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Old 06-27-2008, 05:16 AM   #81
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1% cash (in case you need to feed parking meters)
ROFL

I would love to have Helena's tax-free flexibility. Right now I have 80% in taxable accounts. That's what I have to live on, period. I know you guys hate market timers, but I assume those who trade also acknowledge the wisdom of the stop-loss. Hmmm, do I want to pay 15% now in cap. gains tax (100% probability) or risk what I feel is an 95% probability that this market will drop more than another 15% and stay there for quite a while.
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Old 06-27-2008, 06:31 AM   #82
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I've been procrastinating for 6 months, but I think its time to invest in VTI.
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Old 06-27-2008, 07:13 AM   #83
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Go buy yourself a COLA'd pension.
What kinda cola'd pension am I going to be able to buy at 44?

OH, and thanks all for the responses, still reading..

W
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Old 06-27-2008, 07:43 AM   #84
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(Well, that and a conservative 55:45 fixed:equity asset allocation; my portfolio is only down about 2% since February 14th.)
I think that's the key to it, i.e. have an asset allocation that let's you sleep, while realizing that having adequate money in the market is one of the best ways (long term) to keep up with inflation.

It has seemed that the times I've been ready to panic, sell it all, "be safe", and instead invested some of my lazy cash have been some of the best investments.

One more thought. Let's say things are going in the shi__er and the market is going to drop by another 60-70+%, led by financial. Does being all in cash make you safe when the banking system is going under? I don't think so. Either the credit risk will start to implode "virtually riskless" investments OR the government will be forced to back the debt. If the government backs the debt, they will either have to a) print money, b) raise taxes (with a very large unemployment situation), or c) stop depositors from getting the money. I'd bet on mostly a), and this means the underlying buying power of that cash will be impacted, perhaps severely.
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Old 06-27-2008, 07:51 AM   #85
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ROFL

I would love to have Helena's tax-free flexibility. Right now I have 80% in taxable accounts. That's what I have to live on, period. I know you guys hate market timers, but I assume those who trade also acknowledge the wisdom of the stop-loss. Hmmm, do I want to pay 15% now in cap. gains tax (100% probability) or risk what I feel is an 95% probability that this market will drop more than another 15% and stay there for quite a while.
Hi Ladelfina

You can always take a position in a short fund - like prudent bear or grizzly bear. That way you limit your downside and pay no tax now.

Michael
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Old 06-27-2008, 07:54 AM   #86
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Everyone going to cash might even help the banks increasing liquidity, not if they go for a RUN on the banks though, which I would not expect for most of the banks (not all of them, certainly). If it helps anyone feel better, starting in January 1997, the S&P's yield finally went below 2% where it had never been below before. It went above 2% in January 2008 and is now sitting at 2.15%, still way below historical norms but with stock buybacks replacing most dividends, it could be an indicator the market has bottomed. I am still putting money in, though, so steady as she goes...
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Old 06-27-2008, 07:58 AM   #87
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MichaelB.. thanks for the thought, but I would have to sell something else, triggering the gains of the last 10-20 years (OR use my 2-year cash cushion). copyright1997, when I was working I guess I did have "lazy" cash. Now that cash not only just can't afford to be "lazy".. but it is steadily declining in the Euro purchasing power I need.

There was a comment on the "Big Picture" blog:

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Buy and Hold investors are Wall Street's cash crop... plant the seeds, let them grow, fertilize and water, then whack 'em off at the ankles and turn 'em into pig feed.
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Old 06-27-2008, 08:09 AM   #88
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But now at 49, some six years from what I had hoped was going to be an early retirement, every little sneeze in the stock market is like a kick to the stomach. A repeat of 2000-2002 would force us to work for another 5-10 years.
This would be particularly true if someone was very aggressively into tech stocks and other domestic large-cap equities.

But 2000-2002 was also a classic case study of the power of diversification and asset allocation.

In 2001 and 2002, as large cap U.S. (particularly tech) was melting, small caps were rising. REITs were rising. Bonds were rising. Gold stocks were rising. Emerging markets held their own. In the middle of 2000 I chucked my previous investment strategy after reading Bernstein's The Intelligent Asset Allocator. Thus I threw a total of about half of my portfolio into these assets, with the other part in U.S. large caps and developed international stocks.

In 2001 and 2002 -- TOTAL, both years -- I lost 7% even as the S&P lost about 35%. Not because of any great skill or stock picking -- just by diversifying into non-correlating assets.

This one feels worse *to me* because almost nothing is working, save for commodities (which I think are in a bubble). But even then, diversification means that the bonds are holding their value, the gold and commodities (about 10% of my portfolio combined) are rising, and as a result I'm down 9% from the Halloween high instead of about 20%.

Proper diversification, IMO, is the safety harness and Dramamine of the market roller coaster. It keeps you more secure and prevents you from getting sicker in harsh gyrations.
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Old 06-27-2008, 08:17 AM   #89
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This would be particularly true if someone was very aggressively into tech stocks and other domestic large-cap equities.

But 2000-2002 was also a classic case study of the power of diversification and asset allocation.

In 2001 and 2002, as large cap U.S. (particularly tech) was melting, small caps were rising. REITs were rising. Bonds were rising. Gold stocks were rising. Emerging markets held their own. In the middle of 2000 I chucked my previous investment strategy after reading Bernstein's The Intelligent Asset Allocator. Thus I threw a total of about half of my portfolio into these assets, with the other part in U.S. large caps and developed international stocks.

In 2001 and 2002 -- TOTAL, both years -- I lost 7% even as the S&P lost about 35%. Not because of any great skill or stock picking -- just by diversifying into non-correlating assets.

This one feels worse *to me* because almost nothing is working, save for commodities (which I think are in a bubble). But even then, diversification means that the bonds are holding their value, the gold and commodities (about 10% of my portfolio combined) are rising, and as a result I'm down 9% from the Halloween high instead of about 20%.

Proper diversification, IMO, is the safety harness and Dramamine of the market roller coaster. It keeps you more secure and prevents you from getting sicker in harsh gyrations.
Looks like a textbook AA and retirement saving plan to me.
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Old 06-27-2008, 08:36 AM   #90
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What kinda cola'd pension am I going to be able to buy at 44?

OH, and thanks all for the responses, still reading..

W
Well, you're still pretty young at 44. You could get a job as a teacher. I think Minnesota has, or had, a rule of 90. I think Nebraska has a rule of 95. Basically, in Minnesota's case, when your age plus your years of service equal 90, you get your pension and medical.

Or, if you're still in reasonably good health, you might be able to talk the military into letting you commission. You'd be out at 64 with some great stories and a cola'd pension. It seems that, in a down market, some people are begrudging the military retirees their pension... all it takes is 20 years of your life in some of the prettiest locations on earth to get one.

Another option would be to buy an annuity with a cola rider. There's a significant discussion about those already. Bottom line is that they probably work for some people and not for others.

You could move more of your money into TIPS. Get enough in there that you can sleep at night. I believe Larry Swedroe has proposed, at least as an interesting thought experiment, a portfolio based on 70% fixed income and 30% commodity futures (I think there was some precious metal in there somehwere too). You get rid of a large chunk of downside while still keeping an ok exposure to upside potential.
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Old 06-27-2008, 08:42 AM   #91
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For some, no. And to be politically correct, that's ok too. But for me, yes. But I've been rejected anyway. So I'll lust over my avatar.
What?!!!...you're not the chick in your avatar?
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Old 06-27-2008, 09:09 AM   #92
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What kinda cola'd pension am I going to be able to buy at 44?

OH, and thanks all for the responses, still reading..

W
According to their website, Vanguard through AIG will send you a cola pension for single life only for a single payment of $908,785.66 to get you $37,000 annually with inflation adjustments. IF you are just starting out and would like to save up for this, assuming a 10 percent annual return on your investments and 3.5 percent annual inflation you would need to save 24,000 upgraded each year for inflation for 20 years to achieve enough to purchase the annuity at that time, of course assuming present annuity quotes would be identical 20 years from now.
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Old 06-27-2008, 09:14 AM   #93
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According to their website, Vanguard through AIG will send you a cola pension for single life only for a single payment of $908,785.66 to get you $37,000 annually with inflation adjustments.
The problem with the Vanguard/AIG quote is that I think you have to assume the first payment within a year or so. I tried to see what you could get by putting in $200,000 today for a COLA'd annuity with first payment at 11/01/2020 (age 55) and it was too far out. I suppose that's because they can't price inflation for the next 12+ years.

I suppose the trick there would be to take the $200K and buy TIPS maturing around 10/2020 and then buying a COLA'd annuity with the proceeds upon maturity if that were the strategy. I'm not going to do that, since I think that's leaving too much potential growth on the table for 12 years -- but I suspect that's how it would be done...
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Old 06-27-2008, 11:33 AM   #94
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If it's working you over mentally too much why not try to find a part time job to smooth the rough patch? Even minimal wage income from a 3 days per week when figured as a percentage of annual draw from stash makes a huge difference.
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Old 06-27-2008, 11:40 AM   #95
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MichaelB.. thanks for the thought, but I would have to sell something else, triggering the gains of the last 10-20 years (OR use my 2-year cash cushion). copyright1997, when I was working I guess I did have "lazy" cash. Now that cash not only just can't afford to be "lazy".. but it is steadily declining in the Euro purchasing power I need.
If your investments are euro based US equities, the past year must have been especially painful. I suspect this will even out over the next year or two.

Nothing wrong with buy and hold - as long as your holding is because you want the asset, not just tax avoidance.

Michael
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Old 06-27-2008, 11:48 AM   #96
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Hey, if you want a COLA pension too, then you can go buy a COLA-adjusted annuity from Vanguard for a lot less than I paid for mine. The payer might have a slightly lower credit rating but I'm not sure that'll make a difference over our lifespans. You won't have to learn how to breathe underwater either.
You own a COLA'd insurance annuity? I would not have guessed that. I assume you think that was a mistake?
Just so that it's crystal clear for everyone who doesn't read the link to my profile info in the FAQ archives, I'm referring to my U.S. Navy pension for 20 years in the submarine force.

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This month in dividends:
It is a pity I need to the dividend income to pay bills cause at these prices I'd sure like to buy more but I'll stick to reinvesting dividends in my IRAs.
The regional-bank ETF (KRE) sorta kinda skipped a passthrough of their bank holding's dividend payouts last April, and they're due for their next one in July. It'll be interesting to see what happens (1) if there's a dividend and (2) depending on what the projected yield is-- especially with all the 52-week lows they've been setting this month.

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For some, no. And to be politically correct, that's ok too. But for me, yes. But I've been rejected anyway. So I'll lust over my avatar.
Ruh-roh, you just blew away your fan club of all the posters who thought that avatar was a self-portrait...
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Old 06-27-2008, 01:06 PM   #97
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Excellent point CFB. Every time I listen to someone talk about successfully timing the market at such an extreme level I say "bunk".
Yes, it never fails that when the market is down the folks who went all cash are piping up about how good they are feeling. We seldom hear from them when we are reaching new highs. My general feeling is when the all cash people start posting again, it's about time to use the dry powder.
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Old 06-27-2008, 01:34 PM   #98
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We're also not hearing a whole lot from the folks who like to arb a mortgage.

My house "bond" is holding its value, i'm improving its value on the cheap, I'm not suffering stock market losses on the mortgage amount, and my withdrawal rate is so low by not having to make debt payments that I really could care less what the market levels are.
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Old 06-27-2008, 01:42 PM   #99
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Ruh-roh, you just blew away your fan club of all the posters who thought that avatar was a self-portrait...
Who says you can't lust over yourself?
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Old 06-27-2008, 02:20 PM   #100
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Who says you can't lust over yourself?
Just face it...you've been "outed"....nice try though...LOL. It's no biggy to me as I'm female(and straight)....but the thing is that on occassions my hubby sits with me and reads some of the posts and your avatar caught his eye(and more then once)...LOL....I hate to have to tell him that you are a guy!!!...aaaaaa considering the bad news about the tanking market, perhaps this is not the time to give him this bad news.
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