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Old 07-31-2007, 01:47 PM   #41
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Originally Posted by JohnEyles View Post
My philosophy, too, is to have enough cash in money markets, CDs,
etc to live on for X years or so. However, the taxable portion of
my portfolio is generating $10-15K in dividends annually. So I've
sized this cash reserve as annual expenses MINUS the dividends
(TIMES the number of years).

Is this reasonable ? Dumb question I guess, but in the event of a
BIG correction (10% or more) how much should I expect this dividend
stream will shrink ??
No event that would only produce a 10% fall would likely have any effect at all on your dividends. Remember we had quite near to a 10%er in Feb of this year.

Incidentally, I prefer to use the word drop, or fall, rather than correction. Correction is eupho-speak created by the brokerage industry. What is being corrected? My net worth being returned to its normal pitiful state?

Ha
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Old 07-31-2007, 03:03 PM   #42
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Well, we just live on the income stream of dividends and interest, and also have about two years of living expenses with no changes in expenditures in cash, so we sleep well all the time.

We've been stashing our extra unused dividends in an online savings account, and that's almost up to a year's expenses now as well, so let the markets do what they may, and we'll hardly notice.

And if the whole thing collapses? We'll be fine then as well. We've lived with little money and a lot of money, and either way, life goes on.

LooseChickens
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Old 07-31-2007, 03:34 PM   #43
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American Home Mortgage plummeted $9.43, or 90 percent, to $1.04. The lender, whose shares stopped trading at $10.47 yesterday after it disclosed a cash shortage, has been cut off from credit and didn't have money yesterday to make $300 million of mortgages it had already agreed to provide, the Melville, New York-based company said today in a statement.

Well I guess that qualifies as a meaningful drop. What were stockholders in this company thinking yesterday at 3:59 PM?
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Old 07-31-2007, 04:27 PM   #44
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There is clearly some manipulation that can happen in the last 30 minutes that can drive the DOW down 150 points into the close.

I know that companies are not allowed to buy back their own company stock during the last 30 minutes of trading.

I know that the "uptick" rules have been dropped and that apparently makes it easier for shorting via futures to push the averages down. Don't understand the mechanism.

I've been reading that buyers can't "get in" during the furious futures-driven drops. I don't really understand this either.

However, I strongly suspect this new volatility and end of day behavior is related to rules changes and few specialists left on the NY stock exchange.

Welcome to the future!

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Old 07-31-2007, 04:29 PM   #45
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American Home Mortgage plummeted $9.43, or 90 percent, to $1.04. The lender, whose shares stopped trading at $10.47 yesterday after it disclosed a cash shortage, has been cut off from credit and didn't have money yesterday to make $300 million of mortgages it had already agreed to provide, the Melville, New York-based company said today in a statement.

Well I guess that qualifies as a meaningful drop. What were stockholders in this company thinking yesterday at 3:59 PM?
What indeed? Now I have another question, if you know the answer. AHM was the "10th largest". How many between 1 and 10 do we have to go?
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Old 07-31-2007, 04:31 PM   #46
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There is clearly some manipulation that can happen in the last 30 minutes that can drive the DOW down 150 points into the close.
Audrey
I have no idea what I'm talking about (trust me on this one): I did sell some index fund shares today; of course, they give me the COB price, does that kind of selling have any effect?
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Old 07-31-2007, 04:54 PM   #47
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Went out back to my library (a.k.a. shed) and dug out "The Intelligent Investor" by Mr Graham yesterday evening. Turned over to read chapter 8 "The Investor and Market Fluctuations". Got over to the paragraph that read,

"That a man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment."

I woke up two hours later in the recliner and put the book back in the library.

Thanks Ben!
Does this apply to owners of American Home Mortgage Corp as well? With one billion in mortgages that were approved for home sales being rescinded IN THE LAST TWO DAYS!!! what is the effect on the economy as these sales are reversed?
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Old 07-31-2007, 04:54 PM   #48
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It depends on how much cash the fund has and whether they have to sell stocks to fund redemptions.

2soon
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Old 07-31-2007, 05:00 PM   #49
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When you are getting ready to retire, as I am, timing is damn near everything. Throw a lump sum in at the wrong time, and a return to work is a very real possibility.
If a timing mishap could push the ER portfolio over a cliff, then it's probably best to keep working another year or two or at least cut back to part time.

Everyone could've retired over a decade ago if they'd put their entire portfolio in Apple, Microsoft, & Intel. But setting themselves up for single-stock failures like that would've been pretty miserable in 2001-2002...
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Old 07-31-2007, 08:08 PM   #50
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Does this apply to owners of American Home Mortgage Corp as well? With one billion in mortgages that were approved for home sales being rescinded IN THE LAST TWO DAYS!!! what is the effect on the economy as these sales are reversed?
Assuming an average mortgage amount of $200,000, thats 5000 mortgages.
With an assume rate of about 500000 homes, condos, etc per month, thats
1%, not a huge deal, but certainly will make Aug/Sept numbers look worst
because buyers will need to find new financing.
TJ
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Old 07-31-2007, 09:52 PM   #51
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Yet another Bear Stearns hedge fund is on the ropes...

UPDATE 3-Bear Stearns halts redemptions in third hedge fund | News | Market News | Reuters

No, they haven't said its worthless - yet. You just can't take your money out because they don't want investors to sell at such an inopportune time. Funny - I thought it was **my** money. Guess not.

Sounds to me like they're simply trying to stop a run.

This housing situation is a slow-motion disaster occurring right before our eyes. I believe anyone who thinks this will be contained within the housing market has been smoking something illegal. Dow 15000?

I'd take a bet - with odds, of course - that 10000 is more likely.

As for me, I've decided that having more than 100k in any individual bank at this time is foolhardy. I've got 300+k in an E*Trade bank complete savings account yielding 5.05%.

Not a bad interest rate, but its only FDIC insured to 100k.

And they are in the mortgage business as well as banking...

Time to spread it around...
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Old 07-31-2007, 11:45 PM   #52
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Quote:
Originally Posted by JohnEyles View Post
in the event of a
BIG correction (10% or more) how much should I expect this dividend
stream will shrink ??
I think that if you are reasonably diversified, you probably won't face a decrease in dividend payment unless there is a real economic recession (something I don't see happening in the near future)

Here is a list of "Dividend Aristocrats" - S&P 500 companies that have had increasing dividends for the past 25 years:

3M Co
Abbott Laboratories
Altria Group
Anheuser-Busch Cos
Archer-Daniels-Midland
Automatic Data Proc
Avery Dennison Corp
Bank of America
Bard (C.R.)
BB&T Corp
Becton, Dickinson
CenturyTel Inc
Chubb Corp
Cincinnati Financial
Clorox Co
Coca-Cola Co
Comerica Inc
Compass Bancshares
Consolidated Edison
Dover Corp
Emerson Electric
Family Dollar Stores
Fifth Third Bancorp
First Horizon Natl
Gannett Co
Genl Electric
Grainger (W.W.)
Johnson & Johnson
Johnson Controls
KeyCorp
Kimberly-Clark
Leggett & Platt
Lilly (Eli)
Lowe's Cos
M&T Bank
McDonald's Corp
McGraw-Hill Companies
Nucor Corp
PepsiCo Inc
Pfizer, Inc
PPG Indus
Procter & Gamble
Progressive Corp,Ohio
Questar Corp
Regions Financial
Rohm & Haas
Sherwin-Williams
Sigma-Aldrich
SLM Corp
Stanley Works
State Street Corp
Supervalu Inc
Synovus Financial
Target Corp
U.S. Bancorp
VF Corp
Wal-Mart Stores
Walgreen Co
Wrigley, (Wm) Jr
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Old 08-01-2007, 12:07 AM   #53
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Dow 15000?

I'd take a bet - with odds, of course - that 10000 is more likely.
How about a bet that the Dow may hit both of those numbers in the same month? What do you figure those odds need to be?
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Old 08-01-2007, 07:41 AM   #54
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What indeed? Now I have another question, if you know the answer. AHM was the "10th largest". How many between 1 and 10 do we have to go?
i think new century was #1 at one time. now comes the part where all the banks thought they could sell foreclosures for more than the amount owed
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Old 08-01-2007, 07:56 AM   #55
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How about a bet that the Dow may hit both of those numbers in the same month? What do you figure those odds need to be?
Nah - I figure that would take at least 2 months to occur...

That wouldn't be a bad time to be in the VIX volatility futures though, would it?
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Old 08-01-2007, 09:01 AM   #56
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Because of procrastination and vacations I shifted from 60 Stocks - 40 Bonds/Cash to 42 Stocks - 58 Bonds/Cash back around the end of May beginning of June. I moved about 1/3 of my total assets out of a company 401K to VanGuard and in sat in my Money Market Account for the waiting period. I then started to rebalance back to 60/40 but decided to do it in two chucks since it was a lot of money and didn't want to hit a peak.

So after watching the 14,000+ peak with all this extra cash and think now would be a dumb time to jump in and now watching all the swings I'm feeling pretty comfortable staying in cash right now. At 20 months into ER I'm sleeping well and probably would be sleeping well at my 60/40 split also.

Now the problem of deciding when to jump back into to rebalance to 60/40.

Jeb
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Old 08-01-2007, 04:08 PM   #57
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So after watching the 14,000+ peak with all this extra cash and think now would be a dumb time to jump in and now watching all the swings I'm feeling pretty comfortable staying in cash right now. At 20 months into ER I'm sleeping well and probably would be sleeping well at my 60/40 split also.

Now the problem of deciding when to jump back into to rebalance to 60/40.

Jeb
I'll drink to that, make mine green, maybe a mint julep.
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Old 08-01-2007, 05:18 PM   #58
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Nah - I figure that would take at least 2 months to occur...

That wouldn't be a bad time to be in the VIX volatility futures though, would it?
Yep, although I'm in options now, and really enjoying the wild swings. Can't believe what some people are willing to pay right now. Wouldn't surprise me if I could find a put and call straddle that would return 100% of the underlying stock price over a 6 month period. Haven't found it yet, but I'm looking.
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