Do you think 2023 is 1929, 1966, 2000, etc?

[Andre1969]

I think 2023 is gonna be just like 2023. Same as it ever was.

And you may ask yourself, "Where is that large automobile?"
And you may tell yourself, "This is not my beautiful house"
And you may tell yourself, "This is not my beautiful wife"

Eh, it just popped into my head

 

[RobbieB]

My god, what have I done?

Water flowing under...

 

[RunningBum]

Assuming our future is no worse than anything in Firecalc's historical range, and you are at 100% success, has anyone considered that not everyone around you will have 100% success? Maybe you'll have a sibling or offspring who is in a lot worse financial straits. Or a dear friend. Are you going to help them out, or just help them find a quiet bridge to live under? I feel like a lot of parents are willing to take a hard line with kids, but what if grand kids are involved?

For some there may be no one close enough to feel obliged to help, and some may just choose not to, but others will. Maybe having someone live with you, while being inconvenient, does not hit the bottom line very hard.

Just a point for consideration. Those Firecalc success rates take you at your word that your expenses are accurate.

 

[indiajust]

I like the Dalio and Artemis Capital understanding of cycles to inform decisions. We just rode 40 years of interest rates down to zero, which left bond holders rich. The dropping cost of capital led to PE expansion, which left stock holders rich. We socialized the cost of mortgages in 2008, so that half the mortgage holders in the country now live in government housing via Fannie/Freddie subsidized loans. Uncle Sam's backstop made home holders rich.

Add in 100's of trillions for FICA and healthcare Fed obligations... It is a highly combustible situation.

The typical central bank playbook in these conditions is to forcefully inflate the money supply and ruin anyone who owns bonds or fixed rate notes. The last time this happened was after WW2. So Dalio et al expects a rerun of the late 40's to early 60's. Lots of running in place, full employment, prices like a rubber band.

It took the Fed about 15 years to ruin the value of anyone holding war bonds. Markets seem to move faster nowadays, boom to bust to boom in record time. I am guessing at 3 dips, with plateaus to rest over 5-8 years. Not a hyper inflation, but a steady grind.

As in Weimar Germany, stocks of economically essential companies will struggle along and hold value. Debts become worthless, so its a great time to borrow if you can find someone dumb enough to give you money. The longer it grinds, the weaker companies will falter and fail, till it is just Maslow's needs getting paid.

My grandfathers house $2-4k, my fathers house 20-40k, my house $200-400k. The next generation... $2-4M. Same house, just less valuable money.

It's hard to keep score when the denominator moves around. That's the point.

 

[Out of Steam]

I’m putting all my investments into tulip bulbs. I got a tip from my cousin’s dental hygienist.

On a more serious note, interest in stock investment by people who aren't normally picking stocks has been about as good a sell signal as exists.

 

[GravitySucks]

Lots of pessimism in this thread. I'll give 2023 a 4% chance of being as bad as any if the listed years.

Sent from my LM-Q850 using Early Retirement Forum mobile app

 

[Maidensong]

Income Buckets

This is why we don't have all our eggs in the stock market. Probably 20 years ago, we read a book called Multiple Streams of Income. It was an eye-opener. And we realized after 2008 that having everything in the market was not our best option. We've been retired since 2015 and we have 3 1/2 buckets:

IRA--which we won't touch until we have to when the DH turns 72. It's done nothing but grow since he retired and stopped contributing to it.

SS & small (think microscopic) pension--The DH has received a little pension from the 11 years he spent with an airline which is about enough to cover our Medicare and almost all our supplement payments each month. This year we are finally took our FRA SS benefit which pretty much covers our expenses, less about $700.

Rental properties--These little jewels (10 in all, 5 duplexes) have given us terrific ROI month after month. Even during Covid and eviction moratorium dictums, we did very well. They are also why the DH was able to retire at 60. And now that SS & the pension are covering so much of our budgeted spending, this income is gravy.

Stock account--This is our 1/2 bucket because we use it to fund our travel (Taking six of our family to Alaska in September. Hopefully heading out on our 2nd World Cruise next January). We're also buying our daughter a house from this bucket. We figure why wait to die to bless her life? We've got it. Why not share it with our loved ones?

So the market can go up or it can go down. If one bucket leaks, we'll start using another one.

 

[mh]

No contradiction here. I have 75x yearly living expenses not including pension or SS. As I said, I am merely curious as to what other people think. I happen to think there will be a big crash in 2023 but I'm most probably wrong. If there is, it will be a great buying opportunity.

Give yourself a couple years cash if you are feeling hinky about sequence of returns ?

 

[Hans]

Do you think 2023 is 1929, 1966, 2000, etc?

Total return (price performance plus dividends) of the S&P 500:

1929: -8%
1966: -10%
2000: -9%

My answer to your question is that the above kinds of results are well within the range of likely outcomes for 2023.

And a run-of-the-mill, garden-variety bear market (such as between -20% to -50%) would not be particularly surprising either, as we already know that these happen with some regularity. What would be out of character for the market is if we don't see them happen anymore. That would be the proverbial "man bites dog" story.

In other words, I'm predicting business as usual. Just another day at the office. Yawn.

Which poll answer should I pick?

 

[EastWest Gal]

This is why we don't have all our eggs in the stock market. Probably 20 years ago, we read a book called Multiple Streams of Income. It was an eye-opener. And we realized after 2008 that having everything in the market was not our best option. We've been retired since 2015 and we have 3 1/2 buckets:

IRA--which we won't touch until we have to when the DH turns 72. It's done nothing but grow since he retired and stopped contributing to it.

SS & small (think microscopic) pension--The DH has received a little pension from the 11 years he spent with an airline which is about enough to cover our Medicare and almost all our supplement payments each month. This year we are finally took our FRA SS benefit which pretty much covers our expenses, less about $700.

Rental properties--These little jewels (10 in all, 5 duplexes) have given us terrific ROI month after month. Even during Covid and eviction moratorium dictums, we did very well. They are also why the DH was able to retire at 60. And now that SS & the pension are covering so much of our budgeted spending, this income is gravy.

Stock account--This is our 1/2 bucket because we use it to fund our travel (Taking six of our family to Alaska in September. Hopefully heading out on our 2nd World Cruise next January). We're also buying our daughter a house from this bucket. We figure why wait to die to bless her life? We've got it. Why not share it with our loved ones?

So the market can go up or it can go down. If one bucket leaks, we'll start using another one.

You mentioned IRA and Stock account separately. How is the IRA invested? Stocks, bonds, other? Aren't they both in the markets? But the point of your post was the rental properties, which I totally get.

 

[street]

Always a concern when we don't know what the future will bring. For me a well prepared plan which was made on the assumption that the market will crash, helps me not to worry.

Exiting the markets isn't in my plan of attack. I will stay and hold and depend on past history that market returns back to a normal status. Like my wife says, it is only money, more things in life to worry about, then the ups and downs of the markets.

 

[Exchme]

In April 2020, I moved $100K from one 'dog' of a fund to another fund that had had a sudden 36% drop. It is now up 69.4% from April 2020, so a nice gain; while not a market timer, I saw a bargain opportunity and took it.

The 2008 fiasco emboldened me. It was supposed to be the end of life as we know it and instead the relatively rapid recovery gave me a lot of confidence in market drops as opportunities vs calamities. It's your chance to go back in time and find bargains.

I often mention my "smarter than you" neighbor who proudly announced on the last Friday of Feb, 2008 that she had just "sold everything"; the following week, well......

Um, Vanguard Total Market was only down 21% by April 1 2020 and by June 30 2021 had gone up 76% from April 1 2020. Are you sure your tilts away from the market portfolio are helping? Buying the whole market can often be the best performer over the long haul and its tax efficiency and low fees are nice benefits too. Simple rebalancing when the market moves up and down would also avoid the need to outsmart your neighbor.

I think history will link the 2000 and 2008 crashes since after adjusting for inflation, the market never recovered to its early 2000 high until early 2013. Of course there are other examples of long downturns too like 1905-1921, 1929-1945 and 1966-1982. You might say that each period in-between downturns lasts approximately as long as investor's memories of the last crash.

 

[VFK57]

Our equities account (mostly REITs, gas/oil and 2 pharmaceuticals) are mostly stagnant. One pharmaceutical had sunk about 25% after recovery from 2020. Dividends were cut so returns are lower in comparison to before the pandemic Market 2020 crush. Rental apartment is difficult to rent for a "Qualified" renter(s), after current one moved out. Prior to pandemic it was a week or two in order to collect 5-7 applications and at least 2 were acceptable. I think that the difficult times may lay ahead.

 

[timbervest]

Always good to do a stress test on your portfolio. I keep a "worst case" scenario in my spreadsheet -- what would happen if the stockmarket dropped 50% , bond market 20% and my other non-cash assets dropped 10% (totally arbitrary but a scenario). What impact would that have on my income (taking into account SS, pension, and cash reserves) and my ability to meet my living expenses? Generally, in this case, I can survive, so I try not to worry about it.

 

[FI_RElater]

Um, Vanguard Total Market was only down 21% by April 1 2020 and by June 30 2021 had gone up 76% from April 1 2020. Are you sure your tilts away from the market portfolio are helping? Buying the whole market can often be the best performer over the long haul and its tax efficiency and low fees are nice benefits too. Simple rebalancing when the market moves up and down would also avoid the need to outsmart your neighbor.

I think history will link the 2000 and 2008 crashes since after adjusting for inflation, the market never recovered to its early 2000 high until early 2013. Of course there are other examples of long downturns too like 1905-1921, 1929-1945 and 1966-1982. You might say that each period in-between downturns lasts approximately as long as investor's memories of the last crash.

I'd looked, especially, at the 1905 retiree:
they had two early difficult periods (the 1907 panic (https://en.wikipedia.org/wiki/Panic_of_1907) where there was a 50% drop and the super high inflation of the early 20's)

they had the introduction of the federal income tax, which obviously caused additional stress on their withdrawals

and, obviously, they had the great depression at the tail end of the thirty year period

and, of course, there was no SS to supplement their retirement income as that was introduced well after their earning years so they wouldn't have been eligible

despite all that, they (barely) made it with a 4% wr (but bonds were paying a bit more during much of the time... there was the period afterwards where bonds in no way kept up, but much of that was post-war)

The way we dealt with early years of retirement was to have established a 5 year CD ladder that supplemented the pension. In our sixth year, we're about through with those...(have had below 2.5% wr)... and, unfortunately, with current CD rates a comparable ladder doesn't do much (might as well keep in a stable value type vehicle so as to keep access for whenever needed)... but also have a 45/55 allocation to reduce effect of down market before SS and a 3.5% wr of investments on top gives far beyond the minimum of 100% Firecalc...so all good.
{but I've also deferred past 62, so am able to start SS if the need arises...otherwise it'll be just past FRA or at 70}

 

[scrabbler1]

This is why we don't have all our eggs in the stock market. Probably 20 years ago, we read a book called Multiple Streams of Income. It was an eye-opener. And we realized after 2008 that having everything in the market was not our best option. We've been retired since 2015 and we have 3 1/2 buckets:

IRA--which we won't touch until we have to when the DH turns 72. It's done nothing but grow since he retired and stopped contributing to it.

SS & small (think microscopic) pension--The DH has received a little pension from the 11 years he spent with an airline which is about enough to cover our Medicare and almost all our supplement payments each month. This year we are finally took our FRA SS benefit which pretty much covers our expenses, less about $700.

Rental properties--These little jewels (10 in all, 5 duplexes) have given us terrific ROI month after month. Even during Covid and eviction moratorium dictums, we did very well. They are also why the DH was able to retire at 60. And now that SS & the pension are covering so much of our budgeted spending, this income is gravy.

Stock account--This is our 1/2 bucket because we use it to fund our travel (Taking six of our family to Alaska in September. Hopefully heading out on our 2nd World Cruise next January). We're also buying our daughter a house from this bucket. We figure why wait to die to bless her life? We've got it. Why not share it with our loved ones?

So the market can go up or it can go down. If one bucket leaks, we'll start using another one.

Your overall holdings are a little similar to my "reinforcements," which will begin arriving soon as I reach age eligibility for them. I don't have any rental properties, but I have SS, a frozen company pension (both eligible in a few years), and a rollover IRA waiting for me starting at age ~59.5 (which is next year!). Since late 2008, when I retired at age 45, I have been living only off the taxable portion of my portfolio. Back then, my original plan had me tapping into principal by my late 50s. But instead, thanks to the recovery in 2009 and booming markets, and thanks to the ACA which has reduced my health insurance premiums, the IRA's value has more than tripled, the taxable portfolio has more than doubled, and my expenses have dropped.

I have been gradually reducing my stock holdings in the rollover IRA. I still have around 40% in stocks. Thanks to rebalancing, the bond side of the IRA has more than quadrupled despite no outside money being added.

 

[rmcelwee]

Give yourself a couple years cash if you are feeling hinky about sequence of returns ?

We currently have about 25 years of cash in a fixed fund. Not my idea, it is my wife's security blanket. She says we could lose all of our stock market money and still live with no problems. Our other investments are pretty risky so the cash kind of balances that out. We will adjust things once I no longer have an income from w*rk.

 

[kingfisher]

This time it's different...just like every other time!

+1. That being said, I think it will be most similar to 2000 dot.com bubble.

 

[Montecfo]

Total return (price performance plus dividends) of the S&P 500:

1929: -8%
1966: -10%
2000: -9%

My answer to your question is that the above kinds of results are well within the range of likely outcomes for 2023.

And a run-of-the-mill, garden-variety bear market (such as between -20% to -50%) would not be particularly surprising either, as we already know that these happen with some regularity. What would be out of character for the market is if we don't see them happen anymore. That would be the proverbial "man bites dog" story.

In other words, I'm predicting business as usual. Just another day at the office. Yawn.

Which poll answer should I pick?

You nailed it.

And any prognostication by me, Dalio or anyone else are mildly interesting but do not move the needle.

In a major crash we will be buying equities and living off bonds.

I know there were quite a few folks on this very board who were pretty sure stocks were grossly overvalued last fall, and some sold. That did not end up being a prescient call, at least not to date.

Now, of we get a big bump in interest rates, we would get a re-rating of bonds and equities. I think that will happen, but not be severe because at its core US is a slow-growing economy.

There are a few factors which could cause me to change my mind about this but they are yet to be seen.

 

[VFK57]

We cannot compare 1929 and 1966 with the current state of economy and finances, because it was time of Gold backup when you could not easily add mass of paper money and improve the economy. Neither we can compare 2000 to the current period because in 2000 we had way less National Debt and Budget surplus (not a huge Deficit like now) vs GDP in goods and services. The more we add fiat currency in order to buy bonds and assets, the more chance the once mighty US$ may crush as our output does not grow the way we need to print our way out of trouble like in 2008.