?

Again showing real returns with dividends reinvested here: S&P 500 Return Calculator - Don't Quit Your Day Job...

Even the peark March 2000 you mentioned shows over a 2% return to today. I'm not doubting one exists (I sure haven't run every 15 year period) but sure am having trouble getting that calculator to back up either your original 1.3% claim or your later 1.73%.

Nov 99 to Nov 2014 shows 1.954% real return with dividends reinvested, does that mean failure for a portfolio? It would be interesting to know which percentage of portfolios would fail after a 2% return over first 15 years, especially if you keep in mind very few people are 100% stocks during withdrawal phase and much of the last 15 years has been a bond bull.
according to kitces the math needed to sustain the 4% rule in the lab with no real world spending patterns is you must sustain at least a 2% real returen average over the first 15 years of any 30 year retirement period.

mathamatically you would have failed every time so far that you didn't.

y2k retirees so far have not done that but so far that is the only recent period that clocked in less than 2% real return .

there were a number of time frames that did not in the past and they all ended up being failure periods.
__________________
mathjak107 is offline   Reply With Quote
Old 12-16-2014, 06:10 AM   #80
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
The whole purpose of this market tanking is to rattle my nerves so I'll sign up for OMY. It's not working so far so we can expect it to get really ugly now. I've got two "in office" days left until my Jan 5 resignation/retirement.

Nominal 10% market corrections are pretty normal. There can be several in any given calendar year and the market can still be positive for the year. It's hard to get too excited until a 20+% plunge happens. It's definitely more fun to watch it go up.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B 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
2014 Doritos Crash the Superbowl Contest nvestysly Other topics 2 01-09-2014 04:20 PM
I put it all in Disney in October 2012...and I got a lot of grief from memebers oldnews Stock Picking and Market Strategy 68 11-02-2013 04:03 PM
October 1987 Crash: What would you do? ZMAN FIRE and Money 47 10-19-2007 10:45 PM

 

 
All times are GMT -6. The time now is 06:59 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.