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My view of the stock markets & how I keep my sanity
Old 10-06-2008, 01:49 PM   #1
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My view of the stock markets & how I keep my sanity

I have been retired for 2.5yrs - I'm 53 - this is how I view the current stock market and how my plan helps to keep my sanity. I hope it helps others.

Current position 38/62 mutual funds/Cash
Small pension at 60 - about 10K
Social Security at 63 - I don't know the amount. It would have been the max. if I kept working
So I can cover my expenses without touching the 38% invested in mutual funds.

We are in a secular bear market - 2000 to 15-18 ? - the average length is 18 years

The current down leg - bear market - began in Oct 2007 - it might end by April/May 2009 - 18 mos. the average length.

2009 May ? - a new 4 year up cycle begins
2013 May ? - 18 mos bear market begins
2015 Jan ? - 18 mos bear market ends
2015? secular bull market begins
2033? Secular bull market ends

Now don't think this knowledge helped me - I started averaging in from 100% cash in May 2007 - I wasn't paying attention to the big picture.

My plan
Cash/cash equivalents 5 years of expense
Average into the market.
Watch the 4 year cycle
Try not to focus on the markets or the portfolio hit.
Enjoy life.


What is keeping me sane.
I have enough cash
In the short term I know my mutual funds will get hammered.
In the long term they will recover.

Decision Point®: Chart Spotlight 9/19/2008
Decision Point ®: Cycles Page 1
Analysis of Secular Bear Markets and Secular Bull Markets since 1900.


Bull Markets Return When You Least Expect (Aberdeen Global Income, BlackRock, Eaton Vance) at SmartMoney.com
+++++++
Here is good news - Foreign travel should become less expensive.
I made these comments in another post.
----
The dollar should get stronger - interest rates are now not in sync.
The US Fed rate was lower than others - dollar weak
The others will be lowing their interest rates - dollar gets strong
The recession will end in the USA first - fed will raise rate - dollar gets stronger because the others will not at the same time as the US - they don't want to risk derailing their recovery.
Buy the euro when it is close to parity with the dollar - they will begin to raise rates - and the dollar rates will remain constant.
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Old 10-06-2008, 02:24 PM   #2
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excellent post!
i just checked my portfolio at M*, and when i saw my JAOSX was down 38%, i almost pulled the plug on just that fund. it has a higher exp ratio, so it's been in my sights for over a year.
but then sanity took hold, and i read your post (TY), and remembered to STAY THE COURSE.
besdies, i need a better reason to offload said fund...my stake in it is under $5K, based on better market times.
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Old 10-06-2008, 02:24 PM   #3
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Originally Posted by dex View Post
IWhat is keeping me sane.
I have enough cash
That's really one of the most important things you can do. I'm still deep in the accumulation phase, so overall portfolio losses aren't very important to me. Really the biggest concern is losing my job (which I'm probably not helping by being on this board right now ). And on that note, I'm starting to think that even if you're not retired, having enough cash to get you through a few years worth of hard times is just as important as asset allocation.
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Old 10-06-2008, 02:27 PM   #4
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i just checked my portfolio at M*, and when i saw my JAOSX was down 38%, i almost pulled the plug on just that fund. it has a higher exp ratio, so it's been in my sights for over a year.
You could tax loss harvest and realize some of those losses on your taxes this year... if you had a comp fund you wanted to transfer into that wouldn't match so close as to be considered a wash sale.
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Old 10-06-2008, 02:29 PM   #5
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Originally Posted by dex View Post
Enjoy life.
I'll have to give the rest of your post some thought, but without hesitation I can 100% agree with the above!
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Old 10-06-2008, 02:37 PM   #6
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Quote:
Originally Posted by dex View Post
What is keeping me sane.
I have enough cash
In the short term I know my mutual funds will get hammered.
In the long term they will recover.
They will recover.....they will recover.....they will recover.......the will recover......they will recover....they will recover......they will recover......they will recover.......they will recover......they will recover...............

Instead of counting sheep tonight, I'm going to say this until I fall asleep.
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Old 10-06-2008, 02:43 PM   #7
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You could tax loss harvest and realize some of those losses on your taxes this year... if you had a comp fund you wanted to transfer into that wouldn't match so close as to be considered a wash sale.
yes, indeed. TY for tax loss harvest reminder. i will wait until just before year end to see just how badly it does from here forward. it may get even worse and give me a "better" capital loss. i'm still under the annual $3K limit, just barely.
i have other international funds, so those will be left alone as part of the long term AA plan. JAOSX is the most glaring loss YTD. it jumped right off the page at me.
um...if i convert it into shares of an existing bond fund, what happens wrt "wash sale" rules?
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Old 10-06-2008, 04:03 PM   #8
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After a major downturn, of say 30%, how long will it take mutual funds to recover, much less appreciate? I remember when the Janus Fund tanked (because of Enron). I never recovered what I lost in that fiasco.

It seems that stock assets will rise when the economy begins expanding again, but why would it? What would drive an expanding economy? As I see it, the last expansion was fueled by easy credit and the housing bubble. That's all gone now. Anyone have a reliable crystal ball I can borrow?
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Old 10-06-2008, 04:10 PM   #9
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Originally Posted by Oldbabe View Post
Anyone have a reliable crystal ball I can borrow?
No, but you're welcome to borrow this:
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Old 10-06-2008, 04:27 PM   #10
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If you are retired, I think days like this is when you go out and do something fun or spend time with people you love and remember that that is what life is really about, not the markets.

Audrey
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Old 10-06-2008, 04:30 PM   #11
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It seems that stock assets will rise when the economy begins expanding again, but why would it? What would drive an expanding economy? As I see it, the last expansion was fueled by easy credit and the housing bubble. That's all gone now. Anyone have a reliable crystal ball I can borrow?
There were lots of growing parts of the economy that had nothing to do with the housing bubble. These are healthy, growing businesses. Unfortunately, the credit crisis has hurt these companies, but if we can get past it, those companies can return to executing their business plans again and fueling our economy. Growth forward may be slower, but there will still be expansion.

Audrey
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Old 10-06-2008, 05:44 PM   #12
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I tend to favor "adult beverages." Of course, I started investing in high school and vividly remember losing about 70% of my money in 1973-4 just after I graduated from college. I had about $6K then and ended up with only $2K or so. Then to make matters worse I got married.

I actually maintain my sanity by recalculating how long I can live on just my cash position. I've noticed I play out different scenarios about once or twice a week. It always shows I'm in good shape. I guess I'm very fortunate that I decided last August that equities were for paying for luxuries and travel.
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Old 10-06-2008, 05:48 PM   #13
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Then to make matters worse I got married.
oops, the un-PC remark alert just triggered.
j/k. we know someone else is gonna jump on this opening...i got first dibs! LOL
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Old 10-06-2008, 05:57 PM   #14
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After the bottom of a bear market, in the next 12 months the SP500 increases on average about 35%.

No one knows when the bottom is, and the rebound is rapid.

If you are not "in" at the bottom, you won't get the uptick because no one can consistently determine when the market hits the bottom.
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Old 10-06-2008, 06:26 PM   #15
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It seems that stock assets will rise when the economy begins expanding again, but why would it? What would drive an expanding economy? As I see it, the last expansion was fueled by easy credit and the housing bubble. That's all gone now. Anyone have a reliable crystal ball I can borrow?
It will likely be technology related. During the 80s and 90s, it was the introduction of the personal computer and the internet that fueled productivity gains and numerous related industries. This time, it could be "green" power and transportation. But rest assured that something will arise to drive it.
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Old 10-06-2008, 06:38 PM   #16
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When Berkshire Hathaway was going up and the rest of the market was going down last week, I decided to sell a bit of BRKB, enough for a bit more than a year of living expenses. I told myself it was a rebalancing move to keep BRKB from getting too large in my portfolio, but I must admit that the dirty market timer in the back of my head had something to do with it. For now I'm leaving that money in cash. See, if I was really rebalancing I'd be buying indexes now that the market is down some more with that cash, but I just don't feel like that makes sense. Dirty market timer.

That's the first significant change I've made to my portfolio since retiring a few years ago.
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Old 10-06-2008, 07:06 PM   #17
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I almost lost my sanity today. FIRE'd 5 yrs ago and need to take out some money from our IRA's each year to supplement pensions. Fortunately 2 summers ago, I moved 5 years worth of supplements (profit taking) into a MM. But it is sure hard to see the portfolio sink in value. However I have stopped looking so much and will start to use the mantra "they will recover, they will recover"
Good luck to all
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Old 10-06-2008, 07:27 PM   #18
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"I think days like this is when you go out and do something fun or spend time with people you love and remember that that is what life is really about, not the markets.

Audrey---thanks for these good words---I am not retired yet and tend to get a tad whiny on days like today that I am not ever going to be able to afford to retire. It may be that I decide next year to retire with a little tighter budget, but a good retirement is not only about money.
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Old 10-06-2008, 07:35 PM   #19
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How I keep my sanity when the markets are tanking is remembering that the worst things that happened in my life were not about money .
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Old 10-06-2008, 07:48 PM   #20
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How I keep my sanity when the markets are tanking is remembering that the worst things that happened in my life were not about money .
Amen!
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