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Old 05-24-2009, 09:03 AM   #21
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Do stocks protect form inflation?
Well, in the past, they did, over a long period of time. They didn't do so well over the past few years. Maybe it's different this time!
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Old 05-24-2009, 09:11 AM   #22
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Originally Posted by Radiophilejapan View Post
I'm new here, so bear with me.
Do stocks protect form inflation? I always thought that the hard assets (commodities, real estate) and inflation adjusted securities did it but neither bonds or stocks.
Historically stocks have provided some measure of inflation protection. But in reality it will depend on the ability of businesses to pass along higher costs. If wages remain stagnant relative to prices, they will have little to no power to pass higher costs to consumers (except some monopoly-type businesses) and earnings will not keep up with inflation.

Unfortunately, I see "stagflation" for a few years as the most likely outcome, which will result in a gradual decrease in standard of living for a while.
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Old 05-24-2009, 09:17 AM   #23
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Here is the unemployment projection (as of May) my MegaCorp is using for planning, FWIW.
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Old 05-24-2009, 07:37 PM   #24
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...At 55% equity, I am licking my chops to deploy some more cash. Buy, buy, buy, anyone?

So many stocks so cheap, so little guts! I am talking about myself of course, having seen a few women on this forum more gutsy than myself.
Small potatoes investor here compared to most of you folks.

40/60 AA (reset in Jan 09) is full of chicken feathers.

However, most of monthly DCA is being used to buy stocks (VHDYX) until either a) major market recovery, or b) preset target stake is reached, or c) both happen at once. My rebalancing act will prove to be interesting.

If I had a big chunk of cash sitting around, who know what lurks in the mind of Freebird.
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Old 05-24-2009, 07:52 PM   #25
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Small potatoes investor here compared to most of you folks.
For people with pensions, multiply your annual payout by 25 (same as a 4%SWR), and it's not small potato anymore.

It's just that you do not "get" to ride the white-knuckled roller coaster that the early retirees like me have no choice but to take a seat in. I have fastened my seat belt and am hanging on for dear life.

OK, OK, I know. Buy some annuities, like Nords has said sarcastically...

PS. I am not having a case of envy here. Not at all. I am only pointing out to Freebird that she is richer than she claims.
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Old 05-24-2009, 08:46 PM   #26
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My current asset allocation is 60% equities, so my monthly DCA of 25% of savings into more equities is enough for now.

Meadbh
(gutsy female)
But, but, but I think you take a back seat to crazy connie. In a thread that she started, she mentioned that she has reclaimed her Oct 07 high. I would think that required going full-bore to near 100% equity, bought at March 09 low.

I am still kicking myself for missing that period due to being busy with w*rk, though I would not have the guts to buy more than another 10% or 20%.

No guts, no glory. It's that simple.
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Old 05-24-2009, 09:35 PM   #27
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I'm only really buying TIPS (in a fund) at the moment; stocks too scary for me.

Which means, of course, that stocks will soar from now to eternity; leaving me behind to eat cat food and wave around a sign on street corners that reads, "will wrestle you for food". I'll be wearing those charming cut-off mittens, and may smell a little gamey when without those neat little Handi-Wipes.

You can thank me by sending a small commission of your massive profits, say 5% annually, to an address I will provide upon PM request.
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Old 05-24-2009, 09:41 PM   #28
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My current asset allocation is 60% equities, so my monthly DCA of 25% of savings into more equities is enough for now.

Meadbh
(gutsy female)
I'm still satisfied with my allocation of 40% equities...

bbbamI
(wimpy guy)
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Old 05-24-2009, 10:01 PM   #29
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Buying 100% stocks right now. Not that I think that they're particularly cheap, but I have some catch up to do AA-wise. But I can't say I am convinced the recession is over yet...
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Old 05-24-2009, 10:23 PM   #30
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(wimpy guy)
So, do wimpy guys wear their lips ruby red
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Old 05-24-2009, 10:42 PM   #31
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So, do wimpy guys wear their lips ruby red
Sure...it shows our feminine side...I'm a chick magnet!



Nah...believe me, I am 100% female...and a gutsy one at that.
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Old 05-25-2009, 01:01 AM   #32
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Sure...it shows our feminine side...I'm a chick magnet!



Nah...believe me, I am 100% female...and a gutsy one at that.

What I wear that color too! It makes my lips look fuller.
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Old 05-25-2009, 06:30 AM   #33
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Buy buy buy? I'm just waiting for my portfolio to come back so I can get the heck out of stocks. Well except for a few hormone stocks. Right Unclemick?
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Old 05-25-2009, 10:08 AM   #34
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Buy buy buy? I'm just waiting for my portfolio to come back so I can get the heck out of stocks.
Reminds me of my mother and her Intel stocks in the late 80s. Right after she bought about $5K worth, Intel stock price dropped some. She hung on, then bailed out when the stock recovered to the break-even point.

In 1999, that $5K would have become $100K.
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Old 05-25-2009, 07:52 PM   #35
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For people with pensions, multiply your annual payout by 25 (same as a 4%SWR), and it's not small potato anymore.

It's just that you do not "get" to ride the white-knuckled roller coaster that the early retirees like me have no choice but to take a seat in. I have fastened my seat belt and am hanging on for dear life.

OK, OK, I know. Buy some annuities, like Nords has said sarcastically...

PS. I am not having a case of envy here. Not at all. I am only pointing out to Freebird that she is richer than she claims.
I'm glad you did point this out.
I've seen this multiplication reference in other posts.
I know this isn't rocket science, but why does the pension get multiplied by 25 ? Because I'll live another 25 years if I fit the statistical models for my age and gender ?
I count my survivor pension and annuity as income that gets consumed for the most part on an annual basis, including continued investing.
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Old 05-25-2009, 09:44 PM   #36
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I know next to nothing of annuity and am no actuarial expert here. I believe the 25X factor is just the inverse of the average 4% annual yield of the portfolio that one would need to provide the income that you, you, lucky you, get.

It's obviously just a quick-n-dirty rule of thumb, because when pensioners die there is no residual value, while a private portfolio should or might have something left for the heirs. My children certainly hope so.

In my case, I will take my early SS payout at 62 and multiply it by 25 to add to my stash for a feel-good factor.

PS. See ziggy's excellent point below. For my SS feel-good factor, it's the whole 25X. Yippee!
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Old 05-25-2009, 09:47 PM   #37
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I know next to nothing of annuity and am no actuarial expert here. I believe the 25X factor is just the inverse of the average 4% annual yield of the portfolio that one would need to provide the income that you, you, lucky you, get.
Keep in mind the 4% rule applies to inflation-adjusted payouts, so that would mean the 25x factor applies to a fully COLA'd pension or annuity.

Those with pensions or annuities that aren't COLA'd or have a Diet COLA might want to multiply by less than 25 since they don't get the benefit of an inflation-adjusted income stream.
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Old 05-26-2009, 07:10 AM   #38
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Reminds me of my mother and her Intel stocks in the late 80s. Right after she bought about $5K worth, Intel stock price dropped some. She hung on, then bailed out when the stock recovered to the break-even point.

In 1999, that $5K would have become $100K.
I don't mind being compared to your mother. But that 100k would be worth about $37k right now. Still better than in a 5% average cd savings over the last 25 years.
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Old 05-26-2009, 08:30 PM   #39
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I don't mind being compared to your mother.
My mother, a widow, has been managing her own finances fairly well. However, she is a very risk-averse investor. She bought Intel stock based on a recommendation from my brother. At that point, I was only invested with mutual funds and was not following individual stocks.

When I heard that she waited patiently just to bail-out at the break-even point, I asked why she couldn't wait a little more as the stock was rising. She said that she thanked her lucky star just to be made whole and did not want to press her luck!

No offense to you, Dawg, but I have read time and time again that buy, sell, or hold decisions should be made solely on whether you think the stock will rise or fall from its current price. The price where you bought should be of no concern.

In my mother's case, Intel could also have gone down the tube while she was waiting for it to recover to where she bought it. She was looking at the price, but did not ask why it was going up or down.

At the point she was selling, Intel was recovering from some problems and went on to become THE dominant processor supplier for the ensuing PC boom. Knowing that, she could have hanged on to it a little longer. Now, of course she could have reached a different prediction about Intel's role in the computer industry, but at least it would be a better reason to sell the stock.

OK, you may say that how would an old woman know about a tech stock? Then, just as she bought it based on my brother's recommendation, she could have asked him on the sell decision, as he followed this stock.
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Old 05-26-2009, 10:26 PM   #40
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Keep in mind the 4% rule applies to inflation-adjusted payouts, so that would mean the 25x factor applies to a fully COLA'd pension or annuity.

Those with pensions or annuities that aren't COLA'd or have a Diet COLA might want to multiply by less than 25 since they don't get the benefit of an inflation-adjusted income stream.
I recall playing with this in FIRECALC - non-COLA'd pensions are only worth ~ a 12-14 multiplier. I think that was for a 30 year time frame, but I might have been stretching it out to 40 for the comparison. Ballpark number. I just did iterations until I came up with the same success rate.

-ERD50
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