Foolish economic girly-man

[Marshac]

What a wonderful picture of the future is painted in the last two paragraphs:

http://www.fool.com/News/mft/2004/mft04090118.htm

What do you guys think about Bill's predictions about the future?

 

[Cut-Throat]

Well, I think I basically a pessimist and agree with him.

Although, I have always been wrong in the past and hope that I am now.

An example, when Reagan was elected in 1980, we had bigtime deficeits and 20% prime interest and Bush Sr. called it voodoo economics (which it was) somehow we survived in spite of borrowing huge amounts of money. And then we actually had a surpluss in the Clinton Administration.

So I am putting my money not where my mouth is. I am investing in Stocks and Bonds. But being over 50 now and having faced much more challenging events ( really serious), the money issue is small potatoes.

 

[John Galt]

I love the "girlie men" line, but it will lose it's punch if
overused (not there yet).

I basically agree with Bill, except over all and long term
I think it will be much much worse. I believe a totally
free capitalistic system can solve almost any problem.
Yet, every day we move further and further away.
And, it doesn't matter which party is in power.
Our decline slows a bit with the Republicans, but the direction never varies. I have no hope of ever returning
to the principles on which this country was founded.
Thus, I enter a vote of "no confidence" in the future
economic viability of the USA. Actually, this was a major
reason I ERed. I went "on strike" just like my fictional
doppelganger.

John Galt

 

[BigMoneyJim]

Being young dreamers with income, savings and low or no debt, it may acutally benefit us for everything to crash in the next 5-10 years since we'll be in the best position to take advantage of it. Then again we'll all probably be bailing our parents out of the mess....

Well, nothing more I can do about it, so I think I'll quit worrying for a while.

 

[Jane]

In term of economic outlook, I tend to be a pessimist. So I agree with the article (girlie economic woman? whatever). Even last year(?) when the market was making double digit return and some economic "experts" are slapping each other backs and welcome the return of the bull, I am still not convinced that the bear is behind us.

I worry about jobless economy/increasing unemployment, increasing bankruptcy rate caused by increasing interest rate, and baby boomers going into retirement with little/no savings (it could mean increased tax for the working population?).

Of course there is a silver lining if the economy burns down: house price will be cheaper, stocks will be attractive again (but if we have no jobs, where is the income to buy stocks, house, savings etc? What about deflation?). Don't know about you, but "jobless recovery" seems a little oxymoron-ish to me (how can economy recovers, if people got no job? Call me simple woman, but I like KISS principle).

All I can do to prepare is to have savings, pay off all debts, buy when market is at the lowest, and dig in for the crazy rides ahead.

Jane

 

[retire@40]

My, my, so many pessimists!!! I always get a kick out of statements like the one in the article “I'm afraid that the $200 billion-plus that Americans have cashed out of their houses has been spent.” Spent on what? Another house? Stocks and mutual funds? So what!!! It’s just money movement in our economy.

There have been pessimists in this country since 1776 and they have all been wrong long-term. I can understand being a pessimist in Sudan or North Korea, but how can you be a pessimist in the USA? I have always been an optimist, and frankly, I’m very surprised that there are so many pessimists on an ER forum. Do you think people can ER just as easily in other countries?

And what’s this “jobless recovery?” I don’t understand how people can have no “job” in the United States. From my experience with the public in the work I do, I’ve generally found that people without a job are in that situation by choice. It’s usually laziness and/or stupidity or they have retired. I am all for ER by choice, but I don’t believe pessimists who say they want to work but can’t find a job. If you can’t find a job, then make a job! I saw on TV this morning a lady who created a job for herself by taking leftover ocean-floor mud from scientific expeditions that has always just been thrown away and turning it into pottery for sale. Now that’s an optimist!

As Sir Winston Churchill said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”

 

[unclemick]

A pessimist shows up at the Pearly Gates and tells St. Pete - see I told you so. An optimist arrives and says - I understand you're hiring.

 

[sgeeeee]

Somewhere between the optimist and the pessimist is the realist.

 

[Tommy_Dolitte]

Couldn't have said it better Salaryguru!

A pessimist is an optimist with EXPERIENCE!

 

[Jarhead*]

Cutthroat: You are going to make a fine curmudgion
Safe to say that you have most of us pegged pretty well.
Just wish you'd hurry up and make the African Safari trip with pictures, while i can still afford the electricity to power my computer
Jarhead

 

[haha]

I am by nature a pessimist. I would make a terrible salesman or businessman, unless I were a liquidator. Most things that people buy, I never would have thought anyone would want. Socially, I have to hide this aspect of myself or wouldn't have any friends. Too much of a downer. My alltime favorite song is Blind Lemon Jefferson's "See That My Grave Is Kept Clean".

But this unpleasant, unAmerican habit of mind turns out to be well suited to investing in stocks, though probably not so much in real estate. I have never had the nerve to buy an expensive house, hoping it would appreciate before I lost my job and lost the house. I have lived in the same house ever since I bought it in my mid-thirties.

My only real esate profits were from oddities, like buying raw land from a logger who just wanted to buy another treed tract, and short-platting to sell as mini-farms. It took some work, but no optimism

I now have invested assets considerably greater than my total lifetime earned income. There were even a few years when my kids were young that I qualified for the earned income credit.

My pessimism and wariness has helped me avoid some quagmires. The cost of course is that I have never participated in the absolute boom stage of a market; I have sold by then.

Pessimism has not kept me from being at times as much as 120% long equities, with essentially no fixed income other than checking needs. But only at times when things are so stupidly cheap that it would be really hard to lose. Also, now, at my age, I wouldn't repeat that. I always hated jobs, but I knew I could get one. It's different with some age onboard-- who wants a 63 year old pessimistic misanthrope?

In fact, what employer wants a 63 year old with the world's sweetest personality?

Now, before y'all commit suicide, JUST KIDDING

Mikey

 

[John Galt]

Well mikey, no one would want a 60 year old
pessimistic misanthorpe either. I don't care as I
don't want a job and will not run for office. I always
say what I mean and do what I say (with some poetic license). BTW, I
am not really a pessimist, but a cynic. They are not the same. Basically, I have 100% confidence in my own
abilities, but very little in others. On the other hand, I love people in general and have love in my heart
for all mankind, as long as they stay out of my way

John Galt

 

[unclemick]

I know what you guys are doing - you're just trying to con SG out of a curmudgeon certificate before me.

 

[alwaysretired]

And what’s this “jobless recovery?” I don’t understand how people can have no “job” in the United States. From my experience with the public in the work I do, I’ve generally found that people without a job are in that situation by choice. It’s usually laziness and/or stupidity or they have retired.

Obviously these are not the people they talk abouit when they talk about people with no jobs.

Second of all the people that "should" be out doing ANYTHING simply becaused they need a job are just making a very capitalist business based descision. PAY them enough and THEN they'll work. The rich do it all the time. Businesses do it all the time. That's how the system works. (unless of course you can keep enough people in an economically exploitable position. Then you can force them to work without paying tjem enough.That's capitalism. Ricardo and Smith talked about it at length)

 

[cute fuzzy bunny]

I know what you guys are doing - you're just trying to con SG out of a curmudgeon certificate before me.

I dont need no steenking girlie man certificate. Arrr. Grrr. Arrr.

Either I'm doing a good 'curmudgeon' or its national "talk like a pirate day".

 

[sgeeeee]

I know what you guys are doing - you're just trying to con SG out of a curmudgeon certificate before me.

Don't worry unclemick. Your curmudgeon certification is safe.

 

[retire@40]

Well, a lot of the folks on this forum are here because they are pessimists. We actually saved money for leaner times ahead.

From the posts here it looks like you are right, but I've been thinking of retiring early since I was a teenager not because I was ever a pessimist, but because I was optimistic of becoming wealthy enough to do so. I was also optimistic that I would enjoy the rest of my long life doing things that are fun and stress-free.

Most of these real optimists never had any savings, because they were so optimistic that they could find another job in a heartbeat! They were so optimistic that everything would keep coming up roses like it did in the 90's.

I don't call that optimism, I call it naive. I save my money because I am optimistic that it will grow enough so I can live on my ROI when I am young enough to enjoy it, not because I am afraid I can't work until I die.

I think the whole nature of ER has pessimism deep in its roots. If you run FIRECalc we always try to surive in the worst case scenario. Some here (very intelligent ones) are so pessimistic that they believe the coming times in the U.S. will actually be worse than any model in FIRECalc. This includes the depression where stocks lost 80% of their value. Now that's pessimism for you. Compared to them I'm optimistic with 60% in the Market. I assume you have 100% in the market, if you are so optimistic.

Again, if most people that ER are pessimists, it shocks me. If you look at any of the major indexes over the long-term, they look pretty optimistic to me, so why would a rational mind assume a contrary view of the future? Of course there will be bear markets, but decade by decade the markets look fantastic and I am confident that the market will be higher 5 to 10 years from now than it is today.

Here is the deal with being a pessimist. If we're right then our financial plan will make it. If were wrong, then we'll have to spend more money and get that new Lexus and take an African Photo Safari

Either way we win! - We like it that way

I have been running my scenarios using what I call "the most likely reasonable conservative outcome" method and it has worked. I take all my assets and determine the average return I have been getting over the past 10 years plus my average savings rate. If I were a true pessimist, I would probably put all my money in the bank, but as an realist-optimist, I know I can outperform the bank CD rates long-term by investing in bonds, equities, and real estate.

I think that even though many posters on this forum perceive themselves as pessimists, they are probably just constant worriers (myself included), but optimistic of their future.

 

[wabmester]

As long as interest rates stay low, I'm a short-term optimist. As soon as rates and inflation pick-up momentum, I'll become a mid-term pessimist. For the long-term, I'm neither a pessimist nor an optimist, just very curious

However, I'll give you the following odds:

-- Chances are that you'll see an event that impacts the GDP as hard as the Great Depression in your lifetime: about 30%.

-- Chances are that we'll get a back-to-back repeat of the 1984-2000 market returns: about 0%.

-- Chances that we'll see the historical worst 30-year US market returns in our future lifetime: > 20%.

 

[John Galt]

Hi Wab! Still on the diet. Pretty faithful except for the sugar in my nightly glass of wine. I already lost 4 lbs,
even though that was not the goal. Interesting.

Re. your post You forgot one:

Chances that we'll all end up dead 100%

BTW, I think we should find a way to run "Ahnold"
for President. Might even get me to register and vote
if that happened I thought his speech was the tops.
( Zell Miller was good too) I turned "W" off after 20 minutes.

John Galt

 

[Jane]

Again, if most people that ER are pessimists, it shocks me.  If you look at any of the major indexes over the long-term, they look pretty optimistic to me, so why would a rational mind assume a contrary view of the future?  

I am curious, what indicators do you use to deduce this conclusion? Are you using the past performance of the market index? Past performance is not an indication of future performance.

Jane

 

[Cut-Throat]

I take all my assets and determine the average return I have been getting over the past 10 years plus my average savings rate.

retire@40

Yup, you are an optimist alright. May I also suggest naive, if you use the average results of the late 1990's as a predicter of your future results.

This was a stellar time of returns and to use this as an average you'd have to be a fool.

 

[unclemick]

Hats off to Zell - got me pissed off enough to go register to vote - haven't done that since I voted against Nixon and for the knuckle brain that ran against him.

Deep Throat is still my favorite - "Follow the money."

Hence - stick with the Nowegian widow - the yield of your portfolio is real money - anything else is lagniappe.

 

[wabmester]

Hi Wab!  Still on the diet.  Pretty faithful except for the sugar in my nightly glass of wine.  I already lost 4 lbs,
even though that was not the goal.  Interesting.

You'll probably get the urge to take a nap or two as your body transitions from burning sugar to burning fat.  Drink a ton of water, and eat plenty of roughage (lettuce, broccoli, etc.)   You'll eventually regret ignoring this latter advice  

Re. your post You forgot one:

Chances that we'll all end up dead            100%

I'm optimistic that this probability will be reduced  someday

 

[Cut-Throat]

-- Chances that we'll see the historical worst 30-year US market returns in our future lifetime: > 20%.

Wab,

Do you happen to know what the worst 30 year period return of the Market was?

 

[wabmester]

Do you happen to know what the worst 30 year period return of the Market was?

That's something FIREcalc can tell you.   Set your withdrawal rate to 0.  It looks like the period from 1903-1932 was the worst.   Ignoring inflation, your $1000 investment in 1903 would have become $4482 in 1932.

Edited to add that that's an annualized return of about 5%. Sort of a savings account with a ton of volatility

The best 30-year period yielded about 13%.

The best 17-year period was the horse most of us rode in on: 1982-1998 at 18%!