Trouble Ahead???

[Gone4Good]

The only real debate is the time frame over which the on-going credit deleveraging plays out and the itinerant policies employed to fight it. That is happening, and will NOT go away.

Why are you so sure about this?

Actual debt service isn't that high at the individual, corporate or even the federal level. Absent a renewed collapse in asset prices or national income, it's not clear that "deleveraging" needs to mean an actual decline in debt balances but rather a slowdown in accumulation below the rate of income growth. That has already happened at the individual and corporate level. Unless savings rates are going to continue to increase from the recent ~5% area (which is far from certain), consumer thrift has already stopped being a drag on economic growth.

 

[Steve O]

How can this board be relevant when just about any political discussion is censored

 

[Gone4Good]

Id love to hear what the bulls reasoning is

So far 70% of reporting companies are beating Q4 earnings estimates. If companies meet 2010 earnings estimates (psst, they've massively beat the last three quarters) the SPX is trading 15x this year's earnings. Corporate margins are huge after some very significant cost reductions in 2009. Any revenue growth at all will cause earnings to explode. GDP growth continues to surprise to the upside. Payroll numbers have been improving for 11 months in a row. The index of leading economic indicators has been straight up since March 2009, the index of coincident indicators has been improving since June. The "leadingest" of leading indicators, the yield curve, is as steep as it has ever been. etc. etc. etc.

 

[Gumby]

How can this board be relevant when just about any political discussion is censored

1. As far as I know, you have not been censored. In fact, not a single one of your posts has been moderated at all.

2. Discussions of political and public policy issues directly related to FIRE are, in fact, permitted under the Community Rules. Partisan political bashing or politics unrelated to FIRE is not.

3. If you have a problem with the moderation of the board, you should contact the moderators or administrators directly via personal message, not posting to the thread. Again, a policy spelled out in the Community Rules.

4. You will find a link to the Community Rules and Terms of Service at the bottom of the page. I would suggest you read them. If they make you unhappy, you do not have to stay here.

Thank you,

Gumby

 

[Gone4Good]

Realistically, what 40 year old can't return to the labor force and earn a reasonable living?

I'd add that you don't need to replace 100% of your pre-retirement income. Anyone who is pulling the plug at 40 is a hyper saver. They won't need to replace the savings portion of their old budget. They probably also earned a high salary and paid high taxes. They won't need to pay those high taxes either. They won't even need to replace 100% of their living expenses. Just the portion that mister-market has taken from them.

So for someone who once earned 100, sent 25 to the government, saved 40, and lost half of their net worth in the market, they probably only need to earn about 20 (a.k.a. 20% of their pre-retirement income) to put their original retirement scheme back on track. Or if they wanted to replace 100% of their expenses to allow their portfolio a chance to recover, they can probably get away with earning just half of what they did before they quit.

 

[brewer12345]

Its amazing how quickly some people get eaten by my Iggy List...

 

[unclemick]

1. Dory36's original 33% That's My Story got me to join this forum.

2. Now that the Saints won - my BP is back to normal for a while.

3. Full auto Target Retirement - auto deduct retirement money for the coming year every Feb to MM after Target rebalances in Dec.

If I start deep thinking - I try to watch less market news - you can't avoid it totally - it's a hormone thing.

heh heh heh - .

 

[Steve O]

"Anyone who is pulling the plug at 40 is a hyper saver."

Not necessarily

 

[Steve O]

"Now that the Saints won - my BP is back to normal for a while."

Superbowl is right around the corner...

 

[Nords]

I don't plan on "dumping my angst" here forever

Anyone can redirect a CNBC doom&gloom newsfeed into a series of E-R.org posts. I was hoping for a constructive discussion of how you're going to get through this recession and allocate your assets for the future.

No cola'd pension here, I live off of my investments...

If you want a "cola'd pension" then you can go price a Vanguard COLA annuity. I've already paid for my COLA annuity, and I'm living off my investments too.

I made $$$ during the last crash due to incredibly lucky timing... I made even more during this last run up...
My strategy right now is to not lose a lot of $$$

Well, that's a start. How'd you do it, what are you doing, and what are you planning to do next? "Luck" isn't much of a plan.

This is a forum on ER right FIRE and $$$...
I figured Id try to gauge sentiment among those who are ER'd on their outlook on the future?

Seems like most of the posts in this thread are your sentiments.

Id love to hear what the bulls reasoning is

Me too. Personally I think the worst is behind us, well-run companies will start making money again, there's still value to be found, and there will eventually be a recovery. Angst & drama aside, this is a good time to be fully invested in whatever your long-term asset allocation would be. Mine is listed in my profile.

 

[LARS]

Why are you so sure about this?

Actual debt service isn't that high at the individual, corporate or even the federal level. Absent a renewed collapse in asset prices or national income, it's not clear that "deleveraging" needs to mean an actual decline in debt balances but rather a slowdown in accumulation below the rate of income growth. That has already happened at the individual and corporate level. Unless savings rates are going to continue to increase from the recent ~5% area (which is far from certain), consumer thrift has already stopped being a drag on economic growth.

You and I clearly look at the same "facts" and draw very different conclusions. You are obviously entitled to your interpretation of the "facts", but I do not share your views.

By the way, I never suggested that deleveraging needs to mean actual reduction in debt. What I said was there are many ways to deal with the problem of the bursting credit bubble. The course over the next several years (maybe decade) that central banks and politicians ultimately follow will determine whether there will be real or nominal reductions in debt. But it is clear that it will (is) happen(ing) one way or the other. There is no misinterpreting that fact.

Personally, I do not believe we will be successful in "nominally" growing our way out of this mess without bankrupting the nation, but time will tell.

 

[FUEGO]

I'd add that you don't need to replace 100% of your pre-retirement income. Anyone who is pulling the plug at 40 is a hyper saver. They won't need to replace the savings portion of their old budget. They probably also earned a high salary and paid high taxes. They won't need to pay those high taxes either. They won't even need to replace 100% of their living expenses. Just the portion that mister-market has taken from them.

So for someone who once earned 100, sent 25 to the government, saved 40, and lost half of their net worth in the market, they probably only need to earn about 20 (a.k.a. 20% of their pre-retirement income) to put their original retirement scheme back on track. Or if they wanted to replace 100% of their expenses to allow their portfolio a chance to recover, they can probably get away with earning just half of what they did before they quit.

I guess this was implicit in my own reasoning since I'm planning on being one of those 40 year old hyper savers. I should have stated this in my post though. Our numbers, in a general sense, are as you laid out. Say for example we have 100k income between DW and I, we pay the government maybe $20k, save 40k and live on 40k. Should the portfolio dry up to zero, either DW or I could go find a job for survival purposes and make ends meet and probably save a little. More likely we will still have part of our diminished portfolio remaining to support us, and only require us to earn maybe 20k as you say.

Maybe a better assertion is that any reasonably skilled mouthbreather with a college degree can find SOMETHING that pays 20k or better, even 10+ years out of the rat race. And in my particular situation with a DW and me both potentially looking for a job, it makes the odds of finding 20k of employment income much higher. Heck, any local unskilled city or state job pays $23k+.

So a portfolio failure (50% loss in value) might have a 5-10% chance of happening in the first 10-15 years, in which case we resort to Plan B, employment, and the odds of success on Plan B are probably 95%+. Cumulative probability of failure = 0.1 * 0.05 = 1/2 of a percent.

Acceptable risk in my book.

 

[Zathras]

...Id love to hear what the bulls reasoning is

Not bull reasoning so much as just not a believer the world (financial) is coming to an end.
Yes, there are dangers and downfalls left to be ironed out. But we have also navigated and avoided/gotten past some of the really hairy stuff that could have thrown us into a really bad depression.
I do believe that the worst is past us. But I also recognize that could be incorrect.
I build my allocation accordingly.
But to think I KNOW which direction we are going in the short term would be short sighted and potentially disastrous.

 

[FUEGO]

From the research I have done on FIREcalc runs (and posted about here a couple years ago), most of the ultimate failure scenarios from a portfolio holding significant equities would be known in the initial 5-10 years of a retirement. This 5-10 year period is probably an early enough point in time where the human capital is still large enough that one can exploit it to replenish the investment portfolio. Hence relying on equities and being flexible enough to consider exploiting your human capital should you hit hard times is still a valid approach. Otherwise you will be stuck with working a number of extra years to have a more secure, albeit shortened retirement (ie each year you work you consume some of your "retirement capital" ).

I got un-lazy and decided to search for my earlier research in case any of you have trouble sleeping tonight:

http://www.early-retirement.org/for...-but-i-found-the-secret-to-success-35074.html

In summary, I looked at portfolio values 5-10-15 years out from an ER date. Basically, if at 10 years you have less than 60% of your portfolio, then you are more likely than not to completely deplete your portfolio before the end of your 40 year hypothetical retirement. At 15 years into retirement, if you have less than 50% of your at-retirement portfolio value remaining, then you would have a 90% chance of depleting your portfolio before the end of your 40 year retirement. Based on 40 year retirement period, 4% withdrawal linked to inflation.

Basically common sense, but this research was based on actual historical market performance from FIREcalc. In other words, there are strong indicators that your retirement portfolio will fail you eventually by looking at where you are 10-15 years into retirement. Before it is too late to go back to work. Maybe a better plan B for a 40 year old heading into FIRE versus a 55 year old who would be facing searching for employment at age 65-70. But then again a 55 year old FIREing needs to fund 15 less years of retirement and hence would more optimally have a lower percentage of equities in their portfolio and hence have lower volatility.

 

[Gone4Good]

You and I clearly look at the same "facts" and draw very different conclusions. You are obviously entitled to your interpretation of the "facts", but I do not share your views.

I'm not sure what facts you are referring to, because as far as I can tell you haven't posted any. But if you're referring to my assertion that individual debt service isn't that high, here is the ratio of personal debt service to disposable income for the past thirty years. It was 12.85% at the end of 3Q09 versus 11.2% in 1980.

 

[LARS]

I'm not sure what facts you are referring to, because as far as I can tell you haven't posted any. But if you're referring to my assertion that individual debt service isn't that high, here is the ratio of personal debt service to disposable income for the past thirty years. It was 12.85% at the end of 3Q09 versus 11.2% in 1980.

Your posts on this subject seem to suggest that there was not a credit bubble that burst, and you attempt to pick statistics to prove your point. From my perspective, and so it would seem those of the Federal Reserve and the Federal government based upon their extraordinary actions of late, your statements lack a fundamental understanding of the current financial landscape, and so further debate seems pointless.

You are obviously entitled to your opinion however misguided I may think it based upon my experiences in the financial world as a Managing Director (retired) from a bulge bracket investment banking firm. Still, I hope it guides your investments to shorten the “Yrs. To Go” to your retirement. I have my doubts, but there it is…

 

[haha]

YouTube - Happy Talk

 

[harley]

Personally, I'm rolling with Freddie.

YouTube - "Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem#

 

[haha]

Freddie may be cool, but it looks like Maynard is downright cold. He's the man most likely to score a hat trick with those lascivious lassies.

Ha

 

[Steve O]

Anyone can redirect a CNBC doom&gloom newsfeed into a series of E-R.org posts. I was hoping for a constructive discussion of how you're going to get through this recession and allocate your assets for the future.

I get my news from a variety of sources, CNBC is a convenient way to watch the market during the day though...

As I said I went from 58 to 38% stocks selling on the recent highs and Im up for the year after yesterdays modest rally...

I went from overweight the S&P small caps to slightly underweight, underweight large caps to neutral.

I added some consumer staples, telcom, and utilities looking for dividend yield. Also bought some energy...

38/40/22 stocks/bonds/cash, 75/25 US/international. Bonds are in Wellington/Weleselly, TIPS fund, High yield corporate, and intermediate corporate.

Im thinking of going long US treasuries. I don't think the FED can raise rates and if they do it will kill the housing market...

Any trouble worldwide or a market crash will trigger a flight to safety here... Could a be very risky play...

If you want a "cola'd pension" then you can go price a Vanguard COLA annuity. I've already paid for my COLA annuity, and I'm living off my investments too.

Id love to do this with all of my bond holdings if we ever see higher interest rates...

Id do another separate IRA and go 72T, all of my holdings are in an IRA and I pay the penalty...

Well, that's a start. How'd you do it, what are you doing, and what are you planning to do next? "Luck" isn't much of a plan.

I worked for a steel forging company that had an ESOP. After 19 years I had 1.93 million in company stock.

I quit in July 08 and parked it in a MM fund earning around 3.5% at the time. I got in the market in Oct 08 and bought more in March 09...

Strategy is to hold cash waiting for better opportunities right now...

If we see another rally Im gonna sell another 3%...

Me too. Personally I think the worst is behind us, well-run companies will start making money again, there's still value to be found, and there will eventually be a recovery. Angst & drama aside, this is a good time to be fully invested in whatever your long-term asset allocation would be. Mine is listed in my profile.

I think were headed down and unemployment is going up, Im not real happy about it.

I hope Im wrong, well see..

 

[Zathras]

I do have to hand it to you Steve, at least you aren't one of the doom and gloomers that insists everyone should get out of stocks completely and stick only with cash.
Sounds like you have an asset allocation which allows you to sleep at night and as long as it will also support your retirement, that is all that counts

 

[Snidely Whiplash]

your statements lack a fundamental understanding of the current financial landscape, and so further debate seems pointless.

Totally unnecessary and uncalled for. This is the second thread in which your disagreement with Yrs To Go has resulted in your condescending and dememeaning comments.

based upon my experiences in the financial world as a Managing Director (retired) from a bulge bracket investment banking firm

I'm not sure how you feel this should give your opinion more weight over Yrs To Go's.

 

[Snidely Whiplash]

Its amazing how quickly some people get eaten by my Iggy List...

Can you please post how to do this? It sure would help my blood pressure.

 

[brewer12345]

Can you please post how to do this? It sure would help my blood pressure.

Click on the miscreant's profile. Choose the User Lists dropdown and select Ignore list. Confirm when asked. Voila, no more LARS, tinfoilsteve, *****, etc.

 

[Steve O]

Alcoa looks like a pretty good buy