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Old 01-25-2010, 10:31 AM   #41
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Will we get the sell signal soon

He's gonna have a speech today
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Old 01-25-2010, 10:34 AM   #42
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I thought the speech was on Wednesday??
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Old 01-25-2010, 10:40 AM   #43
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Originally Posted by TromboneAl View Post
My point is, that you can feel just as much regret if the market doubles and you didn't participate as when your equity investments drop.
This is perhaps true, but if so the emotion should be controlled. What counts is that your retirement isn't sunk, and usually large losses experienced are more harmful than large gains missed.

I am always puzzled that although many academic retirement gurus feel that equities are not a very good piece of a retirement strategy, most people on this board feel the opposite.

The rapid cancellation of the recent smash has emboldened people, I believe beyond that which makes sense.

Ha
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Old 01-25-2010, 10:44 AM   #44
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He's gonna get on TV today to talk about a "middle class task force" or something to that effect...

I got that from CNBC

Yea I know CNBC

Financial porn

Im afraid of the schemes their cooking up to spread MY wealth
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Old 01-25-2010, 10:51 AM   #45
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I am always puzzled that although many academic retirement gurus feel that equities are not a very good piece of a retirement strategy, most people on this board feel the opposite.
Most of the academic gurus that I have read accept that equities are a good building block to a portfolio. But not to the exclusion of cash, fixed income investments, longevity insurance, annuities, etc.

Many of the generic retirement scenarios that the academicians study have the retiree calling it quits at 65. Some here plan on ER'ing at 40 or earlier. That equates to a doubling or tripling of the traditional retirement period.

Most of the analysis I have seen says the longer the period of retirement, the higher the equities proportion needs to be to have optimal survivability (holding portfolio size constant).
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Old 01-25-2010, 10:56 AM   #46
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Time in the market does NOTHING to reduce risk...

The next 20 years are not gonna be the same as the last 20 years...
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Old 01-25-2010, 11:07 AM   #47
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With another housing tsunami on the horizon (alt-A and option ARM), I'd say bad things are yet to come.
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Old 01-25-2010, 11:12 AM   #48
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Steve O,
It's true the next 20 years won't be the same -- any 20 year period is never the same. I like to see what Liz Ann Sonders of Schwab has to say about the economy. She provides a well balanced view of what has happened -- but she does not predict what will happen.

This January snapshot is particularly good as she talks about what has happened in the past and what elements to be watching for in this recession. She is the only economist I have found who pulls together information from various sources that makes for a fuller picture.


Market Snapshot with Liz Ann Sonders: An Early Look at 2010

-- Rita
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Old 01-25-2010, 11:13 AM   #49
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I use threads like this one as a great contrarian indicator. It looks like it's time to up my percentage of equities based on all the thoughts in this thread.
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Old 01-25-2010, 11:14 AM   #50
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I use threads like this one as a great contrarian indicator. It looks like it's time to up my percentage of equities based on all the thoughts in this thread.
Didn't work so well in 2007, did it?
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Old 01-25-2010, 11:21 AM   #51
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Most of the academic gurus that I have read accept that equities are a good building block to a portfolio. But not to the exclusion of cash, fixed income investments, longevity insurance, annuities, etc.
No doubt that is true, but you have pretty well included the kitchen sink, and either a very stable portfolio or a very variable one could be made out of these ingredients.

Moshe Milievsky has this take- it you have high and stable human capital go ahead and take risks. A retiree with little or no pension is not in this position.

Indeed, I believe that your equity allocation should depend much less on your so-called time horizon, hard-to-measure risk aversion or fickle confidence in the stock market, and much more on the composition and structure of your personal balance sheet. If your job is reasonably secure, your pension is protected and your income is predictable, then go ahead and take some stock market risk with the non-essential funds.
Thus, I personally am still very heavily allocated to equities and stocks because I have a secure job with a Defined Benefit (DB) pension from a university. Economists call this general asset class “human capital,” which is likely more valuable than financial capital.
So, here is the bottom line. The long run can be very long indeed. The financial planning theories we have used to quantify the “probability of regret” from equity investing must be revised after the new statistical evidence we have uncovered during the past year. The potential rewards must be tempered. To loosely paraphrase one of the greatest economists of our time, Professor Paul Samuelson, the long-run case for equities shouldn’t be oversold.

Oversold equities - FP Comment

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Originally Posted by FUEGO View Post
Most of the analysis I have seen says the longer the period of retirement, the higher the equities proportion needs to be to have optimal survivability (holding portfolio size constant).
As in most things, it helps to think through the suppositions and the reality behind the study scenarios. I have had a roughly 25 year retirement, built mostly on equities and other speculations. However, most of this time has offered a cornucopia of a priori high return possibilities.

In an environment like today's, unless the 40 year old retiree is certain that he can go back to a good job, his position is weaker than an older retired person. Whle it may seem that he has no choice other than to go full speed ahead, that also increases his risk of hitting the wall.

Many ERs have never actually experienced the behavior of stocks under inflation. They assume that inflation makes stocks go up. This was certainly not true during the marked inflation of the mid-seventies, and this was a time of increasing business profits.

If one experts an inflation like the Weimar Republic, then of course own stocks. Own Cuban cigars or chamber pots, or anything other than cash or bonds.

IMO, if a person retires in circumstances like today's feeling that he must own a fairly high allocation of stocks he has retired too soon.

I also do not feel that one has to pick an allocation for all seasons, any more than he has to pick clothing for all seasons. In the summer wear a bathing suit, in the winter a parka. Same with investments.

Ha
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Old 01-25-2010, 11:23 AM   #52
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I use threads like this one as a great contrarian indicator. It looks like it's time to up my percentage of equities based on all the thoughts in this thread.

Go for it and let us know how it turns out for you
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Old 01-25-2010, 11:29 AM   #53
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No doubt that is true, but you have pretty well included the kitchen sink, and either a very stable portfolio or a very variable one could be made out of these ingredients.

Moshe Milievsky has this take- it you have high and stable human capital go ahead and take risks. A retiree with little or no pension is not in this position.

Indeed, I believe that your equity allocation should depend much less on your so-called time horizon, hard-to-measure risk aversion or fickle confidence in the stock market, and much more on the composition and structure of your personal balance sheet. If your job is reasonably secure, your pension is protected and your income is predictable, then go ahead and take some stock market risk with the non-essential funds.
Thus, I personally am still very heavily allocated to equities and stocks because I have a secure job with a Defined Benefit (DB) pension from a university. Economists call this general asset class “human capital,” which is likely more valuable than financial capital.
So, here is the bottom line. The long run can be very long indeed. The financial planning theories we have used to quantify the “probability of regret” from equity investing must be revised after the new statistical evidence we have uncovered during the past year. The potential rewards must be tempered. To loosely paraphrase one of the greatest economists of our time, Professor Paul Samuelson, the long-run case for equities shouldn’t be oversold.

Oversold equities - FP Comment



As in most things, it helps to think through the suppositions and the reality behind the study scenarios. I have had a roughly 25 year retirement, built mostly on equities and other speculations. However, most of this time has offered a cornucopia of a priori high return possibilities.

In an environment like today's, unless the 40 year old retiree is certain that he can go back to a good job, his position is weaker than an older retired person. Whle it may seem that he has no choice other than to go full speed ahead, that also increases his risk of hitting the wall.

Many ERs have never actually experienced the behavior of stocks under inflation. They assume that inflation makes stocks go up. This was certainly not true during the marked inflation of the mid-seventies, and this was a time of increasing business profits.

If one experts an inflation like the Weimar Republic, then of course own stocks. Own Cuban cigars or chamber pots, or anything other than cash or bonds.

IMO, if a person retires in circumstances like today's feeling that he must own a fairly high allocation of stocks he has retired too soon.

I also do not feel that one has to pick an allocation for all seasons, any more than he has to pick clothing for all seasons. In the summer wear a bathing suit, in the winter a parka. Same with investments.

Ha
A very thoughtful response...
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Old 01-25-2010, 11:33 AM   #54
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Don't worry folks, markets will go. They won't crash. They can't..

Simple reason that seems to always work: I think they have to go down and I keep waiting for the next crash with under-allocated equities in my portfolio. Since I am always wrong on market direction, they must go up...
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Old 01-25-2010, 11:50 AM   #55
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We may have a severe correction, like sp 900~950 around. No selling, no buying, but am itching... finally see some in the attractive range...
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Old 01-25-2010, 11:56 AM   #56
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If it worked that way, then everyone would be in cash. My point is, that you can feel just as much regret if the market doubles and you didn't participate as when your equity investments drop.
Actually, I read a study on that. It seems people in general are twice as depressed when they loose something as they are happy if they gain the same thing
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Old 01-25-2010, 12:03 PM   #57
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My long term plan is built on a 35-38% stock allocation with some TIPS and diversified bonds...
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Crooked Fed and the PPT team that's been on vacation lately...
If you believe your second statement and don't trust the Fed (or government as a whole) why are you investing in Treasuries?
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Old 01-25-2010, 12:13 PM   #58
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I think there may be gaps in your tinfoil headgear.
Hey can you guys settle down a little bit?
Me and my chemist(son)are trying to make a major decision here.
Like "Which beer are we going to brew now" ?
I mean somethings are priority you know?
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Old 01-25-2010, 12:43 PM   #59
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With another housing tsunami on the horizon (alt-A and option ARM), I'd say bad things are yet to come.

How do you know that these aren't already priced into the market?
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Old 01-25-2010, 12:46 PM   #60
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I haven't invested in treasuries yet, Im holding 22% in cash
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