What have we/I learned from the recent events?

[free4now]

The lesson I relearned is that markets are not efficient. Yes in the long term the market is a weighing machine, but in the short term it's a voting machine.

And in a strange way, the crisis has vindicated my belief that investing in developing foreign markets is not a good idea because of the lack of transparency. The USA may not have perfect transparency, but it's a heck of a lot better than say China. If the same crisis happened over there we'd probably not even hear about it until the whole economy had failed.

 

[audreyh1]

What I "learn" will depend heavily on what happens to a rescue plan. If the pols behave even semi-sensibly I will have learned that even in hairy times my plans were not too bad. If not, and markets crater 20% over the weekend, I will have learned that I was an idiot to buy anything other than CDs.

Ha

Oh no! I'm in the same boat with Ha!

Audrey

 

[ejman]

Well, I ER'd December 2002 at 52 and according to Quicken my average return since then thru today has been 8.5% on a diversified portfolio with a plain vanilla 60/40 AA. As a certain character said "What me worry?" I think the lesson learned (and relearned) is find an asset allocation you can live with and then live with it!

 

[Gardnr]

That we have forgotten the lessons from the Great Depression -- now that almost everyone who remembered it are no longer with us to repeat their warnings. We've forgotten the lessons that they warned us about and relived a lot of the excesses that they saw in the irrational exuberance of the 1920s.

AMEN!!! I'm just hoping we can hit the "sweet spot" of having enough pain so that people learn those lessons again and we return to those good "old fashioned" values, but not slip into a prolonged depression-type era.

Things like thrift, frugality, etc. need to be seen as virtues again instead of sneered at and thought of as ridiculous.

 

[ABLeever]

Move to a third world country and retire early. Been retired in Panama one year now...love it. Cost of living? $1200/month.....everything. Beautiful home with a view...car paid for...no debt.

Pulled out losing long term investments and fired our financial planner. Got the $ inna safe bank. Do your own research (Conquer the Crash, At the Crest of the Tidal Wave, Elliot Wave Principal). Don't wait until you've lost most of your hard earned money to get it to safe harbor.

At this point we have cash assets and enough retirement income to live well and happy now. Where we place this rescued money is a huge question. BUT it will be short term and in a bank (CDs) that we've studied. (Higher interest rate lures are usually because the bank needs your capital...not the best sign.)

Anyway......Panama. All us that have retired here are (generally speaking) happy campers. Lifes good here and your money stretches

ABLeever

 

[Helen]

Here is my serious answer.

I've thought about what a total economic collapse would mean to me personally. Since I am the one who takes care of my partner's and my investments I talked to her about it. I told her if there was a total economic meltdown we would be OK. I feel this way because I think our priorities are right. A crisis can pull people together and as long as we have health, love and the basics for survival we will be OK (I suppose it's easy to say now). I'm also feeling a little relieved our house hasn't sold. It's paid for and tangible. I had a nightmare that I had moved all the money from the sale of our house into a savings account the afternoon before a total economic meltdown and we had nothing. "Please Cry for Me Argentina" was playing in the background.

The other thing is I've been looking into is the Clinton years. I keep reading on various message boards that Clinton signed a bill to repeal the Glass-Stegall Act which was passed in the 30's because the banks were failing (hey, maybe it was there for a reason?). It turns out the house and senate had a 2/3rds vote to pass it which made the bill "veto proof".

I also read CitiBank (CitiCorp back then) was behind the repeal in a big way in the form of lobbyists. I might have to cut my CitiBank card up and send it back (except I love their rewards program - in other words it's greed over principle).

It appears this situation was avoidable and it is a shame we didn't learn from it the first time. Greed it something we are all capable of and we do need checks and balances.

 

[dex]

i was 100% in cash in about May 2007 and started averaging into the market after that. I should be finished in March of 2009.
I just opened up the Vang. Emerging Market Fund today which should be done by the end of next year.
I have other money I will put into the market at an even slower pace.
After I am all done I will keep a couple of years of expenses in cash.
What I'm saying is that I have faith in the market - stocks and bonds.
The reasons:
1 - expanding population
2 - globalization of the world's economy
3 - no other place for the money to go
The key is to have enough cash to ride out the down times.
Other markets than the USA should outperform the USA - that is why i'm aiming for 30% for outside the USA

allocation excluding cash:
Value Index 8.5% Wellesley Income 9.5% Emerging Markets 8.8% High Yield Corp 19.0% Reit Index Fund 3.5% FTSE all world Ex Us 20.3% Mid Cap Value Indes 9.0% Small Cap Value 9.8% Fidelity Seclect Nat Resources 6.5% Emerging Bonds 5.3%

 

[hankster]

I've learned that excessive debt adds risk, whether it applies to a large international business or an individual citizen. I'm more determined than ever to minimize debt in my life as I move toward retirement.

 

[John23]

I've learned a lot.

-In investing, there are these two schools of thought, technical analysis and fundamental analysis. You're suppose to buy these books, or turn on your bloomberg. And you look at moving averages, and resistence levels or p/e ratios....I think to myself...it wouldn't have done you much good if you bought Lehman at $60 or FNM at $50.

If a company made dumb bets, what more do you have to look at? A lot of people deluding themselves out there.

If you're a real estate investor, and you made some bad bets, buying homes for $300 k that are now worth $150 k, what good would it do you to look at past trades? Or look at volume?!? What more would you learn that you don't already know?

It'd be a whole nother topic, but I think half the people trading in the world are delusional. You have to figure out what's going on much deeper than the numbers or sales ratios will tell you about it.

-Just because you invest billions of dollars, doesnt mean you know what you're doing. All the sovereign wealth funds, and bond investors.

-Human nature never changes. Whether it's tulips, or derevatives behind a computer screen.

 

[Bimmerbill]

I've learned that excessive debt adds risk, whether it applies to a large international business or an individual citizen. I'm more determined than ever to minimize debt in my life as I move toward retirement.

+1 for me too! Working on ridding myself of debt, to ensure a good safe cash flow cushion.

 

[Milton]

Other markets than the USA should outperform the USA - that is why i'm aiming for 30% for outside the USA

I agree with you.

Given your prediction, perhaps it would make sense to reverse your ratio? Might as well have the courage of your convictions and seek the better return, while keeping a bit in the US just in case we're both wrong about what the future holds.

 

[dex]

I agree with you.

Given your prediction, perhaps it would make sense to reverse your ratio? Might as well have the courage of your convictions and seek the better return, while keeping a bit in the US just in case we're both wrong about what the future holds.

here is where i want to get to

Ultimate Goal 40.00% USA Stocks 20.00% USA Bonds 30.00% Non USA Stocks 0.00% Non USA Bonds 10.00% Opportunity
100.00%

 

[Walt34]

I've learned that excessive debt adds risk, whether it applies to a large international business or an individual citizen. I'm more determined than ever to minimize debt in my life as I move toward retirement.

DW and I are so happy now that we have lived within our means for so long. No debt means that the road ahead is unfettered by the chains of debt from past decisions and behaviors.

We wonder what is going to happen with some relatives - one nephew and his family have been evicted in the past for non-payment of rent, but he drives a Lincoln Navigator. He sells real estate in a resort area and of course sales are in the toilet. Another BIL and family are apparently solvent at the moment but have zero cash reserves and $5k in cc debt. For him working will not be optional for the foreseeable future. Another distant relative loves shopping and buying stuff on Ebay, but wonders how she'll pay for propane heat this winter. Go figure.

I'm working at the moment because I want to, and the income is almost all "play money". (Apparently DW and I are incapable of NOT saving.) But I'm also gonna buy myself a nice new motorcycle, and one for her too if she wants one.

 

[Retire Soon]

I've learned that since the Great Depression that the times may have changed, but the people haven't. Our economy can change course in a heartbeat and become vulnerable, fragile, and unstable at lightening speed. All it takes are a few greedy and dishonest business leaders to completely undermine our capitalistic and free enterprise economic system. The bigger it is the harder it falls.

 

[audreyh1]

I've learned that "free-market" (i.e. unregulated market) ideologues go into denial when it blows up in their faces.

Audrey

 

[Nords]

... have been evicted in the past for non-payment of rent, but he drives a Lincoln Navigator.

We've noticed that our tenants have parked their commuter SUV in favor of using a PT Cruiser. They still use window A/C (in a Hawaii home with no insulation and jalousie windows) but they've retrofitted CFLs instead of incandescent bulbs and I'm sure they've cut back on the $700 electric bills. But they recently added a baby to their family.

I'm just happy that he has a good civil-service job and a military pension. In the current credit/housing environment I doubt that they'll be buying a home anytime soon...

 

[Gardnr]

We've noticed that our tenants have parked their commuter SUV in favor of using a PT Cruiser. They still use window A/C (in a Hawaii home with no insulation and jalousie windows) but they've retrofitted CFLs instead of incandescent bulbs and I'm sure they've cut back on the $700 electric bills. But they recently added a baby to their family.

I'm just happy that he has a good civil-service job and a military pension. In the current credit/housing environment I doubt that they'll be buying a home anytime soon...

Wow, bonus for you. Sounds like a good long-term tenant!

 

[Nords]

Wow, bonus for you. Sounds like a good long-term tenant!

Shipmate of a shipmate. We had a deposit practically before the movers even packed out my parents-in-law. We nearly doubled the rent and, although it's probably time to raise it again in a few months, I hesitate to threaten the golden goose.

 

[Gardnr]

...although it's probably time to raise it again in a few months, I hesitate to threaten the golden goose.

Yep, that'd be my position. I've never been a landlord and frankly don't want to get into that business, but if I were I'd certainly find great value in a long term, paying, well-behaved tenant. Too many horror stories out there about bad tenants. But you know that.

Good luck!

 

[Free To Canoe]

Ha is right that we are not done learning lessons yet. We still need to see how this concludes.
This is a good thread and I will take this opportunity to come up with the lessons. More later.

This downturn has been a good test of my financial plans. Like the shakedown voyage of a new ship, this market has revealed where the problems and weaknesses are (keep bailing!). Whether or not my portfolio will work for me is yet to be determined. Emotional weaknesses have been revealed. I would like to have 2 years work of cash type assets to fall back on. It would help in turbulent markets like these. Once storm clouds pass and it is sunny again, I will build this reserve.

 

[dorikin_86]

I hope the recent oil/credit crisis teaches everyone that:

1. You do not need a 10mpg SUV to commute to work by yourself
2. If you can't pay cash for a car - you probably can't afford it
3. If you can't put down 25% on a house or if the mortgage is more than 33% of your income (pretax) - you probably shouldn't buy it

We can't continue to live on debt....

 

[nwsteve]

My learning so far:
Having no debt and living expenses in a safe place makes it much easier to sleep with the noise of the current chaos
For every deregulation, a new version of scam and cheat will appear.
When you see behavior that makes no sense (110% mortgages, money lent to people who can not qualify for "real" financing, success being defined by hedge funds, etc etc), don't just watch and wonder, start looking for the exit and be happy if you are early.
nwsteve