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Old 03-11-2013, 02:57 PM   #81
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Keep in mind that the Dow also broke 14,000 in 2000 and 2007. Both times these were followed by a "thud" but that won't always be the case. And the economy and overall corporate earnings are greater than they were in 2007 and considerably greater than in 2000, so in relative terms the valuation of this "all time high" is much saner than it has been in the past.
Well put. In 13 years the market has basically gone nowhere. Does anyone believe that in another 13 years the market will still be at 14,000? I'd bet on 30,000.
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Old 03-11-2013, 04:07 PM   #82
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So w*rk is bogus, and I'm itchy.
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This good market is playing games with my head.
+1

Back in 2008 I wrote:
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We were so close. If our portfolio had gone up just another 5% last year around the high, we would have both retired. Our portfolio is pretty aggressive, targeting between 28% and 30% bonds, the rest in stocks.
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Now as I watch our portfolio's value decline, I measure the decline in terms of years of salary. Through mid-summer, we had lost about 2 years of combined salary since the peak. Not wonderful, but not enough to really bother me. Now, with our greater losses and lower salary, we are down by almost 10 years of salary!
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On my sad days, I figure I could easily end up working for another decade. On my happier days, I figure when I do ultimately retire, I'll probably have a wealthier retirement than I expected.
So four years later, my portfolio is definitely back, though our expenses have also grown, and I too am getting very itchy. One of my co-workers says when I start seriously considering retirement, he knows a bear market is on the way.

My new years resolution was to try to live as if retired financially, and if the market was still holding up in May give my notice to leave in June. However, even just writing this makes me feel nervous as well as excited.

Letting a rising stock market trigger retirement seems to be similar to the retired person who re-runs FireCalc every day their portfolio spikes higher, and then "re-retires" using the new higher FireCalc withdrawal rate. Both approaches seem to significantly increase the risks one will encounter the worst case scenario. On the other hand, I'm unlikely to finally hit "my number" during a bear market.

However, retiring at a market top is definitely not reassuring. Though as nervous as the recent market highs make me, I would probably be even more nervous or depressed if the market had spent the first part of 2013 going down!
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Old 03-11-2013, 04:23 PM   #83
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+Letting a rising stock market trigger retirement seems to be similar to the retired person who re-runs FireCalc every day their portfolio spikes higher, and then "re-retires" using the new higher FireCalc withdrawal rate. Both approaches seem to significantly increase the risks one will encounter the worst case scenario. On the other hand, I'm unlikely to finally hit "my number" during a bear market.
Not, really - not if you're willing to take the pay cut after a bad year.
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Old 03-11-2013, 04:26 PM   #84
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Keep in mind that the Dow also broke 14,000 in 2000 and 2007. Both times these were followed by a "thud" but that won't always be the case. And the economy and overall corporate earnings are greater than they were in 2007 and considerably greater than in 2000, so in relative terms the valuation of this "all time high" is much saner than it has been in the past.
Good points - especially the corporate earnings part.

But crashes seem to come in "threes" during these secular bear markets, so I tend to expect one more round before we pull out of this one. But since I don't know when, or how bad/mild, I stick with my normal AA.
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Old 03-11-2013, 04:59 PM   #85
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Good points - especially the corporate earnings part.

But crashes seem to come in "threes" during these secular bear markets, so I tend to expect one more round before we pull out of this one. But since I don't know when, or how bad/mild, I stick with my normal AA.
I've never heard of this phenomenon. Can you tell me where this came from?
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Old 03-11-2013, 05:09 PM   #86
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Letting a rising stock market trigger retirement seems to be similar to the retired person who re-runs FireCalc every day their portfolio spikes higher, and then "re-retires" using the new higher FireCalc withdrawal rate. Both approaches seem to significantly increase the risks one will encounter the worst case scenario. On the other hand, I'm unlikely to finally hit "my number" during a bear market.
Emphasis added above.

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Not, really - not if you're willing to take the pay cut after a bad year.
I suppose a dynamic withdrawal would equate to going back to w*rk if the market dropped after retirement in my analogy.
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Old 03-11-2013, 05:49 PM   #87
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I've never heard of this phenomenon. Can you tell me where this came from?
I've just seen lots of graphs of secular bull and bear periods, and sometimes the pattern of threes is pointed out. They all look a bit different, of course - not evenly spaced or equivalent in severity or duration. And who knows if history will repeat itself, either.

If you google you might catch one of those graphs. I don't have a reference link handy.
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Old 03-11-2013, 09:18 PM   #88
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Letting a rising stock market trigger retirement seems to be similar to the retired person who re-runs FireCalc every day their portfolio spikes higher, and then "re-retires" using the new higher FireCalc withdrawal rate. Both approaches seem to significantly increase the risks one will encounter the worst case scenario. On the other hand, I'm unlikely to finally hit "my number" during a bear market.
I agree there's definitely bias here and resetting one's withdrawal numbers when markets go up should increase failure probability (higher valuations -> lower expected returns). This is one reason I think it's dangerous to interpret FIRECALC success rates as probabilities and to take too much confidence in the numbers.
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Old 03-11-2013, 10:44 PM   #89
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Emphasis added above.


I suppose a dynamic withdrawal would equate to going back to w*rk if the market dropped after retirement in my analogy.
If you are adequately padded, save some from the fat years for the lean years, you can probably make it through. The drops don't last forever. There is no rule that says you have to spend everything the year you withdraw it.
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Old 03-11-2013, 11:15 PM   #90
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Is the economy better now than in 2007? Lot of homes are still underwater and unemployment is higher.

Also, isn't consumer spending down?
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Old 03-12-2013, 04:55 AM   #91
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Is the economy better now than in 2007? Lot of homes are still underwater and unemployment is higher.

Also, isn't consumer spending down?

Which economy? The US is probably worse and so is much Europe but the story for the rest of the world is much much better.

In 2007 China had GDP of 3.5 trillion in 2011 it had more than doubled to 7.3 trillion in 2012 growth dropped to a mere 7.5% or roughly 7.9 trillion. Now 7.9 trillion is only 1/2 the US economy but nothing to sneeze amount. India grew almost as fast since 2007 ending at 2.5 trillion trillion last year.

You figure that almost all of the DOW stocks, have more than 1/2 their revenue and even more of their profits overseas and the numbers are almost as dramatic for the S&P 500.

For instance, KFC sells way more in China than the US, GM sells more car in China than in the US, and either 2012 or 2013 China will buy more computer than the US. Corporations have reduced payrolls and costs and are making record profits, which translates into higher stock prices.

So the short answer to your question is the world economy is doing better now than 2007 and is expected to grow between 3.5-4%
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Old 03-12-2013, 06:59 AM   #92
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Which economy? The US is probably worse and so is much Europe but the story for the rest of the world is much much better.

In 2007 China had GDP of 3.5 trillion in 2011 it had more than doubled to 7.3 trillion in 2012 growth dropped to a mere 7.5% or roughly 7.9 trillion. Now 7.9 trillion is only 1/2 the US economy but nothing to sneeze amount. India grew almost as fast since 2007 ending at 2.5 trillion trillion last year.

You figure that almost all of the DOW stocks, have more than 1/2 their revenue and even more of their profits overseas and the numbers are almost as dramatic for the S&P 500.

For instance, KFC sells way more in China than the US, GM sells more car in China than in the US, and either 2012 or 2013 China will buy more computer than the US. Corporations have reduced payrolls and costs and are making record profits, which translates into higher stock prices.

So the short answer to your question is the world economy is doing better now than 2007 and is expected to grow between 3.5-4%
+1

This is why U.S. unemployment is and the housing situation does not have the impact on the financial markets as it did in the past. Large companies are global, and in fact increase their profits by reducing U.S. and European workers and increasing workers in other parts of the world. As the volume of business increases outside fof the U.S., so do the revenues and profit margins. Its why financial advisors are recommending increasingly ones exposure to international stocks. The markets have become much more reflective of the global economy.
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Old 03-12-2013, 07:39 AM   #93
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For instance, KFC sells way more in China than the US, GM sells more car in China than in the US, and either 2012 or 2013 China will buy more computer than the US. Corporations have reduced payrolls and costs and are making record profits, which translates into higher stock prices.

So the short answer to your question is the world economy is doing better now than 2007 and is expected to grow between 3.5-4%
And as you travel you can see evidence of this even in places that do not have the growth of Asia. We visited Ecuador last year and were quite surprised to see that American cars are the number one choice of the middle class. All built in South America
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Old 03-12-2013, 07:57 AM   #94
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Is the economy better now than in 2007? Lot of homes are still underwater and unemployment is higher.

Also, isn't consumer spending down?
The economy is different than pre bubble days. The US has seen the end of 5 to 6% growth. This can't be achieved when an economy previously based in manufacturing has shifted mostly to technology supported mostly by a few markets like Silicon Valley . Slow growth is here to stay and will be the norm US companies have long since known and adapted their business models to reflect this. The new growth is in Asia

As for US housing this is a separate issue. Most people interested in this forum are probably not underwater on their mortgages. As for wall street the topic was actually the scariness if market tops. Markets have long sine adapted to the change in the global economy which is why jobs report and housing numbers move US stocks less mainly limited to certain sectors. The market is high due mostly to the liquidity infusion created by the worlds central bank monetary policies. At some point it may return to what we all learned drives the market (fundamentals and supply/demand) but in the US markets that will not happen until they allow cheap credit to stop and force companies to produce actual profits based totally on growth

To me,consumer spending and the US economy are an oxymoron. As most on this forum know if u follow what the US government wants you to do (overextend yourself) you wind up with an economy that heats up and bursts aka 2007. Sadly a large part of US wealth pre crash was driven by unsustainable credit. Firm an economic point of view this is false growth. Only about 20% of the population will live at those means, have an emergency fund, pay credit cards in full, prepay their mortgage and max out their retirement plans. And that is the ER segment.

If I spent at levels that supported the previous US boom Id be working another 25 years. No thanks
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