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View Poll Results: How are you handling the Financial Crisis and its impact on you
Emotion [Very Worried] - [Impact] Standard of Living is going to drop in a big way 6 3.70%
Emotion [Very Worried] - [Impact] No Standard of Living drop 7 4.32%
Emotion [Worried] - [Impact] Standard of Living is going to drop Modestly 52 32.10%
Emotion [Worried] - [Impact] No Standard of Living is going to drop 33 20.37%
Emotion [Not Worried] - [Impact] Standard of Living is going to drop slightly 28 17.28%
Emotion [Not Worried] - [Impact] No Standard of Living is going to drop 36 22.22%
Voters: 162. You may not vote on this poll

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Old 12-04-2008, 02:05 PM   #41
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What bothers me that during the tech boom I started feeling uneasy and bailed out of the high flying tech stocks so how come I did not see it coming this time ? Was it just greed that motivated me to stay put or overconfidence in the market ?
It sounds like what you did back then was more a matter of rebalancing away "sector risk" than a matter of market timing. A rebalancing to avoid being too overweight certain sectors and asset classes is part of prudent asset allocation.

But the difference is that in the 2000-2002 bear market, asset allocation worked well -- while techs and large caps stunk up the joint, small caps and REITs were up sharply. Gold miners doubled. Emerging markets held their own and those who were properly diversified in '00-'02 avoided getting mauled by the bear.

In this Ursa Major, pretty much everything except cash and Treasuries have gone down together, so it feels like "asset allocation has failed." I think that's what got almost everyone badly hurt this time -- other than the flight-to-safety assets I mentioned above, diversification hasn't much helped.
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Old 12-04-2008, 02:25 PM   #42
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Originally Posted by Moemg View Post
What bothers me that during the tech boom I started feeling uneasy and bailed out of the high flying tech stocks so how come I did not see it coming this time ? Was it just greed that motivated me to stay put or overconfidence in the market ?
What made it harder for me this time was that I had become used to the large and growing dividends from the financial companies. When you coupled that with the favorable tax treatment that dividends have been getting since 2003, it became hard to sell them. I figured the high dividends would let me ride out a downturn. How wrong I was!

Also, unlike 2000, the P/E's never went crazy due to wild price increases. It's just that for the financials, the E went away very quickly.
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Old 12-04-2008, 10:22 PM   #43
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About financial stocks, my wife worked for one, and left in 2006 due to job pressures. So, I advised her to sell out all of her company stock in her 401k. I myself have no financial stocks among my individual equities, except what was in some of my MFs. Later found out after the fact that some of them got lots!

Then, sold some more of other stocks and MFs to raise cash, and thought that was enough. It was really a tsunami, and you thought you would be safe standing back 300 ft from shore!!!

Anyway, harm is already done, and I am hanging on. As I mentioned before, I lost 50% in the 2000-2003 crash, and then came back by changing strategy. I've been down only 30% this time (so far!), so can take it better than most. I've seen people losing 30% this time and already crying murder.

PS. I'd like to add that some foreign markets went down a lot more than ours. This is a world-wide problem, not isolated to the US.
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Old 12-08-2008, 10:06 PM   #44
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I've been retired for 7 years. My wife's job seems secure. We're pretty frugal and our life style was affected more by the skyrocketing gas prices than decline in the stock market.

Due to the plunging stock market and lower CD rates, our net worth is down about 4% from its peak. I don't feel too bad about that when I read about the plight of some of my friends and neighbors.

We keep most of our money in CDs, US Govt savings bonds, stable value funds, etc. I had reduced our exposure to the stock market a few years ago because I have a lower risk tolerance than most folks. So glad that I did that now, though I had doubts back then that I would be missing out on the stock market profits others were celebrating.
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Old 12-08-2008, 11:19 PM   #45
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I have to admit Iím rattled. While my brain tells me to stay the course and this too shall pass, I canít avoid the occasional spells of panic (what if this really is Great Depression II!!!). The worst part is my DW. She is much more risk averse than me and is lobbying to dump our equities for cash. It is hard to see her so distressed, even though Iím convinced this would be exactly the wrong move. We are in our mid 50s & 100% self financed with about a 50/50 allocation. Although our income hasnít changed, the huge hit to our net worth makes many of our retirement dreams (esp. travel) seem implausible.
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Old 12-08-2008, 11:34 PM   #46
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I have to admit I’m rattled. While my brain tells me to stay the course and this too shall pass, I can’t avoid the occasional spells of panic (what if this really is Great Depression II!!!). The worst part is my DW. She is much more risk averse than me and is lobbying to dump our equities for cash. It is hard to see her so distressed, even though I’m convinced this would be exactly the wrong move. We are in our mid 50s & 100% self financed with about a 50/50 allocation. Although our income hasn’t changed, the huge hit to our net worth makes many of our retirement dreams (esp. travel) seem implausible.
I understand your uneasiness, especially when your wife is distressed. You may even feel some responsibility, since you perhaps argued for a larger equity stake than she would have preferred.

But look at it this way.Even if the equity markets lost 75% from the top, a top mind you that was not outrageously overpriced, and lost it straight down with no meaningful rallies that you could use to lighten up if you so desired, you still would go down only 37.5 on your 50:50 portfolio, and this is not likely to be permanent.

Only you can know what is best for you, But one idea would be to look at it again when equity prices are higher. Long term you may want an even more conservative AA than 50:50.

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Old 12-09-2008, 07:20 AM   #47
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I have to admit I’m rattled. While my brain tells me to stay the course and this too shall pass, I can’t avoid the occasional spells of panic (what if this really is Great Depression II!!!).
Actually that sounds pretty calm from where I sit. I don't feel panic but often I think "what if this is many times WORSE than the Great Depression!".

Times were extremely tough during the Depression, but remember that it did not last forever. People survived the Great Depression and some even found their net worth to be greater afterwards than it was before.

We will survive the present economic crisis. With any luck it won't be too many years until we are bragging on the ER-Forum about how we made our millions by investing in XYZ back in 2008.

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Although our income hasn’t changed, the huge hit to our net worth makes many of our retirement dreams (esp. travel) seem implausible.
Surely your dreams of travel included some less expensive trips nearby? Now would be the time to think about the bargain basement trips. Even day trips can be fun.

Frank and I had a wonderful time on a one week trip on the week before Thanksgiving, visiting our tentative ER location in southern Missouri. We drove there, and even went to Kansas City for a day on a whim, as well as Lake Stockton, Fantastic Caverns, and any other local attractions that we thought were appealing. The entire week including motels, restaurants, and gas, cost us less than $1000.

And, Moemg, I guess from our discussions on past threads that possibly you might be wondering how we split those expenses up between the two of us so I will say now that we each paid half!
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Old 12-09-2008, 08:49 AM   #48
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Not worried about current situation, laddered CD's several years back, but am concerned about possible severe inflation kicking in due to big time bail out. But on other hand, if inflation kicks in, then yield of CD's will go up, so that should help.

In short term, recession for fixed income folks could be good as prices tend to fall. If economy stagnates over long term, could be bonus for us.
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Old 12-16-2008, 12:56 AM   #49
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I'm 57. Been retired for a year. i took out enough cash to last me for 3 years. I have 2 years of cash for living expenses left. So, I'm not worried right now, but if things are the same in 2 years, I'll be more concerned.

When I retired, I developed two strategies IF money got tight. The first is that I could always go back to work. That's not that bad really. Secondly, I could downsize my house and, thus, reduce expenses. Well, I lucked out. I spotted a good deal. Was able to sell my house (in So Cal) and bought a foreclosed house (in So Cal). I now have no house payment.

I also got a bit lucky. Most of the financial books that you read say that IF you get a lump sum (for leaving your work), you should invest that money immediately. Fortunately, for me, I decided to chicken out and dollar cost average into stocks. As a result, I've lost a lot less money. Currently, we're at 33% of our money in stocks, but some of those investments were made after the stock market already had declined.

I'm hoping that in 2 years, the stock market will start to rebound. Otherwise, it's NO traveling and seeking work as a greeter at Walmart.
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Old 12-16-2008, 10:44 AM   #50
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Ok ok - one more time - pssst Wellesley.

Or google and do some reading on whatever you can find on the early days of : Wellington fund founded 7/1/1929 in time for the Great Depression.

This decade Wall Street has started to feed the ducks - with dividend oriented funds and ETF's.

Old time religion may make a come back in slightly altered form.

Dividends and interest can be converted into cash - which is almost as good as real money - to paraphrase that legendary guru Yogi Berra.

heh heh heh - I have this personal problem - having been so cheap the first ten, 1993- 2003, years of ER, I've been trying to force myself to raise my standard of living which puts me out of my comfort zone and tends to make me nervous - but I hear you can't take it with you and after 15 yrs of ER I don't seem to be getting younger. .
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Old 12-16-2008, 12:11 PM   #51
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And UncleMick, the Wellesley dividends and long term capital gains that investors will be getting tomorrow sure look good to me.

I know, I know, you like your Target Retirement. Just sayin'.
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